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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE

SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO.     )

 

 

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 Pursuant to Section 240.14a-12

W. R. BERKLEY CORPORATION

(Name of Registrant as Specified In Its Charter)

 

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


Table of Contents

LOGO

W. R. BERKLEY CORPORATION

475 Steamboat Road

Greenwich, Connecticut 06830

Tel: (203) 629-3000 • www.berkley.com

To our fellow shareholders:

Thank you for your continued ownership and support of W. R. Berkley Corporation. Your vote is important to us and, on behalf of our Board of Directors, we encourage you to cast your ballot on the items discussed in the Proxy Statement using the attached proxy card or by voting via telephone or online.

We are extremely pleased with our Company’s 2021 performance. Insurance prices rose in response to rising loss costs, businesses began to reopen, and our alternative investments performed exceptionally well. Yet our results were not simply a product of the environment, but rather a reflection of our strategy and the knowledge and dedication of our people. Throughout the insurance cycle, we diligently focus on managing the business for long-term above-average risk-adjusted returns. This requires discipline and patience in the softer parts of the property casualty insurance market cycle and positions us well for the future. Our diligence was rewarded in 2021, and we remain optimistic about every aspect of our enterprise as we look forward to the remainder of 2022 and beyond.

As always, we produced these results because together our Board of Directors and our employees are the Company’s largest shareholders, giving them a long-term perspective and clarity of purpose. Our core values, highlighting the importance of people, allocating capital to the best opportunities and fulfilling our commitments, has always set us apart and is reflected in our superior long-term results.

The COVID-19 pandemic and its economic and societal impacts have made the past two years very difficult for everyone. Despite the stresses and strains, our employees have demonstrated incredible professional and personal resiliency, working hand-in-hand to help us fulfill our commitments to our customers and supporting the communities where we live and work by volunteering their time and skills and contributing to worthy causes.

Amidst it all, we continued to focus on our people by investing heavily in education and training, enhancing our recruitment and retention efforts and further expanding our enterprise-wide diversity, inclusion and belonging program. As a company of people who serve people, we recognize that preparing our employees for the future enhances our value to our customers and makes our business and our communities better for all of our stakeholders.

Engagement with our independent shareholders remains extremely strong and continues to focus on the environmental and social issues that dominate the current public discourse. We are exploring opportunities to further enhance our reporting on these issues and look forward to continuing this important dialogue with you, our fellow owners.

We thank our employees for their commitment to meeting the needs of our customers, agents, brokers and communities. It is because of them that our business continues to do well and we have been able to successfully adjust and adapt. Their dedication to our values will allow us the opportunity to continue delivering superior risk-adjusted returns and growth in shareholder value in a manner that we can all be proud of for years to come.

Sincerely,

 

LOGO    LOGO
William R. Berkley    W. Robert Berkley, Jr.
Executive Chairman    President and Chief Executive Officer

“Always do right. This will gratify some people and astonish the rest.”

— Mark Twain


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LOGO

W. R. BERKLEY CORPORATION

475 Steamboat Road

Greenwich, Connecticut 06830

 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

June 15, 2022

 

 

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”) of W. R. Berkley Corporation (the “Company”) will be held at its executive offices at 475 Steamboat Road, Greenwich, Connecticut, on Wednesday, June 15, 2022 at 1:30 p.m. for the following purposes:

 

(1)

To elect as directors to serve until their successors are duly elected and qualified the four nominees named in the accompanying proxy statement;

 

(2)

To approve and adopt an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 750,000,000 to 1,250,000,000;

 

(3)

To consider and cast a non-binding advisory vote on a resolution approving the compensation of the Company’s named executive officers pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, or “say-on-pay” vote;

 

(4)

To ratify the appointment of KPMG LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2022; and

 

(5)

To consider and act upon any other matters which may properly come before the Annual Meeting or any adjournment thereof.

In accordance with the Company’s By-Laws, the Company’s Board of Directors has fixed the close of business on April 18, 2022 as the date for determining stockholders of record entitled to receive notice of, and to vote at, the Annual Meeting.

