Notice & Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
|
|
|
þ Filed by the Registrant
|
|
¨ Filed by a Party other than the Registrant |
|
|
|
|
Check the appropriate box: |
|
|
¨ |
|
Preliminary Proxy Statement |
|
|
¨ |
|
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)) |
|
|
þ |
|
Definitive Proxy Statement |
|
|
¨ |
|
Definitive Additional Materials |
|
|
¨ |
|
Soliciting Material Pursuant to §240.14a-12 |
THE PNC FINANCIAL SERVICES GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
|
|
|
|
Payment of Filing Fee (Check the appropriate box): |
|
|
þ |
|
No fee required. |
|
|
¨ |
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
|
|
|
|
(1) Title of each class of securities to which transaction
applies: |
|
|
|
|
(2) Aggregate number of securities to which transaction
applies: |
|
|
|
|
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
|
|
|
|
(4) Proposed maximum aggregate value of transaction: |
|
|
|
|
(5) Total fee paid: |
|
|
¨ |
|
Fee paid previously with preliminary materials. |
|
|
¨
|
|
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
|
|
|
|
(1) Amount Previously Paid: |
|
|
|
|
(2) Form, Schedule or Registration Statement No.: |
|
|
|
|
(3) Filing Party: |
|
|
|
|
(4) Date Filed: |
Delivering a Superior
Banking Experience
for Every Customer
|
|
|
|
|
|
|
|
|
LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER TO OUR SHAREHOLDERS
|
Dear Shareholder
We invite you to attend PNCs 2015 Annual Meeting of Shareholders on Tuesday, April 28,
2015.
The meeting will be held in Pittsburgh, Pennsylvania on the 15th Floor of One PNC Plaza, 249 Fifth Avenue, beginning at
11:00 a.m., Eastern time. We will consider the matters described in this proxy statement and also review significant developments since last years meeting of shareholders.
We are again making our proxy materials available to you electronically. We hope that this continues to offer you convenience while allowing us to reduce the number of copies that we print.
The proxy statement contains important information and you should read it carefully. Even if you plan
to attend the meeting in person, we strongly encourage you to designate the proxies named on the proxy card to vote your shares. If you will not be there in person, you will be able to listen to the meeting by webcast or conference call. Please see
the notice that follows for more information.
We look forward to your participation and thank you for your support of PNC.
March 17, 2015 |
Sincerely, |
William S. Demchak
Chairman, President and Chief Executive Officer
PARTICIPATE IN THE FUTURE OF PNC PLEASE CAST YOUR VOTE
Your vote is important to us and we want your shares to be represented at the annual meeting. Please cast your vote on the proposals listed below.
Under New York Stock Exchange (NYSE) rules, if you hold your shares through a broker, bank, or other nominee (street name),
and you do not provide any voting instructions, your broker can only vote on your behalf for matters that are considered discretionary. The only discretionary matter on this years ballot is the ratification of our auditor
selection. If a matter is not discretionary and you do not provide voting instructions, your vote will not be counted.
Proposals requiring your vote
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More information |
|
Board recommendation |
|
Discretionary matter? |
|
Abstentions |
|
Votes required for approval |
PROPOSAL 1 |
|
Election of 13 nominated directors |
|
Page 11 |
|
FOR each nominee |
|
No |
|
Do not count |
|
Majority of shares
cast |
PROPOSAL 2 |
|
Ratification of independent registered public accounting firm for 2015 |
|
Page 79 |
|
FOR |
|
Yes |
|
|
PROPOSAL 3 |
|
Advisory approval of the compensation of PNCs named executive officers (say-on-pay) |
|
Page 82 |
|
FOR |
|
No |
|
|
Vote your shares
Please read this proxy statement with care
and vote right away. We offer a number of ways for you to vote your shares. We include voting instructions in the Notice of Availability of Proxy Materials and the proxy card. If you hold shares in street name, you will receive information on
how to give voting instructions to your broker or bank. For registered holders, we offer the following methods to vote your shares and give us your proxy:
|
|
|
|
|
|
|
|
|
|
|
|
|
www.envisionreports.com/PNC |
|
Follow the instructions on the proxy card. |
|
Complete, sign and date the proxy card
and return it in the envelope provided. |
Attend our 2015 Annual Meeting of Shareholders
|
|
|
Directions to attend the annual meeting |
|
11:00 a.m. on Tuesday, April 28, 2015 |
are available at |
|
One PNC Plaza
15th Floor |
www.pnc.com/annualmeeting |
|
249 Fifth Avenue |
|
|
Pittsburgh, Pennsylvania 15222 |
4 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
PROXY STATEMENT SUMMARY
Proxy Statement Summary
To assist you in reviewing the proposals to be acted upon, we have included a summary of certain information. This summary does not contain all of the information that you should consider, and
you should review our 2014 Annual Report and the entire proxy statement before you vote.
You may also read our proxy
statement and 2014 Annual Report at www.envisionreports.com.
Who can vote (page 85)
You are entitled to vote if you were a shareholder on the record date of January 30, 2015.
How to cast your vote (page 86)
We offer our shareholders a number of ways to vote, including by Internet, telephone, or mail. Shareholders may also vote in person at the annual meeting.
Voting matters
Item 1: Election of directors (page 11)
|
|
The proxy statement contains important information about the experience, qualifications, attributes, and skills of the 13 nominees to our Board
of Directors. Our Boards Nominating and Governance Committee performs an annual assessment to confirm that our directors continue to have the skills and experience to serve PNC, and that our Board and its committees continue to be effective in
carrying out their duties. |
|
|
Our Board recommends that you vote FOR all 13 director nominees. |
Item 2: Ratification of auditors (page 79)
|
|
Each year, our Boards Audit Committee selects PNCs independent registered public accounting firm. For 2015, the Audit Committee
selected PricewaterhouseCoopers LLP (PwC) to fulfill this role. |
|
|
Our Board recommends that you vote FOR the ratification of the Audit Committees selection of PwC as our independent registered
public accounting firm for 2015. |
Item 3: Say-on-pay (page 82)
|
|
We ask shareholders to cast a non-binding advisory vote on our executive compensation program known generally as the
say-on-pay vote. We have offered a say-on-pay vote since 2009, and our shareholders confirmed their preference for annual votes in 2011. Last year, 88% of the votes cast by our shareholders supported our executive compensation program,
and PNC has averaged 92% support for say-on-pay over the past five years. |
|
|
We recommend that you read the Compensation Discussion and Analysis (CD&A) (beginning on page 36), which explains how and why our
Boards Personnel and Compensation Committee made executive compensation decisions for 2014. |
|
|
Our Board recommends that you vote FOR the non-binding advisory vote on executive compensation (say-on-pay). |
PNC performance highlights (page 37)
|
|
|
|
|
We delivered a successful year in 2014, reporting net income of $4.2 billion (8.7% over budget) and $7.30 diluted earnings per share (7.4% over budget) |
|
|
|
|
Our annual total shareholder return was 20.32%, second highest in our peer group |
|
|
|
|
We strengthened our capital throughout the year and returned capital to our shareholders through both a dividend increase and share repurchases |
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 5
PROXY STATEMENT SUMMARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KEY PERFORMANCE METRICS |
|
2014 actual(1) |
|
|
2013 actual(1) |
|
|
2014 vs. 2013 actual |
|
|
2014
budget(2) |
|
|
2014 actual vs. budget |
|
Net interest income (in millions) |
|
$ |
8,525 |
|
|
$ |
9,147 |
|
|
|
(6.8%) |
|
|
$ |
8,796 |
|
|
|
(3.1%) |
|
Noninterest income (in millions) |
|
$ |
6,850 |
|
|
$ |
6,865 |
|
|
|
(0.2%) |
|
|
$ |
6,684 |
|
|
|
2.5% |
|
Diluted earnings per common share |
|
$ |
7.30 |
|
|
$ |
7.43 |
|
|
|
(1.7%) |
|
|
$ |
6.80 |
|
|
|
7.4% |
|
Return on common equity (without goodwill) |
|
|
12.84% |
|
|
|
14.52% |
|
|
|
(168 bps) |
|
|
|
11.97% |
|
|
|
87 bps |
|
Return on assets |
|
|
1.28% |
|
|
|
1.39% |
|
|
|
(11 bps) |
|
|
|
1.20% |
|
|
|
8 bps |
|
Efficiency ratio |
|
|
61.71% |
|
|
|
60.10% |
|
|
|
(161 bps) |
|
|
|
61.20% |
|
|
|
(51 bps) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 actual(1) |
|
|
2013 actual(1) |
|
|
2014 vs. 2013 actual |
|
Tangible book value per share |
|
|
|
|
|
|
|
|
|
|
$59.88 |
|
|
$ |
54.57 |
|
|
|
9.7% |
|
Estimated Tier 1 risk-based capital ratio |
|
|
|
|
|
|
|
|
|
|
12.70% |
|
|
|
12.40% |
|
|
|
30 bps |
|
Return on economic capital vs. cost of capital |
|
|
|
|
|
|
|
|
|
|
5.02% |
|
|
|
13.76% |
|
|
|
(874 bps) |
|
Annual total shareholder return |
|
|
|
|
|
|
|
|
|
|
20.32% |
|
|
|
36.50% |
|
|
|
(1618 bps) |
|
These tables include non-GAAP financial measures. See Annex A for additional information.
(1) |
To the extent permitted, the amounts have been adjusted to omit, among other things, the effect of extraordinary items (as such term is used under generally
accepted accounting principles), discontinued operations, and merger integration and acquisition costs. The results also include adjustments for select categories of events and transactions that are viewed as being outside our ongoing management of
the business, some categories of which are provided in footnote (b) on page 58 with respect to incentive performance units. When comparing performance metrics to our peers, we adjust their results comparably. 2013 actual includes
adjustments of $57 million or $0.07 per share related to the redemption of trust preferred securities (TRUPs). Expense, earnings and return metrics for 2013 other than return on common equity (without goodwill) and return on economic capital vs.
cost of capital have also been updated to reflect first quarter 2014 adoption of Accounting Standards Update 2014-01 related to investments in low income housing tax credits. |
(2) |
2014 budget results were lower than 2013 actual results for several reasons, including, without limitation, the continued impact of the challenging economic
environment on business results and the runoff of purchase accounting accretion, the recognition that 2013 actual results benefited from a release of reserves for residential mortgage repurchase obligations, and our intent to avoid more balance
sheet risk by adding assets that do not fit within our enterprise risk appetite. |
|
|
|
|
|
PERFORMANCE AGAINST STRATEGIC OBJECTIVES |
Drive growth in newly acquired
and underpenetrated markets |
|
|
|
Continued growth across all lines of business in the Southeast, including increases in key metrics such as average referral sales (Asset Management Group segment), new
primary clients (Corporate & Institutional Banking segment) and increases in average loan volume (Retail Banking segment) |
|
|
|
Increased revenue year over year in the Chicago market in both the Corporate & Institutional Banking and Asset Management group segments |
|
|
|
|
Increased assets under administration and assets under management year over year |
Capture more investable assets |
|
|
|
Increased noninterest income within the Asset Management Group segment |
|
|
|
|
Increased retail brokerage fees and brokerage account client assets |
Redefine the retail banking business |
|
|
|
Increased the percentage of consumers using non-teller channels for the majority of their transactions |
|
|
|
Converted 156 branches to universal branches and closed or consolidated 48 other branches |
Build a
stronger mortgage banking business |
|
|
|
Loan origination and purchase volume down year over year but better than the overall market |
|
|
|
Launched and consolidated all home lending content within one online experience to help improve the customer experience |
Bolster critical
infrastructure and streamline core processes |
|
|
|
Completed significant accomplishments against our multi-year infrastructure enhancement plan |
|
|
|
Implemented an extensive array of tools and methodologies to improve efficiencies and foster continuous improvement across our
Technology and Operations function |
6 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
PROXY STATEMENT SUMMARY
PNC compensation (page 40)
In awarding compensation to each NEO, the Committee considered PNCs overall performance for the
year, as well as performance for the lines of business or functions managed by the NEO, and the individual performance of the NEO. The table below
reflects, for each NEO, the incentive compensation target for 2014 and the actual annual cash incentive and long-term equity-based incentives awarded in 2015 for 2014 performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William S. Demchak |
|
|
Robert Q.
Reilly |
|
|
Michael P.
Lyons |
|
|
E. William
Parsley, III(1) |
|
|
Joseph C.
Guyaux |
|
Incentive compensation target |
|
$ |
8,400,000 |
|
|
$ |
3,000,000 |
|
|
$ |
4,800,000 |
|
|
$ |
5,000,000 |
|
|
$ |
2,480,000 |
|
|
|
|
|
|
|
Incentive compensation awarded |
|
$ |
10,500,000 |
|
|
$ |
3,250,000 |
|
|
$ |
6,000,000 |
|
|
$ |
5,600,000 |
|
|
$ |
3,380,000 |
|
Annual incentive portion |
|
$ |
3,540,000 |
|
|
$ |
1,375,000 |
|
|
$ |
1,980,000 |
|
|
$ |
1,050,000 |
|
|
$ |
1,380,000 |
|
Long-term incentive portion |
|
$ |
6,960,000 |
|
|
$ |
1,875,000 |
|
|
$ |
4,020,000 |
|
|
$ |
4,550,000 |
|
|
$ |
2,000,000 |
|
(1) |
Mr. Parsleys incentive compensation target and award includes two anticipated grants the grant of equity-based awards that all other NEOs
would otherwise receive (valued at $1,250,000) and a separate grant of incentive performance units related to the management of our Asset & Liability Management (ALM) unit, valued at $3,000,000. Please see page 61 for a discussion of
Mr. Parsleys ALM units. |
These amounts differ, in part, from the amounts reflected in the Summary
compensation table on page 56 - that table shows the long-term equity-based incentives awarded in 2014 (for 2013 performance), in accordance with SEC regulations.
PNC governance (page 17)
|
|
You can find out more about our governance policies and principles at www.pnc.com/corporategovernance. |
|
|
Our entire Board is re-elected every year; we have no staggered elections. |
|
|
Our Board is subject to a majority voting requirement; any director not receiving a majority of votes in an uncontested election must tender his
or her resignation to the Board. |
|
|
Our corporate governance guidelines require the Board to have a substantial majority (at least 2/3) of independent directors. Currently, 15 out
of 16 directors (94%) are independent, with our only non-independent director being an executive officer of PNC. A substantial majority of our nominees to the Board (12 out of 13, or 92%) are independent. |
|
|
Our Board has had a Presiding Director, a lead independent director with specific duties, since 2004. |
|
|
Our Presiding Director approves Board meeting schedules and agendas. |
|
|
Our Board meets regularly in executive session, with no members of management present. |
|
|
In 2014, our Board met 11 times and each of our directors attended at least 75% of the aggregate number of meetings of the Board and the
committees on which he or she served. The average attendance of all directors at Board and committee meetings was 99%. All current directors then serving attended our 2014 Annual Meeting of Shareholders. |
|
|
|
We have four primary standing board committees: |
|
|
|
Personnel and Compensation Committee (Compensation) |
|
|
|
Nominating and Governance Committee (Governance) |
Board nominees (page 11)
|
|
|
|
|
|
|
|
|
Name |
|
Age |
|
Director since |
|
Independent |
|
Primary Standing Committee Memberships |
Charles E. Bunch |
|
65 |
|
2007 |
|
þ |
|
Compensation; Governance |
Paul W. Chellgren |
|
72 |
|
1995 |
|
þ |
|
Audit (Chair); Compensation |
Marjorie Rodgers Cheshire |
|
46 |
|
2014 |
|
þ |
|
Audit; Risk |
William S. Demchak |
|
52 |
|
2013 |
|
¨ |
|
Risk |
Andrew T. Feldstein |
|
50 |
|
2013 |
|
þ |
|
Compensation; Risk |
Kay Coles James |
|
65 |
|
2006 |
|
þ |
|
Governance; Risk |
Richard B. Kelson |
|
68 |
|
2002 |
|
þ |
|
Audit; Compensation |
Anthony A. Massaro |
|
70 |
|
2002 |
|
þ |
|
Governance; Risk |
Jane G. Pepper |
|
69 |
|
1997 |
|
þ |
|
Risk |
Donald J. Shepard |
|
68 |
|
2007 |
|
þ |
|
Audit; Governance; Risk (Chair) |
Lorene K. Steffes |
|
69 |
|
2000 |
|
þ |
|
Risk |
Dennis F. Strigl |
|
68 |
|
2001 |
|
þ |
|
Compensation (Chair); Governance |
Thomas J. Usher* |
|
72 |
|
1992 |
|
þ
|
|
Compensation; Governance (Chair) |
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 7
Table of Contents
8 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 9
|
|
|
|
|
Notice
of Annual Meeting
of Shareholders
|
Tuesday, April 28, 2015
11:00 a.m. (Eastern time)
One PNC
Plaza, 15th Floor, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222
WEBCAST
A listen-only
webcast of our annual meeting will be available at www.pnc.com/annualmeeting. An archive of the webcast will be available on our website for thirty days.
CONFERENCE CALL
You may access the listen-only conference call of the annual
meeting by calling 877-272-3498 or 303-223-4398 (international). A telephone replay will be available for one week by calling 800-633-8284 or 402-977-9140
(international), conference ID 21760867.
ITEMS OF BUSINESS
1. |
Electing as directors the 13 nominees named in the proxy statement that follows, to serve until the next annual meeting and until their successors are
elected and qualified; |
2. |
Ratifying the Audit Committees selection of PricewaterhouseCoopers LLP as PNCs independent registered public accounting firm for 2015;
|
3. |
An advisory vote to approve named executive officer compensation; and |
4. |
Such other business as may properly come before the meeting. |
RECORD DATE
The close of business on January 30, 2015 is the record date
for determining shareholders entitled to receive notice of and to vote at the meeting and any adjournment.
MATERIALS TO REVIEW
We began providing access to this proxy statement and a form of proxy card on March 17, 2015. We have made our proxy materials
available electronically. Certain shareholders will receive a notice explaining how to access our proxy materials and vote. Other shareholders will receive a paper copy of this proxy statement and a proxy card.
PROXY VOTING
Even if you
plan to attend the annual meeting in person, we encourage you to cast your vote over the Internet, or by telephone or, if you have a proxy card, by mailing the completed proxy card. This Notice of Annual Meeting and Proxy Statement and our 2014
Annual Report are available at www.envisionreports.com/PNC.
ADMISSION
To be admitted to our annual meeting you must present proof of your stock ownership as of the record date and valid photo identification. Each shareholder may bring one guest who must present valid
photo identification. Please follow the admission procedures described beginning on page 84 of this proxy statement.
March 17, 2015 |
By Order of the Board of Directors, |
Christi Davis
Senior Counsel and Corporate Secretary
10 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
Our Board of Directors determines the number of directors to nominate for election. Our By-laws
contemplate a Board that ranges in size from 5 to 36 directors. For this annual meeting, our Board fixed the number of directors to be elected at 13.
Each of the 13 nominees currently serves on our Board. Beginning on page 12, we include the following information for our nominees:
|
|
the years they first became directors of PNC |
|
|
their principal occupations and public company directorships over the past five years |
|
|
a brief discussion of the specific experience, qualifications, attributes or skills that led to our Boards conclusion that the person
should serve as a director |
The directors will serve for one year, unless they leave the Board early. We do not stagger
our electionsthe entire Board will be considered for election at the 2015 meeting. If elected, each nominee will hold office until the next annual meeting of our shareholders, and until the election and qualification of his or
her successor.
Each nominee consents to being named in this proxy statement and to serve if elected. Our Board has no reason to
believe that any nominee will be unavailable or unable to serve as a director.
On October 2, 2014, the Board of Directors appointed
Marjorie Rodgers Cheshire to serve on the Board. Ms. Cheshire was recommended as a director by one of our non-management directors.
In addition to information on the background and qualifications of each director, this proxy
statement contains other important information related to your evaluation of our nominees. We discuss:
|
|
our Boards leadership structure |
|
|
relationships between PNC and our directors |
|
|
how we evaluate director independence |
|
|
how we pay our directors |
|
|
our director stock ownership requirement |
See the following sections for more details on these topics:
|
|
Corporate Governance (page 17) |
|
|
Director and Executive Officer Relationships (page 28) |
|
|
Director Compensation (page 34) |
|
|
Security Ownership of Directors and Executive Officers (page 77) |
If you sign, date and return your proxy card but do not give voting instructions, or if you do not provide voting instructions when voting over the Internet, we will vote your shares FOR all of the
nominees named on pages 12 to 16. See page 87 regarding the vote required for election of the nominees as directors.
The Board of
Directors recommends a vote FOR each of the nominees listed on pages 12 to 16.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 11
ELECTION OF DIRECTORS (ITEM 1)
|
|
|
|
|
Charles E. Bunch Age 65
Director Since 2007
Experience, Qualifications, Attributes, or Skills
Mr. Bunch is the Chairman and Chief Executive Officer of PPG Industries, Inc., a Pittsburgh-based global supplier of
paints,
|
coatings, optical products, specialty materials, chemicals, glass and fiberglass.
Mr. Bunch received an undergraduate degree from Georgetown University and a masters degree in business administration from Harvard
University.
Mr. Bunchs service as a public company CEO, his extensive management and finance experience and his involvement
in the Pittsburgh community add significant value to our Board. In addition, Mr. Bunch brings regulatory and banking industry experience to our Board as he formerly served as a Director and the Chairman of the Federal Reserve Bank of Cleveland,
our principal banking regulator.
PNC Board Committee Memberships
Nominating and Governance Committee
Personnel and Compensation Committee
Public Company Directorships
ConocoPhillips
H.J. Heinz Company
(until June 2013)
PPG Industries, Inc.
|
|
|
|
|
Paul W. Chellgren Age 72
Director Since 1995
Experience, Qualifications, Attributes, or Skills
Mr. Chellgren is an Operating Partner with Snow Phipps Group, LLC, a New York City-based private equity firm. In 2002, he
retired
|
as the Chairman and Chief Executive Officer of Ashland, Inc., a provider of specialty chemical products, services
and solutions, headquartered in Covington, Kentucky. He also served as the Chief Financial Officer of Ashland.
