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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under § 240.14a-12

 

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Bread Financial Holdings, Inc.

(Name of Registrant as Specified In Its Charter)

NOT APPLICABLE

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

 

No fee required

 

Fee paid previously with preliminary materials

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 


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Letter from

the Chairman

 

 

Dear Fellow Bread Financial Stockholders:

 

On behalf of the Board of Directors, I am pleased to introduce this first proxy statement of Bread Financial, formerly Alliance Data. Rebranding to Bread Financial reflects the culmination of a multi-year business transformation strategy to become a more focused, competitive and tech-forward payment, lending and saving solutions provider. During the year, the Company, led by President and CEO Ralph Andretta and an exceptionally strong executive leadership team, streamlined the business, invested strategically in our people, processes and technology, and delivered solid performance across our key performance metrics.

In 2018, the Board initiated an extensive assessment of each of our businesses and determined that a strategic shift in our model was needed to unlock stockholder value and position the Company for future success. This evolution also suggested the need for a new brand. We chose the Bread Financial name because it embodies our financial services vision and reflects our tech-focused, digital-first approach to delivering our solutions with exceptional service. We made this decision with complete confidence in the Company’s leadership to execute against the new business model — a decision informed by our goals of long-term growth and sustainability — which benefits our stockholders, brand partners, customers and associates.

As Chairman of the Board, I have worked alongside my fellow Directors to help guide the Company and provide the sound corporate governance expected of us, all while ensuring we are mindful of the diverse priorities and interests of our stakeholders. Together, we ensure the Board fulfills its obligations to oversee the Company’s operations, including sustainable, stakeholder-centric practices and risk-mitigation efforts that drive our long-term performance and profitable growth.

With the spinoff of our final non-core segment, LoyaltyOne, completed in November 2021, we are optimally structured now to further strengthen our

competitive positioning as a top provider of payment, lending and saving solutions. Our Board is actively engaged with Company leadership in fulfilling our oversight obligations across all aspects of Bread Financial’s operations, including focused attention on the following business imperatives:

Integrated Corporate Governance. Our Board takes an integrated approach to its oversight obligations and prioritizing diverse interests of all of our stakeholders, including:

 

  Sustainable business practices

 

  Risk mitigation and management

 

  Core governance practices

Regarding Board refreshment, we have added five new independent directors in the last five years, and our composition continues to advance across a diversity of skills, experience, expertise, gender and ethnicity. In 2021 economist Karin J. Kimbrough was elected to the Board, and women were appointed to chair two of the Board’s four standing Committees.

Human Capital, Culture & Executive Compensation. Attracting, developing and retaining top talent is a heightened business imperative, particularly in an increasingly hyper-competitive labor environment, which is expected to continue for some time. Key actions during the year included:

 

  We revised the charter of the Compensation & Human Capital Committee to expand its oversight responsibilities to specifically include human capital programs, policies and practices.

 

 

The Company established a Diversity, Equity & Inclusion (DE&I) office, led by a newly appointed Chief Diversity Officer, who continued to execute on the Company’s formal DE&I strategy developed during the year. This Committee will continue to oversee the execution of broader human capital initiatives including talent mobility, leadership development, equity and inclusion, succession

 

 

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    planning and related efforts that drive associate engagement and retention.

 

  This Committee also modified our executive compensation program in 2021 – further aligning it with the interests of our stockholders and our long-term financial objectives – including through the adoption of three-year cliff-vesting performance-based RSUs and improvements to our balanced scorecards for our annual incentive program to advance key business priorities, including Environmental, Social and Governance (ESG)-related matters.

ESG Imperatives. Key governance enhancements implemented in 2021 ensure appropriate oversight on business practices that reflect our ESG priorities, including customers, associates, the environment and communities; that these priorities are integrated across Bread Financial’s operations; and that leadership is held accountable for making progress against the Company’s sustainability goals.

 

  We revised the Nominating & Corporate Governance Committee charter to more clearly define its ESG oversight responsibilities

 

  We formally adopted an ESG Strategic Framework developed by the Company’s Head of Sustainability, appointed in 2021

 

  We developed a Climate Action Roadmap reflecting the advancement of our commitment to protecting the planet and setting a course for how we manage climate-related risks

 

  We provide quarterly Board-level reviews and evaluations conducted across 5 ESG-related performance scorecards and more than 40 key progress indicators.

Technology Innovation & Digital Advancements. Investing in and modernizing core technology platforms served as critical enablers of Bread Financial’s transformation. Investing in core processing capabilities and expanding our digital product offerings provided the important foundation for the Company’s competitive positioning and strategic differentiation. As such, maintaining a modernized tech stack and prudently investing in data and product innovation driven by evolving consumer trends and technology advancements remains central to Bread Financial’s long-term growth and future success. Ensuring strong oversight of the Company’s enterprise risk management program, including risks associated with competitive threats involving

technology, data and product innovation, and disciplined capital allocation for ongoing necessary innovation investments will continue to be a focus of the Board’s oversight.

Stockholder Engagement. The Board remains committed to supporting Company initiatives that build trust in our leadership team and confidence in our long-term business strategy through increased transparency, access and engagement with stockholders.

 

  The Company held its first formal virtual Investor Day in May, where members of the executive leadership team provided a comprehensive overview of our business transformation, revenue drivers, performance objectives, capital allocation, credit risk management, competitive threats and opportunities, and ESG practices

 

  Along with our Head of Investor Relations, I proactively engaged with a subset of our top institutional investors to understand their perspectives on executive compensation; and

 

  Our Heads of Investor Relations and Sustainability proactively engaged with investors to understand their approach to ESG investing and related priorities, and held productive discussions where we shared an overview of our sustainability practices, objectives, reporting metrics and performance

As the longest-serving Board member, I have never been more optimistic about the Company’s direction, its leadership team and the 6,000 global associates who are empowered, engaged and committed to delivering on our promises to all those we serve. As a valued stockholder, thank you for your confidence in Bread Financial and our bright, sustainable future, which you will help shape through your voting decisions.

 

Sincerely,   

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Roger H. Ballou

Chairman of the

Board of Directors

 

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Notice of Annual

Meeting of

Stockholders

 

                          
          

 

 

                          

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Date & Time:

  

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Place:

  

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Record Date:

 

Tuesday, May 24, 2022

9:00 a.m., Central Time

   Via Webcast @ www. proxydocs.com/BFH    March 31, 2022
       
 

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How to Vote:

     
 

You are cordially invited to attend the virtual meeting, but whether or not you expect to attend, we urge you to grant your proxy to vote your shares by telephone or through the Internet by following the instructions included on the Notice of Internet Availability of Proxy Materials that you received, or if you received a paper copy of the proxy card, to mark, date, sign and return the proxy card in the envelope provided. You may still vote electronically if you attend the virtual meeting, even if you have given your proxy (other than for those shares you hold in Bread Financial’s 401(k) and Retirement Savings Plan), subject to the requirement to provide a proof of legal proxy for the stockholders whose shares are held by brokers or other nominees.

       

 

                          

Items of Business

 

    01 | TO ELECT EIGHT DIRECTORS
    02 | TO HOLD AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
    03 | TO APPROVE THE 2022 OMNIBUS INCENTIVE PLAN
    04 | TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM OF THE COMPANY FOR 2022
    05 | TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR
ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF

 

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Admission

 

 

Important Notice Regarding Admission to the 2022 Virtual Annual Meeting of Stockholders:

As part of our continuing precautions regarding the COVID-19 pandemic and after careful consideration, the meeting will be held in a virtual format only via webcast. There will not be a physical meeting location. Stockholders or their legal proxy holders who wish to attend the Annual Meeting of Stockholders may register in advance at www. proxydocs.com/BFH and enter the control number on their proxy card, Notice of Internet Availability of Proxy Materials or instructions accompanying their proxy materials previously received. See additional instructions for admission and attendance on page 108 of this proxy statement.

The Notice of Internet Availability of Proxy Materials or, if requested, a printed copy of the Proxy Materials, was first mailed on or about April 13, 2022 to all stockholders of record as of March 31, 2022.

 

By order of the Board of Directors,   

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Joseph L. Motes III    April 13, 2022
Corporate Secretary   

7500 Dallas Parkway, Suite 700

Plano, Texas 75024

 

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on May 24, 2022: This proxy statement and annual report on Form 10-K for the year ended December 31, 2021, are available at www. proxydocs.com/BFH or on the Securities and Exchange Commission’s, or SEC’s, website at www.sec.gov.

 

                          

 

 

 

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Proxy

Summary

 

 

This summary highlights certain information about Bread Financial, including our core practices, business highlights, corporate governance, ESG strategy and compensation program. Stockholders are encouraged to read our entire Proxy Statement and 2021 Annual Report carefully before voting.

 

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Items of Business

 

 

01 | ELECTION OF DIRECTORS

The Board of Directors recommends that stockholders vote FOR the election of each of the nominees.

02 | ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Board of Directors recommends that stockholders vote FOR the compensation paid to our named executive officers as disclosed in this proxy statement.

03 | APPROVAL OF 2022 OMNIBUS INCENTIVE PLAN

The Board of Directors recommends that stockholders vote FOR the approval of the 2022 Omnibus Incentive Plan.

04 | RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors recommends that stockholders vote FOR the ratification of the selection of Deloitte & Touche LLP as the independent registered public accounting firm of the Company for 2022.

 

 

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Bread Financial

 

 

2021 was another transformational year for our Company, representing the culmination of a multi-year strategy to simplify, streamline, and – in a change that goes far beyond just a new name – re-brand the company. Moving ahead as Bread Financial, we are a stronger, more focused tech-forward financial services company with increased flexibility and growth potential supporting long-term stockholder value.

Core Practices that Drive our Success

 

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2021 Business Highlights & Awards

 

 

 

NET INCOME (from continuing operations)

 

$797M

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REVENUE (from continuing operations)

 

$3.3B

 

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WOMEN LEADERS

 

43%

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COMMUNITY INVESTMENTS

 

$5.5M

 

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Completed the spinoff of Loyalty Ventures Inc., improving capital ratios and reducing our leverage as we paid off $750 million of debt and reduced goodwill by $700 million

 

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         LOGO         Forbes Best Employers for Diversity

LOGO    Bloomberg Gender Equality Index    LOGO    Stevie Award for Contact Center of the Year, Bronze winner
LOGO    Recognized by the Women’s Forum of New York for commitment to gender equality    LOGO    16th consecutive year Customer Care Centers Benchmark Portal Certified

 

 

 

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2022 Director Nominees

 

 

 

 

 

   

 

   

 

   

 

   

 

   

 

  Committee Memberships  

Directors

  Occupation   Age   Director
Since
  Independent   Audit   Compensation
& HC
  N&CG   Risk  

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Ralph J. Andretta

  President and CEO, Bread Financial Holdings, Inc.   61   2020    

 

   

 

   

 

   

 

   

 

 

 

 

 

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Roger H. Ballou

  Former CEO and Director of CDI Corporation   71   2001        

 

   

 

   

 

 

 

 

 

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John C. Gerspach, Jr.

  Former CFO of Citigroup, Inc.   68   2020     µ    

 

   

 

   

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Karin J. Kimbrough

  Chief Economist of LinkedIn Corporation   53   2021      

 

     

 

     

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Rajesh Natarajan

  Chief Product and Strategy Officer of Globalization Partners   52   2020      

 

   

 

       

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Timothy J. Theriault

  Former EVP, Global CIO and Advisor to CEO of Walgreens Boots Alliance, Inc.   61   2016        

 

   

 

    µ  

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Laurie A. Tucker

  Founder and Chief Strategy Officer of Calade Partners LLC   65   2015      

 

    µ    

 

 

 

 

 

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Sharen J. Turney

  Former CEO of Victoria’s Secret   65   2019      

 

  µ      

 

 

 

 

 

µ  Chair      Member

 

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Corporate Governance Highlights

 

 

Corporate governance at Bread Financial is designed to promote the diverse priorities and interests of all of our stakeholders, strengthen Board and management accountability and foster responsible decision-making. Information on our corporate governance begins on page 2, and a few highlights are set forth in the table below.

 

 

BOARD DIVERSITY AND INDEPENDENCE

 

• 7 of 8 director nominees are independent

 

• 5 new independent directors in the last 5 years

 

• Independent Chair of the Board of Directors

 

• Diverse and highly-skilled board, with three female directors and two directors from diverse ethnic groups

 

• Two female directors serve as Board committee chairs

 

• Committed to seeking women and underrepresented minority candidates to include in every pool from which Board nominees are chosen

  

 

BOARD PRACTICES

 

• Majority voting for uncontested director elections

 

• Annual election of directors

 

• Annual Board and committee self-assessments

 

• Demonstrated commitment to Board refreshment

 

• Significant stock ownership requirements for directors and executive officers

 

• 96% attendance at 2021 Board and committee meetings

 

• Strong commitment to Environmental, Social & Governance matters and diversity, equity and inclusion

 

• Risk oversight by full Board and committees

 

• Responsive to feedback from stockholder engagement

 

                          

ESG Highlights

 

 

Our Board of Directors is committed to sustainability, including integrating ESG principles into our business strategy in ways that optimize opportunities to make positive impacts while advancing long-term financial and reputational goals. In 2021, our Board approved an enhanced and modernized ESG strategy intended to drive additional progress on initiatives that promote sustainability, diversity, equity & inclusion, and increased transparency in our disclosures. Our revamped ESG strategy aligns with the broader transformation of our business and focuses on the following five tenets.

 

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Information on our Commitment to Sustainability begins on page 21, and a few highlights of our 2021 accomplishments are set forth below.

Financial Wellbeing

 

  Increased financial literacy for teens by funding innovative mobile app courses

 

  Engaged with community partners on financial education initiatives
  Continued our investment in digital technologies that broaden consumer credit options
 

 

DE&I and Associate Engagement

 

  Expanded training around conscious inclusion for all associates

 

  Selected for the Bloomberg Gender-Equality Index

 

  Named to Forbes’ 2021 America’s Best Employers for Diversity list

 

  Recognized by the Women’s Forum of New York for our commitment to gender equality
  Announced a new community partnership with Zora’s House – focused on helping women of color develop life and leadership skills

 

  Launched a new holistic goals-based financial planning platform at no cost to associates

 

  Associates volunteered more than 7,000 hours at various events and organizations
 

 

Environmental

 

  Adopted a formalized Environmental Policy Statement

 

  Increased building efficiency by 25%
  Kicked off a formal energy audit to identify additional opportunities to reduce and conserve.

 

  Procured 75% + of electricity from renewable sources
 

 

 

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How Our Compensation Program Supports Our Business Strategy

 

 

Our executive compensation program supports our business strategy by properly incentivizing and rewarding our executives for performance, aligning our executives’ interests with the long-term interests of our stockholders, and allowing us to attract, retain and motivate the highest level of executive talent to guide our business and successfully execute our long-term strategy. This is achieved by linking individual pay with the Company’s performance on a diverse set of measures as well as financial and strategic goals.

The total direct compensation of our named executive officers (“NEOs”) is heavily weighted towards variable, at-risk compensation that is tied to performance, with 85% of our CEO’s total pay at risk and 77% of our other NEOs’ average total pay at risk. The 2021 performance-based component of our CEO’s and our other NEOs’ comprised 60% and 55%, respectively, of such executive officers’ total direct compensation.

 

2021 CEO PAY MIX(1)

 

 

2021 AVERAGE NAMED EXECUTIVE PAY MIX(1)

 

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(1)

These pay mix charts exclude amounts listed in the column titled “All Other Compensation” in the Summary Compensation Table set forth on page 69, as well as the one-time Gap RSUs described below under Compensation Discussion and Analysis.

Our executive compensation program is discussed in detail under the Compensation Discussion and Analysis section of this proxy statement, beginning on page 43.

 

 

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Table of

Contents

 

Agenda and Voting Recommendations      1  
Corporate Governance      2  
Board of Directors and Committees      4  
Director Selection Process      10  
Board’s Role in Risk Oversight      13  
Certain Relationships and Related Party Transactions      16  
Stockholder Engagement      17  
Sustainability Strategy      21  
Proposal 1: Election of Directors      27  
Executive Officers      40  
Compensation & Human Capital Committee Report      42  

 

                           Compensation Discussion and Analysis      43       
  Named Executive Officers      43    
  2021 Company and Compensation Program Highlights      44    
  Compensation Principles and Governance      45    
  Compensation Programs      48    
  Compensation Determination Process      62    
  Compensation Policies and Practices      65    
  Other Plans or Agreements Governing Executive Compensation      67    
                
 

 

 

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Agenda

& Voting

Recommendations

 

                          

 

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Proposal 01

 

                           

 

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Proposal 02

 

                                  
 

 

ELECTION OF DIRECTORS

The Board of Directors recommends that stockholders vote FOR the election of each of the following eight director nominees:

 

     

 

ADVISORY VOTE ON
EXECUTIVE COMPENSATION

The Board of Directors recommends that stockholders vote FOR the compensation paid to our named executive officers as disclosed in this proxy statement.

   
 

• Ralph J. Andretta

• Roger H. Ballou (Chair)

• John C. Gerspach, Jr.

• Karin J. Kimbrough

 

• Rajesh Natarajan

• Timothy J. Theriault

• Laurie A. Tucker

• Sharen J. Turney

       
 

 

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Proposal 03

 

     

 

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Proposal 04

 

   
 

 

APPROVAL OF THE 2022 OMNIBUS
INCENTIVE PLAN

The Board of Directors recommends that stockholders vote FOR the approval of the 2022 Omnibus Incentive Plan.

     

 

RATIFICATION OF THE SELECTION OF
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors recommends that stockholders vote FOR the ratification of the selection of Deloitte & Touche LLP as the independent registered public accounting firm of the Company for 2022.

 

   

 

 

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Corporate

Governance

 

                          
        

 

Overview

 

 

Corporate governance at Bread Financial is designed to promote the diverse priorities and interests of all of our stakeholders, strengthen Board and management accountability and foster responsible decision-making. Just as we are committed to delivering sustainable financial performance, we remain considerate of the material risks and opportunities involved in delivering value to our stockholders, brand partners, customers, vendors, associates and communities. Following a long tradition of sound governance, our Board of Directors continues to develop, support and oversee the implementation of sustainable, stakeholder-centric practices consistent with the evolving governance environment, our stakeholders’ expectations, and the commitments we have made to them.