We intend to hold our Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19) developments; we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. We may impose additional procedures or limitations on Annual Meeting attendees, such as requesting proof of vaccination, masking or rapid testing. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the Annual Meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please refer to the Events and Presentations tab of our corporate website at https://ir.berkley.com/news-and-events/events-and-presentations/default.aspx for updated information. If you are planning to attend our Annual Meeting in person, please check the website one week prior to the Annual Meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.

By Order of the Board of Directors,

PHILIP S. WELT

Executive Vice President – General Counsel and Secretary

Dated: April 29, 2022


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Table of Contents

 

2022 Annual Meeting of Stockholders

 

    

 

1

 

 

 

 

 

Alignment with Stockholder Interests

     2  

2021 Business Highlights

     3  

2021 ESG Highlights

     4  

 

Industry Background and Corporate Strategy

 

  

 

 

 

 

5

 

 

 

 

 

 

Our Business Must Be Managed with a Long-Term Perspective

     5  

Our Long-Term Perspective Has Driven Superior Stockholder Value Creation

     9  

 

Proposal 1: Election of Directors

 

  

 

 

 

 

10

 

 

 

 

 

 

Our Directors and Director Nominees

     10  

 

Proposal 2: Amendment of Restated Certificate of Incorporation to Increase Authorized Common Stock

 

  

 

 

 

 

16

 

 

 

 

 

 

 

Proposal 3: Non-Binding Advisory Vote on Executive Compensation

 

  

 

 

 

 

17

 

 

 

 

 

 

 

Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm

 

  

 

 

 

 

19

 

 

 

 

 

 

 

Executive Officers

 

  

 

 

 

 

20

 

 

 

 

 

 

 

Corporate Governance and Board Matters

 

  

 

 

 

 

21

 

 

 

 

 

 

Highlights

     21  

Board Committees

     23  

Additional Information Regarding the Board of Directors

     29  

Compensation Committee Interlocks and Insider Participation

     33  

Code of Ethics

     33  

Environmental, Social and Governance (ESG) Summary

     34  

Board Oversight of Human Capital Management and Corporate Culture

     36  

Communications with Non-Management Directors

     37  

 

Transactions with Management and Others

 

  

 

 

 

 

38

 

 

 

 

 

 

 

Compensation Discussion and Analysis

 

  

 

 

 

 

39

 

 

 

 

 

 

Compensation Discussion and Analysis — Table of Contents

     39  

Introduction

     40  

Executive Compensation Policies and Practices

     41  

Stockholder Outreach

     42  

Executive Compensation Objectives, Philosophy and Design

     43  

Additional Design Information

     45  

Use of Market and Peer Group Data

     51  

Executive Compensation Decisions During the Last Year

     53  

Severance and Change in Control Benefits

     60  

Other Policies and Considerations

     61  


Table of Contents

 

Compensation Committee Report

 

  

 

 

 

 

63

 

 

 

 

 

 

 

Discussion of Risk and Compensation Plans

 

  

 

 

 

 

64

 

 

 

 

 

 

 

 

 

Executive Compensation

 

  

 

 

 

 

66

 

 

 

 

 

 

Summary Compensation Table

     66  

Plan-Based Awards

     67  

Outstanding Equity Awards

     68  

Option Exercises and Stock Vested

     70  

Non-Qualified Deferred Compensation

     70  

Potential Payments Upon Termination or Change in Control

     71  

Director Compensation

     74  

CEO Pay Ratio

     75  

Equity Compensation Plan Information

     76  

 

Audit Committee Report

 

  

 

 

 

 

77

 

 

 

 

 

 

 

Audit and Non-Audit Fees

 

  

 

 

 

 

78

 

 

 

 

 

 

Pre-Approval Policies

     78  

 

Principal Stockholders and Ownership by Directors and Executive Officers

 

  

 

 

 

 

79

 

 

 

 

 

 

 