Mr. Chellgren
received an undergraduate degree from the University of Kentucky, a masters degree in business administration from Harvard University, and a diploma in Developmental Economics from Oxford University.
Mr. Chellgrens service as a public company CFO and his designation as an audit committee financial expert assist the Board in
its oversight of financial and accounting issues. This financial background provides strong leadership of our Audit Committee, which he chairs. Our Board also values his extensive executive management experience, including as a CEO of a public
company, and his involvement in the southern Ohio and northern Kentucky communities that we serve.
PNC Board Committee Memberships
Audit Committee (Chairman)
Executive Committee
Personnel and Compensation Committee
Public Company Directorships
None
|
|
|
|
|
Marjorie Rodgers Cheshire
Age 46 Director Since 2014 Experience, Qualifications, Attributes, or Skills Marjorie Rodgers Cheshire is President and Chief Operating Officer of A&R Development Corp., a diversified real estate development
|
organization focused on the Baltimore and Washington markets. A&Rs portfolio includes residential,
commercial and mixed-use developments, ranging in value from $1 million to $152 million, with an aggregate value of more than $900 million.
Prior to joining A&R, Ms. Cheshire spent many years in the media and sports industries. Her most recent position was as Senior Director of Brand & Consumer Marketing for the
National Football League. Prior to that, Ms. Cheshire held positions as Vice President of Business Development for Oxygen Media, Director and Special Assistant to the Chairman & CEO of ESPN, and Manager of Strategic Marketing for ABC
Daytime. Ms. Cheshire also worked as a consultant with The Boston Consulting Group, a strategic consulting firm serving Fortune 500 companies.
Ms. Cheshire has a B.S. in Economics from the Wharton School of the University of Pennsylvania and a MBA from the Stanford University Graduate School of Business. She is a Trustee of Baltimore
Equitable Insurance, Baltimore School for the Arts, Johns Hopkins Bayview Medical Center, and Johns Hopkins Hospital.
Our Board values
Ms. Cheshires executive management experience, her background in real estate, marketing and media; as well as her involvement in the Baltimore community and her familiarity with this important market for PNC.
PNC Board Committee Memberships
Audit Committee
Risk Committee
Public Company Directorships
None
12 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
|
|
|
|
|
William S. Demchak Age 52
Director Since 2013
Experience, Qualifications, Attributes, or Skills
Mr. Demchak is Chairman, President and Chief Executive Officer of The PNC Financial Services Group, Inc., one of the
largest
|
diversified financial services companies in the United States. Mr. Demchak joined PNC in 2002 as chief
financial officer. In July 2005, he was named head of PNCs Corporate & Institutional Banking segment responsible for PNCs middle market and large corporate businesses, as well as capital markets, real estate finance, equity
management and leasing. Mr. Demchak was promoted to senior vice chairman in 2009, named head of PNC businesses in August 2010, elected president in April 2012, chief executive officer in April 2013 and appointed as chairman in April 2014.
Before joining PNC in 2002, Mr. Demchak served as the global head of Structured Finance and Credit Portfolio for JPMorgan Chase. He
also held key leadership roles at JPMorgan prior to its merger with the Chase Manhattan Corporation in 2000. He was actively involved in developing JPMorgans strategic agenda and was a member of the companys capital and credit risk
committees.
Mr. Demchak is director of BlackRock, Inc. He is a member of The Financial Services Roundtable and serves on the
Regulatory Management Committee. He is a board member and past chairman of the Greater Pittsburgh Council of the Boy Scouts of America. In addition, he serves on the boards of directors of the Extra Mile Education Foundation and the YMCA of
Pittsburgh.
Mr. Demchak received a Bachelor of Science degree from Allegheny College and earned an MBA with an emphasis in
accounting from the University of Michigan.
The Board believes that the current CEO should also serve as a director. Under the
leadership structure discussed elsewhere in this proxy statement, a CEO-director acts as a liaison between directors and management, and assists the Board in its oversight of the company. Mr. Demchaks experiences and strong leadership provide
our Board with insight into the business and strategic priorities of PNC.
PNC Board Committee Memberships
Executive Committee
Risk Committee
Public Company Directorships
BlackRock, Inc.
|
|
|
|
|
Andrew T. Feldstein
Age 50 Director Since 2013 Experience, Qualifications, Attributes, or Skills Mr. Feldstein is the Chief Executive Officer and Co-Chief Investment Officer of BlueMountain Capital Management, a leading
|
alternative asset manager with $20 billion in assets under management and approximately 300 professionals worldwide.
Mr. Feldstein is the Chair of the firms Management Committee and a member of the Investment and Risk Committees.
Prior to
co-founding BlueMountain in 2003, Mr. Feldstein spent over a decade at JPMorgan where he was a Managing Director and served as Head of Structured Credit; Head of High Yield Sales, Trading and Research; and Head of Global Credit Portfolio.
Mr. Feldstein is a Trustee of Third Way, a public policy think tank; a Trustee of the Santa Fe Institute, an independent research and education center; and a member of the Harvard Law School Leadership Council.
Mr. Feldstein received an undergraduate degree from Georgetown University and a J.D. from Harvard Law School.
Our Board values Mr. Feldsteins extensive financial and risk management expertise. As founder and CEO of BlueMountain Capital and through
his senior management positions at JPMorgan, Mr. Feldstein has built a reputation for innovation and significant insight into risk management. The board believes that these skills are particularly valuable to its effective oversight of risk
management and will also be a valuable resource to PNC as it continues to grow its business and strengthen its balance sheet.
PNC
Board Committee Memberships
Personnel and Compensation Committee
Risk Committee
Public Company Directorships
None
|
|
|
|
|
Kay Coles James Age 65
Director Since 2006
Experience, Qualifications, Attributes, or Skills
Ms. James is President and Founder of The Gloucester Institute, a non-profit organization that trains and nurtures leaders in the
African-
|
American community.
From 2001 to 2006, she served as director of the U.S. Office of Personnel Management, where she was President George W. Bushs principal human resources advisor.
She has also provided consulting services as a former Senior Partner in The J.C. Watts Companies.
Ms. James received an undergraduate degree from Hampton University.
Having supervised the management of thousands of federal employees, Ms. James understands large-scale human resources operations. Our Board values these senior-level federal government and
regulatory experiences, Ms. James experience as former chair of the Nominating and Governance Committee and the Compensation Committee at AMERIGROUP Corporation, and her leadership of a non-profit organization in the Greater Washington,
D.C. area, a significant market for PNC.
PNC Board Committee Memberships
Nominating and Governance Committee
Risk Committee
Public Company Directorships
AMERIGROUP Corporation (until 2012)
Magellan Health, Inc.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 13
ELECTION OF DIRECTORS (ITEM 1)
|
|
|
|
|
Richard B. Kelson Age 68
Director Since 2002
Experience, Qualifications, Attributes, or Skills
Mr. Kelson is the Chairman, President and Chief Executive Officer of ServCo, LLC, a strategic sourcing and supply chain management company. He
has also served
|
as an Operating Advisor with Pegasus Capital Advisors, L.P., a private equity fund manager.
Mr. Kelson retired in 2006 as Chairmans Counsel for Alcoa, a leader in the production and management of primary aluminum, fabricated
aluminum, and alumina. At Alcoa, he served as a member of the executive council, the senior leadership group for the company. From 1994 to 1997, Mr. Kelson served as Alcoas General Counsel. From 1997 through 2005, he served as
Alcoas Chief Financial Officer.
Mr. Kelson received an undergraduate degree from the University of Pennsylvania, and a law
degree from the University of Pittsburgh.
Mr. Kelsons service as a public company CFO and his designation as an audit
committee financial expert assist the Board and Audit Committee with the oversight of financial and accounting issues. The Board also values Mr. Kelsons executive management experience and his background as a public company general
counsel, although he does not serve in a legal capacity or provide legal advice to PNC or our Board.
PNC Board Committee Memberships
Audit Committee
Personnel and Compensation Committee
Public Company Directorships
ANADIGICS, Inc.
Commercial Metals
Company (Lead Director)
Lighting Science Group Corporation (until 2010)
MeadWestvaco Corp.
|
|
|
|
|
Anthony A. Massaro Age 70
Director Since 2002
Experience, Qualifications, Attributes, or Skills
Mr. Massaro is the retired Chairman and Chief Executive Officer of Lincoln Electric Holdings, Inc., a leader in the
design,
|
development and manufacture of welding products and cutting equipment. He retired as CEO in April 2005 and as
Chairman in October 2005.
Previously, Mr. Massaro served as a Group President of Westinghouse Electric Corporation, an electrical
equipment and multipurpose engineering company, and in a variety of other executive positions at Westinghouse.
Mr. Massaro received
an undergraduate degree from the University of Pittsburgh in Chemical Engineering. Mr. Massaro completed the Advanced Management Program at Harvard Business School.
Mr. Massaros service as the CEO of a large public company, and his experience in a number of other senior management positions, assist our Boards oversight of management and issues
generally facing public companies.
PNC Board Committee Memberships
Nominating and Governance Committee
Risk Committee
Special Technology Subcommittee
Public Company Directorships
Commercial Metals Company
|
|
|
|
|
Jane G. Pepper Age 69
Director Since 1997
Experience, Qualifications, Attributes, or Skills
In June 2010, Ms. Pepper retired as the President of The Pennsylvania Horticultural Society (PHS), a non-profit organization, and
Americas first horticultural society. |
Ms. Pepper received undergraduate and graduate degrees from the University of Delaware.
Ms. Pepper brings a diverse set of experiences to our Board, beginning with her management experience at PHS. For 30 years, Ms. Pepper led
this Philadelphia-based organization, supervising over 100 employees, and executing a strategic plan with a vision of sustainability and community impact. Beyond this leadership, the Board appreciates her insights as PNC continues to expand our own
environmentally conscious initiatives.
Ms. Pepper brings additional regulatory and banking industry experience to our Board, having
formerly served as a director and the Chairwoman of the Federal Reserve Bank of Philadelphia.
PNC Board Committee Memberships
Risk Committee
Special Compliance Committee
Public Company Directorships
None
14 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
|
|
|
|
|
Donald J. Shepard Age 68
Director Since 2007
Experience, Qualifications, Attributes, or Skills
Mr. Shepard is the retired Chairman of the Executive Board and Chief Executive Officer of AEGON N.V., a large life insurance and pension
company. |
Mr. Shepard received a masters degree in business administration from the University of Chicago.
Mr. Shepard joined our Board following PNCs acquisition of Mercantile Bankshares Corporation. He joined the Mercantile Board
of Directors in 1992.
Mr. Shepards service as the CEO of a large, international public company, particularly a company in the
financial services sector, gives him insights into many issues facing PNC, and supports the Boards ability to oversee complex and dynamic issues. Mr. Shepards duties and experiences at AEGON also assist our Board with its oversight
of financial and risk issues. Our Board also values Mr. Shepards experience on the Board of a public company in the banking business and his familiarity with the Baltimore community.
PNC Board Committee Memberships
Executive Committee
Audit Committee
Nominating and Governance Committee
Risk Committee (Chairman)
Special
Technology Subcommittee
Public Company Directorships
CSX Corporation
The Travelers Companies, Inc.
|
|
|
|
|
Lorene K. Steffes Age 69
Director Since 2000
Experience, Qualifications, Attributes, or Skills
Ms. Steffes is an independent business advisor with executive, business management and technical expertise in the
|
telecommunications and information technology industries. She formerly served as Vice President and General Manager,
Global Electronics Industry, for IBM, an information technology company. Ms. Steffes also served as the President and Chief Executive Officer of Transarc Corporation, a software development firm, which was later acquired by IBM.
Ms. Steffes received undergraduate and masters degrees from Northern Illinois University.
Our Board values Ms. Steffess managerial experiences throughout the technology industry, including as a chief executive. Her wide array
of experiences in this industry and her understanding of operational and technological issues assist the Board in its oversight of technological issues, which have become increasingly important for large, complex banking organizations.
PNC Board Committee Memberships
Risk Committee
Special Technology Subcommittee (Chair)
Public Company Directorships
RadiSys Corporation
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 15
ELECTION OF DIRECTORS (ITEM 1)
|
|
|
|
|
Dennis F. Strigl Age 68
Director Since 2001
Experience, Qualifications, Attributes, or Skills
Mr. Strigl served as the President and Chief Operating Officer of Verizon Communications Inc., one of the worlds leading
providers
|
of communications services, until his retirement in December 2009. Prior to that, he was the President and Chief
Executive Officer of Verizon Wireless, a joint venture controlled by Verizon.
Mr. Strigl received an undergraduate degree from
Canisius College and a masters degree in business administration from Fairleigh Dickinson University.
Our Board values
Mr. Strigls service as a senior executive at a large public company, and his former executive management expertise as the CEO of Verizon Wireless. His management of a large workforce at Verizon informs his judgment as the Chair of our
Personnel and Compensation Committee and gives him a strong understanding of human resources and compensation matters. Mr. Strigls additional responsibility for internal functional services, such as finance and real estate, adds depth and
experience to the Boards ability to oversee the operations of our company.
PNC Board Committee Memberships
Executive Committee
Nominating and
Governance Committee
Personnel and Compensation Committee (Chairman)
Public Company Directorships
ANADIGICS, Inc. (2000-2008; 2010-Present)
Eastman Kodak Company (until September 2013)
Nokia Corporation
Tellabs, Inc. (until December 2013)
|
|
|
|
|
Thomas J. Usher Age 72
Director Since 1992
Experience, Qualifications, Attributes, or Skills
Mr. Usher is the non-executive Chairman of Marathon Petroleum Corporation, a transportation fuels refining company,
which
|
began as an independent company on July 1, 2011. Until July, 2011 he served as the non-executive Chairman of
Marathon Oil Corporation, an integrated international energy company. He formerly served as the Chairman, Chief Executive Officer, and President of United States Steel Corporation, an integrated international steel producer, until his retirement in
2004. He served as the Chairman of the Board of U.S. Steel until 2006.
Mr. Usher received an undergraduate degree, masters
degree, and Ph.D. from the University of Pittsburgh.
Our Board values Mr. Ushers extensive executive management experience,
including as the CEO of a public company, and significant involvement throughout the Pittsburgh community. In his duties as the Boards Presiding Director, and as Chairman of the Nominating and Governance Committee, Mr. Usher can draw from
a diverse set of leadership experiences and governance perspectives at large public companies, having served as a CEO, a non-executive Chairman, and an independent director.
PNC Board Committee Memberships
Presiding Director
Executive Committee (Chairman)
Nominating and Governance Committee (Chairman)
Personnel and Compensation Committee
Public Company Directorships
H.J. Heinz Company (until June 2013)
Marathon Petroleum Corporation (Non-Executive Chairman)
PPG Industries, Inc.
16 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
CORPORATE GOVERNANCE
Our Board is committed to strong corporate governance practices. Through the Nominating and
Governance Committee, the Board evaluates its governance policies and practices against evolving best practices. This section highlights some of our corporate governance policies and practices. Please see
www.pnc.com/corporategovernance for additional information about corporate governance at PNC, including:
|
|
Corporate governance guidelines |
|
|
Board committee charters
|
To receive free, printed copies of any of these
documents, please send
a request to:
Corporate Secretary
The PNC Financial Services Group, Inc.
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
or corporate.secretary@pnc.com
This proxy statement is also available
at
www.pnc.com/proxystatement
Recent corporate governance developments
Five of our current directors have reached the Board adopted mandatory retirement age of 72. In
anticipation of this event, the Board and Nominating and Governance Committee have been addressing Board composition and director succession planning. Mr. Feldstein was appointed to our Board in 2013 and elected by shareholders at the 2014
annual meeting. In October 2014, the Board appointed Marjorie Rodgers Cheshire as a director. As part of its analysis of orderly director succession and optimal Board composition, the Nominating and Governance Committee recommended, and our Board
approved, a limited waiver of the mandatory retirement age for two of our directors: Paul W. Chellgren, the current chair of our Audit Committee, and Thomas J. Usher, the current chair of our Nominating and Governance Committee and our Presiding
Director, in connection with director nominations made by them in February 2015. Mr. Chellgren and Mr. Usher abstained from this vote. Mr. Chellgren and Mr. Usher have been nominated by our Board for election by shareholders at
the 2015 annual meeting and are included in the Board nominees beginning on page 12.
In connection with this waiver, it is expected
that Mr. Chellgren will remain a member of the Audit
Committee and will assist a new chair of that committee, to be appointed by the Board following our annual meeting of shareholders in April 2015, during the next year. It is also expected that
Mr. Usher will remain a member of the Nominating and Governance Committee and will assist a new chair of that committee during the next year. The Board also waived the provision in the corporate governance guidelines that the Presiding Director
also serve as the chair of the Nominating and Governance Committee. This waiver is limited to the period ending with the 2016 annual meeting of shareholders. The Board has determined that Mr. Usher should continue to perform the duties of the
Presiding Director during the transitional year of our new Nominating and Governance Committee chair.
The Board believes that it is in
the best interests of the company to waive the mandatory retirement age provision on a limited basis as described above. The Board does not intend to amend this retirement age policy on a permanent basis. The Board also believes that it is in the
best interests of the company for Mr. Usher to remain the Presiding Director through the 2016 annual meeting.
Corporate governance guidelines
Our Board has approved corporate governance guidelines. Our Boards Nominating and Governance
Committee reviews the corporate governance guidelines at least once a year. Any changes
recommended by the Committee are approved by the Board. The guidelines address important principles adopted by the Board, including:
|
|
The qualifications that we want to see in a director
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 17
CORPORATE GOVERNANCE
|
|
The director nomination process |
|
|
The duties of our lead independent director (Presiding Director) |
|
|
How the Board committees serve to support the Boards duties |
|
|
A description of ordinary course relationships that will not impair a directors independence |
|
|
The importance of meeting in executive session without management |
|
|
The importance of having access to management |
|
|
The mandatory director retirement age (72) |
|
|
How the Board evaluates our CEOs performance |
|
|
How the Board considers management succession planning |
|
|
Our views on directors holding other board positions |
|
|
How the Board continually evaluates its own performance |
|
|
Our approach to director education |
|
|
The Boards role in strategic planning
|
Annual meeting format
Although our By-laws provide the ability to hold a virtual only annual meeting of shareholders, PNC
currently has no intention to conduct its annual meeting of shareholders in the form of a virtual only annual meeting. Our By-laws preserve our option under Pennsylvania law to hold a virtual annual meeting should we ever decide to do so. While we
will continue to monitor the development of corporate governance practices in regard to the conduct of annual meetings, we currently believe that we would move to a combined form of annual
meeting supplementing the in-person meeting with a virtual annual meeting before we would consider any further format changes to our annual meeting.
Our
Board leadership structure
Based on an assessment of its current needs and the composition, skills, and qualifications of the
directors, the Board believes that the appropriate leadership structure should include the following attributes:
|
|
A substantial majority (at least 2/3) of independent directors |
|
|
Regular executive sessions of all independent directors without management present |
The Boards current leadership structure includes all three attributes. The Board has not adopted a policy with respect to separating the
Chairman and CEO positions. The Board believes that the leadership structure should be flexible enough to accommodate different approaches based on an evaluation of relevant facts and circumstances. The Board considers its structure and leadership
each year. The Personnel and Compensation Committee discusses whether to separate the positions of Chairman and CEO as part of its ongoing evaluation of management succession plans.
William S. Demchak, our current CEO, also serves as Chairman of the Board. Thomas J. Usher, the Boards Presiding Director, serves as our lead independent director. We describe his duties in
more detail below.
Substantial majority of independent directors. We have long maintained a Board with a substantial
majority of directors who are not PNC employees. The NYSE requires at least a majority of our directors to be independent from management.
Mr. Demchak is the only director who is not independent under NYSEs
bright-line rules. The Board has affirmed the independence of each of our other 12 nominees for director. Please see Director and Executive Officer Relationships on pages 28 to 30 for a description of how we evaluate independence.
Presiding Director duties. As the Presiding Director, Mr. Usher is the lead independent director for our Board. The
Boards independent and non-management directors selected him for this role. The Board approved the following duties for the Presiding Director, which are included in our corporate governance guidelines:
|
|
Preside at meetings of the Board of Directors in the event of the Chairmans unavailability. |
|
|
Convene and preside at executive sessions of the Boards independent directors whenever he or she deems it appropriate to do so.
|
|
|
Preside at executive sessions of the Boards non-management and independent directors. |
|
|
Confer with the Chairman or CEO immediately following the executive sessions of the Boards non-management or independent directors to
convey the substance of the discussions held during those sessions, subject to any limitations specified by the independent directors. |
|
|
Act as the principal liaison between the Chairman and the CEO and the Boards independent directors. |
|
|
Be available for confidential discussions with any non-management or independent director who may
|
18 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
CORPORATE GOVERNANCE
|
|
have concerns which he or she believes have not been properly considered by the Board as a whole. |
|
|
Following consultation with the Chairman, CEO and other directors as appropriate, approve the Boards meeting schedule and agendas, and the
information provided to the Board, in order to promote the effectiveness of the Boards operation and decision making and help ensure that there is sufficient time for discussion of all agenda items. |
|
|
Be available for consultation and direct communication with major shareholders as appropriate. |
|
|
Discharge such other responsibilities as the Boards independent directors may assign from time to time. |
During the course of the year, the Presiding Director may suggest, revise, or otherwise discuss agenda items for the Board meetings with the
Chairman or CEO. In between meetings, each director is
encouraged to raise any topics or issues with the Presiding Director that the director believes should be discussed among the non-management or independent directors.
As Chairman of the Nominating and Governance Committee, the Presiding Director leads the Board and committee annual self-evaluation process and the
evaluation of the independence of directors. That Committee also reviews, and the Presiding Director as Chairman of the Committee reports to the Board, significant developments in corporate governance.
Regular executive sessions of independent directors. Our directors have met and will continue to meet in regularly scheduled executive
sessions without management present. The NYSE requires our independent directors to meet once a year. Under our Boards own policy, our independent directors meet by themselves at least quarterly. Our Presiding Director leads these executive
sessions.