 

 

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Corporate Governance Highlights

 

 

 

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• Focus on global growth and long-term success through integrity, ethical decision-making and transparency

 

• Emphasis on the secure and responsible use of data, responsible lending practices and an unwavering commitment to service

 

• Firm commitment to diversity, equity and inclusion (“DE&I”)

 

• Responsive, active and ongoing stockholder engagement

 

 

• Investment in the long-term vitality of our communities through programs and initiatives that make a measurable impact

 

• Respect for the environment through sustainable operations and investments in global conservation efforts

 

• Prioritizing workforce health and safety in response to COVID-19 with work from home and hybrid options for substantially all associates

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• Proxy access

 

• Majority voting for uncontested director elections

 

• Declassified Board of Directors

 

 

• Annual election of directors

 

• Stockholder right to call a special meeting

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• Independent Chair of the Board of Directors

 

• Annual Board and committee self-assessments

 

• All independent director nominees, except CEO

 

• Independent directors frequently meet in executive session

 

• Diverse and highly-skilled Board

 

• Demonstrated commitment to Board refreshment and Board diversity

 

• Committed to seeking women and underrepresented minority candidates to include in every pool from which Board nominees are chosen

 

• Skills matrix-driven nominee selection and Board composition

 

• Two female directors serve as Board committee chairs

 

 

• 96% attendance at 2021 Board and committee meetings

 

• All financially literate Audit Committee members and two Audit Committee Financial Experts

 

• Strong commitment to Environmental, Social and Governance (“ESG”) matters and sustainability

 

• Mandatory retirement age of 75 years for directors

 

• Comprehensive director onboarding program

 

• Prohibition on hedging, pledging, puts, calls, other derivative securities and short sales

 

• Significant stock ownership requirements for directors and executive officers

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• Active Board and committee oversight of the Company’s business plan, corporate strategy and risk management

 

• Monitors the “tone at the top” and our workplace culture and values

 

• Active Board engagement in managing talent and long-term succession planning for executives

 

• Periodic reports and presentations to Board and Audit and Risk committees focusing on cybersecurity

 

 

• Annual dedicated Board meeting focused on corporate strategy

 

• Separate Risk Committee of the Board to assist with risk oversight responsibilities

 

• Nominating & Corporate Governance Committee oversight of ESG matters

 

• Compensation & Human Capital Committee oversight of human capital management strategies and DE&I initiatives

   
   

 

 

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Board Leadership

 

 

 

Our Board of Directors oversees and interacts with management to serve the long-term interests of the Company and our stockholders. In assessing these interests, the Board considers, as appropriate, the day-to-day needs of other stakeholders, including our associates and surrounding communities. Focus areas such as Company strategy, risk assessment and mitigation, compliance, leadership development and succession, human capital management, operational performance, corporate governance, community investment and sustainability comprise the Board’s typical span of oversight.

Our bylaws require the Board of Directors to select a Board chair from among the directors and a chair for each Board committee, while our Corporate Governance Guidelines allow the Board to decide, in its business judgment, the appropriate leadership structure for our Company. The Board periodically

reviews the Company’s leadership structure to determine what best serves the Company and our stockholders. The Board currently believes having a non-executive chair is best practice, and, since December 2009, a non-executive director has occupied the role of Board chair. This structure enables our Chief Executive Officer to focus on the day-to-day operation of our business.

The Board chair, among other duties, presides over Board meetings and executive sessions, promotes the effective flow of constructive feedback between Board members and management, advises and counsels the CEO, assists in setting meeting agendas and facilitates Board communication with our stockholders. Assuming the stockholders elect our director nominees, Mr. Ballou will continue his term as our non-executive Board chair.

 

 

Board of Directors and Committees

 

 

 

We are managed under the direction of our Board of Directors. Under our bylaws, the size of our Board may be between six and twelve directors. We currently have eight directors, including seven non-employee directors. All directors are elected annually and serve a one-year term.

During 2021, our Board of Directors met 11 times. Each of our directors attended at least 75% of the meetings of the Board and Board committees on which they serve. In accordance with our Corporate Governance Guidelines, we expect all director nominees to attend the annual stockholder meeting, but understand there may be exigent circumstances. All director nominees, except Laurie A. Tucker and Karin J. Kimbrough, attended the 2021 virtual annual meeting of stockholders.

Our Board presently has four standing committees, consisting of the Audit Committee, Compensation & Human Capital Committee, Nominating & Corporate

Governance Committee and Risk Committee. Our Board has adopted a written charter for each committee, which sets forth their respective roles and responsibilities. The charters for each of these committees, as well as our Corporate Governance Guidelines and our Codes of Ethics for our senior financial officers, our Board members and our associates, are posted on our website at www.breadfinancial.com.

Our Board has determined that all members of each of our standing committees are independent and fulfill the requirements applicable to each committee on which they serve. In addition, the Board has determined that all members of the Audit Committee are financially literate and each of Mr. Ballou and Mr. Gerspach possesses accounting or related financial management expertise within the meaning of the NYSE listing standards and are Audit Committee financial experts within the meaning of applicable SEC rules.

 

 

 

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Members

Roger H. Ballou

John C. Gerspach, Jr. (Chair)

Timothy J. Theriault

 

Independent/
Financially Literate

Each member is independent
and financially literate.

 

Audit Committee
Financial Experts

Mr. Ballou and Mr. Gerspach

  

Roles and Responsibilities

 

The Audit Committee’s primary roles and responsibilities include:

 

• assisting our Board in fulfilling its oversight responsibilities by reviewing the integrity of our financial statements; our compliance with legal and regulatory requirements; the independent registered public accounting firm’s qualifications and independence; and the performance of both our internal audit department and the independent registered public accounting firm

 

• preparing the Audit Committee report included in this proxy statement

 

• reviewing our financial statements and related disclosures to be included in SEC filings

 

• appointing, compensating, and overseeing our independent registered public accounting firm

 

• approving audit and permissible non-audit services to be performed by our independent registered public accounting firm

 

• reviewing and approving related party transactions

 

• review the audit practices, guidelines and policies of our bank subsidiaries

 

• reviewing certain business and client contracts of our bank subsidiaries, as well as proposed acquisition or divesture, merger, outsourcing or similar agreements within defined thresholds

 

• establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters

 

• providing risk oversight as set forth under the caption “Board’s Role in Risk Oversight” on page 13

 

                          
      

 

 

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Members

Karin J. Kimbrough

Laurie A. Tucker

Sharen J. Turney (Chair)

 

Independent

Each member is independent

  

Roles and Responsibilities

 

The Compensation & Human Capital Committee’s primary roles and responsibilities include:

 

• overseeing matters relating to executive compensation and our benefit plans, as well as strategies and policies related to human capital management

 

• annually reviewing the compensation levels of our executive officers

 

• approving all compensation for our non-CEO executive officers, and, together with the other independent directors, approving the compensation of our CEO

 

• determining target levels of incentive compensation and corresponding performance objectives for our non-CEO executive officers, and recommending such matters to the Board with respect to our CEO

 

• reviewing and approving our compensation philosophy, programs and plans for associates

 

• reviewing and approving our succession plan for key executive officers

 

• periodically reviewing director compensation practices and recommending appropriate revisions to the Board of Directors

 

• administering certain matters with respect to our equity-based compensation plans

 

• reviewing disclosure related to human capital management and executive and director compensation in our proxy statements and discussing the Compensation Discussion and Analysis annually with management

 

• reviewing management’s human capital management strategies, including initiatives, policies and practices related to recruiting, retention and career development and associate engagement and effectiveness

 

• reviewing our associate DE&I initiatives, policies and practices

 

• preparing the Compensation & Human Capital Committee report included in this proxy statement

 

• providing risk oversight as set forth under the caption “Board’s Role in Risk Oversight” on page 13

 

Compensation & Human Capital Committee Interlocks and Insider Participation

 

No member of the Compensation & Human Capital Committee is or has ever been one of our officers or other associates. No interlocking relationship exists between our executive officers or the members of our Compensation & Human Capital Committee and the Board of Directors or compensation committee of any other company.

 

                          
      

 

 

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Members

Rajesh Natarajan

Laurie A. Tucker (Chair)

Sharen J. Turney

 

Independent

Each member is independent

  

Roles and Responsibilities

 

The Nominating & Corporate Governance Committee’s primary roles and responsibilities include:

 

• identifying qualified Board members

 

• recommending to the Board the director nominees for the next annual stockholder meeting (or to fill vacancies), the composition of Board committees, the Board chair and the chair for each Board committee

 

• developing criteria for the selection of directors, including procedures for reviewing potential nominees proposed by stockholders

 

• reviewing with the Board the desired experience, mix of skills and other qualities, including diversity of race/ethnicity and gender, to assure appropriate composition of the Board, taking into account the current directors and the specific needs of our Company and the Board

 

• reviewing and monitoring the size and composition of the Board and its committees

 

• reviewing our Corporate Governance Guidelines to ensure they reflect best practices and recommending proposed changes to the Board

 

• administering and leading the Board in its annual self-assessment performance review of the Board and its committees

 

• monitoring compliance with our Code of Ethics and related ethics complaints

 

• overseeing our ESG and sustainability strategies and receiving reports and advising management on ESG and sustainability strategies, including initiatives, policies, guidelines and practices

 

• providing risk oversight as set forth under the caption “Board’s Role in Risk Oversight” on page 13

 

                          
      

 

 

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Members

John C. Gerspach, Jr.

Karin J. Kimbrough

Rajesh Natarajan

Timothy J. Theriault (Chair)

 

Independent

Each member is independent

  

Roles and Responsibilities

 

The Risk Committee’s primary roles and responsibilities include:

 

• assisting our Board in fulfilling its oversight responsibilities with respect to our Enterprise Risk Management Framework, including our policies, guidelines and practices related to credit, market, liquidity, strategic, reputational, operational and other identified risks; our capital management risks; and the performance of our risk management function, including of our Chief Risk Officer

 

• overseeing our risk assessment and enterprise risk management governance

 

• reviewing and recommending to the Board for approval our Enterprise Risk Management Framework and Enterprise Risk Appetite Statements

 

• reviewing and assessing our operation within such framework and our established risk appetite

 

• reviewing and assessing the alignment of our strategy and capital plans with our risk appetite statements

 

• reviewing and discussing with our Chief Risk Officer each of our bank subsidiaries’ risk assessment and risk management governance, practices, guidelines and policies, as well as related processes and methodologies

 

• monitoring risk management-related regulatory developments and reviewing and overseeing our compliance with applicable laws and regulations

 

• providing risk oversight as set forth under the caption “Board’s Role in Risk Oversight” on page 13

 

                          
      

Executive Sessions

 

 

We regularly conclude our Board meetings with executive sessions. In most instances, either the Board chair or the CEO leads the Board in a director-only executive session. After the CEO leaves the meeting, the Board chair then leads the non-management members of the Board in an executive session. Each committee meeting may also conclude, at the election of such committee members, with an executive session. At the conclusion of each quarterly meeting of the Audit Committee, Mr. Gerspach, the committee chair, typically leads an executive session during which the Chief Financial Officer, the Vice President of Global Audit and representatives of the independent registered public accounting firm may each meet separately with the committee. The Risk Committee may also elect to meet in executive session, and at quarterly meetings typically meets with the Chief Risk Officer in executive session apart from management. The Compensation & Human Capital Committee meets in executive session to discuss compensation matters regarding the CEO. The Board and each of its standing committees meet in executive session to review and discuss the results of their respective annual self-assessments.

 

 

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Annual Board and Committee Evaluations

 

 

 

REVIEW OF PROCESS

 

Our Nominating & Corporate Governance Committee annually examines our evaluation process, determining the appropriate format, approach and questions to ensure process effectiveness

 

 

 

u

 

QUESTIONNAIRE

 

Directors provide
written responses
to the Board and Committee evaluations on an anonymous, unattributed basis, assessing performance and effectiveness and identifying areas for improvement

 

 

 

u

 

SUMMARY OF RESULTS

 

The General Counsel provides summarized results to the Board and each Committee. the results are discussed with the full Board and each Committee during executive sessions

 

 

 

u

 

FOLLOW UP

 

Evaluation results
that require follow
up or identify areas
for improvement are considered and implemented, as appropriate

Our Board conducts an annual evaluation of the Board and its committees, which is administered and overseen by the Nominating & Corporate Governance Committee. As part of the Board evaluation, each director completes a written questionnaire on an anonymous, unattributed basis that is designed to assess the Board’s performance and to solicit feedback for improving Board effectiveness. Directors consider various topics related to Board composition, structure, effectiveness and responsibilities, as well as the overall mix of skills, experience, diversity and backgrounds represented on the Board. In addition, each Board committee conducts a similar evaluation to assess committee performance and effectiveness, the results of which are reviewed by the respective committees in executive session and reported to the Board. The Board meets in executive session to discuss the evaluation results, including input received from the committees. Following such discussion, the Board takes action, either directly or with the assistance of management, to implement changes as appropriate to address feedback and any areas of concern identified in the evaluation process.

 

Feedback Incorporated

Over the past few years, feedback from the Board evaluation process has led to, among other things:

 

    an annual dedicated Board meeting focused on the Company’s strategy

 

    Board refreshment and changes in Board composition

 

    new directors with expertise in areas critical to our business strategy and operations

 

    reduction in waivers granted with respect to our director retirement policy
    outside presentations on emerging risks and other topics of interest

 

    enhancements to our director onboarding and education program

 

    improvements in materials and information provided to the Board

 

    diversification on the location of Board meetings
 

 

 

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Director Selection Process

 

 

Identification, Evaluation and Selection of Candidates for Nomination to the Board of Directors

 

The Nominating & Corporate Governance Committee is responsible for reviewing with the Board the qualifications for Board membership and for identifying, assessing and recommending qualified candidates for the Board’s consideration. The committee developed and maintains a skills matrix that is based on the Company’s strategic plan and is reviewed and updated on a regular basis. The skills matrix assists the committee in its consideration of directors to ensure the Board has the appropriate balance of experience, skills and attributes. The committee evaluates candidates against the skills matrix when determining whether to recommend candidates for initial election to the Board and when determining whether to recommend existing directors for re-election. Current members of our Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of our Board with that of obtaining relevant new skills, experience or perspective.

There are no firm prerequisites to qualify as a candidate for our Board of Directors, but we seek a diverse group of candidates who possess the requisite background, knowledge, experience, expertise and time, as well as, where appropriate, diversity with respect to race/ethnicity and gender, that would strengthen and increase the diversity, skills and qualifications of our Board. The committee also considers other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, and the need for Audit Committee or other

particular expertise. We seek director candidates who have the time to make a significant contribution to our Board, to our Company and to our stockholders. Each member of our Board is expected to ensure that other existing and planned future commitments do not materially interfere with his or her service as a director. Directors are expected to attend meetings of the Board and the Board committees on which they serve and to spend the time needed to prepare for meetings.

When determining the slate of directors, the committee considers current Board members as well as candidates identified through other methods, which may include recommendations from stockholders, our senior executives or Board members, research, including subscription-based portal resources that contain search tools to identify specific skill sets, diversity and relationships of potential candidates to the Company, and third-party search firms. Regardless of the method by which new candidates are identified, the Board has committed to ensuring that every pool from which Board nominees are chosen includes women and underrepresented minority candidates. The committee will consider all candidates identified through the methods described above, and will evaluate each of them, including incumbent directors and candidates recommended by stockholders, based on the same criteria. After completing a thorough evaluation of the candidates, the committee recommends qualified candidates to our Board for review and approval. After careful consideration, the Board will determine the director nominees to recommend to our stockholders for election or re-election at our annual stockholder meeting.

 

 

 

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Board Refreshment

Our Board has maintained an active and successful Board refreshment process, nominating 5 new independent directors in the last 5 years, increasing the Board’s diversity and providing it with a strong mix of experience, skills and backgrounds.

 

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Stockholder Recommendations and Nominations of Director Candidates

 

In addition to the methods for identifying director candidates described above, our stockholders may recommend or nominate one or more persons for election to our Board of Directors in accordance with the requirements discussed below.

Stockholder Recommendations. Stockholders who wish to recommend a prospective nominee for our Nominating & Corporate Governance Committee to consider for election to our Board may notify our Corporate Secretary in writing with whatever supporting material the stockholder considers appropriate. Recommendations should be addressed to: Joseph L. Motes III, Corporate Secretary, Bread Financial Holdings, Inc., 7500 Dallas Parkway, Suite 700, Plano, Texas 75024.

Stockholder Nominations. Stockholders may nominate one or more persons for election to our Board at an annual meeting of stockholders if the stockholder complies with the nomination requirements set forth in our bylaws and any applicable rules and regulations of the SEC. For additional information on the process and deadlines for director nominations by stockholders, see

“Additional Information – What is the deadline for submitting proposals, including director nominations, for our 2023 annual meeting” on page 106.

Section 3.4 of our bylaws sets forth an advance notice procedure for director nominations that are not submitted for inclusion in the proxy statement but that a stockholder instead wishes to present at an annual meeting. Such nominations will not be included in the proxy statement and form of proxy distributed by our Board of Directors.

Further, Section 3.5 of our bylaws provides proxy access rights that permit eligible stockholders to nominate persons for election to our Board in our proxy statement. These proxy access rights permit any stockholder, or group of up to 20 stockholders, owning continuously for at least 3 years shares of our company representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees constituting up to 20% of our Board, provided that the stockholder(s) and the nominee(s) satisfy the requirements set forth in our bylaws.

 

 

Director Succession and Retirement Policy

 

 

Director succession planning is also a focus of the Nominating & Corporate Governance Committee with an emphasis on striking a balance between board refreshment and the need for new or additional skill sets with maintaining the institutional knowledge about our business and operating history. Our Corporate Governance Guidelines provide for a mandatory retirement age of 75, but allow directors turning 75 to complete their term. Our guidelines also allow our Board of Directors to nominate for re-election a director who has surpassed the age of 75 if it is in the best interests of the Company and its stockholders. The average age of our director nominees standing for election at this year’s annual meeting of stockholders is 62, and no nominee is near the mandatory retirement age at this time.

