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Letter from the Presiding Director to Our Shareholders |
Fellow Shareholders,
On behalf of the independent directors, I’d like to thank you for your support of PNC.
The past year has been one of growth and progress for PNC. Following the successful acquisition and conversion of BBVA USA in 2021, PNC began 2022 with BBVA USA fully integrated, allowing the company to leverage its capabilities and delivery model in new and expanding markets.
I would be remiss if I did not acknowledge and thank PNC’s 61,000-plus employees for their incredible efforts and dedication throughout the year, which made this all possible.
The board views PNC’s success in 2022 as a reflection of the power of the national Main Street bank model, and of the company’s unwavering commitment to doing the right thing for all stakeholders. That formula has helped differentiate PNC in the marketplace, deepen relationships with clients, attract top talent, and deliver solid financial returns for you, our shareholders.
Chaired by Bill Demchak, the board works diligently to oversee the development and execution of the company’s strategy, and to ensure management decisions align to that strategy. We do that through regular engagement with company leadership and participation on board committees focused on Audit, Nominating and Governance, Human Resources, Risk, Technology, and Equity & Inclusion; and on a subcommittee focused on Compliance.
As you will read throughout this proxy statement, the board and company management are firmly committed to sound environmental, social and governance (ESG) practices that help us compete effectively and generate long-term value for all our constituents. To that end, each board committee maintains specific oversight responsibility for the company’s ESG efforts pertinent to that committee’s area of focus.
The board believes it is most effective when it represents diverse perspectives. Our independent directors come from a wide range of backgrounds, and each director brings unique ideas and experiences that are highly valuable to the board and its ability to provide strategic guidance and oversight. Of the 12 independent directors nominated for election this year, half are women or people of color.
In May 2022, we were pleased to welcome Renu Khator, Ph.D., chancellor of the University of Houston System and president of the University of Houston, to our board as the newest independent director. Renu brings a wealth of expertise in leadership, economic development, and community engagement. We are grateful for her insight.
The board extends its gratitude to Michael Ward, whose dedicated service as a director comes to a close upon his retirement this year. Mike was truly an asset to the board and he will be missed.
As a board, we are encouraged by PNC’s progress in 2022. We believe the company’s strong foundation and strategic direction position it for continued success in 2023 and beyond.
Thank you once again for your support.
March 15, 2023 |
Sincerely, |
Andrew Feldstein
Presiding Director
CORPORATE GOVERNANCE
The Nominating and Governance Committee reviews the corporate governance guidelines at least annually. Any changes recommended by the Committee are reviewed and approved by the Board.
Our Board leadership structure
Based on an assessment of its current needs and composition, as well as the skills and qualifications of the directors, the Board believes that the appropriate Board leadership structure should include the following attributes:
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A substantial majority (at least two thirds) of independent directors |
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A Presiding Director who serves as the lead independent director |
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Regular executive sessions of all independent directors without management present |
The current leadership structure of the Board includes all three attributes.
The Board recognizes that one of its key responsibilities is to periodically evaluate the optimal leadership structure to ensure robust independent oversight of management and an engaged and effective board with complementary qualities, perspectives and experiences. The Board believes the Board leadership structure should be flexible enough to accommodate different circumstances. As such, the Board periodically reviews its leadership structure and may choose a different leadership structure if circumstances should arise that lead the Board to believe that a different Board leadership structure would promote the long-term interests of our shareholders.
Our governing documents permit the roles of Chair and CEO to be filled by the same or different individuals, and the Board has not adopted a policy with respect to the separation of the Chair and CEO positions. To ensure robust independent leadership on the Board, our corporate governance guidelines provide that the Board shall appoint a Presiding Director, who shall also serve as the chair of the Nominating and Governance Committee. The Board considers its leadership structure each year and discusses whether to separate the Chair and CEO positions as necessary or appropriate, in its judgment, including but not limited to when selecting a new CEO. In making this decision, the Board considers a range of factors, including: the people currently in the roles of CEO, Chair and Presiding Director and their record of leadership and performance in their roles; the current composition of the Board; PNC’s operating and financial performance; any recent or anticipated changes in the CEO role; the effectiveness of the processes and structures for Board interaction with and oversight of management; and the importance of maintaining a single voice in leadership communications and Board oversight, both internally and with shareholders and other stakeholders.
The Board believes the interests of our shareholders are best served at this time through the current combined Chair and CEO leadership structure, supported by a Presiding Director who has oversight responsibilities. This structure provides the appropriate balance between a Chair and CEO with responsibilities for day-to-day management, Board leadership and setting long-term strategy, and an empowered independent Presiding Director with well-defined responsibilities, including facilitating, among other things, the Board’s independent oversight of management, CEO review, promoting communication between senior management and the Board about issues such as management development and succession planning, executive compensation and company performance, and engaging and communicating with shareholders and other stakeholders as appropriate.
William S. Demchak, our current CEO, also serves as Chair of the Board. Andrew T. Feldstein, the chair of the Nominating and Governance Committee, currently serves as Presiding Director. We describe the responsibilities of the Presiding Director in more detail below. Mr. Feldstein also serves as a member of the Risk Committee, where he leverages his expertise in identifying, assessing and managing credit, market and other risks to assist the Committee in performing its risk oversight function.
Substantial majority of independent directors. We have long maintained a Board with a substantial majority of directors who are not PNC employees and who otherwise qualify as independent under the rules of the New York Stock Exchange (the “NYSE”). The NYSE requires at least a majority of our directors be independent from management.
Mr. Demchak is the only director who is not independent under the NYSE’s “bright-line” tests for independence because he is our CEO. The Board has affirmed the independence of each of the other 12 nominees for director. See Director and Executive Officer Relationships beginning on page 36 for a description of how we evaluate the independence of our directors, including information about the NYSE’s bright-line tests for independence.
Presiding Director responsibilities. The Presiding Director, the lead independent director for the Board, is selected by the Board’s independent and non-management directors. The Board approved the following responsibilities for the Presiding Director, which are included in our corporate governance guidelines:
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Preside at meetings of the Board in the event of the Chair’s unavailability |
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Preside at regularly scheduled executive sessions of the Board’s independent directors |
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When the Presiding Director considers it appropriate, convene and preside at meetings or executive sessions of the Board’s independent directors |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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CORPORATE GOVERNANCE
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If the Board includes non-management directors who are not independent, when the Presiding Director considers it appropriate to do so, convene and preside at meetings or executive sessions including such non-management directors |
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Confer with the Chair or CEO immediately following the meetings or executive sessions of the Board’s independent or non-management directors to convey the substance of the discussions held during those sessions, subject to any limitations specified by the independent directors |
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Act as the principal liaison between the Chair and CEO and the Board’s independent and non-management directors |
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Be available for confidential discussions with any director who may have concerns that he or she believes have not been properly considered by the Board as a whole |
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Following consultation with the Chair, CEO and other directors as appropriate, approve the Board’s meeting agendas, in order to promote the effectiveness of the Board’s operation and decision making and help ensure there is sufficient time for discussion of all agenda items |
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Be available for consultation and direct communication with major shareholders as appropriate |
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Discharge such other responsibilities as the Board’s 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 Board meetings with the Chair 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 in executive session.
As chair 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. These responsibilities include identifying and evaluating individuals qualified to become directors, consistent with Board-approved criteria, and recommending to the Board such changes in the Board’s composition, design and structure as the Committee may deem appropriate. The Nominating and Governance Committee also reviews, and the Presiding Director as chair of the Committee reports to the Board on, significant developments in corporate governance.
Regular executive sessions of independent directors. Our independent directors have met and will continue to meet in regularly scheduled executive sessions without management present. The NYSE requires our independent directors to meet in executive session at least once a year. Under the Board’s own policy, our independent directors meet in executive session at least quarterly. The Presiding Director leads these executive sessions.
Board’s role in risk oversight
The Risk Committee of the Board (together with the Compliance Subcommittee of the Risk Committee) oversees and approves the enterprise-wide risk governance framework (the “ERM Framework”) and oversees the processes established to identify, assess, monitor and report the company’s risks. Management-level risk committees are in place to help ensure the risk expectations defined by our ERM Framework are followed and that business decisions are made and executed consistent with the Board’s desired risk profile. The Enterprise Risk Management Committee, chaired by the Chief Risk Officer, is responsible for oversight of risk management through, among other activities, the review of the Enterprise Risk Profile and the discussion of key risk trends and issues. At PNC, we manage the company for the long term and our ERM Framework and risk appetite consider the longer-term strategic risks that face the company. However, a significant focus is applied to those risks, such as credit, operational, liquidity and information security risks, that may have a material impact in the short or medium term.
Independent risk reporting and escalation practices provide the Risk Committee (and the Compliance Subcommittee) the opportunity to understand significant risks the organization faces, understand how those risks affect our risk profile and risk appetite, and provide feedback on management’s plans to manage in the company alignment with PNC’s risk appetite. Additionally, this transparency supports decision making by the Risk Committee. The Chief Risk Officer and PNC’s Chief Compliance Officer, who reports to the Chief Risk Officer, provide regular reports to the Risk Committee (or the Compliance Subcommittee, as applicable) regarding the company’s risk profile, significant existing, new or emerging risks, and significant initiatives to identify, manage and control such risks.
PNC’s ability to report on significant new, emerging or existing risks through the risk reporting framework and committee governance structure allows the Risk Committee to engage in an active dialogue with executive leadership on those risks, provide perspective on the effect of the risk to the company’s risk profile and provide feedback on management’s plans to manage the company in alignment with PNC’s risk appetite. PNC’s disclosure controls and procedures outline the responsibilities of the Chief Risk Officer, the Independent Risk Management organization and other units within PNC with respect to financial disclosures. These responsibilities directly align with the ERM Framework and the ERM Framework policy, which is overseen and approved by the Risk Committee.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
CORPORATE GOVERNANCE
PNC’s governance structure, risk reporting framework, and communication and escalation practices allow for Independent Risk Management to escalate significant new, emerging and existing risks that, if left unmitigated, could push PNC outside of our risk appetite or disrupt our ability to achieve our business objectives. Independent Risk Management regularly engages external parties, both formally and informally, to help ensure future threats and trends are identified and considered in our ongoing risk identification, assessment, monitoring and reporting frameworks. Engagements with external parties include memberships in industry trade groups, consultations with industry experts and formal engagements with independent consultants. As new or emerging risks are identified, PNC evaluates the comprehensiveness of our existing ERM Framework to identify assess, monitor and control those risks.
Communicating with the Board
Shareholders and other interested parties who wish to communicate with the Board, any director (including the Presiding Director), the non-management or independent directors as a group, or any Board committee may send an email to corporate.secretary@pnc.com or a letter to the following address:
Board of Directors
c/o Corporate Secretary
The PNC Financial Services Group, Inc.
300 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2401
The Corporate Secretary will process such communications as set forth herein. The Corporate Secretary will forward email communications to the appropriate director(s) named. The Corporate Secretary will not open a written communication sent to the above physical mailing address if it is addressed to the Board, any director (including the Presiding Director) or group of directors, the non-management or independent directors as a group or any Board committee. The Corporate Secretary will forward the communication to the named director or the Presiding Director, who will determine how to respond. Depending on the content, the Presiding Director may forward the communication to a PNC employee, a third party, another director, a Board committee or the full Board.
The Corporate Secretary may elect not to forward communications that she believes are: (i) a commercial, charitable or other solicitation; (ii) a complaint about PNC products or services that would be customarily handled in the ordinary course of business; (iii) abusive, improper or otherwise irrelevant to the Board’s duties and responsibilities; or (iv) subject to the policies or procedures that specify the proper handling of a communication that addresses such subject matter.
Our Code of Business Conduct and 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.
The Code of Business Conduct and Ethics addresses these important topics, among others:
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Our commitment to ethics and values |
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Fair dealing with customers, suppliers, competitors and employees |
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Conflicts and potential conflicts of interest, including self-dealing, insider trading and other trading restrictions, outside employment and transactions with PNC |
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Gifts and entertainment |
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Creating business records, document retention and protecting confidential information |
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Protection and proper use of our assets, including intellectual property and electronic media |
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Communicating with the public |
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Political involvement, including campaigning and political contributions and spending |
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Compliance with laws and regulations |
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Protection from retaliation |
The Code of Business Conduct and Ethics is available in the “Governance Documents” section of our website at www.pnc.com/corporategovernance. Any shareholder may also request a free printed copy by writing to our Corporate Secretary at the address provided on page 18.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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CORPORATE GOVERNANCE
Our adoption of the Code of Business Conduct and Ethics is intended to satisfy the Securities and Exchange Commission (the “SEC”) requirement to adopt a code that applies to a company’s CEO and senior financial officers. The Audit Committee must approve any waivers of or exceptions to code provisions granted to our directors or executive officers. We will post on our website any future amendments to, or waivers from, a provision of the Code of Business Conduct and Ethics that applies to any of our directors or executive officers (including our Chair and CEO, CFO and Controller).