Communicating with our Board
If you want to communicate directly to our
directors, please mail your
communication to
the following address:
Presiding Director
The PNC Financial Services Group, Inc.
Board of Directors
P.O. Box 2705
Pittsburgh, Pennsylvania 15230-2705
If you follow this process, your communication will not be opened or screened by a PNC employee. The Presiding Director will
receive the communication and determine how to respond. Depending on the content, he may forward the communication to a PNC employee, a third party, another director, a committee, or the full board.
If you send a director-related communication to a PNC location or by electronic mail to a PNC
employee, we will evaluate it based on a process established by our Boards independent directors. Under this process, PNC employees will determine what communications are relayed to directors.
If you are a shareholder and want to recommend a candidate for our Board to be considered by our Nominating and Governance Committee, please follow
the instructions on page 24.
If you are a shareholder and want to directly nominate a director candidate at an annual meeting, submit a
proposal at an annual meeting, or submit a proposal to us to be included in our proxy materials next year, please follow the instructions on page 89.
Our
code of ethics
PNC has adopted, and the Audit Committee has approved, a Code of Business Conduct and Ethics that
applies generally to all employees and directors.
Our code of ethics addresses these important topics, among others:
|
|
Our commitment to ethics and values |
|
|
Fair dealing with customers, suppliers, competitors, and employees |
|
|
Conflicts and potential conflicts of interest |
|
|
Self-dealing and outside employment |
|
|
Insider trading and other trading restrictions, including prohibitions on transactions in any derivative of PNC securities, including buying and
writing options |
|
|
Gifts and entertainment |
|
|
Creating business records, document retention, and protecting confidential information |
|
|
Protection and proper use of our assets, including intellectual property and electronic media |
|
|
Communicating with the public |
|
|
Political contributions and fundraising |
|
|
Compliance with laws and regulations |
|
|
Protection from retaliation |
The code of ethics is available on our website (www.pnc.com/corporategovernance). Any shareholder may also request a free print copy by writing to our Corporate Secretary at the address given
on page 17.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 19
CORPORATE GOVERNANCE
We intend that this code satisfies the SECs requirement to adopt a code that applies to a
companys CEO and senior financial officers. Our Boards Audit Committee must approve any waivers or exceptions to code provisions for our directors or executive officers. We will post on our website any future amendments to, or waivers
from, a provision
of the code of ethics that applies to our directors or executive officers (including our Chairman and CEO, CFO, and Controller).
PNC has also adopted, and our Audit Committee has approved, Ethics Guidelines for Directors to supplement the PNC code of ethics.
Orientation and education
All of our new directors undergo a director orientation program. In addition to written materials
provided to new directors, in-person orientation sessions are held for each new director. In-person orientation sessions generally include meetings with members of senior management to familiarize new directors with PNCs strategic plan, its
significant financial, accounting and risk management issues, its compliance program, its Code of Business Conduct and Ethics and related policies, and specific matters related to the committees to which a new director has been appointed.
Continuing education is provided to the directors through a combination of in-person sessions held
in connection with, or as part of, a meeting of the Board or a committee, and coordination of attendance by directors at outside seminars relevant to the duties of a director. The sessions include training on complex products and services,
PNCs lines of business, significant risks to PNC, and other topics identified by our Board and management.
Board committees
Our Board currently has five standing committees. Four of these committeesAudit, Nominating and
Governance, Personnel and Compensation, and Riskmeet on a regular basis. The Executive Committee meets as needed and is composed of our Chairman and CEO, and the chairs of our other four primary standing committees. The Executive Committee may
act on behalf of the Board and reports regularly to the full Board. Our Presiding Director chairs the Executive Committee, which met one time in 2014.
Our By-laws authorize the Board to create other committees. Each committee may form and delegate authority to subcommittees of one or more committee members. Our Board created a Special Compliance
Committee to assist the Board in its oversight and reporting responsibilities in connection with relevant provisions of consent orders entered into between PNC and banking regulators related to certain residential mortgage and identity theft
protection product matters. Our Risk Committee has formed a subcommittee to facilitate Board-level oversight of our
enterprise-
wide technology risk (the Special Technology Subcommittee).
Each committee
operates under a written charter approved by the Board, or in the case of a sub-committee the applicable standing committee. Each committee and subcommittee annually reviews and reassesses its charter.
Each of the four primary standing committees also performs an annual self-evaluation to determine whether the committee and any of its subcommittees
is functioning effectively and fulfilling its charter duties. The Special Compliance Committee performed a self-evaluation in 2014 and will perform an annual evaluation until it is dissolved.
We describe the main responsibilities of the Boards four primary standing committees below. The descriptions of the committee functions in this proxy statement are qualified by
reference to the charters and our relevant By-law provisions. The charters for the four Board committees discussed in this section are all available on our website at www.pnc.com/corporategovernance.
20 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
CORPORATE GOVERNANCE
Audit Committee
|
|
|
|
|
|
|
Chair |
|
Other members: |
|
Paul W. Chellgren |
|
Richard O. Berndt |
|
|
|
Marjorie Rodgers Cheshire |
|
|
|
Richard B. Kelson |
|
|
|
Donald J. Shepard |
|
|
|
George H. Walls, Jr. |
|
|
|
|
The Audit Committee consists entirely of directors who are independent as defined in the
NYSEs corporate governance rules and in the regulations of the Securities and Exchange Commission related to audit committee members. When our Board meets on April 28, 2015, only independent directors will be appointed to the Committee.
Neither Mr. Berndt nor General Walls will stand for re-election to the Board at the annual meeting as they have
each reached the mandatory retirement age set in PNCs corporate governance guidelines and, following the annual meeting, neither will be a member of the Committee.
The Board has determined that each Audit Committee member is financially literate and that at least two members possess accounting or related financial management expertise. The Board made these
determinations in its business judgment, based on its interpretation of the NYSEs requirements for committee members. Acting on the recommendation of the Nominating and Governance Committee, the Board of Directors determined that
Mr. Chellgren and Mr. Kelson are each an audit committee financial expert, as that term is defined by the SEC.
Our Board most recently approved the charter of the Audit Committee on November 13, 2014, and it is available on our website.
The Audit Committee satisfies the requirements of SEC Rule 10A-3, which includes the following topics:
|
|
The independence of committee members |
|
|
|
The responsibility for selecting and overseeing our independent auditors |
|
|
|
The establishment of procedures for handling complaints regarding our accounting practices |
|
|
|
The authority of the committee to engage advisors |
|
|
|
The determination of appropriate funding for payment of the independent auditors and any outside advisors engaged by the committee and for the
payment of the committees ordinary administrative expenses |
|
The Audit Committees primary purposes are to assist the Board
by:
|
|
Monitoring the integrity of our consolidated financial statements |
|
|
|
Monitoring internal control over financial reporting |
|
|
|
Monitoring compliance with our code of ethics |
|
|
|
Evaluating and monitoring the qualifications and independence of our independent auditors |
|
|
|
Evaluating and monitoring the performance of our internal audit function and our independent auditors |
|
At each in-person meeting of our full Board, the chair of the
Committee presents a report of the items discussed and the actions approved at previous meetings.
The Audit
Committees responsibility is one of oversight. Our management is responsible for preparing our consolidated financial statements, for maintaining internal controls, and for our compliance with laws and regulations, and the independent auditors
are responsible for auditing our consolidated financial statements.
The Committee typically reviews
and approves the internal and external audit plans. The Committee is directly responsible for the selection, appointment, compensation and oversight of our independent auditors (including the resolution of any disagreements between management and
the auditors regarding financial reporting if disagreements occur) for the purpose of preparing or issuing an audit report or related work. We describe the role of the Committee in regard to the independent auditors in more detail on page 79. For
work performed by the independent auditors, the Committee must pre-approve all audit engagement fees and terms, as well as all permitted non-audit engagements. The Committee (or delegate) pre-approves all audit services, audit-related services, and
permitted non-audit services. The Committee considers whether providing audit services, audit-related services, and permitted non-audit services will impair the auditors independence. We describe the Committees procedures for the
pre-approval of audit services, audit-related services, and permitted non-audit services on page 80. The Committee receives routine reports on finance, reserve adequacy, ethics, and internal and external audit.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 21
CORPORATE GOVERNANCE
The Committee has the authority to retain independent legal, accounting, economic, or other advisors. The Committee holds executive sessions with our management, the General Auditor, the Chief
Ethics Officer, and the independent auditors. The independent auditors report directly to the Committee. The Committee appoints our General Auditor, who leads PNCs internal audit function and reports directly to the Committee. The Committee
reviews the performance and approves the compensation of our General Auditor.
Under our corporate governance guidelines,
Audit Committee members may serve on the audit committee of no more than three public companies, including PNC.
The Audit Committee has approved the report on page 81 as required under its charter and in accordance with SEC regulations.
22 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
CORPORATE GOVERNANCE
Nominating and Governance Committee
|
|
|
|
|
|
|
Chair |
|
Other members: |
|
Thomas J. Usher |
|
Charles E. Bunch |
|
|
|
Kay Coles James |
|
|
|
Anthony A. Massaro |
|
|
|
Donald J. Shepard |
|
|
|
Dennis F. Strigl |
|
|
|
Helge H. Wehmeier |
The Nominating and Governance Committee consists entirely of independent directors. When our Board
meets on April 28, 2015, only independent directors will be appointed to the Committee.
Mr. Wehmeier will not
stand for re-election to the Board at the annual meeting as he has reached the mandatory retirement age set in PNCs corporate governance guidelines and, following the annual meeting, he will no longer be a member of the Committee.
Our Board most recently approved the charter of the Nominating and Governance Committee on November 13, 2014, and it is
available on our website.
At each in-person meeting of our full Board, the chair of the Committee presents a report of
the items discussed and the actions approved at previous meetings. The primary purpose of our Nominating and Governance Committee is to assist our Board in promoting the best interests of PNC and its shareholders through the implementation of sound
corporate governance principles and practices. The Committee also assists the Board by identifying individuals qualified to become Board members. The Committee recommends to the Board the director nominees for each annual meeting, and may also
recommend the appointment of qualified individuals as directors between annual meetings.
In addition to the annual
self-evaluation that all primary standing committees perform, the Nominating and Governance Committee also oversees the annual evaluation of the performance of the Board and committees and reports to the Board on the evaluation results, as necessary
or appropriate. The Committee annually reviews and recommends any changes to the Executive Committee charter.
How
we evaluate directors and candidates. At least annually, the Committee assesses the skills, qualifications and experience of our directors and recommends a slate of nominees to the Board. From time to time, the Committee also considers
whether to change the composition of our Board. In evaluating existing directors or new candidates, the Committee assesses the needs of the Board and the qualifications of the individual. Please see the discussion on pages 12 to 16 for more
information on each of our current director nominees.
Our Board and its committees must satisfy SEC, NYSE, and other
banking regulatory standards. At least a majority of our directors must be independent under the NYSE standards, however, our corporate governance guidelines require that a substantial majority (at least 2/3) of our directors be independent. We
require a sufficient number of independent directors to satisfy the membership needs of committees that also require independence.
Beyond that, the Nominating and Governance Committee expects directors to gain a sound understanding of our strategic vision, our mix of businesses, and our approach to regulatory relations and risk
management. The Board must possess a mix of qualities and skills to address the various risks facing PNC. For a discussion of our Boards oversight of risk, please see the section entitled Risk Committee, on page 27.
The Committee has not adopted any specific, minimum qualifications for director candidates. When evaluating each director, as well
as new candidates for nomination, the Committee considers the following Board-approved criteria:
|
|
A sustained record of high achievement in financial services, business, industry, government, academia, the professions, or civic, charitable, or
non-profit organizations |
|
|
|
Manifest competence and integrity |
|
|
|
A strong commitment to the ethical and diligent pursuit of shareholders best interest |
|
|
|
The strength of character necessary to challenge managements recommendations and actions when appropriate and to confirm the adequacy and
completeness of managements responses to such challenges to his or her satisfaction |
|
|
|
Our Boards strong desire to maintain its diversity in terms of race and gender |
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 23
CORPORATE GOVERNANCE
|
|
Personal qualities that will help to sustain an atmosphere of mutual respect and collegiality among the members of our Board |
|
The Committee also considers the diversity, age, skills, experience in
the context of the current needs of the Board and its committees, meeting attendance and participation, and the value of a directors contributions to the effectiveness of our Board and its committees.
Although the Board has not adopted a formal policy on diversity, the Committee considers the diversity of directors in the context
of the Boards overall needs. The Committee evaluates diversity in a broad sense, recognizing the benefits of demographic diversity, but also considering the breadth of diverse backgrounds, skills, and experiences that directors may bring to
our Board.
How we identify new directors. The Nominating and Governance Committee may identify potential
directors in a number of ways. The Committee may consider recommendations made by current or former directors or members of executive management. The Committee may also identify potential directors through contacts in the business, civic, academic,
legal and non-profit communities. When appropriate, the Committee may retain a search firm to identify candidates.
In
addition, the Committee will consider director candidates recommended by our shareholders for nomination at next years annual meeting. For the Committee to consider a director candidate for nomination, the shareholder must submit the
recommendation in writing to the Corporate Secretary at our principal executive office. Each submission must include the information required under Director nomination process in Section 3 of our corporate governance guidelines
found at www.pnc.com/corporategovernance and must be received by November 18, 2015.
The Committee will evaluate
candidates recommended by a shareholder in the same manner as candidates identified by the Committee or recommended by others. The Committee will not consider any candidate with an obvious impediment to serving as one of our directors.
The Committee will meet to consider relevant information regarding a director candidate, in light of the Board approved evaluation
criteria and needs of our Board. If the Committee does not recommend a candidate for nomination or appointment, or for more evaluation, no further action is taken. The chair of the Committee will later report this decision to the full Board. For
shareholder-recommended candidates, the Corporate Secretary will communicate the decision to the shareholder.
If the
Committee decides to recommend a candidate to our Board as a nominee for election at an annual meeting of shareholders or for appointment by our Board, the chair of the Committee will report that decision to the full Board. After allowing for a
discussion, the full Board will vote on whether to nominate the candidate for election or appoint the candidate to the Board.
As our corporate governance guidelines describe, invitations to join the Board should come from the Presiding Director and the Chairman, jointly acting on behalf of our Board.
Shareholders who wish to directly nominate a director candidate at an annual meeting must do so in accordance
with the procedures contained in our By-laws and should follow the instructions in the section entitled Shareholder proposals for 2016 annual meetingAdvance notice procedures on page 89.
24 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
CORPORATE GOVERNANCE
Personnel and Compensation Committee
|
|
|
|
|
|
|
Chair |
|
Other members: |
|
Dennis F. Strigl |
|
Charles E. Bunch |
|
|
|
Paul W. Chellgren |
|
|
|
Andrew T. Feldstein |
|
|
|
Richard B. Kelson |
|
|
|
Thomas J. Usher |
|
|
|
|
The Personnel and Compensation Committee consists entirely of independent directors. The Committee
membership is intended to satisfy the independence standards established by applicable federal income tax and securities laws, as well as NYSE standards. When our Board meets on April 28, 2015, only independent directors will be appointed to
the Committee.
Our Board most recently approved the charter of the Committee on November 13, 2014, and it is
available on our website.
The Committees principal purpose is to discharge our Boards oversight
responsibilities relating to the compensation of our executive officers and other specified responsibilities related to personnel and compensation matters affecting PNC. The Committee may also evaluate and approve, or recommend for approval,
benefit, incentive compensation, severance, equity-based or other compensation plans, policies, and programs. The Committee charter provides that approval of the compensation of the General Auditor and the Chief Risk Officer shall be made by the
Audit Committee and the Risk Committee, respectively.
The Committee has the authority to retain independent legal,
compensation, accounting, or other advisors. The charter provides the Committee with the sole authority to retain and terminate a compensation consultant acting on the Committees behalf, and to approve the consultants fees and other
retention terms. The Committee retained an independent compensation consultant in 2014 and prior years. See Role of compensation consultants below.
The Committee also reviews the Compensation Discussion and Analysis (CD&A) section of the proxy statement with management. See the Compensation Committee Report on page 53. The CD&A begins
on page 36. The Committee reviews the aggregate risk impact of our incentive compensation programs and plans. See Compensation and Risk on pages 54 and 55.
The Committee has responsibility for reviewing and evaluating the development of an executive management succession plan and for reviewing our progress on diversity. The Committee reviews a detailed
succession planning report at least annually. The materials typically include a discussion of the individual performance of executive officers as well as succession plans and development initiatives for other high potential employees. These
materials provide necessary background and context to the Committee, and give each member a familiarity with the employees position, duties, responsibilities, and performance.
How the committee makes decisions. The Committee meets at least six times a year. Before each meeting, the chair of
the Committee reviews the agenda, materials, and issues with members of our management and the Committees independent executive compensation consultant, as appropriate. The Committee may invite legal counsel or other external consultants to
advise the Committee during meetings and preparatory sessions.
The Committee regularly meets in executive sessions
without management present. At each in-person meeting of our full Board, the chair of the Committee presents a report of the items discussed and the actions approved at previous meetings. The chair provides these reports during an executive session
of the Board. The Committee consults with independent directors before approving the CEOs compensation.
The
Committee adopted guidelines for information that will be presented to the Committee. The guidelines contemplate, among other things, that any major changes in policies or programs be considered over the course of two separate Committee meetings,
with any vote occurring at the later meeting.
The Committee reviews all of the elements of the
compensation programs periodically and adjusts those programs as appropriate. Each year, the Committee makes decisions regarding the amount of annual compensation and equity-based or other longer-term compensation for our executive officers and
other designated senior employees. For the most part, these decisions are made in the first quarter of each year, following the evaluation of the prior years performance.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 25
CORPORATE GOVERNANCE
Delegations of authority. In May 2014, the Committee updated the authority delegated to management to make certain decisions or to take certain actions with respect to
compensation or benefit plans or arrangements (other than those that are solely or predominantly for the benefit of executive officers).
For employee benefit, bonus, incentive compensation, severance, equity-based and other compensation or incentive plans and arrangements, the Committee delegated to our Chief Human Resources Officer
(or her designee) the ability to adopt a new plan or arrangement or amend an existing one if:
|
|
the decision is not expected to result in a material increase in incremental expense to PNC, defined as an expense that exceeds 5% of the
relevant expense for that plan category, or |
|
|
|
the change is of a technical nature or is otherwise not material. |
|
This delegation also includes authority to take certain actions to
implement, administer, interpret, construe or make eligibility determinations under the plans and arrangements.
For
grants of equity or equity-based awards, the Committee has delegated to our Chief Executive Officer and our Chief Human Resources Officer (or the designee of either) the responsibility to make decisions with respect to equity grants for individuals
who are not designated by the Committee as executives, including the determination of participants and grant sizes, allocation of the pool from which grants will be made, establishment of the terms of such grants, approval of amendments to
outstanding grants and exercise of any discretionary authority pursuant to the terms of the grants.
The Committee has
also delegated to the Audit Committee (or a qualified subcommittee) and to a qualified subcommittee of the Risk Committee the authority to make equity-based grants and other compensation under applicable plans to the General Auditor and Chief Risk
Officer, respectively.
Managements role in compensation decisions. Our executive officers, including
our CEO and our Chief Human Resources Officer, often review information with the Committee during meetings and may present managements views or recommendations. The Committee evaluates these recommendations, generally in consultation with an
independent compensation consultant retained by the Committee, who attends each meeting.
The chair of the Committee
typically meets with management and an independent compensation consultant before each Committee meeting to discuss agenda topics, areas of focus, or outstanding issues. The chair schedules other meetings with the Committees compensation
consultant without management present, as needed. Occasionally, management will schedule meetings with each Committee member to discuss substantive issues. For more complicated issues, these one-on-one meetings provide a dedicated forum for
Committee members to ask questions outside of the meeting environment.
During Committee meetings, the CEO often reviews
corporate and individual performance as part of the compensation discussions, and other members of executive management may be invited to speak to the Committee about specific performance or risk management. The Committee reviews any compensation
decisions for the Chief Human Resources Officer and CEO and chairman in executive session, without either officer present for the discussion of their compensation. Any recommendations for CEO compensation are also discussed with the full Board, with
no members of management present for the discussion.
Role of compensation consultants. The Committee has
the sole authority to retain and terminate any compensation consultant directly assisting it. The Committee also has the sole authority to approve fees and other engagement terms. The Committee receives comparative compensation data from our
management, from proxy statements and other public disclosures, and through surveys and reports prepared by compensation consultants.
The Committee retained Meridian Compensation Partners as its independent compensation consultant for 2014. In this capacity, Meridian reports directly to the Committee. In 2014, one or more
representatives attended all of the in-person and telephonic meetings of the Committee, and met regularly with the Committee without members of management present. Meridian also reviewed meeting agendas.
Meridian and members of management assisted the Committee in its review of proposed compensation packages for our executive
officers. For the 2014 performance year, Meridian prepared discussion materials for the compensation of the CEO, which were reviewed in executive session without any members of management present. Meridian also prepared other benchmarking reviews
and pay for performance analyses for the Committee. PNC did not pay any fees to Meridian in 2014 other than in connection with work for the Committee.
The Committee evaluated whether the work of Meridian raised any conflict of interest. The Committee considered various factors, including six factors mandated by the SEC rules, and determined that
no conflict of interest was raised by the work of Meridian described in this proxy statement.
Our
management retains other compensation consultants for its own use. In 2014, our management retained McLagan to provide certain market data in the financial services industry. It also uses Towers
26 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
CORPORATE GOVERNANCE
Watson, a global professional services firm, as its principal compensation advisor. Towers Watson provides from time to time various
actuarial and management consulting services to us, including:
|
|
Preparing specific actuarial calculations on values under our retirement plans |
|
|
|
Preparing surveys of competitive pay practices |
|
|
|
Analyzing our director compensation packages and providing reports to our management and the Boards Nominating and Governance Committee
|
|
|
|
Providing guidance on certain aspects of total rewards, talent management and other human resources initiatives |
|
Reports prepared by Towers Watson and McLagan that relate to executive
compensation may also be shared with the Committee.