 

 

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Board’s Role in Risk Oversight

 

 

Our Board of Directors, as a whole and through its committees, maintains responsibility for the oversight of risk management, while our management is responsible for the day-to-day resolution of risks our Company faces. Our Board exercises this oversight both directly and indirectly through its four standing committees, each of which is delegated responsibility for risks within their respective areas of oversight. Our Board receives reports from each of the committees regarding topics discussed at committee meetings, including the areas of risk they oversee. On at least an annual basis, our Board reviews our long-term strategic plans, including discussion of strategic, operational and competitive risks.

The chart below provides an overview of the allocation of risk management responsibilities among each of the Board committees.

 

Committees

  Primary Areas of Risk Oversight

Risk Committee

 

• provides oversight on our enterprise risk management framework, including significant enterprise risk management-related strategies, guidelines, policies and risk limits

 

• evaluates risk information provided by our Chief Risk Officer and reports to the Board those material risks that might adversely affect the achievement of our strategic, financial, compliance, operational and enterprise objectives

 

• reviews and assesses whether we are operating in accordance with our established risk appetite and assesses the alignment of our strategy and capital plans with our risk appetite statements

 

• meets with senior executives and receives reports on risk topics, including, regulatory examination reports, information technology, cybersecurity and physical security, privacy compliance, disaster recovery plans and procedures, operational risk, fraud management, human capital management, capital, liquidity and funding and data quality

 

• provides oversight on the Company’s compliance with applicable laws and regulations

 

• reviews risk assessment and risk management governance and practices at our bank subsidiaries

 

Audit Committee

 

• provides oversight on risks relating to the Company’s financial statements, financial reporting and accounting processes and controls

 

• reviews with management matters related to the effectiveness of the Company’s operational risk management control environment and the status of corrective actions

 

• together with the Risk Committee, reviews the Company’s major financial risk exposures and management’s response to monitor and control such exposures, including financial risks relating to litigation or other legal, regulatory or compliance matters and technology, cybersecurity, physical security and data privacy

 

• together with the Risk Committee, reviews key guidelines and policies governing the Company’s significant processes for risk assessment and risk management

 

Compensation & Human Capital Committee

 

• provides oversight on risks related to compensation matters, including the design of our compensation programs to ensure they align the interests of participants with those of our stockholders and provide safeguards against and do not promote excessive risk-taking by program participants

 

• provides oversight on risks related to human capital management, including recruiting, retention and career development, DE&I and management succession planning

 

Nominating & Corporate Governance Committee

 

• provides oversight on risks related to corporate governance, including governance matters that could impact the Company’s performance or reputation or that are of concern to stockholders, including board composition, diversity and refreshment, ESG and sustainability issues, corporate ethics and corporate culture

 

 

 

 

 

 

 

 

 

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Board Oversight of Data Privacy and Information Security, Including Cybersecurity

 

 

 

Protecting and respecting the privacy of our clients’ and customers’ personal information and maintaining the security of our systems and networks are priorities at Bread Financial. Our Board of Directors is committed to ensuring that the Company continues to maintain effective privacy and security controls and protections in order to maintain the trust of our clients and customers in an evolving environment. The Risk Committee has primary responsibility for overseeing the Company’s risk management program relating to

data privacy and cybersecurity. To this end, the Board and Risk Committee receive at least quarterly updates on both data privacy and cybersecurity matters. These reports focus on, among other things, the evolving threat environment, vulnerability assessments, specific cyber incidents and management’s efforts to stay current and comply with applicable privacy regulations and monitor, detect and prevent cyber threats to the Company.

 

 

Data Privacy

 

Based upon the NIST Privacy Framework, our privacy program drives our commitment to the responsible collection, use and sharing of personal information, and we balance our product development activities with a commitment to transparency, fairness and non-discrimination. We designed our multi-layered information security and data privacy programs and practices to ensure the security and responsible use of the information and data our stakeholders entrust to us. Our associates receive privacy awareness training

on a regular cadence addressing relevant topics from best practices to more role-based topics. Our programs leverage third-party assessments and advice regarding best practices from consultants, peer companies and advisors. We closely monitor and track proposed privacy legislative and regulatory changes as well as industry-related trends and adjust the program accordingly as the privacy landscape evolves.

 

 

Information Security, including Cybersecurity

 

Based upon the NIST Cybersecurity Framework, our information security program deploys a defense-in-depth strategy to ensure that security is an integral and integrated part of our technology investment. We leverage multiple industry solutions to provide data protections with automated controls and ongoing penetration testing of both the internal and external environment. We partner across the lines of defense and with outside parties to continually evaluate our program effectiveness due to the ever-changing threat landscape and to assure alignment with regulatory guidance. An essential component of our program is using current trends to train our associates on a continuous basis. We conduct tabletop exercises with various subject matter experts

across the Company on a regular cadence to walk through cybersecurity incidents and continue to improve our internal processes. Additionally, we provide in-depth associate training, consisting of targeted role-based training, general awareness training and continuous phishing simulation and awareness testing based on real-life scenarios. We maintain an active network of collaboration with law enforcement, industry groups, Information Sharing and Analysis Centers, and peers in the areas of threat intelligence, response and detection, and program best practices. We continuously assess the risks and threats through our cyber defense team around the clock and dynamically adjust our program and investments as required.

 

 

 

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Management Oversight of Risk

 

 

 

Our management is responsible for the day-to-day handling of risks our Company faces and implementing and supervising risk management processes and policies. We have a comprehensive Enterprise Risk Management (ERM) program that is designed to ensure that all significant risks are identified, measured, monitored and addressed. Our ERM program defines our risk appetite, governance, culture and reporting. We manage enterprise risk using our Board-approved Enterprise Risk Management Framework, which includes board-level oversight, several risk management committees, and a dedicated risk management team led by our Chief Risk Officer. Our Chief Risk Officer is responsible for establishing and implementing standards for the identification, management, measurement, monitoring and reporting of risk on an enterprise-wide basis. The Chief Risk Officer reports on risk

management matters to the Risk Committee as well as the Risk and Compliance Committees of our bank subsidiaries.

We also operate several internal management risk committees to oversee our risks, including a Bank Risk Management Committee at each of our bank subsidiaries. The Bank Risk Management Committees are the highest-level management committees to oversee risks and are responsible for risk governance, risk oversight and making recommendations on the risk appetite for our bank subsidiaries and their affiliates. Each of our internal management risk committees provides risk governance, risk oversight and monitoring for their respective risk category(ies) of responsibility. Each committee reviews key risk exposures, trends and significant compliance matters and provides guidance on steps to monitor, control and escalate significant risks.

 

 

Director Independence

 

 

 

We have adopted general standards for determining director independence that are consistent with the NYSE listing standards. For a director to be deemed independent, the Board of Directors must affirmatively determine that the director has no material relationship with us or our subsidiaries, affiliates or any member of our senior management or his or her affiliates. Our Board annually reviews the independence of its non-employee directors. In making this determination, the Board considers relationships and transactions during the past three years between each director or any member of his or her immediate family, on the one hand, and our company, our subsidiaries, affiliates and senior management, on the other hand. For relationships not covered by certain bright-line criteria set forth in the NYSE listing standards, the determination of whether the relationship is material and, therefore, whether the director would be independent, is made by the Board of Directors. Directors have an affirmative obligation to inform our Board of any material changes in their circumstances or relationships that may impact their designation as “independent.” Additional independence requirements established by the SEC

and the NYSE apply to members of the Audit Committee and Compensation & Human Capital Committee.

Our Board undertook a review of director independence and considered transactions and relationships between each of the director nominees and the Company (including our subsidiaries, affiliates and senior management). The Audit Committee and Board of Directors reviewed Ms. Kimbrough’s status as a current employee of LinkedIn Corporation, a subsidiary of Microsoft Corporation. Bread Financial engages in business transactions with LinkedIn and Microsoft. The payments made by Bread Financial to Microsoft during the past three years fall below the NYSE independence standards’ thresholds of materiality for a director who is a current employee of a company to which Bread Financial made, or from which Bread Financial received, payments, and Ms. Kimbrough had no direct or indirect material interest in those transactions. In addition, the Board considered that certain directors serve as directors of other companies with which the Company engages in business or has some other form of relationship.

 

 

 

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Specifically, Mr. Ballou serves as a director of Loyalty Ventures, Inc., the company formed in the spinoff of our LoyaltyOne segment in November 2021 and in which we currently hold 19% of its outstanding shares of common stock. Also, Ms. Turney serves as a director of Academy Sports and Outdoors, Inc., which is one of our business clients. Our Board determined that neither of these relationships constitutes a material

relationship that would impair the independence of these individuals. As a result of this review, the Board of Directors affirmatively determined that none of Ballou, Gerspach, Kimbrough, Natarajan, Theriault, Tucker or Turney has a material relationship with us and, therefore, each is independent as defined by the rules and regulations of the SEC and the listing standards of the NYSE.

 

 

Certain Relationships and Related Party Transactions

 

 

 

Since the beginning of the last fiscal year, the Company has not entered into any transactions, nor are there any proposed transactions, in which the Company was, or is to be, a participant and in which any related person had or is expected to have a direct or indirect material interest.

Our Board of Directors has adopted a written Related Party Transactions Policy, which prohibits us from entering into any “related party transaction” unless the Audit Committee approves such transaction in accordance with the guidelines set forth in the policy, or the transaction is approved by a majority of disinterested directors of the Company. In approving any related party transaction, the Audit Committee must determine that the transaction is beneficial to the Company and the terms of the related party transaction are fair to the Company.

Our Related Party Transactions Policy defines a “related party” to include directors, director nominees, executive officers, five percent or greater stockholders of the Company or an immediate family member of any of these persons. A “related party transaction” includes any transaction or series of related transactions in which: (1) the Company, or any of its subsidiaries, is a participant, (2) the aggregate amount exceeds $120,000 and (3) the related party has or will have a direct or indirect material interest.

Our Related Party Transactions Policy deems the following transactions to be pre-approved and does not require further review:

 

(1)

compensation of directors that has been approved in accordance with the Compensation & Human Capital Committee charter;

 

(2)

employment and compensation of an executive officer that has been approved in accordance with

  the Compensation & Human Capital Committee charter;

 

(3)

a transaction in which the interest of the related party arises solely from the ownership of a class of the Company’s equity securities and all holders of that class receive the same benefit on a pro rata basis;

 

(4)

transactions involving certain indemnification payments and payments under directors and officers liability insurance policies;

 

(5)

a transaction in which the rates or charges involved therein are determined by competitive bids;

 

(6)

a transaction that involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services; and

 

(7)

certain company charitable contributions.

At each Audit Committee meeting, management recommends any related party transactions, if applicable, to be entered into by the Company. After review, the Audit Committee approves or disapproves such transactions and at each subsequently scheduled meeting, management is required to update the Audit Committee as to any material change to those approved transactions. If management becomes aware of an existing related party transaction that has not been pre-approved by the Audit Committee, management must promptly notify the chair of the Audit Committee and the Audit Committee will review and determine whether to ratify such transaction. The Audit Committee establishes such guidelines as it determines are necessary or appropriate for management to follow in its dealings with related parties in related party transactions.

 

 

 

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Stockholder Engagement

 

 

Stockholder engagement remains an important part of our corporate governance practices and is essential to our ongoing business transformation.

Our Board and management value the insights, opinions and feedback of our stockholders. In addition to regularly engaging in dialogue with stockholders through quarterly earnings calls, investor meetings and conferences and other communication channels, we also proactively engage with our stockholders throughout the year to discuss matters relevant to our business. This engagement allows us to provide visibility and transparency into our business and share our perspectives on issues that are important to our stockholders and to better understand their views and expectations and answer any questions they may have. Our Board receives updates throughout the year from our investor relations team and management on our stockholder engagement and feedback received from stockholders and investors. We use the information and viewpoints gathered in our discussions with stockholders to help inform our priorities and strategies in the relevant areas.

2021 Engagement

We significantly increased our stockholder engagement in 2021, demonstrating our continued commitment to transparency and our desire to engage in two-way dialogue with our investors.

 

Contacted investors

representing approximately

66%

of our common stock

   

Investors representing

approximately

45%

of our common stock

responded and engaged

    

 

Key Topics Discussed

 

•  business strategy and outlook

•  ESG

•  corporate governance

•  data privacy and security

•  executive compensation

Perception Studies

 

In 2020, we conducted an investor perception study to solicit strategic guidance for our stockholder communications, obtain insights into company perceptions, and identify significant value drivers. Additionally, we conducted a broader perception

survey to help us identify and assess ESG priorities; prioritize and strengthen our sustainability reporting and related disclosures; and identify key performance metrics.

 

 

 

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Actions Taken in 2021

In response to feedback received from our 2020 investor perception study and our stockholder outreach, we took the following actions in 2021:

 

   

enhanced our disclosures to increase our transparency, including aligning our financial reporting closer to our peers, making it easier for investors to compare, and provided additional disclosures, including credit risk distribution trends and more granularity on our business drivers

 

 

   

simplified and streamlined our business model and our message, most significantly through the spinoff of our LoyaltyOne segment in November 2021

 

 

   

hosted our inaugural investor event in May 2021, whereby we, among other things:

 

     

highlighted our new management team and our Board of Directors

     

provided insight into our strategic direction

     

explained the value of our full product suite

     

discussed the diversification of our brand partners and our pipeline

     

explained the financial discipline we are employing around growth and underwriting

     

provided insight into our long-term targets

     

reaffirmed our progress and ongoing commitment to sustainable business practices

 

   

finalized an enhanced board-approved ESG strategy

Communications with the Board of Directors

 

 

 

Our Board of Directors has adopted a process for stockholders and other interested parties to communicate with the Board or any individual director. Stockholders and other interested parties may send communications to the Board or any individual director in care of Joseph L. Motes III, Corporate Secretary, Bread Financial Holdings, Inc., 7500 Dallas Parkway, Suite 700, Plano, Texas 75024. All communications will be compiled and submitted to the Board or the individual directors on a periodic basis. The Corporate Secretary, however, reserves the right not to forward any abusive, threatening, or otherwise inappropriate communications.

Stockholders and other interested parties may also submit questions or comments to the Board through our Ethics Office by email at CorporateEthics@breadfinancial.com or, on an anonymous basis if desired, through the Ethics Helpline at (877) 217-6218 or www.breadfinancial.ethicspoint.com. Concerns relating to accounting, internal control over financial reporting or auditing matters will be brought to the attention of the Audit Committee and handled in accordance with our procedures with respect to such matters.

 

 

Code of Ethics

 

 

 

We have adopted a Code of Ethics that applies to our associates, officers and directors, and provides an overview of policies and procedures and guidance for behaving ethically and responsibly. In addition, we have adopted a Code of Ethics for Senior Financial Officers and a Code of Ethics for Board Members, which are intended to supplement the Code of Ethics. Each of these Codes of Ethics is posted on our website at www.breadfinancial.com. A copy of each is also

available upon written request directed to Joseph L. Motes III, Corporate Secretary, Bread Financial Holdings, Inc., 7500 Dallas Parkway, Suite 700, Plano, Texas 75024. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to or waiver from a provision of our Code of Ethics, if any, by posting such information on our website.

 

 

 

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Political Contributions and Activity

 

 

 

Engagement in political, legislative and regulatory processes can be important to the success of the Company. The Company works to educate government officials and impact legislative and regulatory matters (at the federal and state levels) on issues important to the best interests of the Company and its associates, customers, and clients. This effort often involves working with industry partners and outside consultants and, at times, engaging directly with government officials and their staffs. The Company has adopted a Political Contributions and Activity Policy that sets forth the ways by which the Company and its associates may participate in political, legislative and regulatory processes. All Company political contributions and activities comply with applicable laws, and we disclose our contributions publicly as required by law.

Eligible associates may also voluntarily participate in the political process by supporting the Company’s non-partisan political action committee (“PAC”), which is governed by comprehensive federal regulations that require the filing of reports with the Federal Election Commission among other reporting and disclosure requirements. Following the January 2021 political violence and election-related controversy in Washington, D.C., our PAC board suspended all contributions. Contributions resumed in the latter half of 2021, but no contributions were made to any member of Congress who voted not to certify the 2020 Presidential election results. Future decisions will be made on an individual, case-by-case basis. Our General Counsel provides oversight for the Company’s political engagements. For further information, please see our Political Contributions and Activity Policy, available on our website at www.breadfinancial.com.

 

 

Director Orientation and Education

 

 

 

We have a director orientation program that familiarizes new directors with our business, and includes presentations by senior management on several areas, including director duties, applicable securities laws, as well as our policies, key associates, strategic plans, financial reporting, Code of Ethics and auditing processes. All directors are invited to attend the orientation presentations. For ongoing director

education, outside experts are periodically invited to present to the Board on various topics of interest relevant to the business to help enhance our directors’ knowledge and keep them current on corporate and other developments relevant to their work as directors. Board members are also encouraged to attend director education courses as they deem appropriate.

 

 

Management Succession Planning

 

 

 

Our Board recognizes the importance of effective executive leadership and annually reviews the Company’s program for talent and management succession planning with the CEO. Our CEO meets with his direct reports annually to review potential successors and development plans for key executive positions. Our CEO then meets with our Board in

executive session to discuss and provide recommendations relating to potential successors for key executive positions. Our Board regularly conducts a talent review that includes reviewing the Company’s leadership pipeline and succession plans for key executive positions.

 

 

 

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Trading in Company Securities

 

 

 

We have insider trading policies that prohibit our directors, executive officers and associates from engaging in hedging transactions with respect to Bread Financial securities. We further prohibit our directors, executive officers and other senior executives and individuals who have access to material non-public information about the Company (covered persons) from trading in puts or calls or engaging in short sales with respect to Bread Financial

securities and from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan. These covered persons are also subject to other trading restrictions, including the ability to trade in Company securities only during designated trading windows and the requirement to pre-clear with the General Counsel’s office all transactions in Company securities, including entering into any Rule 10b5-1 trading plans.

 

 

 

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Commitment

to Sustainability

 

                          
        

 

Our Board of Directors is committed to sustainability, including integrating ESG principles into our business strategy in ways that optimize opportunities to make positive impacts while advancing long-term financial and reputational goals. Management’s approach to sustainability focuses on ethics & integrity, risk management & compliance, and business continuity. As our business has matured over the years, our culture of caring and doing the right thing has deliberately evolved into a principled, stakeholder-driven focus, serving as the underpinnings of our sustainability strategy. We hold ourselves accountable to our stakeholders and to the pillars of our strategy, while also aligning with respected global frameworks.