PNC has also adopted, and the Audit Committee has approved, Ethics Guidelines for Directors to supplement the Code of Business Conduct and Ethics.
Orientation and education
All of our new directors undergo a director orientation program. In addition to written materials provided to new directors, personalized orientation sessions are held with each new director. These personalized orientation sessions generally include meetings with senior management to familiarize new directors with our strategic plans, significant financial, accounting and risk management issues, capital markets activities, compliance programs, the Code of Business Conduct and Ethics and related policies, our principal officers, and our internal and independent auditors, as well as specified matters related to the Board committees or subcommittees to which the new director has been appointed.
We also provide a continuing education program for our directors that considers their knowledge and experience and our risk profile, and includes training on complex products and services, our lines of business, significant risks to the company, applicable laws, regulations and supervisory requirements, and other relevant topics identified by the Board and management. The continuing education program is provided through a combination of personalized sessions and coordination of attendance by directors at outside seminars, including those offered by regulators, relevant to the duties of a director. Certain training sessions may be held in connection with, or as part of, a meeting of the Board or a Board committee.
Board committees
The Board currently has five standing committees. The four primary committees—Audit, Nominating and Governance, Human Resources, and Risk—meet on a regular basis. The Executive Committee, which is composed of our CEO and the chairs of the four primary committees, meets as needed. The Executive Committee may act on behalf of the Board and would report to the full Board following any action taken. Our Presiding Director chairs the Executive Committee, which did not meet in 2022.
Our Bylaws authorize the Board to establish other committees. In June 2020, the Board formed a Special Committee on Equity & Inclusion to assist with its oversight of PNC’s equity and inclusion efforts, internally and externally, including oversight of the implementation of PNC’s publicly-announced financial commitment to help end systemic racism and support the economic empowerment of Black Americans and low- and moderate-income communities. The Special Committee has met regularly since its inception.
In April 2022, following an assessment of its committee structure, the Board determined it was appropriate for the Technology Subcommittee to become a direct committee of the Board rather than a subcommittee of the Risk Committee. Now named the Technology Committee, the Committee has responsibility for assisting the Board with its oversight of technology strategy and significant technology initiatives and programs, including those that can position the use of technology to drive strategic advantages, and fulfilling the oversight responsibilities for technology risk, information management and security risks (including cybersecurity and cyber fraud and physical security risks) and the adequacy of PNC’s business recovery, continuity and contingency plans and test results.
Our Bylaws also provide that the Board may authorize the establishment of subcommittees. The Board has formed a Compliance Subcommittee of the Risk Committee to facilitate Board-level oversight of compliance risk, significant compliance-related initiatives and programs, and the maintenance of a strong compliance risk management culture.
Each committee operates under a written charter approved by the Board, and the Compliance Subcommittee operates under a written charter approved by the Risk Committee. Each committee and subcommittee annually reviews and reassesses its charter. The Nominating and Governance Committee assesses the Executive Committee charter. Each committee and subcommittee, other than the Executive Committee, performs an annual self-evaluation to determine whether it is functioning effectively and fulfilling its charter duties.
We describe the main responsibilities of the Board’s Audit, Nominating and Governance, Human Resources and Risk committees, as well as the Technology Committee and the Special Committee on Equity & Inclusion, below. The descriptions of the committee functions in this proxy statement are qualified in each case by reference to the applicable committee charter and the relevant provisions of our Bylaws. The charters for the four primary committees are available on our website at www.pnc.com/corporategovernance.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
This section discusses relationships between PNC (including its subsidiaries) and our directors, executive officers, their immediate family members, and certain of their affiliated entities. These relationships include transactions we considered in determining the independence of our directors.
In this section, we describe the NYSE independence standards for directors and our Board-adopted independence guidelines.
Director independence
The Board must affirmatively determine that a director has no “material relationship” with PNC for the director to qualify as independent under NYSE rules. A material relationship between a director and PNC can exist as a result of a relationship between PNC and an organization affiliated with the director.
Material relationships may 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.
NYSE rules describe specific relationships that will always impair independence. The absence of one of the enumerated relationships under this “bright-line” test does not mean that a director is deemed independent. The Board must consider all relevant facts and circumstances in determining whether a material relationship exists.
The NYSE bright-line independence tests. Each of the following relationships will automatically impair a director’s independence under the NYSE bright-line tests:
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A director was employed by PNC within the last three years |
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A director’s immediate family member was an executive officer of PNC within the last three years |
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A director or immediate family member received more than $120,000 in direct compensation from PNC, except for certain permitted payments (such as director fees), during any 12-month period within the last three years |
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Certain employment relationships between a director or an immediate family member and PNC’s internal or external auditors |
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A director or immediate family member has within the last three years been an executive officer of a company during the same time that a PNC executive officer served on that company’s compensation committee |
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A director is an employee or an immediate family member is an executive officer of a company that has made payments to or received payments from PNC in excess of the applicable threshold in any of the last three fiscal years |
For purposes of these bright-line tests, references to PNC include certain of PNC’s subsidiaries.
Additional information about the NYSE bright-line director independence tests, including commentary regarding the application of the tests, can be found on the NYSE website at www.nyse.com.
Our Board guidelines on independence. To help assess director independence, the Board adopted guidelines that describe four categories of relationships that will not be deemed to be material. If a relationship involving a director meets the criteria outlined in the guidelines, the Board may affirm the director’s independence without further analysis of that relationship, provided that the director otherwise meets the relevant independence tests. These guidelines are included in our corporate governance guidelines, which can be found in the “Governance Documents” section of our website at www.pnc.com/corporategovernance.
The four categories of relationships described in the director independence guidelines include:
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Ordinary course business relationships, such as lending, deposit, banking or other financial service relationships, or other relationships involving the provision of products or services by or to PNC or its subsidiaries and involving a director, an immediate family member, or an affiliated entity of a director or immediate family member, where such relationships satisfy the criteria described in the guidelines |
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Contributions made by PNC, its subsidiaries or a PNC-sponsored foundation to a charitable organization of which a director or an immediate family member is an executive officer, director or trustee, subject to the conditions described in the guidelines |
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Relationships involving a director’s relative who is not an immediate family member |
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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 trustee or where an immediate family member is employed in a non-officer position |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
Code of Business Conduct and 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 our Corporate Ethics Office and the appropriate Board committee.
Financial services to employees. Our employees and their extended families are encouraged to use PNC for their personal financial services. These 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 an 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 SEC’s 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 certain executive officers and directors, in some cases under circumstances that constitute related person transactions. For additional information, see Director and Executive Officer Relationships—Family relationships on page 40. We track the employment and compensation of relatives of our executive officers and directors, and 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 director’s relative is also a factor in the determination of the director’s independence under NYSE rules and our own adopted guidelines regarding director independence. See Director and Executive Officer Relationships—Director independence beginning on page 36.
Waivers. Employees may generally request waivers or exceptions from certain provisions of the Code of Business Conduct and Ethics from our Corporate Ethics Office. In the case of directors and executive officers, any proposed waiver or exception must be approved by both our Corporate Ethics Office and the appropriate Board committee. In 2022, no directors or executive officers requested a waiver of any of the provisions described above.
Ethics Guidelines for Directors. The Audit Committee has adopted Ethics Guidelines for Directors that contain comprehensive guidance regarding the various PNC policies governing the conduct of our directors. The guidelines are designed to supplement and assist directors in understanding relevant policies, including our Code of Business Conduct and Ethics described above, our Regulation O policies and procedures and our Related Person Transactions Policy, each described in more detail below, our Director Pre-Clearance of Securities Policy and our Anti-Corruption Policy. The Ethics Guidelines for Directors were most recently approved on August 10, 2022.
Regulation O policies and procedures
We maintain additional policies and procedures to help ensure our compliance with Regulation O, which imposes various conditions on a bank’s extension of credit to directors and executive officers and their related interests. Any extensions of credit we make must comply with our Regulation O policies and procedures. Our Regulation O policies and procedures require:
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Extensions of credit to covered individuals or entities be made on substantially the same terms (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; |
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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; and |
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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, has a Regulation O Credit Officer who reviews extensions of credit to Regulation O insiders to determine our compliance with these policies. If an extension of credit would result in an aggregate extension of credit of more than $500,000, or an extension of credit is proposed in connection with an insider whose aggregate extensions of credit already exceed $500,000, the bank’s Board of Directors must approve it in
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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RELATED PERSON TRANSACTIONS
Related person transactions policy
A related person transaction is generally any transaction in which PNC or its subsidiaries is or will be a participant, 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. Our policy for the review and approval of related person transactions was most recently approved on August 10, 2022.
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 the Nominating and Governance Committee, as the transaction could also impact independence. A transaction that involves an executive officer or beneficial owner of more than 5% of our common stock would generally be reviewed by the Audit Committee. The full Board receives reports on approved, disapproved and ratified transactions. Under the policy, a related person transaction may be permitted only if the appropriate Board committee approves the transaction as not inconsistent with the interests of PNC and its shareholders and the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party.
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, 2022 (see Security Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial owners on page 95). 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 our outstanding shares of common stock.
During 2022, we paid BlackRock approximately $8.3 million for use of BlackRock’s enterprise investment system and related services, which include risk analytics, portfolio management, compliance and operational processing. We also paid BlackRock approximately $2.9 million for securities trading related services and approximately $0.1 million for investment advisory and administration services provided to certain of our subsidiaries and separate accounts assets for a fee based on assets under management. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
During 2022, we received approximately $6.2 million in fees from BlackRock for distribution and shareholder servicing activities. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
We may in the ordinary course of business engage in transactions with BlackRock mutual funds, including using the BlackRock funds as treasury management vehicles for our corporate clients, selling BlackRock investment products to our customers or placing our 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 our clients who are shareholders of BlackRock mutual funds.
We 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.
Based on information contained in a Schedule 13G filing with the SEC, The Vanguard Group (“Vanguard”) indicated it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 2022 (see Security Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial owners on page 95). In the ordinary course of business during 2022, our Corporate & Institutional Banking business engaged in treasury management transactions and banking transactions with Vanguard. These transactions were entered into on an arm’s length basis and contained customary terms and conditions. PNC also participates in two syndicated credit facilities to Vanguard and Vanguard-managed funds. These credit transactions were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable facilities with persons not related to PNC, and did not involve more than the normal risk of collectibility. In addition, our Asset Management Group and PNC Investments each include Vanguard funds in their respective investment platforms.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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COMPENSATION DISCUSSION AND ANALYSIS
Evaluating performance
The Committee believes the total compensation targets collectively provide an appropriate balance between fixed and variable amounts, measuring short-term and long-term performance, immediate and deferred payouts, and cash and equity-based awards. For information on how the Committee’s incentive compensation decisions compared to the targets for the 2022 performance year, see page 56.
The Committee believes that an effective executive compensation program requires a comprehensive evaluation of performance across multiple categories. This evaluation generally includes a review of financial performance, how we executed against our strategic objectives and how we manage risk, customer experience and leadership.
The Committee has not adopted a formula-driven compensation program, believing that formulas may reward short-term results or behaviors that do not serve the long-term interests of our shareholders. Metrics that rely solely on formulas may also be inappropriately skewed by results outside of management’s control. Finally, formulas may undervalue important strategic objectives that do not translate to easily or immediately quantifiable metrics. As a result, the Committee evaluates a variety of quantitative and qualitative metrics to attain a comprehensive understanding of PNC’s overall performance.
To the extent possible, the performance metrics reviewed by the Committee align the objectives of our management, shareholders and federal banking regulators. In some cases, these stakeholders have different objectives that cannot be easily reconciled — for example, shareholders seeking higher returns may be willing to tolerate more risk than a federal banking regulator would accept. That is another reason we rely on multiple metrics, representing performance against a range of goals, and include the ability to make significant adjustments for risk management performance.