Compensation committee interlocks and insider
participation. None of the current members of the Personnel and Compensation Committee are officers or employees or former officers of PNC or any of our subsidiaries. No PNC executive officer served on the compensation committee of another
entity that employed an executive officer who also served on our Board. No PNC executive officer served as a director of an entity that employed an executive officer who also served on our Personnel and Compensation Committee.
Certain members of the Personnel and Compensation Committee, their immediate family members, and entities with which they are
affiliated, were our customers or had transactions with us (or our subsidiaries) during 2014. Transactions that involved loans or commitments by subsidiary banks were made in the ordinary course of business and on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.
Please see Director and Executive Officer RelationshipsRelated person transactions policies and proceduresRegulation
O policies and procedures, which begins on page 31, for more information.
Risk Committee
|
|
|
|
|
|
|
|
|
Chair |
|
Other members: |
|
|
|
Donald J. Shepard |
|
Richard O. Berndt |
|
Anthony A. Massaro |
|
|
|
Marjorie Rodgers Cheshire |
|
Jane G. Pepper |
|
|
|
William S. Demchak |
|
Lorene K. Steffes |
|
|
|
Andrew T. Feldstein |
|
George H. Walls, Jr. |
|
|
|
Kay Coles James |
|
|
|
|
|
|
|
|
The Board performs its risk oversight function primarily through the Risk Committee, which includes
both independent and management directors.
Neither Mr. Berndt nor General Walls will stand for re-election to the
Board at the annual meeting as they have each reached the mandatory retirement age set in PNCs corporate governance guidelines and, following the annual meeting, neither will be a member of the Committee.
Our Board most recently approved the charter of the Committee on November 13, 2014, and it is available on our website.
At each in-person meeting of our full Board, the chair of the Committee presents a report of the items discussed and the
actions approved at previous meetings. The Committees purpose is to provide oversight of our enterprise-wide risk governance framework and activities and the processes established to identify, measure, monitor, and manage direct and indirect
risks of PNC. We consider credit risk, market risk (interest rate and price risk), liquidity risk, and operational risk (compliance, legal, fiduciary and investment risk) to be direct risks. Indirect risks include business risk, strategic risk,
model risk, insurance risk and reputation risk. PNCs major financial risk exposures are the responsibility of the Audit Committee. The Risk Committee serves as the primary point of contact between our Board and the management-level committees
dealing with risk management. The Committees responsibility is one of oversight, and the Committee has no duty to assure compliance with laws and regulations.
The Committee receives regular reports on enterprise-wide risk management, credit risk, market and liquidity risk, operating risk, and capital management.
The Committee may also form subcommittees from time to time. It has formed a subcommittee to assist the Risk Committee in fulfilling
its oversight responsibilities with respect to technology risk matters.
The Committee appoints our Chief Risk Officer,
who leads PNCs risk management function. The Committee reviews the performance and approves the compensation of our Chief Risk Officer.
The Risk Committee, along with the Personnel and Compensation Committee, each reviews the risk components of our incentive compensation plans. For a discussion of the relationship between
compensation and risk, please see Compensation and Risk, beginning on page 54.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 27
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
Board meetings in 2014
The table below shows the names of our directors as of December 31, 2014. The table also shows
the number of Board committee meetings held in 2014, and the members and chairs of each committee. We also identify each director who has been designated by our Board as an audit committee financial expert, as defined under SEC
regulations.
Our Board held 11 meetings in 2014. Each director attended at least 75% of the combined total number
of meetings of the Board and all committees on which the director served. Our Board has adopted a policy that strongly encourages each director to attend the annual meeting in person. We remind each director of this policy before the date of the
annual meeting. All of our directors then serving attended PNCs 2014 annual meeting of shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard O. Berndt |
|
Charles E. Bunch |
|
Paul W. Chellgren |
|
Marjorie Rodgers Cheshire |
|
William S. Demchak |
|
Andrew T. Feldstein |
|
Kay Coles James |
|
Richard B. Kelson |
|
Anthony A. Massaro |
|
Jane G. Pepper |
|
Donald J. Shepard |
|
Lorene K. Steffes |
|
Dennis F. Strigl |
|
Thomas J. Usher |
|
George H. Walls, Jr. |
|
Helge H. Wehmeier |
|
Meetings Held |
|
|
|
|
|
|
|
(1) |
|
|
|
(2) |
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit |
|
l |
|
|
|
|
|
l |
|
|
|
|
|
|
|
l |
|
|
|
|
|
l |
|
|
|
|
|
|
|
l |
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating and Governance |
|
|
|
l |
|
|
|
|
|
|
|
|
|
l |
|
|
|
l |
|
|
|
l |
|
|
|
l |
|
|
|
|
|
l |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel and Compensation |
|
|
|
l |
|
l |
|
|
|
|
|
l |
|
|
|
l |
|
|
|
|
|
|
|
|
|
|
|
l |
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk |
|
l |
|
|
|
|
|
l |
|
l |
|
l |
|
l |
|
|
|
l |
|
l |
|
|
|
l |
|
|
|
|
|
l |
|
|
|
|
11 |
|
|
Chair |
(1) |
Designated as audit committee financial expert under SEC regulations |
(2) |
Non-independent director |
(3) |
Presiding director (lead independent director) |
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
This section discusses relationships between PNC and its subsidiaries and our directors, executive
officers, immediate family members, or certain of their affiliated entities. These relationships include transactions that we analyzed to determine the independence of our directors.
In this section, we describe the NYSE independence standards for directors, our Board-adopted
independence guidelines, and our policies and procedures governing related person transactions.
Director independence
To be independent under NYSE rules, our Board must affirmatively determine that a director does not
have a material relationship with PNC. A material relationship between a director and PNC could also include a relationship between PNC and an organization affiliated with a director.
NYSE rules describe specific relationships that will always impair independence. The absence of one of these bright-line relationships
does not mean that
a director is automatically independent. The Board must consider all relevant facts and circumstances in determining whether a material relationship exists.
Material relationships that we may consider include commercial, industrial, banking, consulting, legal, accounting, charitable, and family
relationships. The ownership of a significant amount of PNC stock, by itself, will not prevent a finding of independence under NYSE rules.
28 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
The NYSE bright-line independence tests. Each of the following relationships will
automatically impair a directors independence under the NYSEs bright-line tests:
|
|
A director employed by PNC |
|
|
A director whose immediate family member is a PNC executive officer |
|
|
The directors receipt of more than $120,000 a year in direct compensation from PNC, except for certain permitted payments (such as director
fees) |
|
|
Certain relationships with PNCs external or internal auditors |
|
|
A director (or immediate family member) who has been an executive officer of a company where a PNC executive officer serves or served on that
companys compensation committee |
|
|
Business relationships involving certain companies affiliated with a director or immediate family member of a director that make payments to, or
receive payments from, PNC in excess of certain amounts |
An employee-director of PNC (or a director with an immediate
family member who is a PNC executive officer) will not be independent until three years after the employment relationship ends. The other bright-line tests will impair independence if they existed at any time within the past three years.
For more information about the NYSEs bright-line director independence tests, including the commentary explaining the application of the
tests, please go to the NYSEs website at www.nyse.com.
Our Board guidance on independence. To help assess
whether a material relationship exists, our Board adopted certain guidelines that describe four categories of relationships that will not be considered material. If a relationship meets the criteria outlined in this guidance, it will not be deemed
to be a material relationship. This guidance can be found in our corporate governance guidelines on our website at www.pnc.com/corporategovernance. The Board may then affirm a directors independence without further analysis of this
relationship, provided that the director otherwise meets the other relevant independence tests.
The four categories of relationships
described in this guidance include:
|
|
Ordinary course business relationships, such as lending, deposit, banking, or other financial service relationships or other relationships
involving the provision of products or services between PNC or its subsidiaries and a director, his or her immediate family members, or an affiliated entity of a director or immediate family member, which meet the criteria defined in the guidelines
|
|
|
Contributions made by PNC, its subsidiaries, or a PNC sponsored foundation to a charitable organization in which a director or an immediate
family member is an executive officer, director, or trustee |
|
|
Relationships involving a directors relative who is not an immediate family member
|
|
|
Relationships or transactions between PNC or its subsidiaries and a company or charitable organization where a director or an immediate family
member serves solely as a non-management board member, or where an immediate family member is employed in a non-officer position |
These guidelines also allow investors to assess the quality of a Boards independence determinations.
In applying this guidance, an immediate family member includes a persons spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than domestic employees) who shares such persons home.
If a director has a relationship that
would be not be considered material under our guidelines for independence, but crosses one of the NYSEs bright-line tests, the NYSE test governs and the director will not be treated as independent.
Our Boards independence determinations. At a meeting held on February 13, 2015, the Board made an independence
determination for each of our 16 directors, including our 13 director nominees.
In making these determinations, our Board relied on the
evaluation and recommendations made by the Nominating and Governance Committee. The Board considered relevant facts and circumstances when making these determinations, including an evaluation of the relationships described below.
Our Board based the independence decisions on information known as of February 13, 2015. Each director has been asked to provide updates on
changes that could impact the directors status as an independent director. The Nominating and Governance Committee and Board will consider information throughout the year that may impact independence.
Non-independent directors. Our Board affirmatively determined that Mr. Demchak is the only non-independent director. Mr. Demchak
meets the NYSEs bright-line relationship test as an executive officer of PNC.
Independent directors. Our Board
affirmatively determined that each of the directors listed below has no material relationship with PNC under the NYSE corporate governance listing standards. These determinations were based, in part, on an evaluation of the facts and circumstances
of relevant relationships in light of PNCs own independence guidelines. In some cases, the relationships that we analyzed include relationships that a director has as a partner, member, shareholder, officer or employee of an organization that
has a relationship with PNC. They may also include relationships where an immediate family member of a director is a partner, member, shareholder or officer of an organization that has a relationship with PNC.
Based on these evaluations, our Board affirmatively determined that each of these directors qualifies as independent under the NYSEs corporate
governance listing standards: Richard O. Berndt, Charles E. Bunch,
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 29
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
Marjorie Rodgers Cheshire, Paul W. Chellgren, Andrew T. Feldstein, Kay Coles James, Richard B. Kelson, Anthony A. Massaro, Jane G. Pepper, Donald J. Shepard, Lorene K. Steffes, Dennis F. Strigl,
Thomas J. Usher, George H. Walls, Jr., and Helge H. Wehmeier. Mr. Berndt, General Walls and Mr. Wehmeier are not nominees for director. Bruce C. Lindsay, who served
as a director until April 22, 2014, also qualified as independent until he retired from the Board. James E. Rohr, who served as a director until April 22, 2014, did not qualify as
independent as he met the NYSEs bright-line relationship test as a former executive officer of PNC.
Transactions with directors
This chart reflects banking relationships between PNC and the director, the directors immediate
family members, and a company of which the director is, or was during 2014, a partner, officer, employee, any immediate family member is, or was during 2014, a partner or officer, or in which the director or any immediate family member holds a
significant ownership or voting position (an affiliated entity). The chart also reflects relationships where PNC contributed to a charitable organization of which a director or immediate family
member was a trustee, director or executive officer. All of these transactions meet our Board guidance on independence.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard O. Berndt |
|
Charles E. Bunch |
|
Paul W. Chellgren |
|
Marjorie Rodgers Cheshire |
|
William S. Demchak |
|
Andrew T. Feldstein |
|
Kay Coles James |
|
Richard B. Kelson |
|
Anthony A. Massaro |
|
Jane G. Pepper |
|
Donald J. Shepard |
|
Lorene K. Steffes |
|
Dennis F. Strigl |
|
Thomas J. Usher |
|
George H. Walls, Jr. |
|
Helge H. Wehmeier |
Personal or Family Relationships |
|
Deposit, Wealth Management and Similar Banking
Products(1) |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
Credit Relationships(2) |
|
|
|
l |
|
l |
|
l |
|
l |
|
|
|
l |
|
l |
|
l |
|
l |
|
l |
|
l |
|
|
|
l |
|
l |
|
l |
|
Charitable Contributions(3) |
|
l |
|
|
|
|
|
l |
|
l |
|
|
|
|
|
l |
|
|
|
l |
|
l |
|
|
|
|
|
l |
|
|
|
l |
Affiliated Entity Relationships |
|
Deposit, Wealth Management and Similar Banking
Products(1) |
|
l |
|
l |
|
l |
|
l |
|
|
|
|
|
|
|
l |
|
|
|
|
|
l |
|
|
|
|
|
l |
|
|
|
|
|
Credit Relationships or Commercial Banking
Products(4) |
|
l |
|
l |
|
l |
|
l |
|
|
|
|
|
|
|
l |
|
|
|
|
|
|
|
|
|
|
|
l |
|
|
|
|
(1) |
Includes deposit accounts, trust accounts, certificates of deposit, safe deposit boxes, workplace banking, or wealth management products.
|
(2) |
Includes extensions of credit, including mortgages, commercial loans, home equity loans, credit cards, or similar products, as well as credit and
credit-related products. |
(3) |
Does not include matching gifts provided to charities personally supported by the director because under our Board guidelines matching gifts are not a
material relationship and are not included in considering the value of contributions against our guidance. Matching gifts are capped at $5,000 and are included as other compensation in the director compensation table.
|
(4) |
Includes extensions of credit, including commercial loans, credit cards, or similar products, as well as credit-related products, and other commercial banking
products, including treasury management, purchasing card programs, foreign exchange, and global trading services. |
Customer relationships. We provide financial services to most of our directors. We also
provide financial services to some of their immediate family members and affiliated entities. We offer these services in the ordinary course of our business. We provide the services on substantially the same terms and conditions, including price, as
we provide to other similarly situated customers.
We also extend credit to some of our directors and their immediate family members and
affiliated entities. Federal banking law (Regulation O) governs these extensions of credit. We discuss the impact
of Regulation O and our process for managing these extensions of credit on pages 31 and 32.
Business relationships. We also enter into other business relationships with entities affiliated with our directors or their immediate family members. These relationships are in the
ordinary course of business.
Certain charitable contributions. We make contributions to charitable organizations where our
directors serve as directors, trustees or executive officers. We also match charitable contributions made by our directors. We describe this matching gift program on page 34.
30 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
Related person transactions policies and procedures
Code of ethics. Our Code of Business Conduct and Ethics contains several provisions
that regulate related person transactions. The Code of Business Conduct and Ethics applies generally to all employees, including our executive officers, and directors.
Doing business with PNC. An employee or an immediate family member may want to engage in a business arrangement, such as the sale or lease of property or the provision of services, with PNC.
For these transactions, we require prior approval from a supervisor and our Corporate Ethics Office. If a director desires to engage in a business arrangement with PNC, approval is required from the Corporate Ethics Office and from a Board
committee.
Financial services to employees. Our employees and their extended families are encouraged to use PNC for their
personal financial services. Any services must be provided on the same terms as are available to the general public, all employees in a market or business, or all similarly situated employees.
Transacting PNC business. We prohibit directors and employees from transacting business on behalf of PNC with a supplier or customer in which the director, employee, or extended family member
has a significant personal or financial interest. We also prohibit directors and employees from transacting business on behalf of PNC with respect to their own accounts, extended family member accounts, or accounts for anyone whose close
relationship may reasonably be viewed as creating a conflict of interest. Our phrase extended family member is similar to the SECs definition of immediate family member in Item 404(a) of Regulation S-K. We have
established procedures in certain of our businesses to permit employees to transact business with family members, subject to appropriate oversight and compliance with applicable laws and regulations, including Regulation O.
Employing relatives. We employ relatives of executive officers and directors, in some cases under circumstances that constitute related
person transactions. See Family relationships on page 32. We track the employment and compensation of relatives of executive officers and directors. We have policies that restrict special treatment in the hiring or compensation of a
relative of an executive officer or director. Our employment of a directors relative would be a factor in the determination of the directors independence under NYSE rules and our own adopted guidelines for director independence. See
Director and Executive Officer RelationshipsDirector independence, which begins on page 28.
Waivers. Under the Code
of Business Conduct and Ethics, employees may generally request waivers or exceptions from our Corporate Ethics Office. In the case of directors and executive officers, any proposed waiver or exception must be approved by both the Corporate Ethics
Office and the appropriate committee of our Board. In 2014, no directors or
executive officers requested an exemption under any of the provisions described above.
Ethics guidelines for directors. The Nominating and Governance Committee adopted Ethics Guidelines for Directors that contain comprehensive guidance regarding the various PNC policies that
govern the conduct of our directors, to supplement and assist directors in understanding these policies. These guidelines were most recently amended on August 13, 2014. The guidelines include reference to our policies and procedures applicable
to directors, including our Code of Business Conduct and Ethics, described above, and our Related Person Transactions Policy and Regulation O policies and procedures, each described in more detail below, as well as our Director Pre-Clearance of
Securities Policy, and our Anti-Corruption Policy.
Related person transactions policy. Our policy for the review and
approval of related person transactions was most recently amended on August 14, 2014. A related person transaction is generally any transaction in which PNC or its subsidiaries is or will be a participant, in which the amount involved exceeds
$120,000, and a director (or nominee), executive officer, family member, or any beneficial owner of more than 5% of our common stock, has or will have a direct or indirect material interest.
This policy provides guidance on the framework for reviewing potential related person transactions, and approving, or ratifying related person transactions, and establishes our Presiding
Director as the individual who decides how transactions should be evaluated. In general, a potential related person transaction that involves a director would be reviewed by our Nominating and Governance Committee, as the transaction could
also impact independence. A transaction involving an executive officer would generally be reviewed by the Audit Committee. Under this policy, our full Board receives reports on approved, disapproved and ratified transactions. Under the policy, a
permitted related person transaction must be considered in, or not inconsistent with, the best interest of PNC and its shareholders.
Regulation O policies and procedures. We design additional policies and procedures to help ensure our compliance with Regulation O.
This regulation imposes various conditions on a banks extension of credit to directors and executive officers and related interests. Any extensions of credit must comply with our own Regulation O policies and procedures. This includes a
separate review by our designated Regulation O credit officer. A director can only meet our guidelines for independence for extensions of credit if the credit complied with Regulation O at the time PNC extended it.
Our Regulation O policies and procedures require:
|
|
Extensions of credit to covered individuals or entities be made on substantially the same terms
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 31
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
|
|
(including interest rates and collateral) as those prevailing at the time for comparable transactions with those who are not covered. For credit extensions under a benefit or compensatory
program widely available to all employees, we may not give preference to any covered individual. |
|
|
The covered extension of credit be made following credit underwriting procedures no less stringent than those prevailing at the time for
comparable transactions with non-covered individuals or entities. The extension of credit may not involve more than the normal risk of repayment or present other unfavorable features. |
|
|
The amount of covered extensions of credit do not exceed individual and aggregate lending limits, depending on the identity of the borrower and
the nature of the loan. |
Our subsidiary bank, PNC Bank, National Association, designates a Regulation O Credit Officer
to review extensions of credit to determine our compliance with these policies. If an extension of credit would result in an aggregate credit extension of more than $500,000, the banks Board of Directors must approve it. The
banks Board of Directors receives a report of all extensions of credit made to executive officers under Regulation O.
All loans to
directors, executive officers, and related interests outstanding during 2014:
|
|
complied with our Regulation O policies and procedures; |
|
|
were made in the ordinary course of business; |
|
|
were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with
persons not related to PNC; and |
|
|
did not involve more than the normal risk of collectability or present other unfavorable features. |
Certain related person transactions. Based on information contained in a Schedule 13G filed with the SEC, BlackRock, Inc. (BlackRock),
through certain of its subsidiaries, indicated that it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 2014 (see Security ownership of certain beneficial owners on page 78). BlackRock is the
beneficial owner of our common stock as a result of being a parent
company or control person of the subsidiaries disclosed in its Schedule 13G, each of which holds less than 5% of the outstanding shares of common stock.
During 2014, PNC paid BlackRock approximately $7 million for use of BlackRocks enterprise investment system and related services, which
include risk analytics, portfolio management, compliance and operational processing. PNC also paid BlackRock approximately $3 million for securities trading related services, and approximately $5 million for investment advisory and administration
services provided to certain PNC subsidiaries and separate accounts assets for a fee based on assets under management. These transactions were entered into on an arms length basis and contain customary terms and conditions.
During 2014, PNC received approximately $2 million in fees from BlackRock for distribution and shareholder servicing activities. These transactions
were entered into on an arms length basis and contain customary terms and conditions.
PNC may in the ordinary course of business
engage in transactions with BlackRock mutual funds, including using the BlackRock funds as treasury management vehicles for PNCs corporate clients, selling BlackRock investment products to PNC customers or placing PNC customer funds in
BlackRock mutual funds, using BlackRock funds as an investment vehicle for the PNC 401(k) accounts, providing commercial loan servicing to BlackRock funds, or providing shareholder services to PNC clients who are shareholders of BlackRock mutual
funds.
PNC may also make loans to BlackRock or the BlackRock funds. These loans are made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to PNC; and do not involve more than the normal risk of collectability.
PNC holds an equity investment of approximately 22% in BlackRock. In connection with this equity investment, PNC has entered into various agreements
governing the terms of this relationship. PNC received cash dividends from BlackRock of $285 million during 2014.
Family relationships
No family relationship exists between any of our directors or executive officers and any of our other
directors or executive officers. There are family relationships between certain directors and executive officers and some of the approximately 54,000 PNC employees. These employees participate in compensation and incentive plans or arrangements
on the same basis as other similarly situated employees.
A brother-in law of Gregory Jordan, one of our executive officers, is employed
by PNC and had been
for many years before Mr. Jordan joined PNC in 2013. He participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. He does not share
a household with Mr. Jordan, is not an executive officer of PNC, and does not report directly to an executive officer of PNC. His compensation paid in 2014 exceeded the $120,000 related person transaction threshold and as a result was reviewed
by the Audit Committee.
32 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
A son of Michael Hannon, one of our executive officers, is employed by PNC. He participates in
compensation and incentive plans or arrangements on the same basis as similarly situated employees. He does not share a household with Mr. Hannon, is not an executive officer of PNC, and does not report directly to an executive officer of PNC. His
compensation paid in 2014 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Audit Committee.