ESG Highlights

 

 

 

AS OF DECEMBER 31, 2021

 

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AS OF DECEMBER 31, 2021

 

~60%  

of our total
workforce is female

 

  ~41%   of our total workforce are minorities

 

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INCREASED BUILDING EFFICIENCY BY

 

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WITH THE ONGOING IMPACT OF THE COVID

 

25%  

by requiring that all new builds or major renovations meet LEED Gold or WELL Gold standards

 

  ~95%  

of our total workforce continues to successfully work from home

 

 

 

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ESG Oversight

 

 

ESG Board Oversight

In 2021, we revamped our ESG strategy to align with the broader transformation of our business. Our executive leadership team and Board recognized the importance of embedding environmental and social priorities within our business operations and approved an enhanced and modernized ESG strategy intended to drive additional progress on initiatives that promote sustainability, diversity, equity and inclusion (DE&I), and increased transparency in our disclosures. Our Nominating and Corporate Governance Committee provides oversight on our ESG and sustainability strategies and consults with management on related initiatives, policies, guidelines and procedures. Our Compensation & Human Capital Committee provides oversight on human capital management strategies and also reviews our DE&I initiatives, policies and practices. Our Compensation & Human Capital Committee, along with our full Board of Directors, receives regular updates from senior management and third-party consultants on human capital trends and developments, and other key human capital matters that drive our ongoing success and performance.

Against this backdrop, we hired a new Head of Sustainability, engaged an extensive audience of internal, enterprise-wide leadership, subject matter experts and external stakeholders, and completed our second materiality assessment in 2020. These activities informed our updated ESG strategy and sustainability priorities. The five tenets of our ESG strategy include: (1) ESG Governance, (2) Customers, (3) Associates, (4) Environment, and (5) Community.

 

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LOGO    Managing Our Business Responsibly

ESG Governance

We believe that strong governance related to ethics and integrity, risk management & compliance and business continuity supports the long-term success of our Company, building trust and credibility with our stakeholders. We have a long history of excellence in corporate governance and compliance practices, including an emphasis on accountability and authenticity in-line with our values. We continue to drive the integration of ESG into our overall governance and risk management practices.

Key ESG governance priorities include:

 

  Integrating ESG matters into overall governance structure and enterprise risk management framework

 

  Advancing data identification, collection, quality and accuracy

 

  Proactively engaging stakeholders

 

  Developing cohesive communications while providing advanced, peer-comparable disclosures
 

 

 

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Our strong ESG governance is reflected in many of our policies and practices, including our Corporate Governance Guidelines, Codes of Ethics for our associates, our Board members and our senior financial officers, Environmental Policy Statement, Human Rights Statement, Supplier Code of Conduct and Ethics Helpline, which is operated by an independent, third-party and available 24/7 to all stakeholders. Our Board and its committees meet regularly to review policies, current regulations and industry best practices, and to work towards embedding ESG metrics into our financial and strategic plan.

Our accounting and financial reporting functions are subject to rigorous controls and audits, and our Board actively oversees our audit and enterprise risk management practices. Our risk management teams ensure compliance with applicable laws and regulations and coordinate with subject matter experts throughout the business to identify, monitor and mitigate material risks. These teams maintain disciplined testing programs and provide regular updates to the Board. We leverage the latest encryption configurations and cybersecurity technologies on our systems, devices, and third-party connections and further review vendor encryption to ensure proper information security safeguards are maintained.

 

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LOGO    Empowering Customers

Customers

 

We measure our success not only in terms of financial performance, but also in terms of the customer experience we provide. We put the customer first, driving a customer-centric culture. We are committed to delivering an exceptional, inclusive customer experience, and providing a clear and accessible depiction of our data management principles and practices. We listen to understand, seeking to anticipate and respond to the needs of our customers, creating personalized seamless experiences across all channels, generating a sense of value and appreciation that inspires confidence and loyalty. We endeavor to empower customers through a diverse mix of innovative, responsible products and services, including potential low-carbon offerings.

We are committed to investing in the financial health and wellbeing of all our stakeholders, and we believe

that the success of our customers is a shared responsibility. Examples of our financial wellbeing initiatives in 2021 include:

 

  Increased financial literacy for teens by funding innovative mobile app courses

 

  Engaged with community partners on initiatives in which our associates teach financial education

 

  Continued our investment in digital technologies that broaden consumer credit options beyond traditional retail private label products

 

  Established a Customer Experience Center of Excellence, driving deeper customer loyalty through seamless omnichannel journeys and personalized experiences that support our brand and business objectives
 

 

LOGO    Engaging our Associates

Associates

As of December 31, 2021, we employed approximately 6,000 associates worldwide, with the majority concentrated in the United States. We prioritize transparency and open communication with our associates, continuously listening and acting on their feedback, including through our annual Associate Survey, frequent pulse surveys, open Town Halls and other communications. We maintain a culture of engagement, working to recognize and reward our associates through various initiatives and recognition platforms that help drive retention.

 

 

 

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In 2020, our Chief Executive Officer initiated a formal process to improve our commitment to DE&I. Our commitment starts with our goal of championing a culture of diversity, equity and inclusion while attracting, retaining and developing a workforce that is unique in background, knowledge, skillset and experience. As of December 31, 2021, approximately 60% of our total work force and 43% of our senior leaders were female, while approximately 41% of our total work force and 17% of our senior leaders were minorities, respectively.

 

 

Workforce

 

CREATE PATHWAYS FOR HIRING AND PROMOTIONS THAT MAP TO MARKET AVAILABILITY

 

• Establish a demographic baseline

• Develop talent acquisition strategy

• Launch talent acquisition actions

• Leadership/pipeline development

• Enhance succession planning

 

        

 

Workplace

 

PROMOTE AN INCLUSIVE, ENGAGED CULTURE THAT EMPOWERS ASSOCIATES THROUGH OPPORTUNITIES TO LEARN AND GROW.

 

• Conscious inclusion training

• Provide governance for employee led BRGs

• Create increased engagement and enablement

        

 

Marketplace

 

INFUSE DE&I INTO OUR GROWTH STRATEGY, PRODUCT DELIVERY, CUSTOMER EXPERIENCE AND SUPPLY CHAIN.

 

• Infuse DE&I into product delivery

• Customer experience communications and training

 

   

Community

 

BUILD STRATEGIC PARTNERSHIPS THAT EMPOWER OUR COMMUNITIES AND ADVANCE BUSINESS PRIORITIES.

 

• Engage associates in community building activities

• Partner with BRGs, nonprofits

 

Actions supporting our DE&I commitment included the establishment of a formally defined DE&I strategy, with aligned priorities that extend beyond our workplace, to include customers, suppliers and the community. We expanded our foundational training around conscious inclusion for all associates and leaders, and in the second half of 2021 engaged associates through surveys, focus groups and numerous listening sessions. Our entire executive leadership team underwent unconscious bias awareness training, and new tools were introduced in our recruiting and hiring practices to further improve our processes in this area. A few notable accolades include:

 

  In 2022, selected for the fourth consecutive year for the Bloomberg Gender-Equality Index, which distinguishes companies committed to transparency in gender reporting and advancing women’s equality

 

  Named to Forbes’ 2021 America’s Best Employers for Diversity list

 

  Recognized by the Women’s Forum of New York at their 2021 Breakfast of Corporate Champions, an
   

honor given to public companies that have surpassed 35% women on corporate boards

 

  Announced a new community partnership with Zora’s House — the only co-working and community space in Central Ohio with virtual programing focused on helping women of color develop the life and leadership skills they need to excel in all areas of their life and career
 

 

We are committed to providing our associates with competitive total compensation, benefits and wellness resources. We regularly review our compensation model to ensure fair and inclusive pay practices and pay equity. We provide a comprehensive and competitive benefits package that supports the physical and mental well-being of our workforce, including a focus on financial wellness. Common benefits offered to our associates include medical, dental, and vision, life and disability coverage, parental leave, education reimbursement, and flexible paid time off. We also provide competitive retirement benefits, including a 401(k)-match program.

 

 

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Associate wellbeing remained a top priority in 2021, and we continued to provide numerous existing and new resources and support, including mental health awareness and counselling support, financial education and wellness courses, a variety of online fitness and meditation classes, a fitness cost reimbursement program and other benefits to promote mental and physical health and overall wellbeing. In 2021, we launched a new, holistic, goals-based financial planning platform at no cost to associates that offers unlimited access to financial advisors, smart budgeting, financial education, and more. Over 16% of our associates have enrolled, and 50% of the enrolled associates are saving more than 10% of their income toward their goals.

In 2021, we continued to respond to the unprecedented challenges faced by our associates and clients due to the COVID-19 pandemic. With the ongoing impact of COVID, approximately 95% of our total workforce continues to successfully work from home. We have continued initiatives designed to connect and engage our workforce in a virtual work environment, including providing the necessary technology, support and communication for our associates to be successful in their roles in this unique environment.

 

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LOGO    Protecting the Planet

Environment

We have a role to play in protecting and preserving our planet, and we are committed to addressing environmental risks by adopting sustainable practices throughout our business, including identifying and assessing financial risks associated with climate change. As such, work is underway to identify and integrate low-carbon solutions into product and service offerings while reducing our environmental impacts through resource efficiency.

Our approach to environmental management includes measures to reduce the waste we send to landfills, cultivating a more sustainable supply chain, and reducing our greenhouse gas emissions. We also continuously seek innovative ways to boost efficiency, such as utilizing renewable energy sources and high-efficiency electrical equipment, including LED and motion detector lighting and high-efficiency HVAC units. In 2021, we kicked off a formal energy audit to further understand and identify additional opportunities to reduce and conserve.

In addition to the above principles of advancing a circular economy, in 2021, we continued to employ recycling bins for aluminum, plastic, and paper in our Company’s physical offices, and recycling toner cartridges and electronic equipment, and created Earth Day- inspired campaigns to incent our associates to be more environmentally conscious. We have made strong gains internally by switching from individual desktop printers to multi-function devices (MFDs), which are shared by multiple users and discourage unnecessary printing. We also have a significant customer-facing paperless initiative underway, with a goal to increase adoption of paperless statements by encouraging cardholders to enroll in digital delivery.

 

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We will continue to engage with suppliers throughout our global value chain to measure and manage environmental impacts in order to conserve resources, reduce costs, and promote ethical sourcing practices. Supplier risk assessments are performed regularly, and we expect our suppliers to adhere to our Supplier Code of Conduct.

 

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LOGO    Creating Possibilities for Our Communities

Community

Supporting our communities is where we started our ESG journey, and it is an area we continue to prioritize and excel, making bold, strategic investments that empower and create possibilities in our communities. In parallel with our modernized ESG strategy, we evolved the strategic priorities that drive our community investments to include: 1) Financial Wellness, empowering our communities with the financial education, job training and access they need to build a bright financial future, (2) Equity and inclusion, reducing barriers to self-sufficiency and promoting equal access to opportunity for children and their families, and (3) Protecting our planet, prioritizing our efforts and investments where we have the most significant opportunity to combat climate change and its impacts.

Our Board and executive leadership team believe we have the responsibility and the resources to enable positive change in building a more sustainable, resilient future for all those we serve.

We continually strive to put our knowledge, skills, and resources to work, improving the quality of life in our communities. We define success in terms of our ongoing efforts to reduce inequalities through quality education, addressing food insecurities, good health and well-being, and empowering individuals in low to moderate income communities. Our charitable giving efforts include foodbanks, Nationwide Children’s Hospital, The Nature Conservancy, MyPossibilities, and Junior Achievement.

We provide our associates opportunities and encourage them to volunteer and give back, and they play a critical role in advancing our mission to support the communities where we live and do business. We provide a generous matching gifts benefit and dollars for doers program. Last year, even amid the lingering pandemic, our associates safely volunteered more than 7,000 hours at various events and organizations nationwide in our communities, including through education programs where they taught financial wellness, and at community development organizations that promote self-sufficiency.

Focusing on our priorities will enable us to create stronger connections with customers and engage with the world around us in increasingly positive ways. We will continue to empower our communities through bold, strategic investments that create opportunity by reducing barriers to self-sufficiency.

We routinely engage with our stockholders to better understand their views on ESG matters, carefully considering the feedback we receive and acting when appropriate. For more information, please visit our corporate website: https://investor.breadfinancial.com/sustainability/

 

 

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Proposal 1:

Election of Directors

 

                          
        

 

Our Nominating & Corporate Governance Committee evaluated and recommended to our Board of Directors, and our Board has nominated, the following eight individuals, Ralph J. Andretta, Roger H. Ballou, John C. Gerspach, Jr., Karin J. Kimbrough, Rajesh Natarajan, Timothy J. Theriault, Laurie A. Tucker and Sharen J. Turney, for election as a director, each to hold office for a term of one year until the annual meeting of stockholders in 2023 and until his or her respective successor is duly elected and qualified. Each of the director nominees currently serves on our Board of Directors.

The Nominating & Corporate Governance Committee and the Board of Directors determined that each nominee brings a strong and unique background and set of skills to our Board of Directors, enhancing, as a whole, our Board’s competence and experience in a variety of areas, including executive management and board service, internal controls and corporate governance, financial and accounting acumen, digital technology, data security and privacy, an understanding of industries in which we operate, including financial institutions and related risk management and regulatory compliance, as well as risk assessment and management. Specifically, in nominating these eight directors for election at our 2022 annual meeting of stockholders, consideration was given to such directors’ past service on our Board of Directors and its committees, as applicable, and the information illustrated in our skills matrix and discussed in each of such directors’ individual biographies set forth below. Our Board of Directors recommends that our stockholders vote in favor of each of these director nominees.

 

                          

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   The Board of Directors recommends that
stockholders vote FOR the election of
each of the eight director nominees.

 

 

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Skills Matrix and Description of Director Knowledge, Skills and Experience:

 

 

The matrix below provides information regarding our nominees’ knowledge, skills and experience that are most relevant in light of our Company’s business, long-term strategies and risks. Additional description regarding each of these categories is available in the key following this matrix. Our nominees represent a broad range of backgrounds and experience, and each nominee possesses numerous other competencies not identified below. The fact that a nominee is not designated as having a particular attribute does not indicate that the nominee does not possess that attribute or would not be able to make a meaningful contribution to the Board’s decision-making or oversight in that area. Demographic information regarding our nominees, including diversity, is also included in the matrix.

 

 

KNOWLEDGE, SKILLS & EXPERIENCE

        ANDRETTA             BALLOU             GERSPACH             KIMBROUGH             NATARAJAN             THERIAULT             TUCKER             TURNEY    

Accounting/Auditing/Risk Management

                                               

Business Operations

                                                 

CEO/Executive Leadership

                                               

Corporate Governance/Ethics

                                                     

Corporate Finance/Capital Management

                                                       

Financial Expertise/Literacy

                                               

Human Capital/Compensation

                                                 

Independence

                                                 

Information Technology/Cybersecurity/Privacy

                                                     

International Operations

                                                 

Mergers & Acquisitions

                                                         

Other Public Company Board Experience

                                                     

 

  Relevant Industry  

  Experience  

 

 

Banking/Financial Services

                                                   
 

Business Services

                                                 
 

Data Processing

                                                           
 

e-Commerce/Digital

                                                     
 

Loyalty/Marketing

                                                       
 

Regulated Industry

                                                   
 

Retail

                               

DEMOGRAPHICS

 

RACE/ETHNICITY (per the U.S. Census)

 

African American/Black

                                                             

American Indian/Alaska Native

                                                               

Asian

                                                             

Native Hawaiian/Pacific Islander

                                                               

White

                                                   

Other

               

GENDER

 

Male

                                                     

Female

                                                         

AGE (as of May 24, 2022)

    61       71       68       53       52       61       65       65  

BOARD TENURE (years served as of May 24, 2022)

    2       21       2       1       2       5       7       3  

OTHER PUBLIC BOARDS (serving on as of March 31, 2022)

    0       3       0       1       0       0       1       2  

 

 

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ACCOUNTING / AUDITING /
RISK MANAGEMENT

As a public company, our complex accounting and financial reporting functions are subject to a rigorous program of controls and procedures and our Board plays an important role in oversight of our robust audit and enterprise risk management organizations. Directors with experience in these areas are critical to evaluating and providing effective oversight of our financial statements and financial reporting and our management of the risks inherent in our business operations.

   

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CORPORATE FINANCE / CAPITAL MANAGEMENT

Our corporate finance activities include debt and equity market transactions and stock repurchase programs. We allocate capital in various ways to run our operations, grow our business and return value to stockholders. Director experience in these areas is important for effective oversight of our Company’s financial affairs.

                      

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BUSINESS OPERATIONS

Our business is complex, employing approximately 6,000 associates and using sophisticated technologies to provide tech-forward payment and lending solutions, serving customers and consumer-based industries in North America. Directors with “hands-on” experience developing and implementing operating plans and business strategies at companies with similarly sophisticated business operations have a practical understanding of how such organizations operate in increasingly sophisticated and disruptive competitive environments.

   

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FINANCIAL EXPERTISE / LITERACY

Our business involves complex financial transactions, accounting and reporting requirements. Directors with an understanding of finance and financial reporting processes are able to effectively monitor and assess our operating and strategic performance and ensure accurate financial reporting and robust controls. Substantially all of our nominees are financially literate and two of our nominees satisfy the “accounting or related financial management expertise” criteria set forth in the New York Stock Exchange listing standards.

                      

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CEO / EXECUTIVE LEADERSHIP

Executive leaders have an understanding of organizations and the drivers of individual and team growth and development. Directors with experience serving as a CEO or senior executive enhance the Board’s perspective of our organization’s operations and challenges.

   

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HUMAN CAPITAL / COMPENSATION

The success of our enterprise depends in part on our ability to attract, retain and develop top leaders and a high-performing workforce in markets that are highly competitive for available talent. Directors who have board-level experience with public company executive compensation and broad-based incentive planning, or who have managed or overseen the human resources/compensation function at an operating company help position our Company for success in these areas.