Other Matters to Come Before the Meeting

 

  

 

 

 

 

82

 

 

 

 

 

 

 

General Information

 

  

 

 

 

 

83

 

 

 

 

 

 

 

Outstanding Stock and Voting Rights

 

  

 

 

 

 

91

 

 

 

 

 

 

 

Stockholder Nominations for Board Membership and Other Proposals

 

  

 

 

 

 

92

 

 

 

 

 

 

 

Annex A: Forward-Looking Statements

 

  

 

 

 

 

A-1

 

 

 

 

 

 


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LOGO

 

 

W. R. BERKLEY CORPORATION

PROXY STATEMENT

 

 
         
 

 

ANNUAL MEETING OF STOCKHOLDERS

June 15, 2022

 
            

Your proxy is being solicited on behalf of the Board of Directors of W. R. Berkley Corporation (the “Company”) for use at the Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment thereof. On April 29, 2022, we began mailing to stockholders of record either a Notice of Internet Availability of Proxy Materials (“Notice”) or this proxy statement and proxy card and the Company’s Annual Report for the year ended December 31, 2021.

2022 Annual Meeting of Stockholders

 

LOGO

 

Date and Time:

Wednesday, June 15, 2022 at 1:30 p.m.

 

Location:

W. R. Berkley Corporation, 475 Steamboat Road, Greenwich, Connecticut 06830

 

Record Date:

April 18, 2022

 

 

Proposal

 

 

 

Discussion

Beginning

on Page

 

 

 

Vote Required to

Adopt Proposal

 

 

 

Board

Recommendation

 

 

Broker

Discretionary

Voting

Allowed

 

 

 

Effect of

Abstentions

 

 

 

Effect of

Broker

Non-Votes

 

 

1. Election of four directors

 

 

10

 

 

 

Majority of the votes cast at the Annual Meeting (i.e., more shares voted “FOR” election than “AGAINST” election)

 

 

 

FOR

 

 

No

 

 

     No effect

 

 

   No effect

 

2. Approval of an Amendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 750,000,000 to 1,250,000,000

 

 

16

 

 

 

The vote of the holders of a majority of the stock outstanding and entitled to vote at the Annual Meeting

 

 

FOR

 

 

Yes

 

 

     Same effect as

     a vote against

 

 

   Same effect as a vote against

 

3. Non-binding advisory vote to approve the 2021 compensation of our named executive officers

 

 

17

 

 

 

The vote of the holders of a majority of the stock having voting power present in person or represented by proxy at the Annual Meeting

 

 

 

FOR

 

 

No

 

 

     Same effect as

     a vote against

 

 

   No effect

 

4. Ratification of appointment of independent registered public accounting firm for 2022

 

 

19

 

 

 

The vote of the holders of a majority of the stock having voting power present in person or represented by proxy at the Annual Meeting

 

 

 

FOR

 

 

Yes

 

 

     Same effect as

     a vote against

 

 

   Not applicable

In order for business to be conducted, a quorum of a majority of our common stock outstanding and entitled to vote must be present either in person or by proxy at the Annual Meeting. Abstentions and broker non-votes are included in determining whether a quorum is present. The effects of abstentions and broker non-votes on the matters to be voted on are described in the table above.

 

2022 Proxy Statement   1


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ALIGNMENT WITH STOCKHOLDER INTERESTS

 

 

LONG-TERM VALUE CREATION

 

 

     

 

Performance

 

   

Governance

 

   

Alignment

 

 

MANAGEMENT AND THE BOARD

OF DIRECTORS ARE FOCUSED

ON LONG-TERM VALUE CREATION

   


 

 

 

 

 

OUR CORPORATE GOVERNANCE IS

ALIGNED WITH LONG-TERM

PERSPECTIVE

   


 

 

 

 

 

OUR COMPENSATION PROGRAMS ARE

DESIGNED TO ALIGN INTERESTS

WITH STOCKHOLDERS

     

 Superior risk-adjusted underwriting results Pages 3, 6, 56

 