The daughter of Charles E. Bunch, one of our non-management directors, has been employed by PNC for
several years. She participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. She does not share a household with Mr. Bunch, is not an executive officer of PNC, and does not report
directly to an executive officer of PNC. Her compensation paid in 2014 exceeded the $120,000 related person transaction threshold. Her compensation was reviewed by the Nominating and Governance Committee.
Indemnification and advancement of costs
We indemnify directors, officers and, in some cases, employees and agents, against certain
liabilities. The covered person may have incurred a liability as a result of service on our behalf or at our request. On behalf of a covered person, we may also advance the costs of certain claims or proceedings. If we advance costs, the person
agrees to repay us if it is determined that the person was not entitled to indemnification. The insurance policies we maintain
for our directors and executive officers also provide coverage against certain liabilities.
The indemnification provisions, the advancement of costs, and our insurance coverage may provide benefits to our directors and executive officers. During 2014, we advanced costs with respect to
pending litigation against us on behalf of certain former and current directors and officers, including our CEO, who were also named as defendants.
Section 16(a) beneficial ownership reporting compliance
Section 16(a) of the Securities Exchange Act of 1934 requires persons who own more than ten
percent of a registered class of our equity securities (currently, none) and our directors and executive officers to file with the SEC initial reports of ownership and reports in changes in ownership of any PNC equity securities. To the best of our
knowledge all forms were filed on a timely basis during 2014 except for the following. One of our former directors, James E. Rohr, had a late Form 4 filing related to a distribution from a PNC
deferred compensation plan on January 2, 2014. The information was not processed on a timely basis. The Form 4 was filed on January 17, 2014. Additionally, on March 8, 2014 we
withheld shares to satisfy the tax liability in connection with the vesting of restricted stock for Gregory H. Kozich, an executive officer, but did not file the Form 4 until April 23, 2014. In making this statement, we have relied in part
on the written representations of our directors and executive officers and on copies of the reports provided to us.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 33
DIRECTOR COMPENSATION
Our Boards Nominating and Governance Committee reviews all elements of non-employee director
compensation, explained below, and makes an annual compensation recommendation to the Board. In addition to annual compensation, the Committee may approve special compensation to a director for extraordinary service. The primary objectives of the
Committees annual review are to confirm continued alignment with business and shareholder interests,
evaluate the competitiveness of our director compensation program relative to the peer group, and identify and respond to continued changes in director compensation in light of the competitive
environment. The Nominating and Governance Committee conducted its annual compensation review for 2014 on April 22, 2014.
Mr. Demchak receives no additional compensation for serving as a PNC director.
The following table describes
the components of director compensation in 2014:
|
|
|
|
|
Annual Retainer |
|
|
|
|
Each Director |
|
$ |
60,000 |
|
Presiding Director |
|
$ |
25,000 |
|
Additional retainer for Chairs of Audit, Risk, and Personnel and Compensation Committees |
|
$ |
20,000 |
|
Additional retainer for Chair of Nominating and Governance Committee |
|
$ |
15,000 |
|
Additional retainer for Chair of Executive Committee |
|
$ |
10,000 |
|
Meeting Fees (Board) |
|
|
|
|
Each meeting (except for quarterly scheduled telephonic meetings) |
|
$ |
1,500 |
|
Each quarterly scheduled telephonic meeting |
|
$ |
750 |
|
Meeting Fees (Committee/Subcommittee) |
|
|
|
|
First six meetings |
|
$ |
1,500 |
|
All other meetings |
|
$ |
2,000 |
|
Equity-Based Grants |
|
|
|
|
Value of 1,535 deferred stock units awarded as of April 22,
2014 |
|
$ |
129,953 |
|
Deferred compensation plans. Our non-management directors may choose to defer the
compensation they receive from meeting fees and retainers under our Directors Deferred Compensation Plan. Our Outside Directors Deferred Stock Unit Plan provides for automatic deferrals of any stock units that we may award from time to time. For
compensation deferred under these plans:
|
|
The deferred compensation account tracks the price of PNC common stock (the Directors Deferred Compensation Plan allows a director to track an
interest rate option instead). Additionally, the accounts are credited with a number of units (including fractional shares) that could have been purchased with the equivalent of PNC common stock cash dividends. We do not pay above-market or
preferential earnings on any director compensation that is deferred. |
|
|
The director may choose the payout date and beneficiary (the stock unit plan does not allow a payout date until retirement or age 72).
|
|
|
The payouts will be made in cash. |
Other director benefits. We generally limit the benefits that we provide to our directors, but we regularly provide the following:
|
|
Charitable matching gifts. We will match a directors personal gifts to qualifying charities up to a limit of $5,000 a year.
Mr. Demchak is only eligible to participate in our employee matching gift program ($2,500 annual limit). |
|
|
Insurance policies. We pay for various insurance policies that protect directors and their families from personal loss connected with
Board service. |
|
|
Benefits related to Board service. We pay for expenses connected with our directors Board service, including travel on corporate,
private or commercial aircraft, lodging, meals, and incidentals. |
We may also provide other incidental benefits to our
directors from time to time, including tickets to cultural, social, sporting or other events and small gifts for holidays, birthdays, or special occasions. We may also provide travel for directors on corporate aircraft for personal purposes in
limited circumstances, such as a family emergency or when a seat is available on a previously scheduled flight. We determine the value of these benefits based on the incremental cost to PNC, as described on pages 50 and 51 and we include the
amount in the All Other Compensation column below.
Director stock ownership requirement. Our Board has adopted
a common stock purchase guideline for our non-management directors. Under this guideline, each director must own at least 5,000 shares of PNC common stock (including phantom stock units). Until a director meets this ownership level, he or she must
purchase or acquire common stock or stock units that equal at least 25% of the annual retainer for that year. A director may satisfy this requirement through open market purchases, or by deferring compensation into stock units under the
Directors Deferred Compensation Plan. As of December 31, 2014, the minimum ownership threshold for directors was valued at $456,150, and all of our directors, other than Marjorie Rodgers Cheshire who was appointed in October 2014, satisfied the
ownership guideline.
34 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
DIRECTOR COMPENSATION
Director compensation in 2014
For the fiscal year
2014, we provided the following compensation to our non-employee directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director Name* |
|
Fees
Earned(a) |
|
|
Stock
Awards(b) |
|
|
All
Other Compensation(c) |
|
|
Total |
|
Richard O. Berndt |
|
$ |
144,500 |
|
|
$ |
129,953 |
|
|
$ |
32,462 |
|
|
$ |
306,915 |
|
Charles E. Bunch |
|
$ |
91,500 |
|
|
$ |
129,953 |
|
|
$ |
42,462 |
|
|
$ |
263,915 |
|
Paul W. Chellgren |
|
$ |
128,500 |
|
|
$ |
129,953 |
|
|
$ |
114,246 |
|
|
$ |
372,699 |
|
Marjorie Rodgers Cheshire** |
|
$ |
24,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
24,000 |
|
Andrew T. Feldstein |
|
$ |
107,500 |
|
|
$ |
129,953 |
|
|
$ |
8,473 |
|
|
$ |
245,926 |
|
Kay Coles James |
|
$ |
97,000 |
|
|
$ |
129,953 |
|
|
$ |
36,346 |
|
|
$ |
263,299 |
|
Richard B. Kelson |
|
$ |
113,000 |
|
|
$ |
129,953 |
|
|
$ |
51,842 |
|
|
$ |
294,795 |
|
Bruce C. Lindsay*** |
|
$ |
30,674 |
|
|
$ |
- |
|
|
$ |
48,000 |
|
|
$ |
78,674 |
|
Anthony A. Massaro |
|
$ |
116,500 |
|
|
$ |
129,953 |
|
|
$ |
42,045 |
|
|
$ |
288,498 |
|
Jane G. Pepper |
|
$ |
119,500 |
|
|
$ |
129,953 |
|
|
$ |
57,118 |
|
|
$ |
306,571 |
|
Donald J. Shepard |
|
$ |
154,000 |
|
|
$ |
129,953 |
|
|
$ |
57,078 |
|
|
$ |
341,031 |
|
Lorene K. Steffes |
|
$ |
107,500 |
|
|
$ |
129,953 |
|
|
$ |
55,024 |
|
|
$ |
292,477 |
|
Dennis F. Strigl |
|
$ |
113,000 |
|
|
$ |
129,953 |
|
|
$ |
80,154 |
|
|
$ |
323,107 |
|
Thomas J. Usher |
|
$ |
143,000 |
|
|
$ |
129,953 |
|
|
$ |
99,107 |
|
|
$ |
372,060 |
|
George H. Walls, Jr. |
|
$ |
140,500 |
|
|
$ |
129,953 |
|
|
$ |
60,577 |
|
|
$ |
331,030 |
|
Helge H. Wehmeier |
|
$ |
82,500 |
|
|
$ |
129,953 |
|
|
$ |
73,125 |
|
|
$ |
285,578 |
|
* |
James E. Rohr served as an employee director through April 22, 2014. He did not receive any compensation for his services as a director.
|
** |
Ms. Cheshire was appointed as a director on October 2, 2014. |
*** |
Mr. Lindsay served as a director through April 22, 2014. |
(a) |
This column includes the annual retainers, additional retainers for chairs of standing committees and meeting fees earned for 2014. The amounts in this column
also include the fees voluntarily deferred by the following directors under our Directors Deferred Compensation Plan, a non-qualified defined contribution plan: Paul W. Chellgren ($128,500); Andrew T. Feldstein ($107,500); Kay Coles James ($24,250);
Anthony A. Massaro ($116,500); Jane G. Pepper ($29,875); Donald J. Shepard ($154,000); Lorene K. Steffes ($32,250); Dennis F. Strigl ($113,000); and George H. Walls, Jr. ($140,500). |
(b) |
The dollar values in this column include the grant date fair value, under Financial Accounting Standards Board Accounting Standards Codification Topic 718,
CompensationStock Compensation, of 1,535 deferred stock units awarded to each directors account under our Outside Directors Deferred Stock Unit Plan as of April 22, 2014, the date of grant. The closing stock price of PNC on the date
of grant was $84.66 a share. See Note 14 in our Annual Report on Form 10-K for the year ended December 31, 2014 for more information. |
|
As of December 31, 2014, the non-employee directors listed in the table below had outstanding stock units and stock options in the following amounts:
|
|
|
|
|
|
|
|
|
|
Director Name |
|
Stock Units |
|
|
Stock Options |
|
Richard O. Berndt |
|
|
15,568 |
|
|
|
- |
|
Charles E. Bunch |
|
|
15,568 |
|
|
|
- |
|
Paul W. Chellgren |
|
|
59,356 |
|
|
|
- |
|
Andrew T. Feldstein |
|
|
3,080 |
|
|
|
- |
|
Kay Coles James |
|
|
20,464 |
|
|
|
- |
|
Richard B. Kelson |
|
|
26,021 |
|
|
|
- |
|
Anthony A. Massaro |
|
|
22,640 |
|
|
|
- |
|
Jane G. Pepper |
|
|
28,992 |
|
|
|
2,000 |
|
Donald J. Shepard |
|
|
31,592 |
|
|
|
- |
|
Lorene K. Steffes |
|
|
27,215 |
|
|
|
1,000 |
|
Dennis F. Strigl |
|
|
27,755 |
|
|
|
- |
|
Thomas J. Usher |
|
|
51,514 |
|
|
|
- |
|
George H. Walls, Jr. |
|
|
28,626 |
|
|
|
- |
|
Helge H. Wehmeier |
|
|
37,500 |
|
|
|
- |
|
|
No stock options have been granted to any non-employee director since 2005. None of our non-employee directors had any unvested stock awards as of
December 31, 2014. |
(c) |
This column includes income under the Directors Deferred Compensation Plan, the Outside Directors Deferred Stock Unit Plan, and the Mercantile Bankshares
Corporation Deferred Compensation Plan (for Mr. Shepard only) as follows: Richard O. Berndt ($27,462); Charles E. Bunch ($27,462); Paul W. Chellgren ($109,246); Andrew T. Feldstein ($3,473); Kay Coles James ($36,346); Richard B. Kelson
($46,842); Bruce C. Lindsay ($43,000); Anthony A. Massaro ($42,045); Jane G. Pepper ($52,118); Donald J. Shepard ($57,078); Lorene K. Steffes ($53,624); Dennis F. Strigl ($80,154); Thomas J. Usher ($94,107); George H. Walls, Jr. ($55,577); and Helge
H. Wehmeier ($68,125). This column also includes the dollar amount of matching gifts made by us in 2014 to charitable organizations. No director received any incidental benefits. For one director the 2014 matching gift amount included above exceeds
$5,000 because the directors 2012, 2013 and 2014 donations were matched in 2014. No non-employee director had incremental cost to PNC for personal use of our corporate aircraft in 2014. |
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 35
COMPENSATION DISCUSSION AND ANALYSIS
This section (CD&A) explains our executive compensation philosophy, describes our compensation programs and reviews
compensation decisions for the following named executive officers (NEOs):
|
|
|
Name |
|
Title |
William S. Demchak |
|
Chairman, President and Chief Executive Officer |
Robert Q. Reilly |
|
Executive Vice President and Chief Financial Officer |
Michael P. Lyons |
|
Executive Vice President and Head of Corporate and Institutional Banking |
E. William Parsley, III |
|
Executive Vice President, Chief Investment Officer and Treasurer |
Joseph C. Guyaux* |
|
Senior Vice Chairman and Chief Risk Officer |
* |
Effective January 31, 2015, Mr. Guyaux became the Senior Vice Chairman and CEO and President of PNC Mortgage. |
2014 key compensation decisions
|
|
|
|
|
|
|
Awarded incentive compensation to NEOs based on 2014 performance with at least 50% of total compensation being
equity-based (60% for our CEO and another NEO) and all equity-based awards being 100% at risk, and tied to future performance and risk adjustments |
|
|
|
|
Beginning with the February 2015 equity grants to our NEOs and other senior executives, we no longer provide for automatic acceleration of vesting upon a change in control
(single trigger) accelerated vesting will now require a change in control as well as a qualifying termination of employment (double trigger) |
|
|
|
|
We adopted a policy that prohibits our directors, NEOs and certain other employees from pledging PNC securities |
|
|
|
|
We amended our executive stock ownership guidelines so that the base ownership threshold includes only 50% of unvested equity awards (not 100%) and excludes any restricted
stock units paid in cash |
36 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
2014 PNC performance
|
|
|
|
|
We delivered a successful year in 2014, reporting net income of $4.2 billion (8.7% over budget) and $7.30 diluted earnings per share (7.4% over budget) |
|
|
|
|
Our annual total shareholder return was 20.32%, second highest in our peer group |
|
|
|
|
We strengthened our capital throughout the year and returned capital to our shareholders through both a dividend increase and share repurchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KEY PERFORMANCE METRICS |
|
2014 actual(1) |
|
|
2013 actual(1) |
|
|
2014 vs. 2013 actual |
|
|
2014
budget(2) |
|
|
2014 actual vs. budget |
|
Net interest income (in millions) |
|
$ |
8,525 |
|
|
$ |
9,147 |
|
|
|
(6.8%) |
|
|
$ |
8,796 |
|
|
|
(3.1%) |
|
Noninterest income (in millions) |
|
$ |
6,850 |
|
|
$ |
6,865 |
|
|
|
(0.2%) |
|
|
$ |
6,684 |
|
|
|
2.5% |
|
Diluted earnings per common share |
|
$ |
7.30 |
|
|
$ |
7.43 |
|
|
|
(1.7%) |
|
|
$ |
6.80 |
|
|
|
7.4% |
|
Return on common equity (without goodwill) |
|
|
12.84% |
|
|
|
14.52% |
|
|
|
(168 bps) |
|
|
|
11.97% |
|
|
|
87 bps |
|
Return on assets |
|
|
1.28% |
|
|
|
1.39% |
|
|
|
(11 bps) |
|
|
|
1.20% |
|
|
|
8 bps |
|
Efficiency ratio |
|
|
61.71% |
|
|
|
60.10% |
|
|
|
(161 bps) |
|
|
|
61.20% |
|
|
|
(51 bps) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 actual(1) |
|
|
2013 actual(1) |
|
|
2014 vs. 2013 actual |
|
Tangible book value per share |
|
|
|
|
|
|
|
|
|
|
$59.88 |
|
|
$ |
54.57 |
|
|
|
9.7% |
|
Estimated Tier 1 risk-based capital ratio |
|
|
|
|
|
|
|
|
|
|
12.70% |
|
|
|
12.40% |
|
|
|
30 bps |
|
Return on economic capital vs. cost of capital |
|
|
|
|
|
|
|
|
|
|
5.02% |
|
|
|
13.76% |
|
|
|
(874 bps) |
|
Annual total shareholder return |
|
|
|
|
|
|
|
|
|
|
20.32% |
|
|
|
36.50% |
|
|
|
(1618 bps) |
|
These tables include non-GAAP financial measures. See Annex A for additional information.
(1) |
To the extent permitted, the amounts have been adjusted to omit, among other things, the effect of extraordinary items (as such term is used under generally
accepted accounting principles), discontinued operations, and merger integration and acquisition costs. The results also include adjustments for select categories of events and transactions that are viewed as being outside our ongoing management of
the business, some categories of which are provided in footnote (b) on page 58 with respect to incentive performance units. When comparing performance metrics to our peers, we adjust their results comparably. 2013 actual includes
adjustments of $57 million or $0.07 per share related to the redemption of trust preferred securities (TRUPs). Expense, earnings and return metrics for 2013 other than return on common equity (without goodwill) and return on economic capital vs.
cost of capital have also been updated to reflect first quarter 2014 adoption of Accounting Standards Update 2014-01 related to investments in low income housing tax credits. |
(2) |
2014 budget results were lower than 2013 actual results for several reasons, including, without limitation, the continued impact of the challenging economic
environment on business results and the runoff of purchase accounting accretion, the recognition that 2013 actual results benefited from a release of reserves for residential mortgage repurchase obligations, and our intent to avoid more balance
sheet risk by adding assets that do not fit within our enterprise risk appetite. |
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 37
COMPENSATION DISCUSSION AND ANALYSIS
|
|
|
|
|
PERFORMANCE AGAINST STRATEGIC OBJECTIVES |
Drive growth in newly acquired
and underpenetrated markets |
|
|
|
Continued growth across all lines of business in the Southeast, including increases in key metrics such as average referral sales (Asset Management Group segment), new
primary clients (Corporate & Institutional Banking segment) and increases in average loan volume (Retail Banking segment) |
|
|
|
Increased revenue year over year in the Chicago market in both the Corporate & Institutional Banking and Asset Management group segments |
|
|
|
|
Increased assets under administration and assets under management year over year |
Capture more investable assets |
|
|
|
Increased noninterest income within the Asset Management Group segment |
|
|
|
|
Increased retail brokerage fees and brokerage account client assets |
Redefine the retail banking business |
|
|
|
Increased the percentage of consumers using non-teller channels for the majority of their transactions |
|
|
|
Converted 156 branches to universal branches and closed or consolidated 48 other branches |
Build a
stronger mortgage banking business |
|
|
|
Loan origination and purchase volume down year over year but better than the overall market |
|
|
|
Launched and consolidated all home lending content within one online experience to help improve the customer experience |
Bolster critical
infrastructure and streamline core processes |
|
|
|
Completed significant accomplishments against our multi-year infrastructure enhancement plan |
|
|
|
Implemented an extensive array of tools and methodologies to improve efficiencies and foster continuous improvement across our
Technology and Operations function |
Stakeholder engagement and impact of 2014 say-on-pay vote
In 2014, our shareholders voiced substantial support for the compensation of our NEOs, with
approximately 88% of the votes cast approving the say-on-pay advisory vote on executive compensation. Our shareholders previously recommended that we hold a say-on-pay vote annually.
For the past several years, we have initiated specific outreach efforts with certain institutional investors. At least once a year, we have met in
person, or telephonically, with the governance representatives at these investors, and discussed our governance and compensation programs and philosophies. Typically, these meetings have taken place with the
participation of our Head of Investor Relations and our Corporate Secretary. In light of the decrease in last years say-on-pay vote, when compared to our five-year average (92%) and
based on publicly disclosed votes, we reached out to specific investors to determine whether they had concerns with our compensation philosophy, program or decisions. Based on these discussions and in light of overall investor support in 2014, the
Committee did not believe that any significant changes to the compensation program were needed to address shareholder concerns. The Committee considered the results of this vote as one factor in its compensation decisions, among the other factors
discussed in this CD&A.