                      

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CORPORATE GOVERNANCE / ETHICS

We are an ethics-driven organization, and our Board – and in particular the Nominating & Corporate Governance Committee – provides a foundation for and oversight of our integrity-based culture. Our Board’s good governance practices and our Company’s focus on ESG matters and sustainability benefit from directors who are well-informed with respect to today’s dynamic governance and ethics environment and who have experience serving on the nominating & corporate governance or comparable committees of other boards.

   

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INDEPENDENCE

Independent directors are uniquely situated to provide unbiased oversight of our management and to work with our senior leaders to develop our Company’s strategic plans. Our Board currently consists of, and if all of the director nominees are elected at the annual meeting, will continue to consist exclusively of independent directors, other than the CEO. All directors currently serving on the Board’s standing committees are independent, and if all of the director nominees are elected at the annual meeting, each of those committees will continue to be populated exclusively by independent directors.

 

 

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INFORMATION TECHNOLOGY / CYBERSECURITY / PRIVACY

Our tech-forward business depends on the effective use of complex information technology systems, the safeguarding of data from cybersecurity risks and the protection and responsible, transparent use of consumer data in accordance with applicable privacy regulations and good stewardship practices. Directors with experience implementing or overseeing sophisticated technology and technology strategies, the management and mitigation of cybersecurity risks and compliance with privacy regulations help ensure proper risk management and oversight of these important drivers of our business.

   

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MERGERS & ACQUISITIONS

We have a history of undertaking significant acquisitions and dispositions and may continue to do so in the future. Board members with experience in material M&A transactions enhance the decision-making underlying strategic M&A activities and ensure informed oversight of the processes attendant to completing complex transactions.

                      

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INTERNATIONAL OPERATIONS

We conduct business throughout North America and have associates and offices in countries located outside of the United States. The quality of our Board’s oversight and strategic guidance is enhanced by directors whose understanding of diverse business environments, economic conditions and cultures has been informed by service as a director or senior leader at one or more companies with international operations.

   

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OTHER PUBLIC COMPANY BOARD EXPERIENCE

Public companies must comply with a variety of complex accounting, disclosure and other compliance obligations, and public company boards have significant oversight and other duties. Directors with experience serving on the boards and board committees of other public companies understand public company reporting responsibilities, corporate governance trends and practices and other issues commonly faced by public companies, and have insight into board operations, board/management relations, agenda setting, succession planning and other board duties and activities.

 

 

 

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RELEVANT INDUSTRY EXPERIENCE

Our Nominating & Corporate Governance Committee uses a skills matrix to identify the diverse skills and experience our Board needs to address the dynamic environment in which we operate our business. Directors with experience in industries in which we or our customers operate provide us with a better understanding of the challenges and opportunities facing our business.

 

  

 

 

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2022 Director Nominees and Proposed Committee Memberships:

 

 

 

 

 

    

 

   Committee Membership

Name

   Independent    Audit    Compensation & HC    N&CG    Risk

Ralph J. Andretta

    

 

    

 

    

 

    

 

    

 

Roger H. Ballou (Chair)

          

 

    

 

    

 

John C. Gerspach, Jr.

      Chair     

 

    

 

  

Karin J. Kimbrough

       

 

       

 

  

Rajesh Natarajan

       

 

    

 

     

Timothy J. Theriault

          

 

    

 

   Chair

Laurie A. Tucker

       

 

      Chair     

 

Sharen J. Turney

       

 

   Chair        

 

 

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AGE

 

61

 

 

DIRECTOR SINCE

 

2020

 

 

COMMITTEES:

None

          

Ralph J. Andretta             PRESIDENT | CEO, BREAD FINANCIAL HOLDINGS, INC.

 

   

 

Experience and Qualifications

 

• President and Chief Executive Officer of Bread Financial since February 2020

 

• Managing Director and Head of US Cards for Citigroup from 2011 to November 2019; and prior to that, he held positions in charge of loyalty, co-brand and product development

 

• Global affinity and international card executive at Bank of America from 2010 to 2011

 

• Served 18 years with American Express prior to 2010

 

• Bachelor’s degree in accounting and finance from Siena College

 

 

   

Skills

 

   

• Mr. Andretta’s role as our current Chief Executive Officer provides a link to the Company’s management and a unique level of insight into the Company’s operations

 

• His financial, capital allocation and global operations experience together with his expertise in the banking and financial services, data and loyalty/marketing industries add important and relevant diversity to the Board’s overall mix of skills

 

• Our Board of Directors believes Mr. Andretta is well-qualified for re-election as a Director

 

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AGE

 

71

 

 

DIRECTOR SINCE

 

2001

 

 

CHAIR OF THE BOARD SINCE

 

2020

 

 

COMMITTEES:

Audit

          

Roger H. Ballou             FORMER CEO AND DIRECTOR OF CDI CORPORATION

 

   

 

Experience and Qualifications

 

• Chief Executive Officer and a Director of CDI Corporation, a public company engaged in providing staffing and outsourcing services, from October 2001 until January 2011

 

• Self-employed consultant from October 2000 to October 2001

 

• Chairman and Chief Executive Officer of Global Vacation Group, Inc. from April 1998 to September 2000

 

• Senior advisor for Thayer Capital Partners from September 1997 to April 1998

 

• From April 1995 to August 1997, he served as Vice Chairman and Chief Marketing Officer, then as President and Chief Operating Officer, of Alamo Rent-a-Car, Inc.

 

• Bachelor’s degree from the Wharton School of the University of Pennsylvania

 

• MBA from the Tuck School of Business at Dartmouth

 

 

   

Skills

 

   

• Mr. Ballou’s qualifications include executive and/or board-level experience in the banking, financial services, business services, data and marketing industries and information technology, financial, global operations and M&A expertise and service on public company boards, including as a member or chair of public company Audit, Compensation and Nominating and Corporate Governance Committees

 

 

• Our Board of Directors values Mr. Ballou’s significant executive and public company Board experience as well as his Audit Committee financial expertise which, together with his global operations, banking and other relevant industry experience, strengthen and diversify the Board’s mix of skills, and the Board believes Mr. Ballou is well-qualified for re-election as a Director

   

Other Current Public Directorships

 

• RCM Technologies, Inc.

 Lead Independent Director

 Member of the Audit Committee and Nominating & Corporate Governance Committee

• Univest Financial Corporation

 Chair of the Compensation Committee

 Member of the Audit Committee, Risk Committee and Executive Committee

• Loyalty Ventures Inc.

 Chairman of the Board

 Member of the Compensation Committee and Corporate Governance and Nominating Committee

 

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AGE

 

68

 

 

DIRECTOR SINCE

 

2020

 

 

COMMITTEES:

Audit (Chair)

Risk

          

John C. Gerspach, Jr.             FORMER CFO OF CITIGROUP, INC.

 

   

 

Experience and Qualifications

 

• Self-employed consultant since March 2022

 

• Chief Financial Officer of Citigroup, Inc. from 2009 to 2019 and was employed by Citigroup, Inc. in various capacities of increasing experience and responsibilities since 1990

 

• Chief Financial Officer of Penn Central Industries Group from 1986 to 1990

 

• Comptroller of the Defense Contracting Group at ITT Corporation from 1980 to 1986

 

• Served in various roles with Arthur Andersen & Company at the beginning of his career

 

• Member of the Financial Accounting Standards Advisory Council (FASAC) from 2010 to 2013

 

• Bachelor’s degree in accountancy from the University of Notre Dame

 

• Certified Public Accountant in the State of New York from 1977 to 2019.

 

 

   

Skills

 

   

• Mr. Gerspach’s qualifications include executive-level experience in the banking and financial services industry for a global corporation, including roles in audit, accounting, risk management and international operations

 

• Our Board of Directors believes Mr. Gerspach’s expertise, particularly with respect to banking, financial, audit, risk management and global operations, will benefit our business and the Board’s overall mix of skills, making him well-qualified for re-election as a Director

 

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AGE

 

53

 

 

DIRECTOR SINCE

 

2021

 

 

COMMITTEES:

Compensation & Human Capital

Risk

          

Karin J. Kimbrough             CHIEF ECONOMIST OF LINKEDIN CORPORATION

 

   

 

Experience and Qualifications

 

• Chief Economist for LinkedIn Corporation since January 2020

 

• Assistant Treasurer for Google, Inc. from October 2017 to December 2019

 

• Managing Director and Head of Macroeconomic Policy at Bank of America Merrill Lynch from December 2014 to October 2017

 

• Employed by the Federal Reserve Bank of New York from 2005 to October 2014, serving as Vice President and the Director for the financial stability market monitoring function in the markets group from 2010 to October 2014 and as a manager for analytical development from 2005 to 2010

 

• Economist and strategist, foreign exchange desk, at Morgan Stanley from 2000 to 2005

 

• Bachelor’s degree from Stanford University

 

• Master’s degree in public policy from Harvard University

 

• PhD in economics from the University of Oxford

 

 

   

Skills

 

   

• Ms. Kimbrough’s qualifications include executive-level experience as an economist focused on consumer trends and financial markets, and expertise in financial stability risks assessments, capital markets and financial markets, including serving as a public company Board member and as a member of public company Audit, Compensation, and Nominating and Corporate Governance Committees

 

 

• Our Board of Directors believes that Ms. Kimbrough’s significant expertise in the banking, financial services, data and technology industries will benefit our business and the Board’s overall mix of skills, making her well-qualified for re-election as a Director

   

Other Current Public Directorships

 

• Fannie Mae

 Member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee

 

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AGE

 

52

 

 

DIRECTOR SINCE

 

2020

 

 

COMMITTEES:

Nominating & Corporate Governance

Risk

          

Rajesh Natarajan

 

CHIEF PRODUCT AND STRATEGY OFFICER OF GLOBALIZATION PARTNERS

 

   

 

Experience and Qualifications

 

• Chief Product and Strategy Officer of Globalization Partners since March 2022

 

• Executive Vice President of Products and Engineering of RingCentral, Inc. from December 2020 to December 2021

 

• Executive Vice President and Chief Product and Technology Officer of Ancestry.com from February 2017 to November 2020

 

• Served in senior leadership positions with increasing responsibility in the areas of technology and product development at Intuit, Inc. from 2014 to 2017, including as Senior Vice President and Chief Information Security and Fraud Officer

 

• Served in senior leadership positions with increasing responsibility in the areas of technology and product development at PayPal Holdings, Inc. from 2006 to 2014, including as Vice President, Platform Engineering and Operations

 

• Served in various management positions with increasing responsibility in the area of technology from 1995 to 2006 with Sabre Holdings Corporation, including as an early member of the development team that founded Travelocity.com

 

• Bachelor’s degree in mechanical engineering from Jawaharlal Nehru Technology University in India

 

• Master’s degree in industrial engineering from Clemson University

 

 

   

Skills

 

   

• Mr. Natarajan’s qualifications include executive experience in roles requiring expertise in information technology, cybersecurity, engineering, operations and product development.

 

• Our Board of Directors believes Mr. Natarajan’s expertise, particularly with respect to business operations, technology development, information technology and cybersecurity, will benefit our business and the Board’s overall mix of skills, making him well-qualified for re-election as a Director.

 

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AGE

 

61

 

 

DIRECTOR SINCE

 

2016

 

 

COMMITTEES:

Audit

Risk (Chair)

          

Timothy J. Theriault

 

FORMER EVP, GLOBAL CIO AND ADVISOR TO CEO OF WALGREENS BOOTS ALLIANCE, INC.

 

   

 

Experience and Qualifications

 

• Advisor to the Chief Executive Officer of Walgreens Boots Alliance, Inc. from June 2015 until November 2016

 

• Executive Vice President and Global Chief Information Officer of Walgreens Boots Alliance, Inc. from July 2014 to June 2015

 

• Served in senior leadership positions with increasing responsibility at Walgreen Co. from October 2009 to July 2014, including as Senior Vice President and Chief Information, Innovation and Improvement Officer

 

• Served in various executive and management positions with increasing responsibility in the area of information technology with Northern Trust Corporation from May 1991 to October 2009 and July 1982 to October 1989.

 

• Director of End User Computing and Advanced Technologies for S. C. Johnson & Son, Inc., from October 1989 to May 1991

 

• Current Director and a member of the Financial & Investment Committee and Compliance Committee of Wellmark Blue Cross and Blue Shield

 

• Former lead Director of the Depository Trust Clearing Corporation

 

• Bachelor’s degree from Illinois State University

 

• Completed the Harvard Business School advanced management program

 

 

   

Skills

 

   

• Mr. Theriault brings significant expertise in information technology and cybersecurity to our Board

 

• Together with his financial sophistication, banking, global operations, risk management and compensation experience gained as a senior executive in the financial services, health care and retail industries and service on public company Boards, including as a member of public

 

 

company Audit and Compensation Committees, Mr. Theriault’s expertise and experience broaden the Board’s skill set and enhance its ability to understand and oversee risk, including those associated with information technology, cybersecurity and bank regulatory matters

 

• The Board of Directors believes Mr. Theriault is well-qualified for re-election as a Director

   

Other Public Directorships in Past Five Years

 

• Vitamin Shoppe, Inc.

 

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AGE

 

65

 

 

DIRECTOR SINCE

 

2015

 

 

COMMITTEES:

Compensation & Human Capital

Nominating & Corporate Governance (Chair)

          

Laurie A. Tucker

 

FOUNDER AND CHIEF STRATEGY OFFICER OF CALADE PARTNERS LLC

 

   

 

Experience and Qualifications

 

• Founder and Chief Strategy Officer for marketing consultancy firm, Calade Partners LLC since January 2014

 

• Senior Vice President-Corporate Marketing of FedEx Services, Inc., a subsidiary of FedEx Corporation, a public company engaged in transportation, e-commerce and business services, from 2000 to 2013 and was employed by FedEx in various capacities of increasing experience and responsibilities since 1978

 

• Bachelor’s degree and an MBA from the University of Memphis

 

 

   

Skills

 

   

• Ms. Tucker’s qualifications include financial and compensation expertise, global operations experience and strong leadership skills developed as a public company Board member, including as a member of public company Audit, Compensation and Nominating and Corporate Governance Committees, and as a senior executive serving in various roles at a large multinational public company

 

 

• These credentials, together with her expertise and experience in e-commerce, retail, technology, customer service and corporate marketing, add significant value to the Board of Directors and make Ms. Tucker a well-qualified candidate for re-election as a Director

   

Other Current Public Directorships

 

• Forward Air Corporation

 Chair of the Corporate Governance and Nominating Committee

 

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AGE

 

65

 

 

DIRECTOR SINCE

 

2019

 

 

COMMITTEES:

Compensation & Human Capital (Chair)

Nominating & Corporate Governance

          

Sharen J. Turney             FORMER CEO OF VICTORIA’S SECRET

 

   

 

Experience and Qualifications

 

• Chief Executive Officer of Russia-based jeans brand Gloria Jeans from November 2018 until November 2019

 

• Director of Sweden-based designer sock and underwear brand Happy Socks AB from January 2018 until November 2019

 

• President and Chief Executive Officer of Victoria’s Secret, a division of publicly-traded national retailer L Brands, Inc., from July 2006 until February 2016

 

• President and Chief Executive Officer of Victoria’s Secret Direct, the brand’s catalogue and e-commerce arm, from May 2000 until July 2006

 

• Served for 10 years in various executive roles including President and Chief Executive Officer of Neiman Marcus Direct, the direct marketing division of luxury brand retailer Neiman Marcus Group

 

• Served as an advisor to several retailers and technology companies

 

• Director of FULLBEAUTY Brands from July 2016 to September 2018

 

• Director of Nationwide Children’s Hospital, Inc., including as Chairman of the Board of its Research Institute, from 2012 to 2018

 

• Serves on the Baker Retailing Center Industry Advisory Board at Wharton School at the University of Pennsylvania

 

• Director of the University of Oklahoma Foundation, where she serves as the Chair of the Audit Committee and a member of the Investment Committee

 

• Bachelor’s degree from the University of Oklahoma

 

 

   

Skills

 

   

• Ms. Turney’s qualifications include executive and/or Board-level experience in the retail industry, including as an executive officer of a Fortune 500 fashion retailer, loyalty, marketing and digital/e-commerce expertise, global operations experience, service on public company Boards, including as a member of public company Compensation and Nominating and

 

 

Corporate Governance Committees, financial expertise and executive leadership at companies operating in industries relevant to our business

 

• Our Board of Directors believes Ms. Turney’s expertise, particularly with respect to her retail and digital/e-commerce marketing experience, will benefit our business and enhance our understanding of our customers’ businesses, making her well-qualified for re-election as a Director

 

   

Other Current Public Directorships

 

• Paycom Software, Inc.

 Member of the Compensation Committee and Nominating & Corporate Governance Committee

 

• Academy Sports and Outdoors, Inc.

 Member of the Compensation Committee and Nominating & Corporate Governance Committee

 

 

Other Public Directorships in the Past Five Years

 

• M/I Homes, Inc.

 

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Role of Proxies in Election of Directors

 

 

The persons named as your proxies will have full discretion to cast votes for other persons in the event any nominee is unable to serve. Our Board of Directors has no reason to believe that any nominee will be unable to serve if elected. If a quorum is present, directors are elected by a majority of the votes cast, at the meeting or by proxy. This means that the eight nominees will be elected if they receive more “For” votes than “Against” votes. In accordance with Section 3.3.1 of our bylaws, any nominee who is currently serving as a director and does not receive a majority of votes cast shall immediately tender his or her resignation for consideration by our Board of Directors. Our Board of Directors will then evaluate whether to accept or reject such resignation, or whether other action should be taken. The Board of Directors will publicly disclose its decision to accept or reject such resignation and its rationale within 90 days from the date of certification of the director election results.

 

 

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Executive

Officers

 

                          
        

 

Ralph J. Andretta   PRESIDENT | CHIEF EXECUTIVE OFFICER | DIRECTOR

Biographical Information

 

Mr. Andretta’s biographic information appears under Proposal One: Election of Directors in this proxy statement.

     Age: 61

 

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Perry S. Beberman   EXECUTIVE VICE PRESIDENT | CHIEF FINANCIAL OFFICER

Biographical Information

 

Mr. Beberman, Executive Vice President and Chief Financial Officer, joined us in July 2021.