 Above average risk-adjusted investment returns Pages 3, 7, 9, 56

 

 Prudent capital management Pages 3, 56

 

 Disciplined cycle management is key to long-term success Pages 3, 5

 

 Grow when pricing is strong and reduce volume when prices are inadequate Pages 3, 5

 

 Effectively manage volatility, including from catastrophic events Pages 6, 7, 56

 

 Pursue strategies to build value for the future Pages 7-8

 

 Our long-term return on equity (“ROE”) and total value creation have consistently outperformed the industry and our peers Pages 7, 9, 52, 56

 

 Our total value creation over the last 20 years has been achieved with significantly less volatility than our peers Page 7

 

 Our three- and five-year average Total Shareholder Return rank in the 89th percentile of our peers Page 52

 

 Average annual gain in book value per share (with dividends included) since 1974 of 16.6% has outpaced the S&P 500® Index by 3.6 points Page 9

   

 80% independent directors Pages 10, 22

 

 Board members bring diverse backgrounds, skills, experience and perspectives Pages 12-15, 26-27

 

 Diversified tenure of directors balances Board refreshment with benefit of overseeing the full insurance cycle
Pages 30-31

 

 38% of independent Board members refreshed in the last 5 years Page 33

 

 Separate Executive Chairman and Chief Executive Officer Pages 21, 29

 

 Independent lead director who presides at executive sessions of the Board rotates among the Chair of the Audit Committee, the Chair of the Compensation Committee and any non-management members of the Executive Committee Pages 29-30

 

 Significant required stock ownership by NEOs and directors. Shares held until separation from service. Prohibition on pledging shares used to satisfy ownership requirements. Page 61, 74

 

 Directors and executive officers as a group own 22.5% of the Company’s stock as of April 18, 2022 Page 81

 

 Board oversight of Enterprise Risk Management with ERM management committee that regularly reports to the Board Page 32

 

 Board oversight of Environmental, Social and Governance with ESG management committee that regularly reports to the Board Page 34

 

 Board oversight of human capital management and corporate culture Pages 36-37

   

 CEO and other NEOs’ compensation are 92% and 84%, respectively, performance-based and at-risk
Page 40

 

 58% of CEO and 52% of NEO compensation are long-term and subject to clawback Page 40

 

 NEOs do not receive shares from vested Restricted Stock Unit awards until separation from service
Pages 40, 43, 48

 

 Annual cash incentive awards are performance-based and non-formulaic to discourage short-term oriented behavior that can hurt long-term performance in our industry Pages 43, 45-47

 

 Determination of the NEOs’ annual cash incentive awards are based on financial performance for the current year, financial performance compared to peers, and contributions to long-term value creation Pages 45, 47, 55

 

 100% of long-term compensation, and 63% of CEO’s incentive compensation, are formulaic Page 40

 

 Executive Chairman’s compensation reflects his active role in strategy and investments and his instrumental role in the strategy and investment opportunities that have generated significant realized gains Page 54

 

 CEO compensation is well-aligned with performance, as the Company’s performance ranks in the top quartile of our peers Page 52

 

 Compensation peer group comprised of relevant industry peers Page 51

 

 

FUNDAMENTAL UNDERSTANDING

THAT PROPERTY CASUALTY INSURANCE

IS A LONG-TERM AND CYCLICAL BUSINESS

 

 

 

 

2   W. R. Berkley Corporation


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2021 Business Highlights

 

 

16.2%

  $3.66   $25.09

 

Return on

Stockholders’ Equity

Averaged 12% over the past

5 years

 

 

Net Income Per

Diluted Share

Grew 76% over

the past 5 years

 

Book Value Per Share

Grew 64% over the past

5 years before dividends and share repurchases

Per share amounts in the table above reflect the 3-for-2 common stock split effected on March 23, 2022.