38 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Compensation philosophy and principles
A well-designed compensation program provides incentives to achieve desired results, helps to retain
and attract talent, and discourages excessive risk-taking. This section talks about how we view
compensation, and why we make the decisions that we do. Our Committee relies on several key principles to help guide its compensation decisions:
|
COMPENSATION PRINCIPLES |
1. Pay for performance |
2. Align executive compensation with long-term shareholder value creation |
3. Provide competitive compensation opportunities to attract, retain, and motivate
executives |
4. Encourage the focus on the long-term success of PNC and discourage excessive
risk-taking |
The Committee believes that the successful application of these principles requires a thoughtful
program design, which includes a balanced evaluation of performance metrics. The Committee believes that discretion, flexibility, and judgment are
critical to its ability to deliver incentive compensation that reflects near-term performance results and progress toward longer-term objectives that enhance PNCs ability to continue to
create value for our shareholders.
|
|
|
WHAT WE DO |
|
|
Pay for performance. Most executive pay is at risk and not guaranteed. Our standard long-term equity incentive award is 100%
performance-based. |
|
|
Discourage excessive risk taking. Multiple performance measures and deferral periods, along with robust stock ownership and retention policies, clawback and forfeiture
provisions help discourage excessive risk taking. |
|
|
Engage with shareholders. We actively engage with our shareholders on governance and compensation issues. |
|
|
Require strong ownership and retention of equity. We have adopted strong stock ownership guidelines, and all of our NEOs currently comply with those guidelines. Executives
are subject to additional retention requirements as equity grants vest. |
|
|
Clawback. Our clawback policy permits recapture of prior incentive compensation awarded based on materially inaccurate performance metrics and cancels all
or a portion of long-term incentive awards based on performance against risk metrics, risk-related actions or detrimental conduct. The amount of any clawback applied will be publicly disclosed as appropriate. |
|
|
Limit perquisites. We believe that perquisites should promote modest business-related benefits and we limit them to a modest amount. Executives are asked to reimburse the
value of perquisites over that amount, if legally permissible. |
|
|
Provide reasonable post-employment benefits. We have closed legacy supplemental defined benefit plans to new entrants and we require shareholder approval
on change in control benefits above a certain level. |
|
|
Retain an independent compensation consultant. The Personnel and Compensation Committee retains an independent compensation consultant that provides no other services to
PNC. |
|
WHAT WE DONT DO |
û |
|
No tax gross-ups. Since 2009, we have not entered into any new agreements that permit excise tax gross-ups upon a change in control. We also do not
provide tax gross-ups on our perquisites. |
û |
|
No single trigger acceleration of equity. Beginning with 2015 grants, equity for our senior executives will require a double trigger to vest
upon a change in control the change in control must occur and there must be a qualifying termination of employment. |
û |
|
No change in control agreements without shareholder approval. We will not enter into new change in control arrangements with our executives that would pay
more than 2.99 times base and bonus in the year of termination unless we get shareholder approval. |
û |
|
No repricing of options. Our equity plan does not permit us to reprice stock options that are out-of-the-money, without shareholder approval. |
û |
|
No employment agreements for NEOs. Our named executives do not have individual employment agreements. They serve at the will of the Board, which enables
us to set the terms of any termination of employment, preserving the Committees flexibility to consider the facts and circumstances of any particular situation. |
û |
|
No hedging, pledging, or short sales. We do not permit any of our employees or directors to hedge or pledge PNC securities, or sell PNC securities short. |
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
Compensation program summary
The Committee reviews and approves the compensation to be paid to our CEO and a group of senior
leaders that includes all of our NEOs. Our compensation program strives to balance multiple objectives and address the concerns of a variety of stakeholders.
As a financial institution, we must also comply with various regulatory requirements. The Board of Governors of the Federal Reserve (Federal Reserve) regulates PNC as a bank holding company and has
provided guidance and set expectations with respect to our current compensation program. We expect that the Federal Reserve, the Office of the Comptroller of the Currency and other banking regulatory entities, will remain involved in compensation
matters.
We strive for clarity and transparency in our compensation structure, utilizing features to design a balanced program. While we
try to reflect the expectations of shareholders and regulators, we want our compensation program to achieve multiple objectives, consistent with our compensation principles.
Taken as a whole, our program provides incentives for performance over the short and long-term, rewards achievement against measurable goals and
qualitative objectives, considers market data and discretion, and uses cash today as well as equity deferred into the future. The Committee evaluates multiple performance metrics, both on an
absolute basis and as measured against our peers. The Committee reviews the operation of our compensation program to help ensure that our objectives continue to be met.
Total compensation targets
We set total compensation targets for
our executives in the first quarter of the year, or when an executive assumes a new role with PNC. In establishing targets, the Committee reviews, on an annual basis, available market data for total compensation. Total compensation targets for our
executives, however, are not formulaically set at a particular percentile. Instead, the Committee uses a variety of factors to determine a total compensation target including but not limited to, the appropriateness of the job match and market data,
responsibilities of the position at PNC and the executives experience. For our CEO, our total compensation target generally falls near the median compensation for peers, as adjusted for PNCs size. For our other NEOs, our total
compensation targets generally fall near the unadjusted median compensation for peers.
The total compensation target
for each NEO generally consists of the following components:
We calculate the amounts of cash and equity in the total compensation target using a predetermined mix, with
at least 50% allocated to long-term equity awards. The Committee retains discretion in determining the allocation of cash target compensation between a base salary and an annual incentive award. In addition to approving target compensation amounts
that are at least 50% equity-based, the Committee believes that the cash provided to NEOs should include a substantial performance-based component that varies from year to year. This is why we include an annual incentive award payable in cash in
addition to a base salary. The Committee believes that these components collectively provide an appropriate balance between fixed and variable amounts, short-term and long-term duration of payouts, and cash and equity-based awards.
40 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
For 2014, the Committee set the following compensation targets for our NEOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
S. Demchak(1) |
|
|
Robert Q.
Reilly |
|
|
Michael P.
Lyons |
|
|
E. William
Parsley, III(2) |
|
|
Joseph C.
Guyaux |
|
Base salary |
|
$ |
1,100,000 |
|
|
$ |
500,000 |
|
|
$ |
700,000 |
|
|
$ |
500,000 |
|
|
$ |
620,000 |
|
|
|
|
|
|
|
Incentive compensation target |
|
$ |
8,400,000 |
|
|
$ |
3,000,000 |
|
|
$ |
4,800,000 |
|
|
$ |
5,000,000 |
|
|
$ |
2,480,000 |
|
Annual cash incentive portion |
|
$ |
2,700,000 |
|
|
$ |
1,250,000 |
|
|
$ |
1,500,000 |
|
|
$ |
750,000 |
|
|
$ |
930,000 |
|
Long-term incentive portion |
|
$ |
5,700,000 |
|
|
$ |
1,750,000 |
|
|
$ |
3,300,000 |
|
|
$ |
4,250,000 |
|
|
$ |
1,550,000 |
|
|
|
|
|
|
|
Total compensation target |
|
$ |
9,500,000 |
|
|
$ |
3,500,000 |
|
|
$ |
5,500,000 |
|
|
$ |
5,500,000 |
|
|
$ |
3,100,000 |
|
(1) |
Mr. Demchaks total compensation target for 2014 included an annualized base salary of $1,100,000. His actual base salary for 2014 was $1,089,615.
|
(2) |
Mr. Parsleys long-term incentive target includes two anticipated grants the grant of equity-based awards that all other NEOs would otherwise
receive (valued at $1,250,000) and a separate grant of incentive performance units related to the management of our Asset & Liability Management (ALM) unit, valued at $3,000,000. Please see page 61 for a discussion of
Mr. Parsleys ALM units. |
For the 2015 performance year, the Committee approved total compensation target
increases for two NEOs. The Committee approved an increase in Mr. Demchaks annualized incentive compensation target from $8,400,000 to $9,900,000 and an increase in Mr. Parsleys annualized incentive compensation target from $5,000,000 to
$5,500,000. The Committee approved these increases based on the skills and experience of each NEO, as well as changes in market information for similar executives at other financial institutions.
Other compensation and benefits
In addition to the components included in the total compensation target outlined above, our executive compensation program also includes the following components:
|
|
|
Perquisites |
|
Provide modest business-related benefits |
|
Limited to $10,000, unless approved by the Committee, with reimbursement by the executive for any excess amounts |
|
No tax gross-ups permitted |
Change in Control Arrangements |
|
Allow for continuity of management in anticipation of and through a change in control |
|
Provide compensation when an executive officer is involuntarily terminated following a change in control |
|
Described in more detail on pages 71 to 76 |
Health and Retirement Plans |
|
Promote health and wellness |
|
Help employees achieve financial security after retirement |
Compensation program decisions
As described previously in this CD&A, we delivered very good performance in 2014, with solid net
income, a well-positioned balance sheet, strong shareholder returns, and substantial execution against our main strategic objectives. We also performed well against our peers. In determining actual compensation, the Committee does not rely on a
specific formula. This allows the Committee to use its judgment in considering performance, without providing a particular weight to any one measure.
Evaluating performance
After undertaking a comprehensive review
of our corporate performance, the Committee evaluated the performance of each NEO. To help the Committee understand the market, management provided current benchmarked compensation data for each NEO. The CEO reviewed his assessment of the
performance of executives, including the NEOs, with the Committee.
The Committee approved the compensation amounts for each of our NEOs.
For our CEO, the
Committee approved the compensation amounts in an executive session, with no members of management present. Meridian, the Committees independent compensation consultant for 2014,
participated in this discussion with the Committee during the executive session.
The Committee also reviewed its decisions for our CEO
in an executive session of the independent directors of PNC, with no members of management present. In that executive session, the Committee allowed time for the independent directors to provide comments or questions before finalizing the decisions
for the CEO.
The Committee evaluates several metrics when making compensation decisions. These metrics are designed to align with how
management, long-term shareholders and banking regulators assess our performance. The metrics represent achievement against both objective and subjective goals, and the Committee does not necessarily favor one metric over another. Instead, the
Committee uses these metrics to gain a comprehensive understanding of our overall performance.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS
The following chart describes some of the key metrics that the Committee evaluates, and a brief explanation of why we use them.
|
|
|
|
|
Category |
|
Metric |
|
Why we use it |
Capital and risk |
|
Economic capital |
|
Economic capital represents the amount of resources that we should hold to guard against unexpected losses. Economic capital serves as a common currency of
risk that allows us to compare different risks on a similar basis across our company. |
|
Return on economic capital (ROEC) vs. cost of capital |
|
ROEC is our annualized net income divided by our economic capital. Comparing our profits to how much capital we are holding against potential losses helps to provide a
risk-based evaluation of profitability. When we compare ROEC to our cost of capital that is, a minimum rate of return on the overall capital that we hold it provides a good measure of the excess value that we provide to
shareholders. |
|
Tier 1 risk-based capital ratio |
|
The Tier 1 risk-based capital ratio is used by banking regulators to assess the capital adequacy and financial strength of a bank. This capital ratio must exceed 6% for
PNC to be considered well-capitalized by our regulators. |
Expenses |
|
Efficiency ratio |
|
The efficiency ratio helps us evaluate how efficiently we operate our business. The ratio divides our noninterest expense (such as compensation and benefits, occupancy
costs, equipment, and marketing) by our revenue. In general, a smaller ratio is better. |
Profitability |
|
Earnings per share (EPS) |
|
EPS is a common metric used by investors to evaluate the profitability of a company. It shows the earnings (net income) we make on each outstanding share of our
stock. |
|
EPS growth |
|
While EPS represents a specific dollar amount, EPS growth represents the percentage growth of EPS since last year. EPS growth helps us to compare our annual earnings
strength to our peers. |
|
Return on assets (ROA) |
|
Investors often evaluate banks by their asset size, with loans and investment securities generally making up the largest components of assets. ROA is our annualized net
income divided by our average assets and represents how efficiently we use assets to generate profit. |
|
Return on common equity |
|
Return on common equity is our annualized net income attributable to our common shareholders divided by average common shareholders equity. It shows how
efficiently we use our investor funds (common equity) to generate profit. |
Revenue |
|
Net interest income |
|
Net interest income measures the revenue generated from lending and other activities minus all interest expenses (such as interest paid on deposits and borrowing). It is
a good indicator of performance for banks given the importance of interest earning assets and interest bearing sources of funds. |
|
Noninterest income |
|
Noninterest income measures the fees and other revenue we derive from our businesses (other than interest income). A healthy mix of net interest income and noninterest
income provides diverse earnings streams and lessens a banks reliance on the interest rate environment. |
Valuation |
|
Tangible book value per share |
|
This measure takes our total tangible common shareholders equity (intangible assets, such as goodwill, are excluded) and divides that by the number of shares
outstanding. This provides investors with an objective valuation method and allows them to compare relative values of similar companies. |
|
Total shareholder return (TSR) |
|
TSR is a common metric used to show the total returns for an investor in our common stock. Annual TSR takes into account the change in stock price from the beginning to
the end of the year, as well as the reinvestment of any dividends issued throughout the year. |
42 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
In awarding compensation to each NEO, the Committee considered PNCs overall performance for the
year, as well as performance for the lines of business or functions managed by the NEO, and the individual performance of the NEO. The table below reflects, for each NEO, the incentive compensation target for 2014 and the actual annual cash
incentive
and long-term equity-based incentives awarded in 2015 for 2014 performance. These amounts differ, in part, from the amounts reflected in the Summary compensation table on page 56- that table
shows the long-term equity-based incentives awarded in 2014 (for 2013 performance), in accordance with SEC regulations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William S. Demchak |
|
|
Robert Q.
Reilly |
|
|
Michael P.
Lyons |
|
|
E. William
Parsley, III(1) |
|
|
Joseph C.
Guyaux |
|
Incentive compensation target |
|
$ |
8,400,000 |
|
|
$ |
3,000,000 |
|
|
$ |
4,800,000 |
|
|
$ |
5,000,000 |
|
|
$ |
2,480,000 |
|
|
|
|
|
|
|
Incentive compensation awarded |
|
$ |
10,500,000 |
|
|
$ |
3,250,000 |
|
|
$ |
6,000,000 |
|
|
$ |
5,600,000 |
|
|
$ |
3,380,000 |
|
Annual incentive portion |
|
$ |
3,540,000 |
|
|
$ |
1,375,000 |
|
|
$ |
1,980,000 |
|
|
$ |
1,050,000 |
|
|
$ |
1,380,000 |
|
Long-term incentive portion |
|
$ |
6,960,000 |
|
|
$ |
1,875,000 |
|
|
$ |
4,020,000 |
|
|
$ |
4,550,000 |
|
|
$ |
2,000,000 |
|
(1) |
Mr. Parsleys incentive compensation target and award includes two anticipated grants the grant of equity-based awards that all other NEOs
would otherwise receive (valued at $1,250,000) and a separate grant of incentive performance units related to the management of our Asset & Liability Management (ALM) unit, valued at $3,000,000. Please see page 61 for a discussion of
Mr. Parsleys ALM units. |
The charts below show the base salary for 2014 for each NEO, and the annual cash
incentive and long-term incentive awarded in 2015 for 2014 performance. The bar surrounding each circle shows the amount of total compensation that is variable and at-risk. These amounts differ, in part, from the amounts reflected in the Summary
compensation table on page 56- that table shows the long-term equity-based incentives awarded in 2014 (for 2013 performance), in accordance with SEC regulations.
WILLIAM S. DEMCHAK: CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Demchak was appointed CEO in April 2013 and Chairman in April 2014.
|
|
|
WILLIAM S. DEMCHAK PAY-FOR-PERFORMANCE |
2014 KEY ACHIEVEMENTS |
|
|
Delivered outstanding performance as CEO, with strong net income and shareholder returns, a well-positioned balance sheet, and reduced expenses.
Performed well against our peers, ranking 2nd in our peer group with an annual total shareholder return (TSR) of
20.3%. Maintained a well-positioned and core funded balance sheet with a loans to deposits ratio of 88%.
Strengthened capital by growing key capital ratios and improving our CCAR process while returning capital to
shareholders through a dividend increase and repurchases of shares. Made significant strides in executing on our key strategic
objectives. |
|
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS
ROBERT Q. REILLY: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Mr. Reilly was appointed Chief Financial Officer in August 2013.
|
|
|
ROBERT Q. REILLY PAY-FOR-PERFORMANCE |
2014 KEY ACHIEVEMENTS |
|
|
As Chief Financial Officer, provided effective supervision of major internal financial and accounting functions and continued to play an integral part in our achievement of financial
priorities, including exceeding our continuous improvement goal of $500 million in cost savings and decreasing our overall expenses year over year.
Increased collaboration between the finance function and our lines of business, and improved employee engagement within finance.
Served as primary spokesperson with investors, the media and the investment community and continued to support our
reputation with those stakeholders. Maintained strong financial control and discipline,
collaborating with our business leaders to drive business performance, growth, efficiency and returns. |
|
|
MICHAEL P. LYONS: EXECUTIVE VICE PRESIDENT AND HEAD OF CORPORATE AND INSTITUTIONAL BANKING
Mr. Lyons has been an Executive Vice President since November 2011 and is head of Corporate and Institutional Banking.
|
|
|
MICHAEL P. LYONS PAY-FOR-PERFORMANCE |
2014 KEY ACHIEVEMENTS |
|
|
Managed a major business that contributed approximately 36% of our revenue and 50% of our profits in 2014.
Delivered solid financial results, growing adjusted pre-provision net revenue over the prior year, with notable
outperformance in our asset-based lending group and Harris Williams. Achieved loan and deposit growth while maintaining our
desired risk appetite and credit quality. Successfully focused on cross-selling opportunities and
new revenue initiatives while managing expenses. |
|
|
44 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
E. WILLIAM PARSLEY, III: EXECUTIVE VICE PRESIDENT, CHIEF INVESTMENT OFFICER AND TREASURER
Mr. Parsley has served as Treasurer and Chief Investment Officer since January 2004. He was appointed Executive Vice President of PNC in
February 2009.
|
|
|
E. WILLIAM PARSLEY, III PAY-FOR-PERFORMANCE |
2014 KEY ACHIEVEMENTS |
|
|
Delivered outstanding performance on our core investment portfolio while continuing to improve the credit quality of the portfolio.
Enhanced the firms liquidity and capital profile, increasing our liquidity coverage and improving our
long-term capital plan. Partnered successfully with the Risk and Finance functions to improve the evaluation and reporting of risks across
the entire balance sheet. Made several improvements to the Comprehensive Capital Analysis and Review (CCAR) process. |
|
|
JOSEPH C. GUYAUX: SENIOR VICE CHAIRMAN AND CHIEF RISK OFFICER
Mr. Guyaux was appointed Senior Vice Chairman and Chief Risk Officer in February 2012. Effective January 31, 2015, he was appointed as
Senior Vice Chairman and CEO and President of PNC Mortgage.
|
|
|
JOSEPH C. GUYAUX PAY-FOR-PERFORMANCE |
2014 KEY ACHIEVEMENTS |
|
|
Completed a comprehensive risk appetite reassessment to enhance the process for assessing PNCs aggregate risk.
Created a new Enterprise Risk Appetite Statement with supporting risk principles; linked our risk appetite to
capital planning and the stress testing process. Strengthened the model validation and model development
functions, and helped to support the validation of models for the CCAR process. Improved our enterprise data governance strategy and
leadership. |
|
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS
The amount of incentive compensation that we award to our NEOs both annual and long-term
is based on corporate, business and individual performance for the year. For our NEOs, a significant portion of the total compensation target - at least 50% - consists of a long-term, equity-based award. For our CEO and another NEO, this
percentage is 60%.
Annual incentive awards (cash). We pay annual incentive awards in cash. To preserve the tax
deductibility of these awards, the Committee previously approved the eligibility of Mr. Demchak and the next three highest-paid NEOs (other than the CFO), to receive annual incentive awards under our 1996 Executive Incentive Award Plan, a
shareholder-approved plan that allows PNC to receive a tax deduction for certain compensation.
For more information on this plan and the process for establishing maximum amounts, please see footnote (a) of the Grants of plan-based awards in 2014 table on page 58, and
Consideration of tax deductibility on page 52.
Long-term incentive awards (equity-based). Under our current
programs, each NEO generally receives his long-term incentive award in two primary forms - the incentive performance unit, which measures PNC performance over a three-year period, and the performance-based restricted share unit (RSU),
which vests in equal annual installments over a four-year period. In addition to the regular incentive performance unit, Mr. Parsley received an incentive performance unit tied to the performance of our Asset & Liability Management
(ALM) function, which he manages.
46 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
All of these equity-based awards are made under PNCs shareholder-approved 2006 Incentive Award Plan. The table below summarizes the material
terms and conditions of these awards. The significant differences between grants made in 2014 and grants made in 2015 are that the 2015 grants include a revised peer group (see page 48) and include a double trigger acceleration of
vesting provision upon a change in control (see page 72).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive performance units |
|
Performance-based RSUs |
|
ALM incentive performance units |
Who receives an award? |
|
All NEOs |
|
|
|
|
|
All NEOs |
|
Mr. Parsley |
How do we
measure
performance? |
|
2015-2017 (three
years) Vesting occurs at the end of the period
Performance based on
absolute and relative metrics - 50% based on our return on common equity without goodwill (ROCE) compared to our cost of common equity (COCE)
- 50% based on our
EPS growth rank against our peers 0-125% of target award
Units payable in PNC
common stock up to target (0-100%) and payable in cash above target (100-125%) |
|
2015-2018 (four
years) Vesting occurs in annual installments
Vested amount adjusted
based on PNCs annual total shareholder return (TSR) Aligns executives interests directly with the interests of shareholders, and has a considerably stronger
tie to performance than time-based restricted shares while also supporting retention |
|
2015-2017 (three
years) Vesting occurs at the end of the period
PNCs ALM
performance compared to a benchmark performance index 0-200% of target award
Units payable in
cash |
|
|
|
|
75-125% of target award
Units payable in PNC
common stock |
|
|
What is the
payout? |
|
The payout percentage
grid ranges are listed below. Actual payout percentages will take into account how close the performance metric or peer group rank is to the metric or rank above and below. For example, if EPS Growth Rank is closer to 5th than 6th, the actual payout
percentage will be closer to 115% than 105%. If ROCE as a % of COCE is between 105% and 110%, the payout percentage will be between 100% and 125%. |
|
|
ROCE
as % of COCE |
|
Payout % |
|
EPS Growth Rank |
|
Payout % |
|
Annual
TSR |
|
Payout % |
|
ALM vs.
index |
|
Payout % |
|
>= 110% |
|
125% |
|
1 |
|
125% |
|
>= +25% |
|
125% |
|
>= +40 basis points |
|
200% |
|
105% |
|
100% |
|
2 |
|
125% |
|
0% |
|
100% |
|
+20 basis points |
|
150% |
|
100% |
|
75% |
|
3 |
|
125% |
|
<= -25% |
|
75% |
|
0 to -25 basis points |
|
100% |
|
75% |
|
50% |
|
4 |
|
120% |
|
|
|
|
|
-35 basis points |
|
40% |
|
<= 50% |
|
0% |
|
5 |
|
115% |
|
|
|
|
|
<= -40 basis points |
|
0% |
|
|
|
|
|
6 |
|
105% |
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
95% |
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
80% |
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
60% |
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
40% |
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
0% |
|
|
|
|
|
|
|
|
How do we
adjust for risk? |
|
If PNC does not meet or exceed the required Tier 1 risk-based capital ratio for well-capitalized institutions in a specific year, the award will not
vest. If our return on economic capital does not exceed our cost of capital for the year, the Committee may reduce or eliminate the award. |
|
|
What are other significant
provisions?
|
|
No voting
rights Dividends will accrue until vesting and be paid out in cash, adjusted for actual performance |
|
No voting
rights No accrued dividends |
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 47
COMPENSATION DISCUSSION AND ANALYSIS
Compensation policies and practices
The Committee adopts policies and procedures to assist in the fulfillment of its duties, and reviews
these from time to time. We describe some of the significant policies and procedures in this section.