 

Before joining the Company, Mr. Beberman served in various leadership roles with increasing responsibility at Bank of America for 15 years, most recently as Senior Vice President and Finance Executive of Bank of America’s consumer and wealth management lending products from October 2019 to June 2021. Mr. Beberman joined Bank of America following its acquisition of MBNA, where he had spent more than 17 years in leadership roles with increasing responsibility.

 

Mr. Beberman’s Board activities are focused in the not-for-profit sector. He is currently a Director of Ronald McDonald House of Delaware, where he serves as the Chair and a member of the Executive Committee, Finance Committee, Governance Committee and Advisory Committee, and Reach Riverside Corp., where he serves as the Chair of the Finance Committee.

 

Mr. Beberman holds a Bachelor’s degree in business administration and an MBA from the University of Delaware.

     Age: 56

 

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Valerie E. Greer   EXECUTIVE VICE PRESIDENT | CHIEF COMMERCIAL OFFICER

Biographical Information

 

Ms. Greer, Executive Vice President and Chief Commercial Officer, joined us in June 2020. Before joining the Company, Ms. Greer led the U.S. cards co-brand business at Citigroup where she worked from 2011 to April 2020. Prior to that, she served as the General Manager, Partnerships for JPMorgan Chase from 2006 to 2011. She served in senior leadership positions with increasing responsibility at HSBC from 1994 to 2006, including as the Executive Director of HSBC’s private label business from 2003 to 2006.

 

Ms. Greer is currently a Director of Ruling Our eXperiences, Inc., a girls not-for-profit organization where she serves as a member of the Development Committee.

 

Ms. Greer holds a Bachelor’s degree from University of Manitoba and an MBA from the Kellogg School of Management at Northwestern University.

     Age: 57

 

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Tammy M. McConnaughey   EXECUTIVE VICE PRESIDENT, OPERATIONS AND CREDIT RISK

Biographical Information

Ms. McConnaughey, Executive Vice President, Operations and Credit Risk, joined us in June 1992.

 

Ms. McConnaughey has served in senior leadership positions within our Card Services business with increasing responsibility over her nearly thirty-year tenure across collections, customer care and credit risk, most recently as Senior Vice President of Operations and Credit Risk, Card Services.

 

Ms. McConnaughey is currently a Director of Mid-Ohio Food Collective, a not-for-profit organization.

 

Ms. McConnaughey holds a Bachelor’s degree in business from Mount Vernon Nazarene University.

     Age: 48

 

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Joseph L. Motes III   EXECUTIVE VICE PRESIDENT | CHIEF ADMINISTRATIVE OFFICER |
GENERAL COUNSEL | SECRETARY

Biographical Information

Mr. Motes, Executive Vice President, Chief Administrative Officer, General Counsel and Secretary, joined us in July 2015 and assumed his current Executive Vice President and Chief Administrative Officer position in June 2019 while continuing as General Counsel and Secretary.

 

Before joining the Company, Mr. Motes was with Akin, Gump, Strauss, Hauer & Feld, LLP for nearly 20 years, and was the partner and lead relationship manager for the Company.

 

Mr. Motes holds a Bachelor’s degree in geology from Trinity University and a J.D. from Southern Methodist University Dedman School of Law, where he served as Editor-in-Chief of the SMU Law Review.

     Age: 60

 

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J. Bryan Campbell   SENIOR VICE PRESIDENT | CHIEF ACCOUNTING OFFICER

Biographical Information

Mr. Campbell, Senior Vice President, Chief Accounting Officer, joined us in November 2021.

 

Before joining the Company, Mr. Campbell was employed by American Express Company, where he served as Vice President of Finance within the Controllership leadership team from February 2017 to November 2021, as Vice President of Finance – Head of External Reporting from March 2015 to February 2017, and in various roles of increasing responsibility from August 2007 to March 2015. Mr. Campbell served as Assistant Controller at General Electric Company from 2006 to 2007 and held various strategic and finance roles at Credit Suisse, Deloitte and KPMG from 1995 to 2006.

 

Mr. Campbell holds a Bachelor’s degree in accounting and finance from the University of Colorado at Boulder and is a Certified Public Accountant in the state of Colorado.

     Age: 49

 

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Compensation

Committee Report

 

                          
        

 

The Compensation & Human Capital Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation & Human Capital Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

This report has been furnished by the members of the Compensation & Human Capital Committee.

Karin J. Kimbrough

Laurie A. Tucker

Sharen J. Turney, Chair

 

 

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Compensation

Discussion & Analysis

 

                          
        

 

Named Executive Officers

 

 

This Compensation Discussion and Analysis (“CD&A”) describes the material compensation elements for each of Bread Financial’s named executive officers (“NEOs”) and provides an overview of the compensation policies and practices applicable to our NEOs.

 

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Ralph Andretta

President and CEO

 

Perry Beberman

Executive VP, Chief Financial Officer

 

Valerie Greer

Executive VP, Chief Commercial Officer

 

Tammy McConnaughey

Executive VP, Operations and Credit Risk

 

Joseph Motes

Executive VP, Chief Administrative Officer, General Counsel and Secretary

Timothy P. King, our former Executive Vice President and Chief Financial Officer who resigned in April 2021, is also an NEO for fiscal year 2021.

 

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2021 Company Performance Highlights, Strategic Spinoff Transaction and Rebranding from Alliance Data to Bread Financial

 

 

The following highlights our strategic transactions and other performance achievements in 2021 and subsequent rebranding from Alliance Data to Bread Financial:

 

  In November 2021, we simplified our business model by completing the spinoff of our final non-core business segment, LoyaltyOne, allowing us to focus on assets with the highest growth potential.

 

  We improved our capital ratios and reduced our leverage as we paid off $750 million of debt and reduced goodwill by $700 million as a result of completing the LoyaltyOne spinoff.

 

  Following the spinoff, Loyalty Ventures Inc. (NASDAQ: LYLT) became an independent publicly-traded company, in which we have retained a 19% ownership interest.

 

  In March 2022, we rebranded from Alliance Data to Bread Financial, reflecting the culmination of a multi-year business transformation strategy to become a more focused tech-forward payment, lending and savings solutions provider.

 

  We delivered solid performance across key performance metrics in 2021, including:

 

    Generating revenues of $3.3 billion from continuing operations;
    Delivering net income of $797 million from continuing operations; and

 

    Increasing credit sales 20% year-over-year, ending 2021 with a near-historic low full-year loss rate.

 

  We expanded our digital-first product suite, incorporating digital installment lending and split pay options that are increasingly popular with younger shoppers.

 

  We enhanced our core technology and advanced digital capabilities, moving closer to completion of our Fiserv processing platform migration and adding new self-service options through our redesigned customer account center.

 

  We established new strategic relationships on our fintech digital payments platform.

 

  We made significant progress on our ESG initiatives, including development and implementation of a Board-approved multi-year sustainability strategy.
 

 

Summary of Key Compensation Decisions and Executive Compensation Enhancements in 2021

 

 

During 2021, the Compensation & Human Capital Committee of the Board of Directors made the following adjustments to our executive compensation program, recognizing our progress on the multi-year transition to a more focused tech-forward payment, lending and savings solutions provider, and further aligning it with the interests of our stockholders and our long-term financial objectives:

 

  Revised the structure of our long-term equity incentive awards for our NEOs to consist of 60% performance-based restricted stock units (“PBRSUs”) and 40% time-based restricted stock units (“TBRSUs”), emphasizing the performance component of our NEO’s long-term equity incentive compensation.

 

  Approved grants of three-year cliff vesting PBRSUs, subject to pre-determined annual return on equity (“ROE”) metrics, as then modified by a relative Total Stockholder Return (“rTSR”) metric.
  Refined our 2021 balanced scorecards’ performance metrics for the annual executive cash incentive awards to reflect specific and measurable financial and non-financial goals (including ESG-related matters).

 

  Increased base salaries of two of our NEOs in recognition of their increased roles within the organization and enhanced responsibilities, with the remaining NEOs receiving nominal base salary increases. See “–Compensation Programs – Base Salary” below.
 

 

 

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Compensation Principles and Governance

 

 

 

We consider our executive compensation program integral to our ability to grow and improve our business. Our executive compensation program is structured at competitive levels and is designed to reward executive officers when the Company achieves above industry-average performance, and to significantly reduce rewards for performance below expectations. We maintain compensation plans that tie a substantial portion of our NEOs’ overall target annual compensation to the achievement of pre-established financial and non-financial objectives that support our business strategy, with a mix that balances short- and long-term goals.

 

The Compensation & Human Capital Committee employs multiple performance measures and strives to award an appropriate mix of annual and long-term incentives to avoid overweighting short-term objectives. The goals of our executive compensation program are to properly incentivize and reward our executives for performance and to allow us to attract, retain and motivate the highest level of executive talent to guide our business and successfully execute our long-term strategy.

 

 

The primary principles of our compensation program are described below:

 

PRINCIPLES OF OUR COMPENSATION PROGRAM

Pay for Performance

   The key principle of our compensation philosophy is pay for performance. We measure performance against challenging annual and long-term goals aligned with our key business priorities.

Delivery of Long-Term Stockholder Value

   We reward performance that meets or exceeds goals that the Compensation & Human Capital Committee establishes with the objective of increasing stockholder value over time and driving long-term strategic outcomes, including our ESG efforts.

Motivate and Retain
Key Talent

   It is essential that we attract, retain and motivate the highest level of executive talent to guide our business and successfully execute our long-term strategy, and we design our executive compensation program to do so.

 

 

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Key Compensation Policies and Practices

Our compensation programs, practices and policies are reviewed and evaluated on an ongoing basis to address evolving best practices and changing regulatory requirements. We list below some of the more significant best practices we have adopted and the practices we have avoided.

 

                           LOGO   What We Do   LOGO    LOGO   What We Don’t Do                           
 

PERFORMANCE-BASED PAY

 

We emphasize pay for performance. For 2021, executive compensation included both non-equity and long-term equity components tied to financial and non-financial performance.

 

ROBUST GOAL-SETTING

 

We set challenging goals that align with Company strategy.

 

CLAWBACK PROVISIONS

 

Our equity incentive plans include provisions that allow us to “clawback” executive incentive compensation in certain circumstances.

 

DOUBLE-TRIGGER CHANGE IN CONTROL

 

We use double trigger acceleration provisions upon a change in control in our equity incentive plans.

 

SIGNIFICANT STOCK OWNERSHIP

 

Our directors and executive officers have significant stock ownership requirements.

 

BALANCED COMPENSATION STRUCTURE

 

We utilize a balanced approach to compensation, combining fixed and variable, short-term and long-term, and cash and equity components.

 

INDEPENDENT COMPENSATION COMMITTEE

 

Each member of our Compensation & Human Capital Committee meets the independence requirements under SEC rules and NYSE listing standards.

 

INDEPENDENT COMPENSATION CONSULTANT

 

The Compensation & Human Capital Committee engages an independent compensation consultant.

  

NO EMPLOYMENT OR CHANGE IN CONTROL AGREEMENTS

 

We do not have employment agreements or change in control agreements with our executive officers.

 

NO TAX GROSS-UP PROVISIONS

 

We do not enter into excise tax gross-up arrangements with any of our executive officers.

 

NO EXCESSIVE PERQUISITES

 

We provide only limited perquisites to our executive officers.

 

NO SPECULATIVE TRADING

 

Our directors and executive officers are prohibited from trading in puts or calls or engaging in short sales with respect to our securities.

 

NO EXCESSIVE RISK-TAKING

 

We regularly review our compensation program to ensure that the program does not promote unnecessary or excessive risk-taking.

 

NO PLEDGING OF OUR SECURITIES

 

Our directors and executive officers are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.

 

NO HEDGING OF OUR SECURITIES

 

Our directors, executive officers and associates are prohibited from engaging in hedging transactions with respect to our securities.

 

NO DIVIDENDS ON RSUs UNLESS VESTED

 

We do not pay dividends or dividend equivalent rights on RSUs granted to directors or executive officers unless they vest.

 

 

 

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Say-on-Pay

 

At our 2021 annual meeting of stockholders, we received approximately 81% approval for the “say-on-pay” advisory vote on the compensation of our NEOs. Following our 2021 annual meeting of stockholders, we engaged in proactive outreach efforts with investors representing approximately 66% of our common stock, and holders of approximately 45% of our common stock responded and engaged with us on various matters, including executive compensation. For more information on our engagement efforts and feedback received through these stockholder conversations, please see “Corporate Governance – Stockholder Engagement”.

The Compensation & Human Capital Committee considers the long-term interests of the Company and our stockholders when making decisions regarding our compensation program and will continue to consider the outcome of future say-on-pay votes. We currently provide stockholders an annual “say-on-pay” advisory vote on the compensation of our NEOs and will continue to do so through our next stockholder advisory vote regarding the frequency of holding advisory votes on executive compensation, which will be no later than our annual meeting of stockholders in 2023.

 

 

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Compensation Programs

 

 

Overview of 2021 NEO Compensation Program Elements

The following is an overview of the 2021 compensation program elements for our NEOs. We use each component of compensation to satisfy one or more of our compensation objectives. The Compensation & Human Capital Committee places a significant portion of the overall target compensation for our executive officers “at risk,” without encouraging excessive or unnecessary risk-taking.

 

  

 

   Form of Payment   Performance
Period
  Performance
Criteria
  Objectives   For More
Information

Base Salary

                  Cash; Fixed   Ongoing   Alignment of salary with performance is evaluated on an annual basis  

• Compensates for day-to-day performance

• Attract, retain and reward NEOs with competitive fixed pay

• Reflects experience and job scope

  Page 49

Annual Incentive Compensation (“AIC”)

    

 

  Cash; Performance-Based   One Year   Balanced Scorecard Results  

• Balanced Scorecards incorporate range of Stockholder, Associate and Customer Performance Metrics

• Rewards successful completion of annual, pre-established strategic goals, both financial and non-financial

  Page 50

Long-Term Incentive Compensation (“LTIC”)

   LOGO   60% Performance-Based RSUs   Three-Year Cliff Vesting   Return on Equity (“ROE”), with rTSR modifier  

• Aligns incentives with stockholder interests and long-term financial objectives

• Intended to satisfy long-term retention objectives

  Page 57
   LOGO   40% Time-Based RSUs   Vests Ratably Over Three-Year Period   Time-Based RSUs, subject to continued employment  

• Rewards creation of long-term value

• Provides opportunity for stock ownership, which attracts and motivates our NEOs and promotes retention

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As illustrated below, the total direct compensation of our NEOs is heavily weighted towards variable, at-risk compensation that is tied to performance, with 85% of our CEO’s total pay at risk and 77% of our other NEOs’ average total pay at risk. The 2021 performance-based component of our CEO’s and our other NEOs’ comprised 60% and 55%, respectively, of such executive officers’ total direct compensation.

 

2021 CEO PAY MIX(1)

 

 

2021 AVERAGE NAMED EXECUTIVE PAY MIX(1)

 

LOGO   LOGO

 

(1)

These pay mix charts exclude amounts listed in the column titled “All Other Compensation” in the Summary Compensation Table set forth on page 69, as well as the one-time Gap RSUs described below under “ – Long Term Equity Incentive Compensation (LTIC) – Transitional ‘Gap’ Awards Granted in 2021.”

Base Salary

 

While a meaningful portion of our NEOs’ compensation is contingent upon meeting specified performance targets, we pay our NEOs a base salary as fixed compensation for their time, efforts and commitments throughout the year. To aid in attracting and retaining qualified executive officers, the Compensation & Human Capital Committee seeks to keep base salary competitive by considering, among other factors, the nature and responsibility of the position and, to the extent available, salary norms for persons in comparable positions at our proxy peer group; internal pay equity; the expertise of the individual; and the competitiveness in the market for the executive officer’s services. The committee reviews base salaries at least annually.

In January 2021, the Compensation & Human Capital Committee, with its independent compensation consultant, reviewed the base salaries of our NEOs for fiscal year 2021. The committee considered the various factors set forth above, including the competitive assessment prepared by the independent compensation consultant, and approved increases in base salary of approximately 3%—6% for each of Mr. Andretta, Ms. Greer and Mr. King, as set forth in the table below. For Mr. Motes, the committee approved a 20% increase in base salary, in recognition of Mr. Motes’ expanding scope of responsibilities in his role as Chief Administrative Officer, in addition to his duties as Executive Vice President, General Counsel and Secretary. For Ms. McConnaughey, the committee approved an approximately 25% increase in base salary in connection with Ms. McConnnaughey’s promotion to Executive Vice President, Operations and Credit Risk, in January 2021. These changes in base salary became effective in January 2021.

 

 

 

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BASE SALARY (ANNUALIZED RATE)

 

Named Executive Officer

   2021        2020        %
Change
 

Ralph J. Andretta

     1,050,000          990,000          6.1

Perry S. Beberman(1)

     600,000                   N/A  

Valerie E. Greer

     620,000          600,000          3.3

Tammy M. McConnaughey

     550,000          439,431          25.2

Joseph L. Motes III

     600,000          500,000          20.0

Timothy P. King(2)

     540,000          525,000          2.9

 

(1)

Mr. Beberman was hired in July 2021.

 

(2)

Mr. King served as our Executive Vice President and Chief Financial Officer through April 13, 2021, at which time his resignation became effective.

Annual Incentive Compensation (AIC)

 

AIC is the annual cash-denominated performance-based component of executive compensation designed to recognize Company performance as well as individual performance. The purpose of AIC is to provide an incentive to our NEOs and other executive officers to contribute to our annual growth and profitability objectives and to retain such executive officers. The Compensation & Human Capital Committee focuses on matching rewards with results and encourages executive officers to make significant contributions toward our financial results by providing a basic reward for reaching threshold expectations, plus an upside for reaching our aspirational goals. The AIC is structured to reflect specific and measurable financial and non-financial goals (including ESG-related matters), which are approved by the committee at the beginning of the year and set forth on the Company’s annual balanced scorecards.

SUMMARY OF 2021 BALANCED SCORECARDS

For 2021, the Compensation & Human Capital Committee approved a set of six balanced scorecards, one for each of the Corporate, Card Services, Bread Payments (which in this section refers to the Bread® business that we acquired in 2020, prior

to our corporate re-branding), Banking, AIR MILES® and BrandLoyalty portions of the business. This CD&A focuses solely on the Corporate, Card Services and Bread Payments scorecards, which were the only scorecards that impacted the AIC payments for our 2021 NEOs.