The CEO reviews PNC’s quarterly and annual performance with the Committee. During these quarterly reviews, the Committee receives a report on the following metrics, with comparisons to the prior year’s results, the current year’s budget or peer performance results, as appropriate:
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Category of Metric |
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Metrics Evaluated |
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Financial Performance (measured against prior year, current year budget and peer group) |
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Net interest income |
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Noninterest income* |
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EPS growth* |
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Return on assets* |
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Return on equity* |
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Risk-adjusted efficiency ratio |
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Capital, Risk and Expense Management (measured against prior year and to the extent available, peer group) |
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Tangible book value |
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CET1 ratio |
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Loans to deposits ratio |
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Net charge-offs to average loans |
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Allowance for loan and leases losses to total loans |
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Noninterest expense |
|
|
Business Growth (measured against prior year, current year budget and to the extent available, peer group) |
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Average loan balances |
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Allowance for loan and lease losses |
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Average interest-bearing deposits |
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Average noninterest-bearing deposits |
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Assets under administration |
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Mortgage origination value |
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Total Shareholder Return (“TSR”) (measured against peer group and the S&P banking index) |
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One-year Three-year |
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Five-year |
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|
|
|
We also adjust some of these metrics for certain events as described in more detail beginning on page 53. In addition to these metrics, the Committee measures our progress against strategic objectives and assesses our risk management performance. The Committee also reviews detailed breakdowns of diversity representations and talent trends throughout each level of our workforce. In determining the amount of incentive awards against the incentive compensation targets, the Committee may consider these performance metrics without assigning a specific weight or formula to any on metric.
Incentive compensation program
The incentive compensation target includes two components: an annual incentive award payable in cash and a long-term incentive award that is equity-based and granted in two different forms (PSUs and RSUs). After the performance year ends, the Committee evaluates PNC’s aggregate performance for the year, as well as the individual performance of each NEO, and determines an incentive compensation amount to be awarded to each executive, expressed as a percentage of the incentive compensation target set at the beginning of the performance year.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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49 |
COMPENSATION DISCUSSION AND ANALYSIS
Once the Committee determines the final incentive compensation amount, it is divided between the annual cash incentive and the long-term equity-based incentive. The long-term incentive award makes up at least 50% of the value of the total compensation awarded to the NEO. Ms. Larrimer retired in 2022 and did not receive a long-term incentive award for the 2022 performance year.
Although not a part of our annual incentive compensation program, as previously disclosed, the Committee also granted Leadership Continuity Awards in the form of performance-based restricted share units (“PRSUs”) to three NEOs (Mr. Reilly, Mr. Lyons and Mr. Parsley) during the second quarter of 2022. The Committee did not grant a Leadership Continuity Award to Mr. Demchak, our CEO, or to Ms. Larrimer or Mr. Jordan. The Leadership Continuity Awards are described on page 60.
The Committee’s evaluation of 2022 performance and the related compensation decisions made by the Committee for each NEO are described on pages 53 to 62.
Long-term incentive award (equity-based). The long-term incentive is equity-based and granted through two separate awards — PSUs and RSUs. The Committee made these grants to NEOs in the first quarter of 2023 (for 2022 performance) and in the first quarter of 2022 (for 2021 performance). Ms. Larrimer retired in 2022 and did not receive a long-term incentive award for the 2022 performance year. These awards, and all other equity-based awards, are made under PNC’s shareholder-approved 2016 Incentive Award Plan.
The table below summarizes the material terms and conditions of the awards granted in 2023 for 2022 performance (these terms and conditions are the same as the terms and conditions of the awards granted in 2022 for 2021 performance):
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Name of Award |
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% of Long- Term Incentive Value |
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Vesting Schedule |
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Metrics |
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Payout Range (% of Target) |
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Stock or Cash Payout |
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PSU |
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60% |
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After three-year performance period ends |
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PNC’s return on equity (ROE) compared to performance targets EPS growth rank against our peer group |
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0–150% |
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Stock |
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|
|
|
|
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RSU |
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40% |
|
Annual installments over three years |
|
Time-based |
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0–100% |
|
Stock |
PSUs. With respect to 2022 performance, in the first quarter of 2023 the Committee granted to certain of our senior executives, including all NEOs (except for Ms. Larrimer), PSUs that represent an opportunity to receive shares of PNC common stock. The payout is based on how PNC performs against two corporate performance metrics over a three-year performance period. Performance against these two metrics generates a percentage (the corporate performance factor). The award may be decreased if PNC fails to satisfy a risk performance metric or based on a discretionary risk performance review conducted by the Committee. After applying any risk-related performance adjustment (and if PNC satisfies the risk performance metric), the resulting percentage is applied to the number of target PSUs to determine the final number of units available for settlement. The PSUs have a maximum payout opportunity of 150% of target. Payout of any award under the PSUs also requires the satisfaction of service requirements and other award conditions.
The Committee may also increase or decrease the size of the final payout to maintain the intended economics of the award if circumstances change. These circumstances include external events affecting PNC or members of its peer group or its financial statements that are outside of PNC’s control and not reasonably anticipated.
The two corporate performance metrics include an absolute metric (an internal PNC measurement against a target) and a relative metric (PNC performance against our peer group). The absolute metric is PNC’s three-year average return on equity (“ROE”), as adjusted, compared to three-year ROE performance targets established in advance by the Committee. The relative metric is PNC’s three-year average EPS growth, as adjusted, compared to the three-year average EPS growth of our peer group.
The ROE metric, as adjusted, will be calculated annually for each year of the performance period. At the end of the three-year performance period, average ROE for the performance period will be determined as the average of PNC’s annual ROE for each year. In establishing the ROE performance targets, the Committee considers multiple factors, including our historical performance, budget and future growth expectations, peer group results, cost of capital and analyst expectations.
The EPS growth metric, as adjusted, will be calculated for each year of the performance period. At the end of the three-year performance period, the annual EPS growth percentages will be averaged. PNC’s three-year average EPS growth will be compared to the three-year average of each member of our peer group to determine our percentile rank.
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50 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
Once PNC’s percentile rank relating to average EPS growth, as adjusted, and PNC’s average ROE, as adjusted, are determined for purposes of the grants, the corporate performance factor, ranging from 0–150%, will be calculated using the grid below and applying bilinear interpolation.
The chart below shows the corporate performance metrics for the 2023 PSU grants (the corporate performance metrics for the 2022 grants were disclosed in last year’s proxy statement). For the 2023 PSU grants, the Committee maintained the three-year average ROE performance range of 8%-13%, but increased each of the levels within that range by 75 basis points from last year. The Committee approved this grid based on the overall economic environment and PNC’s risk appetite, as well as an analysis of PNC’s cost of capital and a multi-year pro forma analysis of ROE.
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|
|
|
|
|
|
|
2023 PSU Award (2023-2025 Performance Period) |
|
Three-year average EPS growth, as adjusted (relative) |
|
PNC percentile rank (25th percentile or below) |
|
PNC percentile rank (50th percentile) |
|
PNC percentile rank (75th percentile or above) |
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|
|
|
|
Three-year average ROE, as adjusted (absolute) |
|
13.00% |
|
100.0% |
|
125.0% |
|
150.0% |
|
12.25% |
|
87.5% |
|
112.5% |
|
137.5% |
|
11.25% |
|
75.0% |
|
100.0% |
|
125.0% |
|
10.25% |
|
62.5% |
|
87.5% |
|
100.0% |
|
8.00% |
|
50.0% |
|
75.0% |
|
87.5% |
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Below |
|
0.0% |
|
25.0% |
|
50.0% |
When calculating our adjusted average ROE and EPS growth for this award, consistent with our prior awards, we will reverse the after-tax impact of our provision for credit losses — that is, we will add back the provision amount to our reported net income. We will then subtract total net charge-offs from the net income amount and adjust net income for the change in taxes. Net charge-offs represent the amount of a loan (or portion of a loan) that we remove from our balance sheet because we deem it to be uncollectible, less any recoveries. We expect this adjusted ROE and EPS growth to present a more accurate measurement of how efficiently we create profit, as it replaces our estimated credit losses (provision) with the actual losses we incur (net charge-offs). Adjustments will also be made on an after-tax basis for the impact to PNC and the companies in our peer group, as appropriate, of items resulting from changes in federal tax law, discontinued operations (as such term is used under GAAP), and any acquisition costs and merger integration costs.
RSUs. With respect to 2022 performance, in early 2023 the Committee also granted to certain of our senior executives, including all NEOs (except for Ms. Larrimer), RSUs that represent an opportunity to receive shares of PNC common stock. The RSUs vest pro rata over three years, with each of the three annual installments (tranches) vesting on the anniversary of the grant date (or if later, the date the Committee determines that all risk conditions have been satisfied). Vesting also requires the satisfaction of service requirements and other award conditions.
Additional provisions for PSUs and RSUs. The provisions described in this section apply to both of our long-term incentive awards — the PSUs and the RSUs.
Risk-based performance reviews. All long-term incentive awards are subject to risk-based performance reviews. The primary risk-based metric measured as part of this review is the Basel III common equity Tier 1 capital ratio (the “CET1 Ratio”). PNC must maintain a minimum capital ratio of 4.5%, plus an additional capital stress buffer. At the end of the performance year, the minimum required CET1 Ratio was 7.4%.
For PSUs, for each year during the three-year performance period that PNC fails to meet the CET1 Ratio, one-third of the target number of PSUs granted will be eligible for forfeiture. After the three-year performance period ends, the Committee will conduct a final performance review and may reduce the number of target shares available for payout if PNC did not meet the CET1 Ratio for one or more years during the performance period.
For RSUs, each RSU tranche is subject to the same risk-related performance metric that will be applied to the PSUs, with all or a portion of that tranche being eligible for forfeiture. After the year ends, the Committee will conduct a risk-based performance review and may decrease the number of shares available for payout under the applicable RSU tranche if PNC did not meet the CET1 Ratio as of the end of the most recent year before the vesting date of that tranche.
In addition, and independent from the evaluation of the CET1 Ratio, the Committee may conduct another risk performance review for the PSUs and the RSUs. This discretionary review would generally occur in connection with a risk-related action of potentially material consequence to PNC. If the Committee exercises its discretion to conduct a risk performance review, the Committee will review and determine if a reduction to the corporate performance factor for risk performance is appropriate for the PSUs or if a reduction for risk performance is appropriate for the applicable RSU tranche.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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51 |
COMPENSATION DISCUSSION AND ANALYSIS
In addition to a review of key financial metrics, the Committee also reviewed PNC’s performance against the three Board-reviewed strategic priorities listed below. The Committee concluded that management continued to drive growth across the franchise and make strategic investments to position PNC for long-term success, including the following achievements:
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|
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Executing against our three strategic priorities |
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Expanding our leading banking franchise to new markets and digital platforms |
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Began 2022 with BBVA USA fully integrated. Our progress within the BBVA-influenced markets continues to exceed our expectations in terms of growing client relationships and opportunities for revenue synergies throughout the company. |
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Added more than 41,000 ATMs across the country through a partnership with Allpoint®, which PNC customers can use surcharge-free. |
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Deepening our customer relationships by delivering a superior banking experience and financial solutions |
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Eliminated non-sufficient fund (NSF) fees for all consumer deposit account customers. |
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Acquired Linga, enhancing our payment capabilities to better serve restaurant and retail clients. |
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Entered a new partnership to offer specialized property and casualty insurance designed specifically for high net worth and ultra-high net worth individuals. |
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Leveraging technology to create efficiencies that help us better serve customers |
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Launched PNC EarnedIt, an innovative, on-demand pay solution that enables PNC’s clients to provide their employees with access to earned pay prior to payday. |
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Introduced a digitally optimized, end-to-end mortgage application process. |
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Made significant progress toward a real-time core deposit system. |
In addition to evaluating our corporate performance based on these financial and strategic metrics, the Committee reviewed the individual performance of each NEO. The CEO discussed the individual performance of the other NEOs with the Committee and, where appropriate, discussed the performance of the lines of business or functions managed by the NEOs. The Committee approved compensation for each NEO based on an evaluation of corporate, business and individual performance. The Committee discussed compensation recommendations for the CEO with Meridian, the Committee’s independent compensation consultant for 2022, our Chief Human Resources Officer, and our Head of Executive Compensation. Other than the secretary for the meeting, no other members of management were present. Following this discussion, the Committee approved the compensation for our CEO in an executive session.
The Committee also reviewed the CEO compensation decisions in an executive session of the independent members of the Board, with no members of management present. In that executive session, the Committee allowed time for the independent directors to provide comments or questions about the CEO’s performance or compensation.
2022 compensation decisions
Based on a comprehensive evaluation of PNC’s 2022 performance, as described above, the Committee determined that it was appropriate to award incentive compensation that was at, or close to, the target amount for each NEO. Ms. Larrimer received an annual cash incentive amount at target, but in light of her retirement in 2022, she did not receive a long-term equity-based incentive award.
The Committee focused on PNC’s record revenue, increased loans, strong EPS growth, successful expansion in new markets and management’s continued successful achievement against strategic objectives. The Committee also considered long-term shareholder value creation, noting that three-year and five-year total shareholder returns ranked 4th in our peer group and that one-year TSR, although negative, outperformed our peer group.