In addition to formal policies and
procedures, the Committee has several practices that it follows in the fulfillment of its duties and responsibilities. Some of these practices are described below.
Compensation and risk
The Committee evaluates the risks inherent
in the incentive compensation program. For a detailed discussion of how the Committee evaluates risk, please see Compensation and Risk, which begins on page 54.
Independent compensation consultant
The Committee retains
Meridian Compensation Partners, LLC as its independent compensation consultant. For a discussion of this relationship and the considerations that the Committee takes into
account when determining independence, please see pages 26 and 27.
Peer group
The Committee selects a peer group each year. We use this group to measure relative performance and to determine our incentive performance unit
payouts. We also use this group for general compensation comparisons.
In approving a peer group, the Committee analyzes several factors,
including the mix and complexity of businesses, the markets being served, market capitalization, asset size, and changes resulting from mergers or shifts in strategic direction. We also look at the companies with whom we compete for talent.
The Committee annually reviews the composition of the peer group with management and its independent consultant. The following peer
group for 2014 remained unchanged from the prior year and included 12 companies in addition to PNC, with assets, revenues and market capitalization for each company measured as of December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peer Group Company |
|
Ticker Symbol |
|
|
|
Peer |
|
Assets
(in millions) |
|
|
|
|
Peer |
|
Revenue
(in millions) |
|
|
|
|
Peer |
|
Market Capitalization
(in millions) |
|
Bank of America Corporation |
|
BAC |
|
|
|
JPM |
|
$ |
2,573,126 |
|
|
|
|
JPM |
|
$ |
94,205 |
|
|
|
|
WFC |
|
$ |
283,439 |
|
BB&T Corporation |
|
BBT |
|
|
|
BAC |
|
$ |
2,104,534 |
|
|
|
|
WFC |
|
$ |
84,347 |
|
|
|
|
JPM |
|
$ |
232,472 |
|
Capital One Financial Corporation |
|
COF |
|
|
|
WFC |
|
$ |
1,687,155 |
|
|
|
|
BAC |
|
$ |
84,247 |
|
|
|
|
BAC |
|
$ |
188,141 |
|
Comerica Incorporated |
|
CMA |
|
|
|
USB |
|
$ |
402,529 |
|
|
|
|
COF |
|
$ |
22,314 |
|
|
|
|
USB |
|
$ |
80,281 |
|
Fifth Third Bancorp |
|
FITB |
|
|
|
PNC |
|
$ |
345,072 |
|
|
|
|
USB |
|
$ |
19,939 |
|
|
|
|
PNC |
|
$ |
47,713 |
|
JPMorgan Chase & Co. |
|
JPM |
|
|
|
COF |
|
$ |
308,854 |
|
|
|
|
PNC |
|
$ |
15,375 |
|
|
|
|
COF |
|
$ |
45,683 |
|
KeyCorp |
|
KEY |
|
|
|
STI |
|
$ |
190,328 |
|
|
|
|
BB&T |
|
$ |
9,158 |
|
|
|
|
BB&T |
|
$ |
28,028 |
|
M&T Bank Corporation |
|
MTB |
|
|
|
BB&T |
|
$ |
186,814 |
|
|
|
|
STI |
|
$ |
8,163 |
|
|
|
|
STI |
|
$ |
21,978 |
|
Regions Financial Corporation |
|
RF |
|
|
|
FITB |
|
$ |
138,706 |
|
|
|
|
FITB |
|
$ |
6,052 |
|
|
|
|
FITB |
|
$ |
16,790 |
|
SunTrust Banks, Inc. |
|
STI |
|
|
|
RF |
|
$ |
119,679 |
|
|
|
|
RF |
|
$ |
5,100 |
|
|
|
|
MTB |
|
$ |
16,626 |
|
U.S. Bancorp |
|
USB |
|
|
|
MTB |
|
$ |
96,686 |
|
|
|
|
MTB |
|
$ |
4,456 |
|
|
|
|
RF |
|
$ |
14,298 |
|
Wells Fargo &
Company |
|
WFC |
|
|
|
KEY |
|
$ |
93,821 |
|
|
|
|
KEY |
|
$ |
4,090 |
|
|
|
|
KEY |
|
$ |
11,946 |
|
|
|
|
|
|
|
CMA |
|
$ |
69,190 |
|
|
|
|
CMA |
|
$ |
2,523 |
|
|
|
|
CMA |
|
$ |
8,385 |
|
For 2014, the Committee believed that this peer group provided a balanced mix of
institutions in light of our size, mix and scope of businesses, products and services, and sources of executive talent. PNC is larger than a majority of the peers, positioned between the median and the 75th percentile of the peer group, based on total assets,
revenue, and market capitalization. For 2015, the Committee decided, after a review of the peer group companies, to remove Comerica Incorporated from the peer group. The Committee approved the removal of Comerica based on its relatively smaller
size, business mix and geographic footprint as compared to PNC.
Executive stock ownership and retention
Our executive officers historically have held a significant portion of their personal wealth in the form of our common stock (or other equity that
reflects the performance of our common stock). The Committee believes it is important to require our executive officers, to meet minimum stock ownership guidelines, denominated in shares.
Each executive officer and other key employees is subject to additional ownership requirements, even after the original ownership target is met. The ownership requirements increase the number of
48 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
PNC shares that an individual needs to own over time. As new awards vest, designated employees need to retain more shares of stock, which they must then hold until they retire or leave PNC. This
ownership policy reflects compensation awards over an executives career, and also ties an executives personal wealth closely to the performance of PNC and the interests of our long-term shareholders.
Equity interests that count toward satisfaction of the ownership guidelines include shares owned
outright by the officer, or his or her spouse and dependent children, restricted shares (subject to vesting requirements), certain equity awards and shares or stock units held in a benefit plan. We count 50% of any unvested equity-based award toward
satisfaction of the ownership guidelines. The guidelines are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer/Category |
|
Share ownership (base requirement) |
|
|
Base requirement (value as of 12/31/2014)(1) |
|
|
Ongoing retention requirement |
|
President and Chief Executive Officer |
|
|
125,000 |
|
|
|
$11,403,750 |
|
|
|
33% |
|
Management Executive Committee and Other
Corporate Executive Group (CEG) Members |
|
|
15,000 - 25,000 |
|
|
$ |
1,368,450 - $2,280,750 |
|
|
|
25% |
|
Executive Officers (non-CEG Members) |
|
|
5,000 |
|
|
|
$456,150 |
|
|
|
10% |
|
(1) |
Value based on PNC closing price of $91.23 as of December 31, 2014. |
Newly hired or promoted employees who become subject to these guidelines will have up to six years to
satisfy the guidelines. The Committee monitors compliance with these stock ownership guidelines and has determined that our current NEOs satisfy the guidelines. All other employees subject to the guidelines either satisfy the guidelines or are
within the compliance period.
Clawback and forfeiture
We have a clawback policy that applies to all of our NEOs and other executive officers, as well as other senior employees and those employees receiving equity-based compensation. This
policy applies to all incentive compensation provided on or after January 1, 2013, although some elements of the policy were in effect previously.
A summary of PNCs clawback
and incentive compensation adjustment policy is included in the table below.
|
|
|
|
|
|
|
Provision |
|
Explanation |
|
Eligible Compensation Elements |
|
Applicable Employee Population |
Clawback Inaccurate Metrics |
|
Applies to incentive compensation awarded as the result of materially inaccurate performance metrics (see below for additional details) |
|
All incentive compensation vested or unvested |
|
NEOs and other senior leaders |
Negative Adjustments Risk Metrics Performance |
|
May apply when there is less than desired performance against corporate or business unit risk metrics, as applicable |
|
All unvested long-term incentive compensation |
|
Clawback Detrimental Conduct |
|
Applies in the following instances:
when an individual engages in competitive activity without prior consent either as an employee of PNC
or for one year after employment when an individual commits fraud, misappropriation
or embezzlement when an individual is convicted of a felony |
|
All unvested long-term incentive
compensation |
|
All equity recipients |
Negative Adjustments Risk-Related Actions
|
|
May apply when an individuals actions, or the failure to act, either as an individual or a supervisor, demonstrates a failure
to provide appropriate consideration of risk (see below for additional details) |
|
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS
For purposes of the clawback for materially inaccurate performance metrics, performance metrics
include any metric, including corporate financial results, used directly or indirectly to determine whether or not incentive compensation is to be provided to an executive (or group of executives) or to determine the amount of any such compensation.
The portion of the incentive compensation that represents the excess over what would have been provided if there had been no material inaccuracy in the performance metric will be subject to clawback. The Committee retains discretion, to the extent
legally permissible, to determine that it would not be in PNCs best interests to seek to enforce the clawback.
For purposes of the
negative adjustment resulting from risk related actions, the Committee may reduce or cancel unvested long-term incentive compensation granted to an employee who takes risk-related actions (or fails to take action) that result in or are reasonably
expected to result in a material adverse impact to PNC or a business unit, such as:
|
|
Not following applicable risk management policies or procedures, |
|
|
Disregarding the significant risks associated with a course of action for which the employee is responsible, |
|
|
Violating, or permitting or enabling PNC to violate, statutory or regulatory requirements, or |
|
|
Not escalating risk concerns to appropriate individuals, committees or other governing bodies. |
This applies both to individual employees who took risk-related actions (or failed to take action) and their supervisors. The types of adverse
impacts could include matters such as impacts to PNCs or a business segments or corporate functions financial performance, capital or liquidity positions, reputation or business prospects.
The negative adjustment resulting from risk related actions allows PNC to recoup unvested equity awards from recipients whose inappropriate
risk-taking activities have resulted in or are expected to result in a material adverse impact to PNC in the future. By doing so, PNC is able to add further risk-balancing to our incentive arrangements by accounting for both forward- and
backward-looking risk adjustments.
In February 2014, the Committee adopted amendments to the policy to provide that if PNC applies the
policy to recoup or clawback incentive compensation or negatively adjust incentive compensation as a result of risk-related actions and the underlying factual circumstances are otherwise publicly reported by PNC (1) in a filing with the SEC
or (2) in disclosure that would otherwise meet the requirements for public disclosure by PNC under the SECs Regulation FD or
(3) are disclosed by a third party in a publicly available court or administrative
filing, then PNC will disclose in its annual shareholder meeting proxy statement, a current report on Form 8-K or other public filing made by it with the SEC or a posting in a clearly
identifiable location in the Investor Relations section of its corporate website:
|
|
a general description of the circumstances giving rise to the incentive compensation recovery or adjustment, including items such as number of
employees, seniority of employees, and line of business impacted, and |
|
|
the aggregate amount of incentive compensation recovered or adjusted. |
PNC may limit such disclosure if it would be likely to result in, or exacerbate, any existing or threatened, employee, shareholder or other litigation, arbitration or proceeding against PNC.
Shareholder approval of severance agreements
We have a Board-approved policy regarding the shareholder approval of future severance arrangements. This policy applies to future severance arrangements with executive officers. Under this policy,
PNC will not enter into an arrangement with an executive officer that provides for additional severance benefits in an amount exceeding 2.99 times the sum of the executive officers annual base salary and target bonus for the year of
termination, unless the future severance arrangement is approved by the affirmative vote of a majority of votes cast by shareholders on the matter.
The policy applies only to future severance arrangements. Future severance arrangements do not include existing severance agreements or agreements to which PNC becomes obligated in connection
with an acquisition, unless in each case the severance agreement is modified to materially increase benefits that would be considered additional severance benefits. Our Board retains the right to amend, terminate or waive the policy and will
promptly disclose any such change. We have made this policy available at www.pnc.com/corporategovernance.
Since 2009, no new
change in control agreement has included an excise tax gross-up. For a more detailed discussion on change in control arrangements, please see Change in control agreements on page 71.
Limiting perquisites
The Committee believes in limiting the
amount of perquisites provided to our executives. During 2014, each executive officer received a $10,000 allowance for perquisites. If the executive exceeded this allowance, the executive was asked to reimburse PNC for the excess, if legally
permissible.
50 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
We consider a benefit to be a perquisite or personal benefit unless its purpose is clearly and
exclusively business related. We value perquisites based on their incremental cost to us. Executive officers do not receive tax gross-ups on any perquisites.
The principal perquisites that we may provide to our executive officers include financial consulting and tax preparation services and limited personal use of corporate aircraft, as approved by our
CEO. One of our executive officers also receives the reimbursement of costs related to home security services. We may provide additional perquisites to an executive officer from time to time.
William S. Demchak also has access to our corporate aircraft for personal flights. During 2014, Mr. Demchak was required to pay PNC for the cost of all such flights, as determined under the terms of
lease (time-sharing) agreements between PNC and Mr. Demchak. Mr Reilly and Mr. Guyaux also have time-sharing agreements. During 2014, Mr. Guyaux paid for most of his personal usage of the corporate
aircraft under the terms of his time-sharing agreement. During 2014, the Committee chair approved personal costs for use of the corporate aircraft in excess of $10,000 for Mr. Reilly that were not reimbursed
under his time-sharing agreement. The Committee has approved the time-sharing agreements in order to comply with Federal Aviation Administration (FAA) rules and regulations that would otherwise prohibit
executives from reimbursing PNC for the incremental cost of personal flights.
Due to certain operational restrictions and administrative
efficiencies, we operate our corporate aircraft under FAA rules and regulations that limit our ability to accept reimbursement for personal aircraft usage unless an individual has a time-sharing agreement. The time-sharing agreements provide a
mechanism to obtain reimbursement from the executive. The costs paid by our executive officers under the terms of the agreements include incremental costs, as well as a federal excise tax and other fees. For flights subject to these time-sharing
agreements, the officer is required to pay us for the following costs:
|
|
fuel, oil, lubricants, and other additives; |
|
|
travel expenses of crew, including food, lodging, and ground transportation; |
|
|
hangar and tie-down costs away from the aircrafts base of operation; |
|
|
insurance obtained for the specific flight; |
|
|
landing fees, airport taxes, and similar assessments; |
|
|
custom, foreign permit, and similar fees directly related to the flight; |
|
|
in-flight food and beverages; and |
|
|
passenger ground transportation. |
During 2014, the Committee approved amendments to the policy governing the use of company aircraft.
To supplement the policy, the Committee also adopted written procedures to document and refine the principles to be applied in determining the classification of a flight as business or personal
and the calculation of aggregate incremental cost for perquisite purposes, including definitions of personal use and enhanced methods for allocating costs between business and personal in complex situations and an approach for capturing deadhead
flights where appropriate in the calculation of incremental costs for personal aircraft use. The Committee also approved the use of an amended form of time-sharing agreement to bring amounts to be billed into alignment with the new procedures
(subject to FAA maximum billing limitations). As permitted by the FAA rules, the new form of agreement provides for the billing of an additional charge equal to 100% of the costs of fuel, oil and lubricants listed above to facilitate the alignment
of incremental cost as currently calculated and amounts billed.
Beginning with the 2015 performance year, the Committee approved some
changes to the policy on perquisites. The Committee continues to believe in limiting perquisites for executives, and most of our NEOs receive only two perquisites financial preparation and tax consulting services and occasional personal use
of the corporate aircraft. We ask our NEOs to reimburse PNC for the incremental cost of perquisites over a threshold amount, which has been $10,000. FAA regulations impose restrictions on the ability of NEOs to reimburse PNC for personal aircraft
use. As a result, minimal aircraft use often results in perquisites that exceed the threshold. Personal flights often include trips that the Committee believes are reasonable, such as attending funerals or asking an executive to return early to
headquarters from vacation.
The Committee approved a new annual perquisites limit of $20,000 for each NEO, other than the CEO,
consisting of a $10,000 general limit and a $10,000 limit for personal aircraft use. This would allow each NEO to continue to receive financial consulting and tax preparation services and also allow for an occasional personal flight on the corporate
aircraft (usually no more than 2-4 hours of flight time a year).
We continue to provide Mr. Demchak a $10,000 general perquisite limit.
In addition, as the Committee has previously recommended that Mr. Demchak take all flights (personal or business) on the corporate aircraft, the Committee approved an allowance, not to exceed $100,000, for personal flights taken on the aircraft. Mr.
Demchak will continue to pay for the cost of any flights that exceed this allowance under the terms of his existing time-sharing agreement. Mr. Reilly and Mr. Guyaux will pay for any personal flights in excess of their $10,000 allowance
pursuant to the terms of their time-sharing agreements.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 51
COMPENSATION DISCUSSION AND ANALYSIS
Guidelines on the use of discretion
The Committee has adopted guidelines regarding the use of discretion in incentive compensation plans. Under these guidelines, the use of discretion
will be exercised so that incentive compensation awards are reasonably aligned with risk-adjusted performance. The guidance provides, among other things, that discretionary increases in compensation should be based on behaviors, actions, or results
that are deemed to be extraordinary, exceed expectations, or provide meaningful direct or indirect benefits to PNC or our businesses. At the same time, discretionary reductions in compensation should be based on behaviors, actions, or results that
fail to meet expectations or negatively impact our performance, reputation, or work environment. The guidelines specifically address the need to evaluate both inappropriate risk-taking behaviors during the performance year, as well as the outcome of
prior inappropriate risk-taking behaviors, when making discretionary incentive compensation decisions. In addition, managers are generally required to document how discretion was applied in considering risk-taking behaviors and outcomes in
employees performance evaluations or incentive compensation recommendations, particularly for our most senior level employees.
Restrictions on trading, hedging and pledging
We have a policy that prohibits certain employees, including all executive officers, from purchasing or selling our securities beginning the 16th day of the last month of each calendar quarter until the
second business day after we release our earnings for that quarter. We may also impose additional trading restrictions on our employees, including our executive officers, due to the availability of material, non-public information regarding PNC or
our securities. In addition, we require certain employees, including all executive officers, to pre-clear personal investments (other than in specified types of securities) made by the individual or any immediate family members.
Our Code of Business Conduct and Ethics and related policies, which apply to all of our employees,
have for many years included anti-hedging provisions that prohibit all employees from day trading or short selling PNC securities and prohibit all employees from engaging in transactions in any derivative of PNC securities (other than securities
issued under a PNC compensation plan), including buying and writing options.
Additionally, the Restricted Employee Investment
Transaction Rules, which covers executive officers, senior executives, and other employees who by the nature of their role must comply with additional restrictions and procedures that govern their personal investment transactions, was amended in
June 2014 to prohibit pledging PNC securities. This policy prohibits employees and directors from pledging PNC securities owned by them for loans or obligations on the margin or otherwise.
Consideration of tax deductibility
Section 162(m) of the
Internal Revenue Code does not generally allow a company to deduct compensation over $1 million paid to certain executive officers. Under the tax rules, the executive officers whose compensation is subject to Section 162(m) includes the CEO and
the next three highest-compensated executive officers (other than the CEO and the CFO).
One exception to this disallowance applies to
performance-based compensation paid under shareholder-approved plans. Awards made under our shareholder-approved plansthe 1996 Executive Incentive Award Plan (annual incentive awards) and the 2006 Incentive Award Plan (other equity-based
awards)are intended to be eligible for the performance-based exception and therefore, deductible by PNC for federal income tax purposes.
Although the Committee considers the desirability of limiting PNCs non-deductible expenses when it makes compensation decisions, the Committee believes in maintaining the flexibility and
competitive effectiveness of the executive compensation program. Tax deductibility, while an important consideration, is analyzed as one component of the overall program.
52 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis with PNCs management, and based on our review and discussions, we
recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
The Personnel and
Compensation Committee of the Board of Directors of The PNC Financial Services Group, Inc.
Dennis F. Strigl,
Chairman
Charles E. Bunch
Paul W. Chellgren
Andrew T. Feldstein
Richard B. Kelson
Thomas
J. Usher
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 53
COMPENSATION AND RISK
This section explains how we consider risk at PNC, and the relationship between risk management, performance, and compensation. We also discuss the
risk reviews presented to our Boards Personnel and Compensation Committee, and the methodology we use to assess the potential risks in our incentive compensation plans.
Risk management at PNC
We encounter risk as part of the normal course of operating our business. The successful execution of
our strategy requires effective management of the risks we decide to take.
We want our decisions to reflect our desired risk appetite. It is our responsibility to establish an
enterprise risk management framework that facilitates risk management for the benefit of our shareholders.
Enterprise risk appetite statement
We manage our risk appetite to optimize long-term shareholder value while supporting our employees, customers,
and communities. In doing so, we:
|
1. |
Achieve our business objectives and protect our brand by accepting risks that are understood, quantifiable, and analyzed through all phases of the economic
cycle |
|
|
2. |
Earn trust and loyalty from all stakeholders including employees, customers, communities, and shareholders |
|
|
3. |
Reward individual and team performance by taking into account risk discipline and performance measurement |
|
|
4. |
Practice disciplined capital and liquidity management so that the firm can operate effectively through all economic cycles |
|
We strive to embed a culture of risk management throughout PNC. With each of our employees, we
reinforce the importance of managing risks in executing on our strategic objectives and in support of our desired risk appetite.
We
approve our Enterprise Risk Management Framework and key risk policies at the Board level. We discuss our risk management approach in the Risk Management section of Item 7 of this years Annual Report on Form 10-K.
We reflect our desired enterprise risk appetite by helping to ensure that our performance management
and compensation arrangements for all employees are balanced in ways that do not create incentives for imprudent or excessive risk-taking and best reflect our strategic objectives, business model, and management structure.
Compensation and risk
Our compensation philosophy supports and reflects PNCs risk appetite and risk management
culture. Our risk policies and procedures guide our management decisions, including how we pay employees. By setting and communicating our risk appetite in advance, we seek to manage and control the risks that employees can take or influence,
consistent with their roles and responsibilities.
All employees have performance goals tied to business and individual performance, but
each employee, no matter their role at PNC, also has risk management goals. We evaluate employee performance against these goals, including the risk management goals, in addition to considering risk outcomes from actions taken in prior years. We
incorporate this comprehensive evaluation of
employee risk management into our incentive compensation decisions. In addition, all employees are encouraged to collaborate across groups to identify and mitigate risks and elevate issues as
required.