Our Company had a record year on many fronts in 2021, despite industry-wide catastrophe losses and continuing low interest rates. We reported record full-year underwriting income and net income of $845.3 million and $1.0 billion, respectively, combined with net investment income that was just shy of the record reported for 2018. Our 16.2% return on equity in 2021 exceeded our long-term goal of 15%, while our 12.5% growth in book value per share before dividends and share repurchases equaled our target.

 

 

89.6%

  $9.5B   $8.9B

 

Combined Ratio

 

 

Total Revenues

 

 

Record Net Premiums Written

Gross and net premiums written grew 20.9% and 22.0% to a record $10.7 billion and $8.9 billion, respectively. Growth was fueled by continued strong rate increases in all lines of business, except workers’ compensation, combined with higher exposure growth. Our results also benefited from our continued focus on terms and conditions, attachment points and limits, and risk selection, as well as expense management. Our underwriting results continued to outperform with an 89.6% combined ratio that was 10.0 points better than the property casualty insurance industry’s 99.6%. Our strategy positions us well for expansion in improving rate environments, such as we are currently experiencing.

Our financial performance allowed us to reward our stockholders by returning approximately 47% of net income through ordinary dividends and share repurchases, while still growing reported book value per share by 6%.

 

 

LOGO

 

 

2022 Proxy Statement   3

 

 


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2021 ESG Highlights

We are committed to promoting good environmental, social and governance practices throughout the organization. In 2021, we continued to focus on these practices as an extension of our core guiding principle that “Everything Counts, Everyone Matters®”.

Advancing Diversity, Inclusion and Belonging

 

 

LOGO

 

In 2021, we continued to strengthen our diversity, inclusion and belonging (DIB) efforts and build upon the extensive work being done at our businesses in this area, through our corporate DIB Committee. The committee is a tool for driving continued participation at all levels of the Company and providing a framework that each individual business can adapt to support this important area in our organization.

 

We have been actively engaging and soliciting feedback from employees regarding our DIB efforts. Recent employee engagement surveys revealed high marks for our existing DIB policies, culture and activities. We also learned that our employees wanted additional training and

opportunities for dialogue on these topics. As a result, in 2021 we introduced new diversity training, added education materials in our online learning system, created a platform to provide a forum to share information and held live events to discuss these areas. By giving voice to our employees and increasing learning resources on this topic, we are creating a more aware and empowered workforce with a greater focus on improving not just our numbers, but our behaviors and culture. We remain focused on the importance of diversity in our business and look to all of our employees to support our culture of inclusivity and belonging.

Managing Climate Risk

 

Supporting the transition to a low carbon economy by investing in green bonds, helping our clients manage their catastrophe risks and exposures through our products and services and looking for opportunities to underwrite more companies that are shifting their business to cleaner energy sources remained an important focus in 2021. We also continued to expand our tools for understanding our catastrophe exposure, including wildfire and severe convective storm risk; and, for operations in the U.S., we began transitioning our fleet of cars to hybrid sedans and SUVs. Providing information to stakeholders regarding climate risks, opportunities and actions is another priority. In our 2021 Sustainability Report, we enhanced the discussion of climate change opportunities, climate risk measurement and reporting, other climate-related risks and investments in sustainable value.

  LOGO

For more information, see our 2021 Sustainability Report on the Investor Relations page of our corporate website.

 

 

 

4   W. R. Berkley Corporation


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    INDUSTRY BACKGROUND AND CORPORATE STRATEGY    

 

 

Industry Background and Corporate Strategy

Our Business Must Be Managed with a Long-Term Perspective

 

LOGO

 

The property casualty insurance business has historically been cyclical. It can take an extended time for insured losses to be reported, ultimate costs to be determined and final payments to be made, especially for liability claims. The uncertainty of insurers’ ultimate loss costs and fluctuating competitive conditions result in alternating periods of “hard” markets (more profitable for insurers) and “soft” markets (less profitable for insurers). Various lines of property casualty insurance generally improve (or deteriorate) concurrently, but not necessarily at the same pace, and can at times move in different directions.  