While the Committee believed that our financial metrics were strong when compared to 2021 results and our 2022 budget, and that PNC generally performed well against its peers, the Committee believed that it was appropriate to award incentive compensation at approximately the target amount. The total compensation awarded to our CEO was down 15% from the compensation he received last year, and each of our other NEOs (except for Ms. Larrimer, who retired in 2022) received total compensation that represented a decline of approximately 15% to 19%. As CEO,
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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55 |
COMPENSATION DISCUSSION AND ANALYSIS
performance period — the sale of PNC’s equity investment in BlackRock in 2020 followed by the acquisition of BBVA USA in 2021 and the related successful expansion into new markets throughout 2022 — greatly contributed to PNC’s excellent performance and shareholder value creation.
The strategic sale of PNC’s 22.4% equity investment in BlackRock in May 2020 resulted in sizable net proceeds to PNC of $14.2 billion and an after-tax gain of $4.3 billion. The acquisition of BBVA USA, which we announced in November 2020 and closed in 2021, successfully redeployed the excess BlackRock capital. From a strategic and operational perspective, the Committee recognized that selling our outstanding equity investment in BlackRock and then closing and converting an institution the size of BBVA USA in 11 months — while continuing to navigate a global pandemic and retaining key executive talent — represented a remarkable accomplishment.
The Committee also discussed how the financial accounting treatment of these transactions both positively and negatively affected average ROE and average EPS growth, the two PSU performance metrics. The BlackRock sale generated a significant amount of surplus capital that could not be immediately redeployed, and also eliminated any recurring income we would otherwise have received from our equity investment. In addition, the PSU agreement required us to adjust the metrics for discontinued operations (under GAAP), which eliminated the $4.3 billion gain on sale of the BlackRock equity. As a result, the sale of our BlackRock investment significantly reduced both of our PSU performance metrics in 2020 and 2021.
In light of this, the Committee further evaluated the two performance metrics. The Committee adjusted average ROE and average EPS growth over the performance period to remove the financial accounting impact of the BlackRock transaction. These adjustments eliminated the net book value of the BlackRock equity investment, which removed the excess, undeployed capital, but also eliminated the large gain on the sale of the equity and the income derived from BlackRock during the performance period. These adjustments resulted in a payout percentage of 128.88%. Without these adjustments, the formulaic payout percentage for the PSUs was 94.94%.
The Committee considered PNC’s overall performance over the three-year period, the benefits of divesting our passive BlackRock investment and strategically and quickly redeploying the capital by acquiring BBVA USA and expanding into new markets, successfully creating a coast-to-coast franchise. In evaluating the overall accounting impact of the BlackRock transaction, the Committee considered the competing financial effects of excess capital that could not be immediately redeployed, a significant gain on the sale of equity, and the loss of a recurring income stream. The Committee concluded that the long-term strategic benefits from the BlackRock equity sale and successful and rapid acquisition and conversion of BBVA USA outweighed any temporary (and expected) accounting impact on ROE and EPS growth.
In the Committee’s view, the payout percentage should be above target to reward management for achieving three-year and five-year total shareholder returns that ranked 4th in our peer group, and executing on strategic plans to realize PNC’s longer-term objectives, while also building up temporary capital during an uncertain economic environment. The Committee believed that looking at the two performance metrics on both a formulaic and fully adjusted basis provided helpful context and boundaries for the payout decision.
Based on this analysis, the Committee reduced the fully adjusted payout percentage for the 2020 PSU award to 111.91%, which averaged the unadjusted and fully adjusted payout percentages, recognizing only a portion of the fully adjusted results. The Committee believed that this payout appropriately valued PNC’s three-year performance during a complex and unprecedented period of time, and rewarded management for the successful execution of strategic objectives, and significant growth in new markets from 2020 through 2022.
Compensation policies and practices
The Committee adopts policies and procedures to assist in the fulfillment of its duties, and 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 those 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, see Compensation and Risk beginning on page 69.
Independent compensation consultant
The Committee retains Meridian Compensation Partners, LLC as its independent compensation consultant. For a discussion of this relationship and the considerations the Committee takes into account when determining independence, see the discussion under the heading Corporate Governance—Board committees—Human Resources Committee—Role of compensation consultants on page 29.
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62 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
Peer group
The Committee selects a peer group each year. We use this group to help measure relative performance and to determine payouts under our long-term incentive awards. 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 generally compete for talent.
Each year, the Committee reviews the composition of the peer group with management and its independent compensation consultant. For 2022, the Committee believed that the existing peer group generally provided a balanced mix of institutions considering our size, mix and scope of businesses, products and services, and sources of executive talent.
The peer group currently includes the following 11 companies, with assets and market capitalization for PNC and our peer group measured as of December 31, 2022 and revenue for PNC and our peer group measured for the full year:
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Peer Group Company |
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Ticker Symbol |
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Peer |
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Assets (in billions) |
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Peer |
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Revenue (in billions) |
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Peer |
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Market Capitalization (in billions) |
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Bank of America Corporation |
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BAC |
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JPM |
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$ |
3,665.7 |
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JPM |
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$ |
128.7 |
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JPM |
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$ |
393.5 |
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Capital One Financial Corporation |
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COF |
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BAC |
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$ |
3,051.4 |
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BAC |
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$ |
95.0 |
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BAC |
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$ |
264.9 |
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Citizens Financial Group, Inc. |
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CFG |
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WFC |
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$ |
1,881.0 |
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WFC |
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$ |
73.8 |
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WFC |
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$ |
158.3 |
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Fifth Third Bancorp |
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FITB |
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USB |
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$ |
674.8 |
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COF |
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$ |
34.3 |
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USB |
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$ |
66.8 |
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JPMorgan Chase & Co. |
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JPM |
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PNC |
|
$ |
557.3 |
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USB |
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$ |
24.2 |
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PNC |
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$ |
63.3 |
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KeyCorp |
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KEY |
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TFC |
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$ |
555.3 |
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TFC |
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$ |
23.0 |
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TFC |
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57.1 |
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M&T Bank Corporation |
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MTB |
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COF |
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$ |
455.2 |
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PNC |
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$ |
21.1 |
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COF |
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35.4 |
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Regions Financial Corporation |
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RF |
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CFG |
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$ |
226.7 |
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FITB |
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8.4 |
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MTB |
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24.6 |
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Truist Financial Corporation |
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TFC |
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FITB |
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$ |
207.5 |
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MTB |
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$ |
8.2 |
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FITB |
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22.4 |
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U.S. Bancorp |
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USB |
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MTB |
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$ |
200.7 |
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CFG |
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8.0 |
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RF |
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$ |
20.1 |
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Wells Fargo & Company |
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WFC |
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KEY |
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$ |
189.8 |
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KEY |
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|
7.2 |
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CFG |
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$ |
19.4 |
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RF |
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$ |
155.2 |
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RF |
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|
7.2 |
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KEY |
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$ |
16.3 |
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After a review by the Committee, the peer group for 2023 remained unchanged from 2022.
Executive stock ownership and retention requirements
Our executive officers historically have held a significant portion of their assets in the form of our common stock (or other equity-based instruments that reflect 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 PNC shares.
Each executive officer must meet additional ownership requirements, even after meeting the original ownership target. The ownership requirements increase the number of PNC shares that an individual must own over time with an ongoing retention requirement. This retention requirement provides that as new equity awards vest, designated executives must retain a percentage of the stock, which they must generally hold until they retire or leave PNC. This ownership policy reflects compensation awards over an executive’s career and ties an executive’s personal wealth closely to the long-term performance of PNC and the interests of our 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 time-vesting requirements), certain equity awards and shares or stock units held in a benefit plan. We do not permit executives to count unvested performance-based securities (i.e., the PSUs) toward satisfaction of the guidelines. The guidelines are as follows:
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Officer/Category |
|
Base ownership requirement (in shares) |
|
Base ownership requirement (in dollars)(1) |
|
Ongoing retention requirement (as a % of newly vested equity) |
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|
|
CEO |
|
125,000 |
|
$19,742,500 |
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33% |
|
|
|
|
All other NEOs(2) |
|
25,000 |
|
$3,948,500 |
|
25% |
(1) |
Value based on PNC closing price of $157.94 per share on December 30, 2022 (the last trading day of the year).. |
(2) |
Certain other senior executives, including generally all executive officers, are also subject to stock ownership guidelines. |
Newly hired or promoted executives who become subject to these guidelines will have up to six years to satisfy the guidelines. Under the policy, the Committee considers the circumstances of an executive’s failure to comply with the
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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63 |
COMPENSATION DISCUSSION AND ANALYSIS
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.
Approval of severance agreements
We have a Board-approved policy regarding shareholder approval of future severance arrangements. 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 officer’s 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 Board retains the right to amend, terminate or waive the policy and will promptly disclose any such change. We have made this policy available in the Governance Documents section of www.pnc.com/corporategovernance.
None of our change of control agreements contain any excise tax “gross-up” provisions. For a more detailed discussion on change of control agreements, see Change in Control and Termination of Employment—Change of control agreements on page 83.
Limiting perquisites
The Committee believes in limiting the number and value of perquisites provided to our executives. We consider a benefit to be a perquisite or personal benefit unless its purpose is clearly and exclusively business-related. We determine the value of perquisites based on their incremental cost to us.
The principal perquisites we may provide to our executive officers include financial consulting and tax preparation services and limited personal use of corporate aircraft. The perquisites we provide to our executive officers under the program do not include any tax “gross ups.” Some of our executive officers participate in benefit programs or receive perquisites that we no longer offer to current executives, including two NEOs who remain eligible to receive executive physicals. In 2022, Mr. Demchak also received a one-time reimbursement for expenses associated with regulatory fees and related legal and accounting expenses in connection with required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. We include the amount of this reimbursement in the “All Other Compensation” column of the Summary compensation table on page 71.
Certain executives, including all currently employed NEOs (other than our CEO), receive a $10,000 allowance for personal aircraft usage. As the Committee has previously recommended that our CEO take all flights (personal or business) on the corporate aircraft, the Committee has approved an allowance not to exceed $100,000 for personal flights taken on the corporate aircraft by our CEO. The cost of any personal flights taken on the corporate aircraft that exceed the applicable allowance are reimbursed by the executive pursuant to the terms of a time sharing agreement between the executive and PNC.
Due to certain operational restrictions and administrative efficiencies, we operate our corporate aircraft under Federal Aviation Administration 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 agreement provides a mechanism to obtain reimbursement from the executive. The costs paid by an executive under the terms of the agreement include incremental costs, as well as a federal excise tax and other fees. For flights subject to a time sharing agreement, the executive is required to pay us for the following costs:
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fuel, oil, lubricants and other additives; |
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travel expenses of crew, including food, lodging and ground transportation; |
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hangar and tie-down costs away from the aircraft’s base of operation; |
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insurance obtained for the specific flight; |
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landing fees, airport taxes and similar assessments; |
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custom, foreign permit and similar fees directly related to the flight; |
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in-flight food and beverages; and |
• |
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passenger ground transportation. |
The Committee has adopted an aviation policy and written procedures to document the principles to be applied in determining the classification of a flight as business or personal and the calculation of aggregate incremental costs for perquisite purposes, including definitions of personal use, enhanced methods for allocating costs between business and personal use in complex situations and an approach for capturing deadhead flights, where appropriate, in the calculation of incremental costs for personal use of the corporate aircraft.
Guidelines on the use of discretion
The Committee has adopted guidelines on using discretion in incentive compensation plans. Under these guidelines, the use of discretion will be exercised, when permitted under a plan, so that incentive compensation awards are reasonably aligned with risk-adjusted performance. Certain plans have discretionary and formulaic components, while other plans
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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65 |
COMPENSATION AND RISK
This section explains how we consider risk at PNC, how the Board administers its risk management function related to compensation and risk, and the relationship between risk management, performance and compensation. We also discuss the risk reviews presented to the Human Resources 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 to maintain the trust of our customers and provide the best overall customer experience.
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 customers and shareholders.
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Enterprise risk appetite statement |
We dynamically manage our risk appetite to optimize long-term shareholder value while supporting our employees, customers, and communities. In doing so, we: |
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Achieve our business objectives and protect our brand by accepting risks that are understood, quantifiable, and analyzed through all phases of the economic cycle. |
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Earn trust and loyalty from all stakeholders, including employees, customers, communities, and shareholders. |
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Reward individual and team performance by taking into account risk discipline and performance measurement. |
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Practice disciplined capital and liquidity management so that we can operate effectively through all economic cycles. |
At the highest level, our risk appetite is set to maintain capital levels above our policy limits through a range of economic scenarios.
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 our Annual Report on Form 10-K for the year ended December 31, 2022.