The balanced scorecards encompass a selection of both financial and non-financial metrics important to all stakeholders, including metrics relating to our Stockholders, Customers and Associates. The inclusion of non-financial targets allows us to equally prioritize initiatives of significance in value-creation, for example, risk, control and regulatory matters, ESG-related matters, customer and client relationships and human capital management. For 2021, the Compensation & Human Capital Committee assigned each NEO to one or more scorecards based on the anticipated amount of time devoted by the applicable NEO to corporate (i.e. enterprise-wide) matters versus specific areas of the business. For 2022, however, having completed the spinoff of our former LoyaltyOne segment and reflective of the continued transformation of our business, we have adopted a single unified balanced scorecard.

 

 

 

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The table below sets forth the scorecard(s) to which our NEOs were assigned by the Compensation & Human Capital Committee for purposes of our 2021 AIC program:

2021 SCORECARD ASSIGNMENT(S)

 

Named Executive Officer

   Corporate      Card
Services
     Bread
Payments
 

Ralph J. Andretta

     100              

Perry S. Beberman

     100     

 

 

 

 

 

    

 

 

 

 

 

Valerie E. Greer

     30      50      20

Tammy M. McConnaughey

     40      60       

Joseph L. Motes III

     100              

Timothy P. King

     100              

HOW AIC AWARDS ARE CALCULATED

Below is a description of the manner in which the Compensation & Human Capital Committee calculates the amount of the AIC payout, if any, for each of our NEOs:

 

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The Payout Percentage in the graphic above is based on the weighted average results of the balanced scorecard(s) to which the NEO is assigned. For each balanced scorecard performance metric, measurement was either (a) pass/fail or (b) based on threshold, target and maximum levels of achievement. Payout for the balanced scorecards provides for equal weighting of each metric within the scorecard categories of Stockholder, Customer and Associate, as applicable, with the results for the categories weighted as shown in the tables below.

For those metrics that were not simply pass/fail, the Compensation & Human Capital Committee established threshold, target and maximum levels, with the threshold equating to the 50% payout level, the target equating to the 100% payout level, and the maximum equating to the 150% payout level. In no event will payout exceed the 150% payout level, even in the case of significant overperformance. Threshold

refers to the minimum acceptable level of performance that will result in payout, target is the desired level of performance, and maximum is the level of performance that will result in a maximum payment, which will not be exceeded in any event.

For each scorecard metric, a score is assigned between 0 and 1.5, based on performance:

 

  Performance below the established threshold and ratings of “fail” received a score of 0

 

  Performance that met or exceeded the threshold, but did not meet the target, received a score along the range from 0.50 to 0.99

 

  Ratings of “pass” received a score of 1

 

  Performance that met or exceeded the target, but did not meet the maximum, received a score along the range from 1.00 to 1.49

 

  Performance that met or exceeded the maximum received a score of 1.5
 

 

 

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Within each category (Stockholder, Customer, Associate), these metric scores are added together and averaged, with equal weighting given to each metric). Each category score is then multiplied by the applicable category weighting to determine total Payout Percentage. For example, the Corporate scorecard is weighted 80% to Stockholder metrics and 20% to Associate metrics. Within the Stockholder category, there are five individual performance metrics; each of those five metrics accounts for 20% (1/5th) of the total result for the Stockholder category, which in turn accounts for 80% of the overall Corporate scorecard result.

Establishing a maximum payout amount under our AIC plan deters excessive risk-taking, while having an equitable payout amount that can be earned at a defined performance threshold encourages goal attainment. No payout is made for performance below the minimum threshold.

2021 BALANCED SCORECARD METRICS AND RESULTS

Our 2021 balanced scorecards encompassed a selection of both financial and non-financial metrics important to all stakeholders, including metrics relating to our Stockholders, Customers and Associates. Quantitative and qualitative performance metrics were pre-established in these three categories (Stockholders, Customers, Associates), and the Compensation & Human Capital Committee reviewed progress against each metric throughout the year and evaluated achievement of the goals in January 2022. The scorecard metrics were established by reference to our corporate strategy, which is designed to deliver superior performance, and in turn create value for our stockholders and benefit our customers, associates and the communities in which we operate. The financial metrics selected for 2021 were designed to incentivize strong financial results and align our NEOs’ interests with the interests of our stockholders, while the inclusion of non-financial metrics allowed us to also prioritize initiatives of significance in value-creation, including in the areas of risk, control and regulatory matters, ESG-related matters, customer and client relationships and human capital management.

 

 

 

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Below is a detailed description of the scorecard metrics selected by the Compensation & Human Capital Committee for 2021 and of the Company’s performance against those metrics:

2021 CORPORATE BALANCED SCORECARD

 

Metric

  Achievement   Description

STOCKHOLDER

  EBT (Consolidated)    

80%

  $1,044 mm achieved in 2021; positive result yielded maximum component funding.
  Operating Expenses    

 

  Target goal was to reduce corporate operating expenses, excluding strategic transaction costs, to $86.4 mm; actual adjusted operating expense was reduced to $87.3 mm, which exceeded threshold but was slightly short of target, resulting in 94% component funding on this metric.
 

Renew the Credit Facility

 

 

 

  This metric (pass) was achieved due to the significant amendments made to the corporate credit facility in July 2021.
  Environmental, Social & Governance (ESG)     This metric (pass) was achieved due to adopting a Board-approved ESG strategy in 2021, including harmonizing objectives and developing key ESG metrics aligned with business strategy and performance goals to be implemented and measured in 2022. See “Commitment to Sustainability” above for more information regarding our ESG efforts in 2021.
 

Audit Management

 

 

 

  This metric was based on the number of internal audits resulting in adverse findings. Zero adverse audits occurred in 2021, resulting in maximum component funding.

ASSOCIATE

 

Opportunity Index

 

 

 

 

20%

  This metric measured career opportunity as defined by promotions, lateral moves and internal cross-functional hires. Corporate achieved 60.5%, resulting in maximum component funding.
  Associate Experience    

This metric measured associate engagement based on ratings for “Engaged Outcome” items in associate surveys, measuring:

• Career Confidence: Overall, I believe my career goals can be met at this company.

• Motivation: This company motivates me to contribute more than is required by my work.

• Advocacy: I would recommend this company to people I know as a great place to work.

Corporate achieved 120% component funding on this metric.

 

Diversity, Equity & Inclusion (DE&I)

 

 

  2021 metric based on minority US population’s promotions and lateral moves, ensuring that opportunities are afforded to minorities throughout the organization. Corporate achieved 140% component funding on this metric.

 

 

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2021 CARD SERVICES BALANCED SCORECARD

 

Metric

  Achievement   Description

STOCKHOLDER

  EBT (Card Services)     50%   $1,245 mm achieved in 2021; positive result yielded maximum component funding.
  Revenue (Card Services)     $3,634 mm achieved in 2021; positive result exceeded target by 2.5%.
  Fraud Loss Management     $67.7 mm in fraud losses in 2021; positive result yielded maximum component funding.
  Loss Rate     $719.6 mm achieved in 2021; positive result yielded maximum component funding.
 

Operating Expenses

 

 

 

  Target goal was to reduce operating expenses, excluding strategic transaction costs, to $1,882.5 mm; $1,792.7 mm achieved, resulting in 124% component funding on this metric.
 

Audit Management

 

 

 

  This metric was based on the number of internal audits resulting in adverse findings. Zero adverse audits occurred in 2021, resulting in maximum component funding.
CUSTOMER  

SLA Achievement

 

 

 

  35%   This metric was based on meeting or exceeding certain customer care center response-time service levels at least 88% (target) of the time; positive result yielded maximum component funding.
 

Complaint Management

 

 

 

  Metric based on annualized complaints as a percent of average active accounts for 2021; positive result yielded maximum component funding.
 

Sales Growth

 

 

 

  Metric based on percentage growth of year-over-year sales; positive result yielded maximum component funding.
  Digital Users     Metric based on volume of digital users as percentage of total open accounts. Achieved 113% component funding.
ASSOCIATE  

Opportunity Index

 

 

 

  15%   This metric measured career opportunity as defined by promotions, lateral moves and internal cross-functional hires. Card Services achieved 59.4% compared to the 51.8% target, yielding maximum component funding.
  Associate Experience    

This metric measured associate engagement based on ratings for “Engaged Outcome” items in associate surveys, measuring:

• Career Confidence: Overall, I believe my career goals can be met at this company.

• Motivation: This company motivates me to contribute more than is required by my work.

• Advocacy: I would recommend this company to people I know as a great place to work.

Card Services achieved 129% component funding on this metric.

 

Diversity, Equity & Inclusion (DE&I)

 

 

 

  2021 metric based on minority US population’s promotions and lateral moves, ensuring that opportunities are afforded to minorities throughout the organization. Card Services achieved 144% component funding on this metric.

 

 

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2021 BREAD PAYMENTS BALANCED SCORECARD

 

Metric

  Achievement   Description
STOCKHOLDER   Revenue    

 

  50%   Revenue result did not achieve threshold for component funding.
  End of Period A/R    

 

  End of period A/R result did not achieve threshold for component funding.
  Total Merchants on Platform    

 

  The total merchants on platform result did not achieve threshold for component funding.
 

Number of tenants signed

 

 

 

  Goal of 4 tenants to be signed, positive result of 5 tenants signed yielding maximum component funding.
CUSTOMER  

C-SAT

 

 

 

 

35%

  Target customer satisfaction (C-SAT) score of 80% favorable; 91% achieved resulting in maximum component funding.
  Trustpilot Rating     Strong 4+ rating; positive result yielded maximum component funding.
ASSOCIATE   Associate Experience     15%  

This metric measured associate engagement based on ratings for “Engaged Outcome” items in associate surveys, measuring:

•Career Confidence: Overall, I believe my career goals can be met at this company.

•Motivation: This company motivates me to contribute more than is required by my work.

•Advocacy: I would recommend this company to people I know as a great place to work.

Bread Payments achieved 110% component funding on this metric.

 

Diversity, Equity & Inclusion (DE&I)

 

 

 

  For 2021, DE&I on the Bread Payments scorecard was a pass/fail item to align into the enterprise-wide DE&I process as a minimum standard, setting a baseline to measure against in 2022.

Based on the balanced scorecard metrics and results set forth above, the Compensation & Human Capital Committee calculated the following balanced scorecard payout percentages for 2021:

 

Scorecard

   Payout Result,
Unadjusted
     Payout Result,
As Adjusted(1)
 

Corporate

     119      123

Card Services

     139      140

Bread Payments

     87      87

 

(1)

The Compensation & Human Capital Committee has the discretion to adjust the results of the scorecards for certain one-time and other appropriate adjustments, including adjustments relating to M&A costs (including those relating to the LoyaltyOne spinoff), one-time restructuring or impairment costs, one-time regulatory fees and/or expenses, one-time costs relating to executive transitions, legal fees, fluctuations in foreign currency exchange rates and one-time events. Based on this authority, the committee (i) approved adjustments for the Corporate balanced scorecard that increased the payout from 118.7% to 122.8% and (ii) approved adjustments to the Card Services balanced scorecard results that increased the payout from 139.2% to 140.2%. There were no adjustments made to the Bread Payments balanced scorecard results.

 

 

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SUMMARY OF 2021 PERFORMANCE-BASED AIC PAYMENTS

The following table sets forth the AIC payments for the 2021 performance year, prior to the adjustments to such payouts discussed in the next section below. These AIC payments are also included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal Year 2021.

 

  

 

   Annual
Base
Salary ($)
(12/31/2021)
     x      Target
AIC
(%)(1)
    =     Target
AIC ($)
     x      Final
Weighted
Scorecard
Results (2)
    =      AIC
Payment
($)
 

Ralph J. Andretta

     1,050,000       

 

 

 

 

 

     160    

 

 

 

 

 

    1,680,000       

 

 

 

 

 

     122.80    

 

 

 

 

 

     2,063,040  

Perry S. Beberman(3)

     600,000       

 

 

 

 

 

     150    

 

 

 

 

 

    900,000       

 

 

 

 

 

     122.80    

 

 

 

 

 

     1,002,600  

Valerie E. Greer

     620,000       

 

 

 

 

 

     150    

 

 

 

 

 

    930,000       

 

 

 

 

 

     124.34    

 

 

 

 

 

     1,156,362  

Tammy M. McConnaughey

     550,000       

 

 

 

 

 

     100    

 

 

 

 

 

    550,000       

 

 

 

 

 

     133.24    

 

 

 

 

 

     732,820  

Joseph L. Motes III

     600,000       

 

 

 

 

 

     125    

 

 

 

 

 

    750,000       

 

 

 

 

 

     122.80    

 

 

 

 

 

     921,000  

Timothy P. King (4)

     540,000       

 

 

 

 

 

     125 %    

 

 

 

 

 

    675,000       

 

 

 

 

 

     122.80 %    

 

 

 

 

 

     290,025  

 

(1)

For fiscal year 2021, the Compensation & Human Capital Committee, following review of a competitive assessment of peer benchmarking data prepared by its independent compensation consultant, approved increases in target AIC for Mr. Andretta from 150% to 160%, for Mr. Motes from 100% to 125%, and for Mr. King from 100% to 125%. The Compensation & Human Capital Committee reviews this data at the beginning of each year in setting target AIC percentages for our NEOs for the upcoming year.

 

(2)

Scorecard weightings for 2021 performance were as follows: Messrs. Andretta, Beberman and Motes – 100% Corporate; Ms. Greer – 30% Corporate, 50% Card Services, 20% Bread Payments; Ms. McConnaughey – 40% Corporate, 60% Card Services.

 

(3)

Pursuant to the terms of Mr. Beberman’s offer letter to join the Company in July 2021, Mr. Beberman’s 2021 AIC payment was guaranteed at $900,000 and, to the extent that the Corporate balanced scorecard exceeded the target payout of 100% for 2021, Mr. Beberman was eligible for an AIC payment in an amount equal to 50% of the amount in excess of 100% achievement times $900,000, which resulted in a payment of $1,002,600. See “–Other Plans or Agreements Governing Executive Compensation” below.

 

(4)

Mr. King resigned in April 2021, and his AIC award of $290,025 was payable pursuant to his separation agreement. See “–Potential Payments upon Termination or Change in Control” below.

 

DISCRETIONARY ADJUSTMENTS

Our CEO may recommend to the Compensation & Human Capital Committee adjustments with respect to each AIC payout (other than with respect to CEO’s own payment amount). The committee may adjust the AIC payout of the executive officers other than the CEO, and the Board of Directors may adjust the CEO’s AIC payout, as well as that of any other executive officer. In determining whether and to what extent any such discretionary adjustments will be made, the Compensation & Human Capital Committee or Board of Directors, as applicable, typically considers the value provided by the relevant executive officer, as demonstrated by the challenges addressed and particular expertise required of such executive officer during the fiscal year.

For 2021, both the Compensation & Human Capital Committee and the Board of Directors, as applicable, made the following adjustments to the AIC for certain of our current named executive officers:

  For Ms. Greer, the committee approved an adjustment of $43,638 in recognition of Ms. Greer’s efforts in developing a strong new business pipeline, recruiting key new talent and enhancing the Company’s digital offerings and partnerships.

 

  For Ms. McConnaughey, the committee approved an adjustment of $42,180 in recognition of Ms. McConnaughey’s results in the areas of fraud reduction and management of credit losses and for her work on COVID-19-related initiatives, including developing the Company’s return-to-office plans.

 

  For Mr. Motes, the committee approved an adjustment of $29,000 in recognition of Mr. Motes’ efforts in connection with the LoyaltyOne spinoff transaction, risk management, enhancing the Company’s internal and external communications functions and fulfilling expanded duties as Chief Administrative Officer.
 

 

 

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  For Mr. Andretta, the Board of Directors approved an adjustment of $135,000 in recognition of Mr. Andretta’s strong leadership in transforming and focusing the business through the LoyaltyOne spinoff and other initiatives and in attracting, retaining and motivating top talent to guide the business and successfully execute our long-term strategy.

The adjustments described above are included in the “Bonus” column of the Summary Compensation Table for Fiscal Year 2021. As Mr. Beberman’s 2021 AIC payment was made in accordance with his offer letter to join the Company, no adjustments were made to his AIC payout.

 

 

Long-Term Equity Incentive Compensation (LTIC)

 

We grant long-term equity incentive awards to align the interests of our NEOs and other executive officers with those of our stockholders and foster a focus on long-term results, as well as to encourage retention. In granting these awards, the Compensation & Human Capital Committee may establish such restrictions, performance measures and targets as it deems appropriate. Awards of performance-based LTIC pay out solely upon attainment of a threshold level of pre-determined performance targets, as well as continued employment of the executive officer.

In determining the size of long-term equity incentive awards, the committee generally considers, among other factors, the value of total direct compensation for comparable positions at our proxy peer group,

Company and individual performance against strategic plans, the number and value of LTIC awards previously granted, the allocation of overall equity awards attributed to our executive officers relative to all equity awards and the relative proportion of long-term incentives within the total direct compensation mix.

In 2021, we granted LTIC awards to our senior management and executive officers, including our NEOs, pursuant to our 2020 Omnibus Incentive Plan. As permitted by the plan, the Board of Directors has delegated its authority under the plan to the Compensation & Human Capital Committee, except for purposes of awards to the CEO.

 

 

2021 LTIC PLAN DESIGN

For fiscal year 2021, the Compensation & Human Capital Committee, and the Board of Directors with respect to the CEO, revised the structure of our LTIC plan for our NEOs to consist of 60% performance-based restricted stock units (“PBRSUs”) and 40% time-based restricted stock units (“TBRSUs”), the features of which are summarized in the table below:

 

Element

   Key Metrics    Features

Performance-Based Restricted Stock Units

(60% of Award)

  

• Pre-determined annual ROE targets over 3-year period (0-150% achievement)

• Annual ROE achievement averaged at end of 3-year term

• 3-year relative TSR modifier (+/-20%) applied at end of 3-year term

  

• 3-year cliff vesting period (FY 2021-2023)

• Payout tied to performance and stock price

• Annual ROE targets, established at the time of grant by the Committee

• Payouts range from 0-170% of target shares awarded depending on achieved performance

Time-Based Restricted Stock Units

(40% of Award)

  

• Vest ratably over 3-year period

  

• Units encourage long-term retention and align NEOs interests with stockholders

After taking into consideration the long-term incentive practices in the marketplace, we believe that an equity mix of PBRSUs and TBRSUs provides a conservative and balanced approach. The portion granted in TBRSUs is intended to provide not only some stability in our equity program and increase retention, but also to promote direct alignment with stockholders through our executives’ stock holdings. The portion granted in PBRSUs, whose vesting criteria are tied to our financial performance, is intended to focus and incentivize our executives to deliver exceptional performance.