Our compensation program is designed to encourage management of risk within our appetite and discourage inappropriate
risk-taking by granting a diverse portfolio of incentive compensation awards to our executives and other senior employees that is expected to reward desired behavior over time. Specifically, we balance our portfolio of awards between fixed and
variable compensation; cash and equity-based compensation; and annual and long-term compensation. We base awards on the Committees assessment of a variety of quantitative and qualitative performance measurements, both on
54 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
COMPENSATION AND RISK
an absolute and a relative basis. Compensation decisions also rely on discretion to consider other factors, such as effective risk management, compliance with controls and ethical duties,
competition for top talent, market-based pay levels, and the need to attract, develop, grow, and retain the leadership team.
As
discussed in our CD&A, the long-term incentive program includes grants to our NEOs and certain other executives that include robust risk-based performance metrics. Payouts under these grants could be reduced or eliminated if we do not meet
specific risk criteria over the vesting period.
We maintain an equity program for approximately 130 senior leaders below the executive levels to help
ensure that their incentive compensation awards reflect risk-adjusted performance outcomes that would pay out, if at all, over a four-year period. These senior leaders receive a portion of their incentive compensation in an equity-based award that
is subject to a risk-based review trigger. We maintain separate risk-based review triggers for senior leaders in business segments versus those in administrative or control functions. If a risk-based review is triggered, the applicable review
committee will determine whether a downward adjustment is warranted, up to a complete cancellation of the share units in that years tranche.
Risk review of compensation plans
Our Chief Risk Officer (CRO) reports at least quarterly to our Boards Personnel and
Compensation Committee to discuss risk management and review the connection between effective risk management and incentive compensation. Our CRO also presents the Committee with a risk assessment for each of our principal business units as well as
a collective assessment of staff functions including finance, human resources, legal, operations and technology. In addition, we have at least one director who was a member of both the Personnel and Compensation and Risk Committees during 2014.
We also have systematically identified individuals or groups of employees who could potentially expose us to material
financial loss, either individually or as a collective group. As with our incentive compensation plan assessment, we also established a cross-functional team that continues to identify and monitor these individuals or groups.
We have developed a governance framework for our incentive compensation plans to help monitor and validate these plans. We want our plans to achieve
an appropriate balance of compensation and risk-adjusted performance this framework helps to ensure that we have the appropriate procedures, controls and reviews in place to do so. We will continue to assess and modify our incentive
compensation plans as part of this framework to appropriately reflect risk considerations and the duration of the risks and to enhance the documentation of existing risk-balancing strategies.
Examples of incentive plan modifications include:
|
|
Adding or increasing the visibility of risk metrics to plans based on the structure of the plan and the nature of the business and the roles of
participants |
|
|
Adding or formalizing language around delaying award payments or recapture of payments. Delayed payments (hold backs) are used in
instances where quality metrics are critical to help mitigate risk |
|
|
Enhancing documentation of the plan design and use of discretion in non-formulaic plans at the pool funding, business allocation, or individual
award level |
Based on our approach to risk management, our comprehensive incentive plan governance framework, our risk
assessments for significant businesses and staff functions, and the addition of risk-based metrics to long-term incentive compensation programs, we believe that the risks arising from our compensation plans, policies, and practices are not
reasonably likely to have a material adverse effect on PNC.
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 55
COMPENSATION TABLES
Summary compensation table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name & Principal Position |
|
Year |
|
|
Salary
($)(a) |
|
|
Stock Awards
($)(b) |
|
|
Non-Equity Incentive Plan Compensation ($)(c) |
|
|
Change in Pension Value & Nonqualified Deferred Compensation Earnings
($)(d) |
|
|
All
Other Compensation ($)(e) |
|
|
Total
($) |
|
William S. Demchak |
|
|
2014 |
|
|
$ |
1,089,615 |
|
|
$ |
5,999,978 |
|
|
$ |
3,540,000 |
|
|
$ |
650,626 |
|
|
|
$57,685 |
|
|
$ |
11,337,904 |
|
Chairman, President |
|
|
2013 |
|
|
|
922,115 |
|
|
|
3,863,752 |
|
|
|
3,083,333 |
|
|
|
53,668 |
|
|
|
59,235 |
|
|
|
7,982,103 |
|
& CEO |
|
|
2012 |
|
|
|
750,000 |
|
|
|
4,416,686 |
|
|
|
1,825,840 |
|
|
|
473,720 |
|
|
|
58,894 |
|
|
|
7,525,140 |
|
Robert Q. Reilly |
|
|
2014 |
|
|
|
500,000 |
|
|
|
1,549,936 |
|
|
|
1,375,000 |
|
|
|
316,836 |
|
|
|
60,922 |
|
|
|
3,802,694 |
|
Executive V.P. & |
|
|
2013 |
|
|
|
475,000 |
|
|
|
1,189,642 |
|
|
|
1,075,000 |
|
|
|
35,169 |
|
|
|
35,327 |
|
|
|
2,810,138 |
|
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Lyons |
|
|
2014 |
|
|
|
700,000 |
|
|
|
4,079,882 |
|
|
|
1,980,000 |
|
|
|
21,677 |
|
|
|
6,577 |
|
|
|
6,788,136 |
|
Executive V.P. & Head of Corporate |
|
|
2013 |
|
|
|
700,000 |
|
|
|
4,555,912 |
|
|
|
2,020,000 |
|
|
|
21,411 |
|
|
|
2,154 |
|
|
|
7,299,477 |
|
& Institutional Banking |
|
|
2012 |
|
|
|
700,000 |
|
|
|
5,982,880 |
|
|
|
|
|
|
|
11,448 |
|
|
|
336,352 |
|
|
|
7,030,680 |
|
E. William Parsley, III |
|
|
2014 |
|
|
|
500,000 |
|
|
|
4,574,917 |
|
|
|
1,050,000 |
|
|
|
164,669 |
|
|
|
10,200 |
|
|
|
6,299,786 |
|
Executive V.P., Chief |
|
|
2013 |
|
|
|
500,000 |
|
|
|
4,194,598 |
|
|
|
1,075,000 |
|
|
|
|
|
|
|
5,577 |
|
|
|
5,775,175 |
|
Investment Officer |
|
|
2012 |
|
|
|
484,615 |
|
|
|
4,380,190 |
|
|
|
694,700 |
|
|
|
148,751 |
|
|
|
12,762 |
|
|
|
5,721,018 |
|
& Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph C. Guyaux* |
|
|
2014 |
|
|
|
620,000 |
|
|
|
1,874,984 |
|
|
|
1,380,000 |
|
|
|
725,352 |
|
|
|
22,235 |
|
|
|
4,622,571 |
|
Senior Vice Chairman |
|
|
2013 |
|
|
|
620,000 |
|
|
|
1,605,308 |
|
|
|
1,255,000 |
|
|
|
435,506 |
|
|
|
34,253 |
|
|
|
3,950,067 |
|
& Chief Risk Officer |
|
|
2012 |
|
|
|
620,000 |
|
|
|
3,610,221 |
|
|
|
985,400 |
|
|
|
706,775 |
|
|
|
21,438 |
|
|
|
5,943,834 |
|
* |
Effective January 31, 2015, Mr. Guyaux became the Senior Vice Chairman and CEO and President of PNC Mortgage. |
(a) |
The Salary column includes any salary amounts deferred by an NEO under qualified (ISP) or non-qualified (DCIP) benefit plans. We describe these PNC
plans on page 67. Please also see the Non-qualified deferred compensation in fiscal 2014 table on page 68 for the aggregate deferrals during 2014. |
(b) |
The amounts in the Stock Awards column reflect the grant date fair value of long-term incentive awards. The grant date fair values are calculated
in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, CompensationStock Compensation (FASB ASC Topic 718). See Note 14 in our Annual Report on Form 10-K for the year ended December 31,
2014 for more information. In 2014, stock awards were granted on February 13, 2014 consisting of long-term incentive performance units and performance-based restricted share units, and for Mr. Parsley, a grant of ALM incentive performance
units. The grant date fair value of the incentive performance units, performance-based restricted share units and the ALM incentive performance units is calculated using the target number of units underlying the award and a per share value based on
the NYSE closing price of our common stock on February 13, 2014 of $81.14. If PNCs performance during the applicable measurement period results in the maximum number of units vesting, our executives would each be entitled to receive a
maximum award with a grant date fair value of the maximum award as follows: |
|
|
|
|
|
|
|
|
|
|
|
Grant Date Fair Value of Maximum Award |
|
NEO |
|
Incentive Performance Units |
|
|
Performance-Based Restricted Share
Units |
|
William S. Demchak |
|
$ |
3,749,987 |
|
|
$ |
3,749,987 |
|
Robert Q. Reilly |
|
$ |
968,710 |
|
|
$ |
968,710 |
|
Michael P. Lyons |
|
$ |
2,549,926 |
|
|
$ |
2,549,926 |
|
E. William Parsley, III* |
|
$ |
984,330 |
|
|
$ |
984,330 |
|
Joseph C. Guyaux |
|
$ |
1,171,864 |
|
|
$ |
1,171,864 |
|
|
* |
The grant date fair value of Mr. Parsleys ALM grant at the maximum value is $5,999,978. |
|
|
See the Grants of plan-based awards in 2014 table on pages 58 and 59 for more information regarding the grants we made in 2014, the Outstanding equity awards
at 2014 fiscal year-end table on pages 62 to 63 for more information regarding options and other awards outstanding at December 31, 2014, and the Option exercises and stock vested in fiscal 2014 table on page 64 for more information regarding
stock vesting during 2014. |
(c) |
Our NEOs received an annual incentive award paid in cash early in 2015 which is reflected in this column for the 2014 performance year.
|
(d) |
The dollar amounts in this column include the increase in the actuarial value of our Qualified Pension Plan, ERISA Excess Pension Plan and Supplemental
Executive Retirement Plan. We describe these plans on page 65. The amounts include both (1) the change in value due to an additional year of service, compensation changes and plan amendments (if any) and (2) the change in value
attributable to other assumptions, most significantly discount rate. |
|
We do not pay above-market or preferential earnings on any compensation that is deferred on a basis that is not tax-qualified, including such earnings on
non-qualified defined contribution plans. For an additional explanation on how we calculate the earnings on our deferred compensation plans, see the 2014 rates of return chart in the Non-qualified deferred compensation in fiscal 2014 table on page
70. |
56 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
SUMMARY COMPENSATION TABLE
(e) |
The amounts in this column include, for all NEOs, net of any reimbursements to PNC: (1) the dollar value of matching contributions made by us to the ISP; (2)
the net insurance premiums paid by us in connection with our Key Executive Equity Program; (3) the executive long-term disability premiums paid by us; (4) perquisites and other personal benefits; and (5) matching gifts made by us to charitable
organizations under our employee charitable matching gift program. |
|
None of our NEOs received perquisites in 2014 with a value that exceeded $10,000, after giving effect to any reimbursements made by executives in accordance
with our policy, except for Mr. Reilly whose only perquisite included incremental personal costs in connection with his use of the PNC aircraft. Our Personnel and Compensation Committee prohibits reimbursements for taxes in connection with
perquisites and personal benefits. |
|
All other compensation for 2014 consisted of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO |
|
Perquisites and Other Personal Benefits* |
|
|
Registrant ISP Contributions |
|
|
Insurance Premiums** |
|
|
Other*** |
|
|
Total to Summary Compensation Table |
|
William S. Demchak |
|
|
|
|
|
$ |
10,400 |
|
|
$ |
47,285 |
|
|
|
|
|
|
$ |
57,685 |
|
Robert Q. Reilly |
|
$ |
26,995 |
|
|
$ |
10,400 |
|
|
$ |
23,377 |
|
|
$ |
150 |
|
|
$ |
60,922 |
|
Michael P. Lyons |
|
|
|
|
|
$ |
6,577 |
|
|
|
|
|
|
|
|
|
|
$ |
6,577 |
|
E. William Parsley, III |
|
|
|
|
|
$ |
10,200 |
|
|
|
|
|
|
|
|
|
|
$ |
10,200 |
|
Joseph C. Guyaux |
|
|
|
|
|
$ |
10,400 |
|
|
$ |
9,335 |
|
|
$ |
2,500 |
|
|
$ |
22,235 |
|
|
* |
The dollar amount of the perquisite represents the incremental cost of providing the benefit. For 2014, the incremental cost to PNC of the personal aircraft
use is calculated by multiplying the total number of personal flight hours times the average direct variable operating costs (including costs related to fuel, maintenance expenses related to operation of the plane during the year and landing and
parking fees) per flight hour for the particular aircraft for the year plus crew expenses attributable to the personal use. Since the aircraft are used primarily for business travel, we do not include in the calculation the fixed costs that do not
change based on usage, such as crew salaries and other maintenance and inspection and capital improvement costs intended to cover a multiple-year period. |
|
** |
We pay premiums for certain of the NEOs in connection with our Key Executive Equity Program, which is a split-dollar insurance arrangement. However, new
participants have not been permitted in this program since 2007. In addition, we pay long-term disability premiums on behalf of certain of our NEOs. The dollar amounts under the Insurance Premiums column include the 2014 net premiums we
paid in connection with our Key Executive Equity Program on behalf of Mr. Demchak ($40,534) and Mr. Reilly ($16,732). These net premiums represent the full dollar amounts we paid for both the term and non-term portions of this plan, after any
officer contributions. The amounts under this column also include the long-term disability premiums we paid on behalf of Mr. Demchak ($6,751), Mr. Reilly ($6,645) and Mr. Guyaux ($9,335). |
|
*** |
This column reflects the dollar amount of matching gifts made by us to charitable organizations under our employee charitable matching gift program.
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 57
GRANTS OF PLAN-BASED AWARDS IN 2014
Grants of plan-based awards in 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(a) |
|
|
Estimated Future Payouts Under Equity Incentive Plan Awards(b) |
|
|
All Other Stock Awards: Number of Shares of Stock or Units
(#) |
|
Grant Date Fair Value of
Stock and Option Awards
($)(c) |
|
Award Type |
|
Grant Date |
|
|
Thres- hold ($) |
|
|
Target
($) |
|
|
Maximum
($) |
|
|
Thres- hold
($) |
|
|
Target
(#) |
|
|
Maximum
(#) |
|
|
|
William S. Demchak |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Award |
|
|
February 12, 2014 |
|
|
|
|
|
|
$ |
2,700,000 |
|
|
$ |
10,412,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Performance Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,973 |
|
|
|
46,216 |
|
|
|
|
$ |
2,999,989 |
|
Performance-Based Restricted Share Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,973 |
|
|
|
46,216 |
|
|
|
|
$ |
2,999,989 |
|
Robert Q. Reilly |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Award |
|
|
February 12, 2014 |
|
|
|
|
|
|
$ |
1,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Performance Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,551 |
|
|
|
11,938 |
|
|
|
|
$ |
774,968 |
|
Performance-Based Restricted Share Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,551 |
|
|
|
11,938 |
|
|
|
|
$ |
774,968 |
|
Michael P. Lyons |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Award |
|
|
February 12, 2014 |
|
|
|
|
|
|
$ |
1,500,000 |
|
|
$ |
10,412,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Performance Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,141 |
|
|
|
31,426 |
|
|
|
|
$ |
2,039,941 |
|
Performance-Based Restricted Share Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,141 |
|
|
|
31,426 |
|
|
|
|
$ |
2,039,941 |
|
E. William Parsley, III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Award |
|
|
February 12, 2014 |
|
|
|
|
|
|
$ |
750,000 |
|
|
$ |
10,412,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Performance Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,705 |
|
|
|
12,131 |
|
|
|
|
$ |
787,464 |
|
Performance-Based Restricted Share Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,705 |
|
|
|
12,131 |
|
|
|
|
$ |
787,464 |
|
ALM Incentive Performance Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,973 |
|
|
|
73,946 |
|
|
|
|
$ |
2,999,989 |
|
Joseph C. Guyaux |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Award |
|
|
February 12, 2014 |
|
|
|
|
|
|
$ |
930,000 |
|
|
$ |
10,412,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Performance Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,554 |
|
|
|
14,442 |
|
|
|
|
$ |
937,492 |
|
Performance-Based Restricted Share Units |
|
|
February 13, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,554 |
|
|
|
14,442 |
|
|
|
|
$ |
937,492 |
|
|
(a) |
The amounts listed in the Target column relate to the target annual incentive award for the 2014 performance year. Annual incentive awards for 2014
were paid in 2015. All incentive awardscash and equity-basedare payable based on performance, and the targets help the Personnel and Compensation Committee to determine the appropriate amount of incentive compensation for target
performance. The amount listed in the Target column shows the target annual incentive award included in the total compensation target approved by the Committee for each NEO as of the date listed. The amount listed in the
Maximum column shows the amount that the Committee approves each year in order to preserve tax deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended. The Maximum amount is not intended to be tied
to performance rather, it is a formulaic determination made under IRS regulations that provides PNC with the flexibility to receive tax deductions for performance-based compensation. The Committee looks to the performance for the year and the
target annual incentive amount when making incentive compensation decisions, and exercises negative discretion to provide an award that is significantly smaller than the Maximum amount. For NEOs who are covered employees
under §162(m) of the Internal Revenue Code of 1986, as amended, the calculation of the Maximum amount was approved by the Personnel and Compensation Committee on February 27, 2014, based on 0.2% of our Incentive
Income, an adjusted net income metric that is defined in the 1996 Executive Incentive Award Plan. At the time the Maximum amount is set, the Committee uses a budgeted amount for 2014, which is included as $10,412,000 in the
Maximum column. Under our current approach, there is no maximum bonus amount for Mr. Reilly. |
|
(b) |
The amounts listed in these columns include the incentive performance unit grants and the performance-based restricted share unit grants, as further described
on pages 46 and 47. As there is no guaranteed minimum payout for these awards and, in the case of the incentive performance unit grants, the Personnel and Compensation Committee has discretion to decrease any award otherwise payable, we have not
included a Threshold amount in this column. The Target amount represents 100% of the grant and the Maximum amount represents 125% of the grant (rounded down to whole shares). For the incentive performance unit
grants, the performance period began on January 1, 2014 and will end on December 31, 2016. For the performance-based restricted share unit grants, the performance period began on January 1, 2014 and will end on December 31, 2017,
with vesting opportunities for a portion of the grant on each of the four applicable grant date anniversaries. |
58 THE PNC FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement
GRANTS OF PLAN-BASED AWARDS IN 2014
|
|
In addition, for Mr. Parsley the amounts also include an ALM incentive performance unit grant as described in footnote (b) to the Summary
compensation table on page 56. For a discussion of the terms, conditions and performance goals related to this incentive performance unit grant, see page 47. As there is no guaranteed minimum payout for Mr. Parsleys award, and the
Personnel and Compensation Committee has the discretion to decrease any award otherwise payable, we have not included a Threshold amount in this column for this award. The Target amount represents 100% of the grant and the
Maximum amount represents 200% of the grant. For this grant, the performance period began on January 1, 2014 and will end on December 31, 2016. |
|
|
In determining the payout for regular grants of incentive performance units made in 2014, adjustments will be made on an after-tax basis for the impact of:
|
|
|
|
extraordinary items or discontinued operations (as such terms are used under GAAP) |
|
|
|
items resulting from a change in tax law |
|
|
|
acquisition costs and merger integration costs |
|
|
|
any costs or expense arising from specified Visa litigation and any other gains recognized on redemption or sale of Visa shares, as applicable
|
|
|
|
in PNCs case, the net impact on PNC of significant gains or losses related to certain BlackRock transactions
|
|
|
|
acceleration of the accretion of any remaining issuance discount in connection with the redemption of any preferred stock
|
|
|
|
any other charges or benefits related to the redemption of trust preferred or other preferred securities |
|
(c) |
The grant date fair values for incentive performance units and performance-based restricted share units are all calculated in accordance with FASB ASC Topic
718. See Note 14 in our Annual Report on Form 10-K for the year ended December 31, 2014 for more information. The grant date fair values for incentive performance units, performance-based restricted share units and ALM incentive performance units
represent the closing price for our common stock on February 13, 2014 of $81.14. The grant date fair values for incentive performance units and performance-based restricted share units represent the target amount of units in the grant.
|
THE PNC
FINANCIAL SERVICES GROUP, INC. - 2015 Proxy Statement 59
OUTSTANDING EQUITY AWARDS AT 2014 FISCAL YEAR-END
Outstanding equity awards at 2014 fiscal year-end
The following tables show, for each NEO, the outstanding equity awards as of December 31, 2014.
These awards include the following:
|
|
Stock options exercisable over time |
|
|
Restricted stock or restricted share units that have not vested |
|
|
Incentive performance units, specifically: |
|
|
|
Regular units granted in 2012, 2013 and 2014 that may pay out if PNC achieves specific performance and risk-based criteria. 2012 awards measure
our earnings per share growth (EPS growth) and return on common equity excluding goodwill (ROCE) against our peers. 2013 and 2014 awards measure our EPS growth against our peers and our ROCE compared to our cost of common equity. The awards are also
subject to annual risk-based requirements and adjustments, which include meeting or exceeding the required Tier 1 risk-based capital ratio for well-capitalized institutions (2013 and 2014 awards) and return on economic capital
|
|
|
(ROEC) meeting or exceeding our cost of capital (2012, 2013 and 2014 awards). |
|
|
|
In recognition of Mr. Parsleys management responsibilities regarding the ALM function at PNC during 2012, 2013 and 2014, units granted
to Mr. Parsley in 2012, 2013 and 2014 will pay out if our ALM unit outperforms a benchmark index during the 2012 to 2014, 2013 to 2015 or 2014 to 2016 performance period, respectively. |
|
|
Performance-based restricted share units, specifically: |
|
|
|
Annual long-term incentive awards, each granted in 2011, 2012, 2013 and 2014 and a special achievement award granted in 2011, that will each pay
out if PNC meets the minimum well-capitalized Tier 1 capital ratio established by our primary regulator; payout may be adjusted by 25% up or down based on TSR in each year. The 201 |