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, are designed to provide a superior customer experience and are reflective of our business model, management structure and risk appetite.
Our compensation philosophy supports and reflects PNC’s 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 customer focus and risk management goals. We evaluate employee performance against these goals, in addition to considering risk outcomes from actions taken in prior years. We incorporate this comprehensive evaluation of employee risk management into our performance and incentive compensation decisions. In addition, all employees are encouraged to collaborate across groups to identify and mitigate risks and elevate and address identified issues or concerns.
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 Committee’s assessment of a variety of quantitative and qualitative performance measurements, both on an absolute and a relative basis. Compensation decisions also rely on discretion to consider
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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69 |
COMPENSATION AND RISK
other factors, such as effective risk management, delivering a superior customer experience, compliance with controls and ethical duties, commitment to diversity and inclusion, competition for top talent, market-based pay levels and the need to attract and engage our leaders.
As discussed in the CD&A, the long-term incentive program includes grants to NEOs and certain other executives that include a risk-based performance metric. Payouts under these grants could be forfeited if we do not meet the CET1 Ratio described on page 51. We also have a broad-based clawback and incentive compensation adjustment policy as described beginning on page 64.
We maintain an equity program for approximately 145 senior leaders below the executive levels that is designed to help ensure that their incentive compensation awards reflect risk-adjusted performance outcomes that would pay out, if at all, over a three-year period. These senior leaders receive a portion of their incentive compensation in an equity-based award that is subject to the same risk-related performance metric that will be applied to the PSU and RSU grants made to NEOs and certain other executives. Additionally, the equity award agreements for these senior leaders all contain an enterprise-wide risk-based review trigger, while the agreements for senior leaders in business segments (as opposed to those in administrative or control functions) contain an additional, business-specific risk-based review trigger. 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 year’s tranche.
Risk review of compensation plans
Our Chief Risk Officer reports at least quarterly to the Human Resources Committee to discuss risk management and review the connection between effective risk management and incentive compensation. The Chief Risk Officer also presents the Committee with a risk assessment for each of our principal business units and a collective assessment of staff functions, including finance, human resources, legal, operations and technology. In addition, we maintain at least one director who is a member of both the Human Resources and Risk Committees. At present, PNC’s lead director, who is a member of the Risk Committee, also serves on the Human Resources Committee.
We also have systematically identified individuals who could potentially expose us to material amounts of risk or financial loss. As with our incentive compensation risk assessment described below, we have established a cross-functional team that continues to identify and monitor these individuals. These individuals are subject to a supplemental risk management review as part of the performance management process by the Chief Risk Officer and his designees; we take this review into account when determining incentive compensation awards for our most senior executives.
We have developed a standardized governance framework for our incentive compensation plans to help monitor and validate that our plans balance risk and reward, comply with applicable laws and regulations, demonstrate fiscal responsibility and maintain an appropriate customer focus. This framework helps to ensure that we have the appropriate procedures, controls and independent challenges in place to do so. We continue to assess and, where appropriate, modify our incentive compensation plans in accordance with this framework to help ensure our plans appropriately reflect risk considerations, including the management of identified issues, the duration of the risks and alignment with our desired risk appetite. Examples of incentive plan modifications include:
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Adding or increasing the visibility of risk and customer focus metrics to plans based on the structure of the plan and the nature of the business and the roles of participants |
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Adding or formalizing language around delaying award payments or recapture or reduction of payments where subsequent risk metrics indicate excessive risk-taking |
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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 inclusion of risk-based metrics in our 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.
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70 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
COMPENSATION TABLES
Pension benefits at 2022 fiscal year-end
The principal elements of our post-employment compensation are a qualified defined benefit cash balance pension plan, a non-qualified excess cash balance pension plan and a non-qualified supplemental executive retirement plan, each described in this section, as well as a qualified defined contribution savings plan and a non-qualified deferred compensation and incentive plan as described in Non-qualified deferred compensation in fiscal 2022 on page 80.
Cash balance pension plan. We maintain a pension plan for most of our full-time employees. The pension plan is a defined benefit cash balance pension plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and is intended to be qualified under Section 401(a) of the Internal Revenue Code. Each calendar quarter, eligible participants receive “earnings credits” based on a percentage of eligible compensation. Earnings credit percentages for employees who were plan participants on December 31, 2009 are based on a schedule using the participant’s age and years of credited service at that date and are frozen at that level. Earnings credits for all employees who become participants on or after January 1, 2010 are a flat 3% of eligible compensation.
The plan defines eligible “compensation” as regular earnings plus eligible variable compensation, such as paid annual incentives. Eligible “compensation” does not include deferrals under the terms of the non-qualified deferred compensation and incentive plan; these are instead taken into account under our excess pension plan described below. We generally limit eligible variable compensation for a plan year to a total of 100% of the first $25,000 plus 50% of the next $225,000.
For participants who had accrued benefits prior to 1999 under the pension plan formula then in effect, an initial cash balance “account” was established based on the present value of the accrued benefits at the time of the conversion to the current program.
Plan participants generally receive quarterly “interest credits” at a rate of one-fourth of the annual interest rate on 30-year Treasury securities. Employees who were already plan participants as of December 31, 2009 receive a minimum interest credit.
At the end of 2008, the cash balance pension plan previously sponsored by National City Corporation was merged into this plan. Earnings and interest credits for National City participants are generally as noted above.
We contribute to the plan an actuarially determined amount necessary to fund the total benefits payable to participants. Actuaries calculate total contributions instead of contributions for each individual participant.
Excess pension plan. We maintain an ERISA excess pension plan, which is a supplemental non-qualified pension plan. The excess benefits under this plan equal the difference, if any, between a participant’s benefit under the qualified pension plan computed without regard to applicable Internal Revenue Code limits and taking into account amounts deferred under the non-qualified deferred compensation and incentive plan, and the participant’s actual benefit under the qualified pension plan.
Supplemental executive retirement plan. We maintain a supplemental executive retirement plan for certain executive officers. As part of its ongoing review of compensation practices, the Human Resources Committee decided in 2007 to eliminate future plan participation for new executive officers. This plan provides earnings credits based on a percentage of annual incentives awarded under eligible executive bonus plans in accordance with a schedule based on the participant’s age and years of credited service. This plan also provides quarterly interest credits that mirror the interest credits under the qualified pension plan.
Executive officers who participated in the supplemental executive retirement plan on December 31, 1998 and who were at least age 50 with five or more years of credited service receive grandfathered benefits based on the pension formula in effect prior to 1999. For executive officers at or above a certain organizational level who participated on December 31, 1998 but who did not meet the requirements for legacy benefits, we doubled the earnings credit percentages in order to mitigate the effect of the transition to the cash balance pension formula.
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78 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Benefits upon termination of employment
Our NEOs may receive various forms of compensation or benefits in connection with a termination of employment. These benefits result from:
• |
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change of control agreements, |
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the terms of our equity-based grants, and |
• |
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other existing plans and arrangements in which our NEOs participate. |
We do not have a separate severance plan or program for the NEOs. The Human Resources Committee has discretion to provide severance benefits subject to the parameters of our Board-approved policy, as described in the CD&A on page 65.
The benefits an executive may receive will depend on whether PNC or the executive terminated employment and, if PNC terminated employment, whether the termination was for cause, resulted from death or disability, or followed a change in control, and whether the executive is retirement-eligible. If a retirement-eligible employee resigns or is terminated without cause, we consider it a retirement. For these purposes, a “retirement-eligible” employee is someone who is at least 55 years old and has at least five years of service with PNC. As of December 31, 2022, five of our six NEOs are retirement-eligible.
Change of control agreements
As of December 31, 2022, we have entered into separate change of control agreements with each of our NEOs and similar agreements with a limited group of other senior officers. These agreements have been a valuable component of our executive compensation program for several years. We believe these arrangements mitigate concerns arising from a change of control, and help to ensure the continued dedicated service of our key employees. Cash payments contemplated by these agreements require a “double trigger” — that is, the occurrence of both a change of control and a qualifying termination of employment. A qualifying termination would occur if the executive resigned for “Good Reason” or the surviving company terminated the executive other than for “Cause,” “Disability” or death (each as defined in the change of control agreement). The treatment of equity awards upon a change of control is addressed in the equity award agreements themselves, as described below, rather than the change of control agreements.
The change of control agreements provide for cash payments to our NEOs calculated based on various compensation components, including annual base salary and an annual incentive award (bonus). For purposes of the change of control agreements, annual base salary is equal to 12 times the highest monthly base salary rate payable to the executive in the 12-month period preceding the month of the change of control. The cash payment related to base salary is equal to two times the annual base salary, and the cash payment related to bonus is equal to two times the applicable bonus percentage multiplied by annual base salary. The agreements also provide for continued benefits under (or compute cash payments by reference to) certain of our retirement and health and welfare benefit plans.
None of our change of control agreements contain any excise tax “gross-up” provisions. Our current change of control agreements provide that in the event the benefits payable to an executive trigger excise taxes under Section 4999 of the Internal Revenue Code, the executive will be entitled to a reduction in benefits so that no excise tax is imposed if such a reduction would result in a greater net (after-tax) benefit to the executive than payment of the full amount of his or her benefits. We have a Board-approved policy that requires shareholder approval of certain future severance arrangements if the arrangement provides for additional severance benefits in an amount exceeding 2.99 times the sum of the executive’s annual base salary and target bonus.
The change of control agreements prohibit the executives from employing or soliciting any of our officers during the one-year period following termination, and from using or disclosing any of our confidential business or technical information or trade secrets.
While the benefits to be received under a change of control agreement may be significant to an individual, they first require the occurrence of a significant transaction. As a result, the benefits are highly speculative and are contingent on a variety of facts and circumstances. In recognition of this, the Human Resources Committee of the Board does not consider the amount of potential change in control payments when it makes annual compensation decisions for our NEOs. Change in control protections, although meaningful, also become relatively less significant to PNC as we increase in size.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
|
83 |
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Other material conditions. The retirement, termination without cause and disability awards summarized above are generally subject to forfeiture if it is determined that a grantee has engaged in certain competitive activities during employment or the one-year period following termination of employment, or if the grantee has engaged in other detrimental conduct. In addition, the award is subject to grantee’s agreement not to solicit certain customers or employees of PNC during employment and the one-year period following termination of employment, to at all times maintain the confidentiality of business and technical information, and to disclose and assign certain inventions.
Awards are generally subject to PNC’s clawback, adjustment, or similar policies and to any clawback or recoupment that may be required by applicable law or regulations.
Existing plans and arrangements
As of December 31, 2022, our NEOs could participate in our qualified cash balance pension plan, ERISA excess pension plan, ISP and DCIP. In addition, Mr. Demchak, Mr. Reilly, Mr. Parsley and Ms. Larrimer participate in our SISP, and Mr. Demchak and Mr. Reilly participate in our DCP (although they may no longer make contributions to these plans). The NEOs earn these benefits for services provided to us while employed, and many of these plans are also available on a broader basis to other employees. For the most part, an NEO’s entitlement to these benefits does not depend on how employment is terminated.
Mr. Demchak and Mr. Reilly also participate in our supplemental executive retirement plan, a company-paid executive long-term disability (“LTD”) program, and the Key Executive Equity Program (“KEEP”), a split-dollar life insurance program. Participants in the executive LTD program are generally eligible for additional LTD benefits of $10,000 per month until they are no longer disabled or have reached age 65. KEEP provides benefits in the event of a participating executive’s death while actively employed (equal to 1.5 times then-current annual base salary) or following an eligible retirement (retirement after reaching age 55 and five years of service with PNC, generally equal to annual base salary prior to retirement). Following a change in control, the life insurance policy would transfer to the participating executive. The supplemental executive retirement plan, executive LTD program and KEEP were frozen to new participants as of December 31, 2007.
Certain NEOs are also eligible to receive two years of company-paid financial planning and tax preparation services upon retirement.
Estimated benefits upon termination
The following table shows the estimated incremental benefits payable to our NEOs as of December 31, 2022 as a result of termination of employment in a variety of situations. These estimated amounts have been calculated as if employment was terminated on December 31, 2022. For change in control benefits, we assumed a change in control of PNC and a termination of employment by the surviving company without cause (or a resignation of the officer for good reason) on that date. To the extent relevant, the amounts assume a PNC stock price of $157.94, the closing price of our common stock on December 30, 2022 (the last trading day of the year). If we calculated these amounts using a different price, the amounts could be significantly different. The benefits below do not include the balances under our qualified cash balance pension plan, ERISA excess pension plan, supplemental executive retirement plan, SISP, ISP, DCIP or DCP unless the NEO receives an enhanced benefit under the termination scenario. In addition, stock options are not included as there were no stock options outstanding for the NEOs as of December 31, 2022.