 

 

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The PBRSUs are subject to an annual return on equity (“ROE”) metric with threshold, target and maximum goals for each of 2021, 2022 and 2023 and then modified by a relative Total Stockholder Return (“rTSR”) metric at the conclusion of the three-year period ended December 31, 2023. For the ROE metric, threshold, target and maximum goals from 50% to 150% achievement are to be calculated on a scale interpolated between the fixed threshold, target and maximum goal amounts, with the average of such achievement adjusted +/- 20% by the rTSR modifier measurement, for a payout range of between 30% (assuming threshold is achieved) and 170% of target.

After consideration of market practices and consultation with our independent compensation consultant, the Compensation & Human Capital committee adopted ROE as the primary performance metric for our PBRSU grants in 2021. ROE is a valuable performance metric because:

 

  it directly reflects the return generated by the company on our stockholders’ investment

 

  it encompasses profitability, efficiency, balance sheet management and financial leverage, and is among the most widely used indicators of financial performance in our industry and among our peers
  achieving a high ROE requires prudent management of the tradeoffs between risk and return, requiring an appropriate balance between achieving the highest return on invested capital and managing risk

 

  using ROE as a performance metric aligns the interests of our NEOs with those of our stockholders, because sustaining a high ROE is a primary driver of strong earnings growth and long-term value

The rTSR modifier is intended to further align the interests of our NEOs with those of our stockholders.

In the event threshold performance is not achieved in one or more fiscal years, the payout could be less than 30% and as low as 0%. To the extent earned, these PBRSUs will vest in February 2024, provided that the executive is employed by us on the vesting date. The high proportion of performance-based awards reflects our pay-for-performance philosophy and aligns our NEOs’ interests with those of our stockholders. The Compensation & Human Capital Committee believes the combined annual ROE over three years and three-year rTSR goals for the performance shares can be characterized as challenging to achieve, but attainable with the application of significant skill and effort on the part of our executive officers.

 

 

FY 2021 TO FY 2023 PERFORMANCE SHARE PLAN DESIGN

 

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The payout for the PBRSUs will be determined when the full measurement can occur, after December 31, 2023. For all grants, the recipient must be employed by us at the time of vesting to receive the stock. The 45-day average fair market value of the Company’s common stock as quoted on the NYSE as of the date of grant is

utilized as the basis for determining the specific number of either PBRSUs or TBRSUs to be granted.

The Compensation & Human Capital Committee will continue to review our compensation plans to support our current and long-term business strategy, to continue to align pay with stockholder interests and sustain good governance practices.

 

 

2021-2023 LTIC AWARDS GRANTED DURING 2021

Based on the Company’s new LTIC grant structure adopted in 2021, the following LTIC grants were approved in February 2021 (the “2021-2023 LTIC Awards”), which were divided 60% into PBRSUs and 40% into TBRSUs:

 

Name

   2021-2023
LTIC Target
Grant Value ($)
       PBRSUs
Granted
(in shares)(1)
       TBRSUs
Granted
(in shares)(1)
 

Ralph J. Andretta

     4,200,000          39,476          26,319  

Perry S. Beberman

     See below          See below          See below  

Valerie E. Greer

     1,100,000          10,340          6,894  

Tammy M. McConnaughey

     1,000,000          9,400          6,267  

Joseph L. Motes III

     1,100,000          10,340          6,894  

Timothy P. King(2)

     1,100,000          8,908          5,939  

 

(1)

The target numbers of RSUs were determined by dividing the total grant value of the award by the 45-day average fair market value of the Company’s common stock as quoted on the NYSE as of the date of grant. As discussed under “—Treatment of Outstanding RSUs Upon LoyaltyOne Spinoff” below, the numbers of RSUs shown in this table reflect anti-dilution adjustments made in connection with the spinoff of Loyalty Ventures Inc. by the Company, except the RSUs granted to Mr. King reflect the unadjusted amount since Mr. King’s RSUs were forfeited prior to the spinoff.

 

(2)

In connection with his resignation effective April 13, 2021, all of Mr. King’s unvested outstanding equity awards were forfeited.

Mr. Beberman joined the Company in July 2021, and as such did not receive an LTIC grant in February 2021. However, as part of Mr. Beberman’s sign-on compensation package, and in recognition of the earned compensation forfeited upon termination of Mr. Beberman’s prior employment, the Compensation & Human Capital Committee approved a make-whole award in July 2021 that included a one-time grant of TBRSUs with a target value of $1,100,000, vesting ratably over a 3-year period, and a grant of PBRSUs with a target value of $350,000, with terms consistent with the PBRSUs granted to the other NEOs in February 2021. See “Other Plans or Agreements Governing Executive Compensation” below for additional information regarding Mr. Beberman’s compensation arrangements.

 

 

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TRANSITIONAL “GAP” AWARDS GRANTED IN 2021

In 2021, the Company for the first time granted 3-year PBRSUs based on an ROE metric, which will cliff-vest following the completion of the 2023 fiscal year. We intend to continue these 3-year cliff-vesting PBRSU grants going forward, which we believe are consistent with our compensation philosophy and with market practice of our peers. Prior to 2021, however, the Company’s performance-based equity grants were based either on 1 or 2-year EBT or rTSR performance and the achievement of certain strategic objectives. In order to facilitate the Company’s transition from these 1 or 2-year equity grants to our current 3-year cliff-vesting PBRSU structure, the Compensation & Human Capital Committee (and, with respect to our CEO, the Board) in 2021 approved one-time transitional “gap” TBRSUs to our NEOs, which vest ratably over a 3-year period (the “Gap RSUs”). The purpose of the Gap RSUs is to bridge the gap between the Company’s prior LTIC structure and current LTIC structure and, during that transition period, promote retention and ensure that our NEOs’ priorities remained aligned with those of our stockholders and that our NEOs continued to comply with our stock ownership guidelines. To determine the amounts of the 2021 Gap RSU grants, the committee reviewed modeling prepared by the independent compensation consultant illustrating the estimated number of PBRSUs that would have otherwise vested during the transition period had the Company maintained its 1 or 2-year PBRSU structure, and the Gap RSU grants were sized to fill that void. The 2021 Gap RSUs are described below:

 

Name

   Gap RSU
Target Grant
Value ($)
       Gap RSUs
Granted
(in shares)(1)
 

Ralph J. Andretta

     2,520,000          39,476  

Valerie E. Greer

     660,000          10,340  

Tammy M. McConnaughey

     600,000          9,400  

Joseph L. Motes III

     960,000          15,040  

Timothy P. King (2)

     660,000          8,908  

 

(1)

The target numbers of RSUs were determined by dividing the total grant value of the award by the 45-day average fair market value of the Company’s common stock as quoted on the NYSE as of the date of grant. As discussed under “—Treatment of Outstanding RSUs Upon LoyaltyOne Spinoff” below, the numbers of RSUs shown in this table reflect anti-dilution adjustments made in connection with the spinoff of Loyalty Ventures Inc. by the Company, except for the RSUs granted to Mr. King reflect the unadjusted amount since Mr. King’s RSUs were forfeited prior to the spinoff.

 

(2)

In connection with his resignation effective April 13, 2021, all of Mr. King’s unvested outstanding equity awards were forfeited.

 

 

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SETTLEMENT OF 2020 PERFORMANCE-BASED RSUS

In 2020, the Compensation & Human Capital Committee approved certain two-year PBRSUs for Messrs. Andretta, King and Motes, which were awarded on February 18, 2020 (the “2020 PBRSUs”). None of our other NEOs received 2020 PBRSUs, as Mr. Beberman and Ms. Greer both joined the Company subsequent to the making of these grants, and Ms. McConnaughey’s 2020 performance-based grant was subject to a one-year performance metric. The terms of the 2020 PBRSUs are set forth in the table below:

 

Design Element

   Description

Performance/Vesting Period

  

• 2-year performance period, starting January 1, 2020 to December 31, 2021

• Earned shares cliff vest and paid following the end of the performance period

Performance
Metric

  

• Relative TSR measured against the companies within the S&P 500 as of 1/1/2020

• TSR calculated based on the average trading price of ADS and S&P 500 companies over the 30 trading days preceding 1/1/2020 (beginning stock price) and the 30 trading days preceding 1/1/2022 (ending stock price)

Formula

  

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• Dividends — Calculation will assume that dividends are re-invested on the Ex-Dividend date
(two days prior to the record date)

Performance and Payout Matrix

                  

 

   Percentile TSR Rank    Payout as a % of Target                          
  

 

 

Below Threshold

   <25th Percentile    0%  

 

  

 

 

Threshold

   25th Percentile    0%  

 

  

 

 

Target

   55th Percentile    100%  

 

  

 

 

Above

   90th Percentile    150%  

 

  

 

 

Maximum

   100th Percentile    175%  

 

  

 

• Payout for performance between points is interpolated on a straight-line basis

• Payout is capped at 100% of target if ADS absolute TSR is a negative return.

The 2020 PBRSUs were earned over the two-year performance period ended December 31, 2021 and earned 2020 PBRSUs vested on the date of payment. The number of 2020 PBRSUs earned was based on achieved performance against pre-determined rTSR goal for fiscal years 2020 and 2021. To achieve 0% to 175% of the target award, the Compensation & Human Capital Committee set the 2020-2021 rTSR goal on a fixed scale measured against the companies within the S&P 500 as of January 1, 2020, calculated based on the average trading price of the Company and S&P 500 companies over the 30 trading days preceding January 1, 2020 and the 30 trading days preceding January 1, 2022, where the rTSR meets or exceeds the 25th to the 100th percentile. In February 2022, the Compensation & Human Capital Committee determined that the Company’s 2-year TSR ranked below the 25th percentile of the S&P 500 over that same time period, which resulted in no payout under the 2020 PBRSUs.

 

 

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TREATMENT OF OUTSTANDING RSUs UPON LOYALTYONE SPINOFF

In November 2021, we completed the spinoff of our former LoyaltyOne segment into an independent, publicly-traded company, Loyalty Ventures Inc. (NASDAQ: LVI). In connection with the spinoff, the outstanding RSUs held by our directors, executive officers and other employees were equitably adjusted to reflect the difference in the value of our common stock before and after the spinoff in a manner that was intended to preserve the overall intrinsic value of the awards by taking into account the relative value of our common stock before and after the spinoff.

Through this anti-dilution adjustment, the number of shares underlying each RSU outstanding as of the date of the spinoff was multiplied by a factor of approximately 1.16. Except as otherwise noted, all disclosures in this Proxy Statement reflect such adjustments. Our RSUs continue to vest on their original vesting schedule. Stock-based compensation awards that were held by employees who transferred to Loyalty Ventures Inc. in connection with the spinoff were either settled in shares of our common stock or were forfeited and replaced with a combination of cash and Loyalty Ventures Inc. equity awards.

 

 

Compensation Determination Process

 

 

Role of the Compensation & Human Capital Committee

 

The Compensation & Human Capital Committee reviews and approves the compensation for our non-CEO executive officers from the time of their hire or promotion to such roles, and, together with the other independent directors, approves the compensation of our CEO. The committee typically sets the total direct compensation for our executive officers near the beginning of each year. This timing allows us to consider the performance of the Company and each executive officer in the prior year, as well as expectations for the upcoming year.

AIC and LTIC targets and scales are established and grants are awarded as early as practicable in the year, contingent upon the availability of the prior year’s financial results, to maximize the time period over which the applicable performance incentives apply. Consistent with our practice of granting equity-based awards for new hires, promotions and associates that have joined the Company as a result of a merger or acquisition on a date certain each month (currently the 15th of each month or the next business day), LTIC awards for executive officers are made on February 15 (or the next business day) of each year, or such other pre-determined date following release of the

Company’s earnings for the prior fiscal year as is appropriate. In the event there exists material information that we have not yet disclosed, the committee may delay or defer the grant of any equity-based awards until all disclosures are current.

Material changes to pay levels for executive officers are typically made only upon a significant change in job responsibilities.

The Compensation & Human Capital Committee, or with respect to the CEO, the Board of Directors, approved compensation levels in early 2021 for those executive officers previously identified and for each newly-hired executive officer at the time of their hiring or shortly thereafter. For all of our associates, our philosophy continues to be to compensate all associates on a competitive basis with a mid-market target for all skilled positions in all geographic locations based on relevant peer or industry group data. Some amounts may be higher or lower based on factors such as skill levels, performance, seniority, workload, span of control, retention considerations and institutional knowledge. For additional information on the process for establishing compensation, see “Compensation Programs” beginning on page 48 and “Competitive Considerations” below.

 

 

 

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Role of the Chief Executive Officer

 

Typically, our CEO makes compensation recommendations to the Compensation & Human Capital Committee with respect to our non-CEO executive officers. The committee may accept or adjust the CEO’s recommendations in its sole discretion and also makes a recommendation regarding the CEO’s compensation to the full Board of Directors. The CEO does not make any

recommendations to the Compensation & Human Capital Committee or to the Board of Directors relating to performance measures, targets or similar items that affect CEO compensation. Moreover, the CEO is recused from discussions of CEO compensation during Board of Directors and Compensation & Human Capital Committee meetings.

 

 

Role of the Compensation Consultant

 

The Compensation & Human Capital Committee directly engages Meridian Compensation Partners, LLC (“Meridian”), as its external executive compensation consultant for its industry knowledge and experience in advising on executive compensation matters. The committee has considered and assessed all relevant factors, including, but not limited to, those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, as amended, that could give rise

to a potential conflict of interest with respect to Meridian. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Meridian. In particular, Meridian assisted the Compensation & Human Capital Committee in 2021 with competitive market analysis, peer assessment, and consultation and review of compensation policies and practices.

 

 

Competitive Considerations

 

In determining appropriate levels of compensation, the Compensation & Human Capital Committee considers the competitive market for talent and compensation levels provided by comparable companies to minimize significant differences that could negatively impact our ability to attract and retain skilled executive officers. As referenced above, the committee engaged Meridian to, among other things, assist with competitive market analysis and peer assessment. For conducting market review, Meridian formed and surveyed two data sets, both of which were approved by the committee: a general industry group and a proxy peer group. The general industry group encompasses companies of similar size based on revenue. The proxy peer group consists of public companies that are currently monitored as competitors or are in similar industries and have similar revenue or market capitalization.

PROXY PEER GROUP

Meridian reviewed the compensation practices for the proxy peer group set forth below with whom we compete for business and talent. This approach provides us with a balanced perspective, reflecting industry, performance and company size considerations as they affect executive pay. Meridian collected, analyzed and presented comprehensive market data, including base salary and target short- and long-term incentive amounts, for each of our executive officers, including our then current NEOs, from both published proxy data and Equilar’s Executive Compensation Survey.

 

 

 

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For 2021, the companies comprising the proxy peer group included:

 

 

 

    

 

      

 

     Relative to BFH       

 

 

Company Name

   Symbol      Market Cap ($B)
as of 2/27/2022
     Market Cap     Revenue      Fiscal 2021
Revenue ($M)(1)
 

Bread Financial Holdings, Inc.

     BFH        3.4                     3,655  

Ally Financial Inc.

     ALLY        16.8        5.0 ×      2.4 ×       8,671  

Capital One Financial Corporation

     COF        63.5        18.8 ×      8.9 ×       32,379  

Citizens Financial Group, Inc.

     CFG        22.4        6.6 ×      1.9 ×       7,058  

Comerica Incorporated

     CMA        12.5        3.7 ×      0.9 ×       3,351  

Discover Financial Services

     DFS        35.7        10.6 ×      3.9 ×       14,378  

Fifth Third Bancorp

     FITB        32.8        9.7 ×      2.3 ×       8,265  

Huntington Bancshares Incorporated

     HBAN        22.4        6.6 ×      1.6 ×       5,958  

KeyCorp

     KEY        23.5        7.0 ×      2.1 ×       7,683  

M&T Bank Corporation

     MTB        23.6        7.0 ×      1.7 ×       6,067  

Mastercard Incorporated

     MA        360.8        106.8 ×      5.2 ×       18,884  

PayPal Holdings, Inc.

     PYPL        129.2        38.2 ×      6.9 ×       25,371  

Regions Financial Corporation

     RF        22.8        6.7 ×      1.9 ×       6,960  

Santander Consumer USA Holdings Inc.(2)

     SC        N/A        N/A       N/A        N/A  

SVB Financial Group

     SIVB        36.6        10.8 ×      1.6 ×       5,794  

Synchrony Financial

     SYF        22.5        6.7 ×      2.6 ×       9,466  

 

(1)

Source: Standard & Poor’s Capital IQ, whose methodology seeks to standardize revenue calculations.

(2)

Santander was the subject of a take-private transaction that closed in January 2022.

 

MARKET REVIEW

Market data provides an important benchmark by indicating what an executive officer could expect to earn at a comparable company and what we might expect to pay if we should have to recruit and compete for outside executive talent. Market data, however, is only one factor that the Compensation & Human Capital Committee considers in assessing the reasonableness of compensation provided to our NEOs. The committee also considers other relevant factors, including an NEO’s experience, breadth of knowledge, talent supply and demand that may be industry or application specific, cost constraints, internal compensation equity considerations, Company performance, individual performance, expected future contributions, prior compensation and retention risk for each NEO.

When conducting the market review, the Compensation & Human Capital Committee reviews each component of compensation in relation to certain percentiles of both the proxy peer group and the general industry group surveyed. Generally, the committee targets at the 50th percentile each component of our NEOs total direct compensation (base salary plus target AIC plus target LTIC). However, the committee may set any element of an NEO’s total direct compensation above or below the 50th percentile based on factors such as an NEO’s skill level, performance, seniority, workload, span of control, retention considerations and institutional knowledge. We believe compensation provided to our NEOs, vis-à-vis the proxy peer group and the general industry group companies surveyed, is appropriate given the success of our NEOs in guiding the Company

 

 

 

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