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William S. Demchak |
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Termination for Cause |
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Voluntary Termination/ Termination without Cause(a) |
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Retirement(a) |
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Change in Control(b) |
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Disability |
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Death |
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Cash Severance |
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— |
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— |
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|
— |
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$ |
11,005,577 |
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|
|
— |
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|
|
— |
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Base Salary |
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|
— |
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|
|
— |
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|
|
— |
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|
$ |
2,400,000 |
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|
|
— |
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|
|
— |
|
Bonus |
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|
— |
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|
|
— |
|
|
|
— |
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|
$ |
8,605,577 |
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|
|
— |
|
|
|
— |
|
Enhanced Benefits |
|
|
— |
|
|
|
— |
|
|
$ |
21,730 |
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|
$ |
394,701 |
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|
$ |
560,000 |
|
|
$ |
1,800,000 |
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Defined Benefit Plans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
335,140 |
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|
|
— |
|
|
|
— |
|
Defined Contribution Plans |
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|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
24,400 |
|
|
|
— |
|
|
|
— |
|
General Benefits & Perquisites |
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|
— |
|
|
|
— |
|
|
$ |
21,730 |
|
|
$ |
35,161 |
|
|
$ |
560,000 |
|
|
$ |
1,800,000 |
|
Value of Unvested Equity |
|
|
— |
|
|
|
— |
|
|
$ |
31,686,948 |
|
|
$ |
30,870,575 |
|
|
$ |
31,686,948 |
|
|
$ |
30,870,575 |
|
RSUs |
|
|
— |
|
|
|
— |
|
|
$ |
9,512,013 |
|
|
$ |
9,512,013 |
|
|
$ |
9,512,013 |
|
|
$ |
9,512,013 |
|
PSUs |
|
|
— |
|
|
|
— |
|
|
$ |
22,174,935 |
|
|
$ |
21,358,562 |
|
|
$ |
22,174,935 |
|
|
$ |
21,358,562 |
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TOTAL |
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|
— |
|
|
|
— |
|
|
$ |
31,708,678 |
|
|
$ |
42,270,853 |
|
|
$ |
32,246,948 |
|
|
$ |
32,670,575 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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85 |
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 2)
Under the Audit Committee’s charter, the Committee is responsible for the selection, appointment, compensation, retention and oversight of our independent auditors. In connection with this responsibility, the Committee evaluates, monitors and reports to the Board regarding the independence, qualifications and performance of the independent auditors, including an evaluation of the lead audit partner. The Committee approves all audit engagement fees and terms associated with the retention of the independent auditors. The Audit Committee charter requires the Committee to consider, not less frequently than when the lead audit partner is rotated, whether PNC should adopt a policy of regular rotation of the independent audit firm. In addition to assuring the required rotation of the lead audit partner, the Committee oversees the selection of the new lead audit partner and the chair of the Committee participates directly in the selection of the new lead audit partner.
The Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as our independent auditors for 2023. PwC has been our independent auditors since 2007. In making this selection, the Committee considered whether there should be a rotation of the independent audit firm. It also carefully considered, among other things, PwC’s qualifications and performance, the quality and candor of its communications with the Committee and PNC, and its independence, objectivity and professional skepticism. On February 16, 2023, the Committee presented its conclusions regarding the selection and appointment of PwC as our independent auditors to the Board, including a determination that the selection of PwC as our independent auditors is in the best interest of PNC. Following this presentation, the Board voted unanimously to recommend that shareholders vote to ratify the Committee’s selection of PwC as our independent registered public accounting firm for 2023. The Committee and the Board believe that the continued retention of PwC as our independent auditors is in the best interest of PNC.
The Audit Committee and the Board have adopted a policy that if the ratification of the independent auditors does not receive a majority of the votes cast at the annual meeting, the Committee will reconsider its selection of independent auditors. However, the Committee will be under no obligation to select new independent auditors. If the Committee does select new independent auditors for 2023, we will not seek shareholder ratification of the new selection.
We expect representatives of PwC to be available during the annual meeting. They will have an opportunity to make a statement and respond to appropriate questions. You can learn more about the Audit Committee’s responsibilities with respect to the independent auditors in the Committee’s charter, which is posted in the corporate governance section of our website at www.pnc.com/corporategovernance.
Audit, audit-related and permitted non-audit fees
In considering the nature of the services provided by our independent auditors, the Audit Committee determined that the services are compatible with the provision of independent audit services. The Committee discussed these services with the independent auditors and our management to determine that they are permitted under SEC rules and regulations concerning auditor independence.
The following table summarizes the total fees for professional services rendered by PwC to PNC for 2022 and 2021:
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Category |
|
2022 (in millions) |
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2021 (in millions) |
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Audit fees |
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$21.4 |
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|
|
$22.6 |
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|
|
Audit-related fees* |
|
|
$2.8 |
|
|
|
$2.9 |
|
|
|
|
Tax fees |
|
|
$0.1 |
|
|
|
$0.4 |
|
|
|
|
TOTAL FEES BILLED |
|
|
$24.3 |
|
|
|
$25.9 |
|
* |
Excludes fees of $2.0 million in 2022 and $1.6 million in 2021 for financial due diligence services related to potential private equity investments. In those instances, the fees were paid by the company issuing the equity. |
Audit fees. These fees consisted primarily of the audit of our annual consolidated financial statements, reviews of our quarterly consolidated financial statements included in Form 10-Q filings, comfort letter procedures, other services related to SEC matters and required attestation services.
Audit-related fees. These fees consisted primarily of SSAE 18, compliance and internal control reviews.
Tax fees. These fees were primarily attributable to tax compliance services, including tax return preparation and review, and assistance with tax examinations.
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96 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
“SAY-ON-PAY”: ADVISORY VOTE
ON EXECUTIVE COMPENSATION (ITEM 3)
What is the purpose of this item?
We describe this item as an advisory vote on executive compensation, but it is more commonly known as “say-on-pay.” We provide this vote under the federal securities laws (Section 14A of the Securities Exchange Act of 1934) and in recognition of our shareholders’ vote in 2017 recommending that we hold an advisory vote on executive compensation each year. After our shareholders voted in 2017, the Board affirmed that recommendation and elected to hold future say-on-pay votes on an annual basis, until the next shareholder vote on the frequency of future say-on-pay votes. As described in the next item, we are conducting an advisory shareholder vote on the frequency of future say-on-pay votes at this year’s annual meeting of shareholders.
With this item, shareholders may submit an advisory vote on the compensation of our CEO and the other five executive officers named in the Summary compensation table on page 71. The Summary compensation table provides an annual snapshot of the compensation paid or granted to our NEOs.
What does it mean to have a “say-on-pay” advisory vote?
As an advisory vote, the outcome of the say-on-pay vote will not bind PNC or the Board. We will disclose how many shareholders voted “For” and “Against” the resolution and how many shareholders abstained from voting.
We believe in soliciting input from our shareholders throughout the year on a variety of issues, and this advisory vote fits within our broader shareholder engagement efforts. Last year, approximately 96% of the votes cast by our shareholders approved the compensation of our named executive officers, and we have averaged approximately 96% support in say-on-pay votes over the past five years.
While this vote is non-binding, the Board values the opinions of shareholders and will carefully consider the results when making future compensation decisions. In considering an overall executive compensation program, say-on-pay cannot convey a shareholder’s view on a discrete element of our compensation program or a specific decision made by the Human Resources Committee. Each year, the Committee receives reports on the outcome of the say-on-pay vote, how our say-on-pay vote compared to our peers and other large public companies, and whether any changes to the compensation program were being recommended for the Committee’s consideration in light of the results. The Committee expects to undertake a similar evaluation this year.
Where can I find more information on executive compensation?
We describe our executive compensation program and the compensation awarded under that program in the CD&A, the compensation tables and the related disclosure contained in this proxy statement. See pages 44 to 87 for additional information.
What are some of the performance and compensation program highlights for 2022?
Please review the CD&A, which begins on page 44, as well as the accompanying compensation tables and related disclosure beginning on page 71. Performance and compensation program highlights for 2022, which are included in the CD&A, should be read in conjunction with the full CD&A, the compensation tables and the related disclosure contained in this proxy statement.
The Board of Directors recommends a vote FOR the following advisory resolution:
“RESOLVED, that the holders of the common stock and the voting preferred stock of The PNC Financial Services Group, Inc. (PNC), voting together as a single class, approve the compensation of PNC’s named executive officers as described in the Compensation Discussion and Analysis, compensation tables and related disclosure contained in PNC’s proxy statement for the 2023 Annual Meeting of Shareholders.”
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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99 |
GENERAL INFORMATION
We will hold our annual meeting of shareholders on Wednesday, April 26, 2023. This proxy statement includes information about PNC, describes the proposals to be considered at the meeting and explains the voting process. We encourage you to read it carefully.
This section of the proxy statement reviews important topics such as how to participate in the meeting, how to access our proxy materials, how to vote and how a proposal gets approved. As permitted by our Bylaws and applicable law, we will hold a virtual-only annual meeting of shareholders.
In this section, we sometimes discuss differences between “registered” and “street name” shareholders. We refer to those who own PNC shares in their own name as “registered” holders or “shareholders of record.” We refer to those who own PNC shares through an account at an intermediary — such as a brokerage firm or bank — as holding shares in “street name” or as “beneficial owners.” For purposes of reviewing the proxy materials and voting your shares, this distinction is important.
Participating in the annual meeting
The 2023 Annual Meeting of Shareholders will be a virtual-only meeting held via webcast on Wednesday, April 26, 2023 at 11:00 a.m. Eastern Time. The annual meeting will be accessible at www.virtualshareholdermeeting.com/PNC2023. We want to ensure that all shareholders are afforded the same rights and opportunities to participate as they would have at an in-person meeting, including the ability to vote shares electronically and submit questions during the meeting, as well as having access to the Board and our management. All members of the Board and all executive officers are expected to join the annual meeting and be available for questions.
To participate in the annual meeting, you must be a PNC shareholder on the record date of February 3, 2023. You may vote your shares and will have the opportunity to submit questions during the meeting. Shareholders should refer to the Regulations for Conduct included as Annex B to this proxy statement and available on the annual meeting website at www.virtualshareholdermeeting.com/PNC2023. We are committed to acknowledging each relevant question we receive, subject to the guidelines described in this section and in the Regulations for Conduct. Questions submitted in accordance with the Regulations for Conduct will be generally addressed as time permits. We limit each shareholder to one question in order to allow us to answer questions from as many shareholders as possible. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. Questions regarding personal matters and questions regarding general economic, political or product matters that are not directly related to the business of PNC will not be answered. If there are matters of individual concern to a shareholder and not of general concern to all shareholders, or if a question posed was not otherwise answered, shareholders may contact Investor Relations separately after the annual meeting. Contact details, as well as other helpful information, can be found in the shareholder services section of our website at www.pnc.com/shareholderservices.
Questions may be submitted prior to the annual meeting at www.proxyvote.com or you may submit questions in real time during the meeting using the annual meeting website at www.virtualshareholdermeeting.com/PNC2023. Please note that in order to access these sites, shareholders will need their unique control number that appears on the Notice of Internet Availability of Proxy Materials, the proxy card (printed in the box and marked by the arrow) or the instructions that accompanied the proxy materials, as applicable. For beneficial owners, instructions should be included on the voting instruction form provided by their broker or bank. If you do not have your control number, you will be able to join the meeting as a guest; however, you will not be able to vote or submit questions during the meeting.
If you encounter any technical difficulties when accessing or using the annual meeting website, please call the technical support number that will be posted on the annual meeting website login page. The annual meeting website is supported on browsers and devices running the most updated version of applicable software and plugins.
Reviewing proxy materials
Accessing proxy materials. We began providing access to the proxy materials on March 15, 2023. The SEC allows us to deliver proxy materials to shareholders over the Internet. We believe this offers a convenient way for shareholders to review our information. It also reduces printing expenses and lessens the environmental impact of paper copies. Shareholders may access the proxy statement and our 2022 Annual Report online. Upon request, we will continue to provide email or paper copies of proxy materials to shareholders for the current annual meeting or for future meetings.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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101 |
GENERAL INFORMATION
If you hold PNC shares in street name, we generally cannot mail our materials to you directly. Your broker, bank or other nominee must provide you with the Notice of Internet Availability of Proxy Materials or the proxy statement and a voting instruction form, and your broker, bank or other nominee must also explain the voting process to you.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26, 2023: This Notice of Annual Meeting and Proxy Statement and the 2022 Annual Report are available at:
www.proxyvote.com
Have you received more than one set of proxy materials? If two or more PNC shareholders live in your household, or you maintain more than one shareholder account on the books of our transfer agent, you may have received more than one set of our proxy materials.
In order to reduce duplicate packages and lower expenses, we rely on SEC rules that allow delivery of one set of proxy materials to multiple shareholders sharing the same address and the same last name, if this type of delivery has been consented to as provided by these rules. This is referred to as “householding” of the proxy materials. Even if you consent to householding, we will deliver a separate proxy card or Notice of Internet Availability of Proxy Materials for each account. Householding will not affect your right or ability to vote.
If you would like to opt out of or into householding in the future, or would like to receive a separate copy of the proxy materials, please write or call Broadridge Financial Solutions, Inc. at the address or phone number below:
Broadridge Financial Solutions, Inc.
51 Mercedes Way
Edgewood, NY 11717
(866) 540-7095
You may also receive more than one set of our proxy materials if you have more than one brokerage account. Our householding process does not include accounts that you maintain at a brokerage firm or bank. Some brokerage firms and banks offer householding; please contact your broker or bank directly if you are interested.
Voting your shares
We want our shareholders, as the owners of PNC, to consider the important matters before them and exercise their right to vote. The Board is asking for, or soliciting, a proxy from our shareholders. This section describes the different aspects of the voting process and how proxy voting works.
Who can vote? You are entitled to vote if you were a PNC shareholder as of the record date of February 3, 2023.
What is a proxy? If you are unable to participate and vote electronically during the virtual annual meeting, you can tell us exactly how you want to vote your shares and allow an officer to vote on your behalf. This is referred to as giving us a “proxy.” By instructing a proxy to carry out your wishes, you can ensure that your vote is counted.
Soliciting your proxy. The Board is soliciting your proxy to make sure that your vote is properly submitted and received on time, and to improve the efficiency of the annual meeting. We may solicit proxies using several methods, including by mail, personal interviews, telephone or fax. We may also use the Internet to solicit proxies.
PNC officers or employees may solicit proxies, but will not receive any special compensation for doing so. We will ask brokerage houses, banks and other custodians of PNC stock to forward proxy materials to their clients who hold PNC stock, and we will pay for the expenses they incur to do so. In addition, we have retained Morrow Sodali, LLC, 333 Ludlow Street, 5th Floor, South Tower, Stamford, CT 06902, a proxy soliciting firm, to assist us with the solicitation of proxies for the annual meeting for a fee of $15,000, plus reimbursement of reasonable out-of-pocket expenses.
Revoking your proxy. What if you change your mind after you give us your proxy to vote? You can amend your voting decisions in several ways. We refer to this as “revoking” your proxy.
To revoke your current proxy and replace it with a new proxy, we must receive the newly executed proxy before the applicable deadline. If you revoke by mail, we must receive the new proxy card before the annual meeting begins. Please make sure you have provided enough time for the new proxy card to reach us. If you revoke using the phone or Internet voting options, we must receive your revocation by the deadline for voting set forth in the Notice of Internet Availability of Proxy Materials or proxy card you received.
You can also revoke your proxy by voting electronically during the virtual annual meeting. Once the polls close at the annual meeting, the right to revoke your proxy ends. If you have not properly revoked your proxy by that time, we will vote your shares in accordance with your most recent valid proxy.
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102 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
GENERAL INFORMATION
If you hold PNC shares in street name, follow the instructions provided by your broker or bank to revoke your voting instructions or otherwise change your vote.
How to vote. You may vote electronically during the virtual annual meeting by accessing the annual meeting website at www.virtualshareholdermeeting.com/PNC2023. We also offer the following methods to vote your shares and give us your proxy in advance of the meeting:
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Internet |
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Go to www.proxyvote.com and follow the instructions. This voting system has been designed to provide security for the voting process and to confirm that your vote has been recorded accurately. |
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Vote by phone using the applicable number — for registered holders - (800) 690-6903 or for beneficial holders - (800) 454-8683 |
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If you received a printed version of the proxy materials, complete, sign and date the proxy card and return it in the envelope provided. The envelope requires no postage if mailed in the United States. |
Voting instructions are included in the Notice of Internet Availability of Proxy Materials and the proxy card. If you hold PNC shares in street name, you will receive information from your broker or bank on how to provide your voting instructions.
PNC is incorporated under the laws of Pennsylvania. Pennsylvania law allows proxies to be submitted by electronic transmission, including by telephone or over the Internet, and permits a shareholder of record, such as a brokerage firm or bank, to communicate a vote by telephone or Internet on behalf of a beneficial owner.
Brokers voting your shares. If you hold PNC shares in street name, you must give instructions to your broker or bank regarding how you would like your shares to be voted. If you do not provide any instructions, your broker has discretionary authority to vote your shares only with respect to proposals that are “routine” items. NYSE rules define which items are “routine” or “non-routine.” We discuss whether the proposals to be acted upon at the annual meeting are “routine” or “non-routine” items below under How a proposal gets approved—Vote required for approval.
If a proposal is considered a non-routine item under NYSE rules and you do not provide voting instructions to your broker or bank, no vote will be cast on your behalf with respect to that proposal. This is referred to as a “broker non-vote” and it will not be counted as a vote cast on the proposal. In some cases, street name holders may need to take additional actions to ensure that their shares are voted.
Our voting recommendations. If your shares are registered in your name and you sign, date and return your proxy card but do not provide voting instructions, or you use Internet or telephone voting and do not provide voting instructions for each proposal, your shares will be voted as follows:
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FOR each of the Board’s 13 nominees for director |
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FOR the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2023 |
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FOR the approval of the advisory resolution on the compensation of our named executive officers |
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FOR a frequency of “ONE YEAR” for future advisory votes on executive compensation |
Confidential voting. The Board has adopted a “confidential voting” policy. With the exceptions described below, this policy states that all proxies, ballots, voting instructions from employee benefit plan participants and voting tabulations that identify the vote of a particular shareholder or benefit plan participant be kept permanently confidential and not be disclosed. We keep votes confidential and do not disclose them to our directors, officers or employees, except:
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As necessary to meet legal requirements or to pursue or defend legal actions; |
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To allow the Judge of Election to certify the voting results; |
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When expressly requested by a shareholder or benefit plan participant; or |
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If there is a contested proxy solicitation. |
Broadridge Financial Services, Inc., our independent vote tabulator and Judge of Election for the annual meeting, confirmed that its procedures will be consistent with this policy.
How a proposal gets approved
Quorum. Under Pennsylvania law, we must have a quorum before we can consider proposals at an annual meeting. A “quorum” refers to the minimum number of shares that must be present at the meeting. To have a quorum for the annual meeting, we need the presence of PNC shareholders or their proxies who are entitled to cast at least a majority of the votes that all shareholders are entitled to cast.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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103 |
GENERAL INFORMATION
In determining if a quorum exists, we count the number of shares represented by shareholders who attend the annual meeting and the number of shares represented by proxies. If you return a proxy, whether you vote for or against a proposal, abstain from voting or only sign and date your proxy card, your shares will be counted as present for purposes of determining if a quorum exists.
Issued and outstanding shares. On February 3, 2023, the record date for the annual meeting, we had approximately 400 million shares of common stock outstanding, as well as additional shares of preferred stock. The table below shows the number of issued and outstanding shares of our common and preferred stock entitled to vote on the record date. We have additional issued and outstanding series of preferred stock that are not entitled to vote at the meeting. The table also shows the number of votes for each share for the matters brought before this meeting. The number of votes shown for each share of voting preferred stock equals the number of full shares of PNC common stock that can be acquired upon the conversion of a share of preferred stock. At the meeting, holders of common and preferred stock entitled to vote will vote together as a single class. There is no cumulative voting.
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Issued and Outstanding Shares Entitled to Vote |
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Votes Per Share |
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Effective Voting Power |
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Common |
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399,753,124 |
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1 |
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399,753,124 |
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Preferred — Series B |
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503 |
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8 |
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4,024 |
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Vote required for approval. Different proposals may have different voting requirements for approval. This section provides information regarding the vote required for approval of each proposal presented in the proxy statement and additional details regarding the mechanics of proposal approval.
Under Pennsylvania law, if you abstain from voting or fail to vote, your shares will not be counted as votes cast on the proposal. To abstain, you must check the “Abstain” box on your proxy card, or select the appropriate option when voting by Internet or telephone. A broker non-vote is treated as a failure to vote. Therefore, if you do not provide instructions to your broker or bank regarding how to vote on a proposal that is a non-routine item, your shares will not be counted as votes cast on that proposal. If you are a shareholder of record and you sign, date and return your proxy card but do not provide voting instructions, or you submit your proxy by Internet or telephone and do not provide voting instructions, we will vote your shares represented by that proxy as recommended by the Board and those shares will be counted as votes cast.
Election of directors (Item 1). Under Pennsylvania law, unless a company’s articles of incorporation or bylaws provide otherwise, directors are elected by a plurality of the votes cast. Our Bylaws include an eligibility requirement for director nominees in uncontested elections, whereby an incumbent director will offer to resign from the Board if he or she does not receive a majority of the votes cast. To receive a majority of the votes cast, the shares voted “for” a director’s election must exceed 50% of the total number of shares voted with respect to that director’s election. Our Bylaws and corporate governance guidelines describe this majority voting requirement and the related procedure in the event that a director must tender his or her resignation to the Board. This is considered a non-routine item, so there may be broker non-votes with respect to this proposal. Broker non-votes and abstentions will not be included in the total votes cast and will not affect the results of the vote on this proposal.
Ratification of independent registered public accounting firm (Item 2). A majority of the votes cast will be required to approve the ratification of the Audit Committee’s selection of PwC as our independent registered public accounting firm for 2023. This is considered a routine item, so brokers will have the discretion to vote uninstructed shares on behalf of beneficial owners with respect to this proposal. Therefore, broker non-votes are not expected to exist for this proposal, although a broker may otherwise fail to submit a vote. Failures by brokers to vote and abstentions will not be included in the total votes cast and will not affect the results of the vote on this proposal.
“Say-on-pay”: Advisory vote on executive compensation (Item 3). A majority of the votes cast will be required to approve this item, an advisory vote on the compensation of our named executive officers. Because your vote is advisory, it will not be binding on the Board or PNC. This is considered a non-routine item, so there may be broker non-votes with respect to this proposal. Broker non-votes and abstentions will not be included in the total votes cast and will not affect the results of the vote on this proposal.
Frequency of “say-on-pay” vote (Item 4). The frequency of future advisory votes on the compensation of our named executive officers—every one year, every two years or every three years—receiving the highest number of votes cast will be the frequency that shareholders approve on an advisory basis. Because it is an advisory vote, it will not be binding on PNC or the Board. This is considered a non-routine item, so there may be broker non-votes with respect to this proposal. Broker non-votes and abstentions will not be included in the total votes cast and will not affect the results of the vote on this proposal.
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104 |
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
SHAREHOLDER PROPOSALS FOR THE 2024 ANNUAL MEETING
SEC Rule 14a-8. If you are a shareholder who would like us to include your proposal in the notice of our 2024 annual meeting of shareholders and related proxy materials, you must comply with SEC Rule 14a-8, including with respect to submission of your proposal by the applicable deadline. Our Corporate Secretary must receive your proposal in writing at our principal executive offices no later than November 16, 2023. If your proposal is not received by the deadline or you do not otherwise comply with Rule 14a-8, we will not consider your proposal for inclusion in next year’s proxy materials.
Advance notice procedures. Under our Bylaws, shareholders may nominate an individual for election to the Board or propose other business to be brought directly at an annual meeting of shareholders by giving advance notice to PNC. To be eligible to do so, a shareholder must be a shareholder of record as of the date the notice is delivered to PNC and at the time of the annual meeting, must be entitled to vote at the annual meeting and must comply with the notice and other applicable procedures set forth in our Bylaws.
A shareholder’s notice of a nomination or other business must be in writing and contain the information specified in our Bylaws, and must be delivered on a timely basis. To be timely, a shareholder’s written notice related to our 2024 annual meeting of shareholders must be delivered to the Corporate Secretary at our principal executive offices not earlier than December 28, 2023 (the 120th day prior to the first anniversary of this year’s annual meeting) and not later than January 27, 2024 (the 90th day prior to the first anniversary of this year’s annual meeting). Shareholders who intend to solicit proxies in support of director nominees other than the Board’s nominees under SEC Rule 14a-19 must comply with the applicable provisions of our Bylaws, including by providing the notice required under SEC Rule 14a-19 by January 27, 2024, as well as complying with the additional requirements of SEC Rule 14a-19, including SEC Rule 14a-19(b).
These advance notice procedures are separate from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy materials pursuant to SEC Rule 14a-8 referred to above, and from the procedures you must follow to submit a director nominee for consideration by the Nominating and Governance Committee for recommendation to the Board for election as described under Corporate Governance—Board committees—Nominating and Governance Committee—How we identify new directors on page 26.
Proxy access procedures. Our Bylaws permit a shareholder, or a group of up to 20 shareholders, who has continuously for at least three years owned at least 3% of the outstanding shares entitled to vote in the election of directors to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two directors or 20% of the number of directors serving on the Board on the last day on which notice of a nomination may be delivered (known generally as “proxy access”).
The proxy access notice must be in writing and contain the information specified in our Bylaws for a proxy access nomination, and must be delivered on a timely basis. To be timely, a proxy access notice regarding a nomination for our 2024 annual meeting of shareholders must be delivered to the Corporate Secretary at our principal executive offices not earlier than October 17, 2023 (the 150th day prior to the first anniversary of the filing date of the definitive proxy statement for this year’s annual meeting) and not later than November 16, 2023 (the 120th day prior to the first anniversary of the filing date of the definitive proxy statement for this year’s annual meeting).
These proxy access procedures are separate from the advance notice procedures referred to above, from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy materials pursuant to SEC Rule 14a-8 referred to above, and from the procedures you must follow to submit a director nominee for consideration by the Nominating and Governance Committee for recommendation to the Board for election as described under Corporate Governance—Board committees—Nominating and Governance Committee—How we identify new directors on page 26.
General. The proxies we appoint for the 2024 annual meeting of shareholders may exercise their discretionary authority to vote on any shareholder proposal timely received and presented at the meeting. Our proxy statement for the 2024 annual meeting must advise shareholders of any such proposal and how our proxies intend to vote. A shareholder may mail a separate proxy statement to our shareholders and satisfy certain other requirements to remove discretionary voting authority from our proxies.
The Chairperson or other officer presiding at the annual meeting has the sole authority to determine whether any nomination or other business proposed to be brought before the annual meeting was made or proposed in accordance with our Bylaws, and to declare that a defective proposal or nomination be disregarded.
Please direct any notices or questions about the requirements discussed in this section to our Corporate Secretary at the address provided on page 18.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2023 Proxy Statement |
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105 |
Pay vs Performance Disclosure
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12 Months Ended |
Dec. 31, 2022
USD ($)
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Dec. 31, 2021
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Dec. 31, 2020
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Pay vs Performance Disclosure [Table] |
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Pay vs Performance [Table Text Block] |
Pay versus performance table
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Value of Initial Fixed $100 Investment based on: (4) |
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Summary Compensation Table Total for PEO (1) |
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Compensation Actually Paid to PEO (1)(2)(3) |
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Summary Compensation Table Total for Non-PEO NEOs (1) |
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Average Compensation Actually Paid |
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The Peer Group TSR utilizes the S&P 500 Banks Index (“S&P 500 Banks”), which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report on Form 10-K for the year ended December 31, 2022. |
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William S. Demchak was our PEO for each year presented. The individuals comprising the Non-PEO NEOs for each year presented are: |
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2020: Robert Q. Reilly, Michael P. Lyons, E William Parsley, III and Karen L. Larrimer |
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2021: Robert Q. Reilly, Michael P. Lyons, E William Parsley, III and Karen L. Larrimer |
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2022: Robert Q. Reilly, Michael P. Lyons, E William Parsley, III, Karen L. Larrimer and Gregory B. Jordan |
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CAP amounts shown have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized or received by the NEOs. |
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CAP reflects the Summary compensation table totals for our NEOs, as adjusted for certain amounts as set forth below. Amounts in the “Exclusion of Stock Awards” columns below are based on the totals from the “Stock Awards” column of the Summary compensation table. Amounts in the “Exclusion of Change in Pension Value” columns below reflect the amounts attributable to the change in pension value reported in the Summary compensation table. Amounts in the “Inclusion of Pension Service Cost” columns below are based on the service cost for services rendered during the listed year. |
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Summary Compensation Table Total |
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Exclusion of Change in Pension Value for PEO |
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Inclusion of Pension Service Cost for PEO |
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Inclusion of Equity Values |
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Compensation Actually Paid |
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Average Summary Compensation Table Total |
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Average Exclusion of Stock Awards |
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Average Inclusion of Equity Values |
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Average Compensation Actually Paid |
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| The amounts in the “Inclusion of Equity Values” columns above are derived from the amounts set forth in the following tables:
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Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO |
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Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO |
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Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year |
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Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year |
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Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for PEO |
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Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for PEO |
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Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs |
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Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs |
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Average Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs |
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Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs |
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Equity Awards Forfeited During Year for Non-PEO |
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Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for Non-PEO NEOs |
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Equity Values for Non-PEO NEOs |
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The comparison assumes $100 was invested for the period starting December 31, 2019 through the last business day of the listed year, for each of PNC and the S&P 500 Banks. |
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Adjusted ROE is a non-GAAP financial measure. See Annex A for a reconciliation of non-GAAP financial measures to GAAP, and for additional information about the adjustments to GAAP measures. |
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Company Selected Measure Name |
Adjusted ROE
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Named Executive Officers, Footnote [Text Block] |
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2020: Robert Q. Reilly, Michael P. Lyons, E William Parsley, III and Karen L. Larrimer |
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2021: Robert Q. Reilly, Michael P. Lyons, E William Parsley, III and Karen L. Larrimer |
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2022: Robert Q. Reilly, Michael P. Lyons, E William Parsley, III, Karen L. Larrimer and Gregory B. Jordan |
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Peer Group Issuers, Footnote [Text Block] |
The Peer Group TSR utilizes the S&P 500 Banks Index (“S&P 500 Banks”), which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report on Form 10-K for the year ended December 31, 2022.
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PEO Total Compensation Amount |
$ 19,473,490
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$ 17,506,270
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$ 15,879,053
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PEO Actually Paid Compensation Amount |
$ 18,419,052
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26,625,622
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13,080,702
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Adjustment To PEO Compensation, Footnote [Text Block] |
CAP reflects the Summary compensation table totals for our NEOs, as adjusted for certain amounts as set forth below. Amounts in the “Exclusion of Stock Awards” columns below are based on the totals from the “Stock Awards” column of the Summary compensation table. Amounts in the “Exclusion of Change in Pension Value” columns below reflect the amounts attributable to the change in pension value reported in the Summary compensation table. Amounts in the “Inclusion of Pension Service Cost” columns below are based on the service cost for services rendered during the listed year.
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Summary Compensation Table Total |
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Exclusion of Change in Pension Value for PEO |
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Inclusion of Pension Service Cost for PEO |
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Inclusion of Equity Values |
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Compensation Actually Paid |
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Non-PEO NEO Average Total Compensation Amount |
$ 12,309,964
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7,940,191
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6,890,142
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Non-PEO NEO Average Compensation Actually Paid Amount |
$ 12,394,784
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11,637,177
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5,608,478
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Adjustment to Non-PEO NEO Compensation Footnote [Text Block] |
CAP reflects the Summary compensation table totals for our NEOs, as adjusted for certain amounts as set forth below. Amounts in the “Exclusion of Stock Awards” columns below are based on the totals from the “Stock Awards” column of the Summary compensation table. Amounts in the “Exclusion of Change in Pension Value” columns below reflect the amounts attributable to the change in pension value reported in the Summary compensation table. Amounts in the “Inclusion of Pension Service Cost” columns below are based on the service cost for services rendered during the listed year.
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Average Summary Compensation Table Total |
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Average Exclusion of Stock Awards |
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Average Inclusion of Equity Values |
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Average Compensation Actually Paid |
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Compensation Actually Paid vs. Total Shareholder Return [Text Block] |
Description of Relationship Between PEO and Non-PEO NEO CAP and PNC TSR and Relationship Between PNC TSR and Peer Group TSR The following graph sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs, and PNC cumulative TSR over the three most recently completed fiscal years. As reflected in the graph CAP for all NEOs is generally aligned with PNC’s cumulative TSR over the period presented.
* |
Note the TSR above is indexed to an initial $100 investment for the period starting December 31, 2019 through the last business day of the listed year. |
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Compensation Actually Paid vs. Net Income [Text Block] |
Description of Relationship Between PEO and Non-PEO NEO CAP and Net Income The following chart sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs, and our net income during the three most recently completed fiscal years. CAP for all NEOs is generally aligned with PNC’s net income for 2021 and 2022, but CAP for all NEOs in 2020 appears much lower relative to our net income during 2020, which was significantly impacted by PNC’s strategic sale of its 22.4% equity investment in BlackRock. This sale resulted in an after-tax gain on sale of $4.3 billion. In 2020, net income from continuing operations, which excluded the impact of the BlackRock sale, was $3.0 billion, reflecting closer alignment for the full period presented.
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Compensation Actually Paid vs. Company Selected Measure [Text Block] |
Description of Relationship Between PEO and Non-PEO NEO CAP and Adjusted ROE The following chart sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs, and our Adjusted ROE (our CSM) during the three most recently completed fiscal years. Similar to the graph above, CAP for all NEOs is generally aligned with PNC’s Adjusted ROE for 2021 and 2022, but CAP for all NEOs in 2020 appears lower relative to our Adjusted ROE during 2020. For a discussion of how our Human Resources Committee assessed our performance and our NEO pay for 2020, including the impact of the sale of our 22.4% equity investment in BlackRock during 2020, see the Compensation Discussion and Analysis section in our annual proxy statement for the 2021 performance year.
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Total Shareholder Return Vs Peer Group [Text Block] |
The graph below compares our cumulative TSR over the three most recently completed fiscal years to that of the S&P 500 Banks over the same period. As the graph reflects, our cumulative TSR over each of the three most recently completed fiscal years is above that of the S&P 500 Banks for each year during the same period. Taken together with the graph above, this reflects alignment between our NEOs’ CAP as disclosed in the Pay v performance table with both (i) PNC’s cumulative TSR and (ii) PNC’s performance with respect to cumulative TSR relative to the S&P 500 Banks over the same period.
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Tabular List [Table Text Block] |
Tabular List of Most Important Financial Performance Measures The following table presents the financial performance measures that the company considers to have been the most important in linking CAP to our PEO and Non-PEO NEOs for 2022 to company performance. The measures in this table are not ranked.
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Annualized Three-Year TSR Rank vs. Peers |
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Annualized Five-Year TSR Rank vs Peers |
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Total Shareholder Return Amount |
$ 109.49
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134.44
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97.27
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Peer Group Total Shareholder Return Amount |
94.38
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116.82
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86.25
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Net Income (Loss) |
$ 6,113,000,000
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$ 5,725,000,000
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$ 7,558,000,000
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Company Selected Measure Amount |
0.1259
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0.0959
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0.0939
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PEO Name |
William S. Demchak
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Measure [Axis]: 1 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Adjusted ROE
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Non-GAAP Measure Description [Text Block] |
Adjusted ROE is a non-GAAP financial measure. See Annex A for a reconciliation of non-GAAP financial measures to GAAP, and for additional information about the adjustments to GAAP measures.
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Measure [Axis]: 2 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Adjusted EPS
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Measure [Axis]: 3 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Annualized Three-Year TSR Rank vs. Peers
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Measure [Axis]: 4 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Annualized Five-Year TSR Rank vs Peers
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PEO [Member] | Exclusion of Change in Pension Value [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
$ 0
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$ (338,606)
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$ (1,399,380)
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PEO [Member] | Exclusion of Stock Awards [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(15,000,015)
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(12,000,025)
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(10,320,237)
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PEO [Member] | Inclusion of Pension Service Cost [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
370,608
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478,826
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393,939
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PEO [Member] | Inclusion of Equity Values [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
13,574,969
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20,979,157
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8,527,327
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PEO [Member] | YearEnd Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
12,123,506
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13,081,706
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8,584,874
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PEO [Member] | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO () [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(944,686)
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6,461,296
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70,776
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PEO [Member] | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for PEO [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
2,396,149
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1,436,155
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(128,323)
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Non-PEO NEO [Member] | Exclusion of Change in Pension Value [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(15,249)
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(95,656)
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(299,797)
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Non-PEO NEO [Member] | Exclusion of Stock Awards [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(9,598,689)
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(4,165,160)
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(3,927,655)
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Non-PEO NEO [Member] | Inclusion of Pension Service Cost [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
65,950
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83,017
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73,084
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Non-PEO NEO [Member] | Inclusion of Equity Values [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
9,632,808
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7,874,785
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2,872,704
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Non-PEO NEO [Member] | YearEnd Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
9,201,403
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4,773,399
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3,439,287
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Non-PEO NEO [Member] | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO () [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(504,672)
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2,545,225
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(322,598)
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Non-PEO NEO [Member] | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for PEO [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
$ 936,077
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$ 556,161
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$ (243,985)
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