 

 

 

 

 

LOGO

Because this cyclicality can cause variability in results over time, an insurer’s results should be considered over the entire length of the cycle.

 

 

We manage our business to outperform over the full insurance cycle. Managing a property casualty insurance company for the long term requires discipline throughout the cycle, especially in soft markets. Companies that are too aggressive in soft markets can suffer large losses later, while increasing volume in hard markets can lead to profitable growth.

The Classic Insurance Cycle

 

 

LOGO

We will forgo top-line growth when prudent and pursue top-line growth when advantageous to maximize long-term profitability.

 

 

 

2022 Proxy Statement   5

 

 


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    INDUSTRY BACKGROUND AND CORPORATE STRATEGY    

 

 

 

Losses from large events cause significant volatility in industry results. We seek to maximize returns on a risk-adjusted basis. As a result, our historical catastrophe losses from major industry events have been significantly lower than industry averages.   LOGO

We manage our business with an appropriate consideration of volatility in analyzing risk.

 

 

The relative lack of volatility in our results has contributed to superior long-term performance.

 

LOGO    LOGO

The graph above on the left shows that our accident year loss ratios have outperformed the property casualty insurance industry for 15 years. Accident year loss ratios are a key measure of profitability, representing accident year losses as a percent of earned premium. (A lower loss ratio is better.) The graph above on the right shows the impact of catastrophe losses on those loss ratios, and the dramatically less volatility for our Company.

Our outperformance is a result of our disciplined underwriting and risk management.

The cornerstone to long-term success is understanding risk-adjusted return. All returns are not created equal, and we focus on the risks we are taking to achieve our returns and create stockholder value.

 

 

 

 

 

6   W. R. Berkley Corporation


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    INDUSTRY BACKGROUND AND CORPORATE STRATEGY    

 

 

We seek to maximize returns on a risk-adjusted basis over the long term by limiting volatility in all aspects of our business. Catastrophes are only one source of volatility for property casualty insurance companies. Rising loss costs, social and financial inflation, and changes in the judicial or political climate also can drive volatility. We attempt to address these risks through pricing, terms and conditions, and risk selection and by focusing on products with lower individual policy limits, primarily issuing policies with defined aggregate limits, and attempting to avoid unfavorable or unpredictable political or legal environments.  

LOGO

 

Based on a composite of 27 property and casualty insurers. Excludes companies with coefficients of variation that exceed 275%. Source: Dowling & Partners.

Over the long term, we have created more value for stockholders with less volatility than most of our peers.

 

 

 

Strategies that we pursue to create long-term value may result in short-term expenses, but they ultimately benefit long-term ROE and build value for the future. An example is our strategy of starting businesses rather than acquiring them. Costs are expensed as they occur, avoiding the creation of intangible assets. This allows us to build the business in a more controlled way, and develop a culture at each business that is consistent with our values.  

 

 

LOGO

We make long-term decisions to enhance long-term ROE and build stockholder value.

 

 

 

 

2022 Proxy Statement   7

 

 


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    INDUSTRY BACKGROUND AND CORPORATE STRATEGY    

 

 

 

Investing for capital gains enhances our ROE. Our total-return investment strategy is designed to support our long-term return. In response to the extended low interest rate environment, we have increased our investments in private equity, real estate and other asset classes. These changes have caused us to give up some current investment income, but the gains have ultimately benefited our ROE when viewed over longer periods.   

 

LOGO

We remain focused on total risk-adjusted return for stockholders.

We continue to have the potential to realize unrealized gains that are not reflected on our balance sheet. For certain of our investments, accounting rules depart from the underlying economics and require us to carry the investments at a value other than fair value. The appreciation in the value of certain of these investments is therefore not fully reflected in our book value until they are sold, and we have the ability to hold these assets during times of market stress.

Net realized gains on investment sales have contributed an average of nearly 2.5% per year to our ROE over the past 10 years.

 

 

 

We maintain a strategic posture with respect to inflation. Because of the extended low interest rate environment and relatively flat yield curve, we shortened the duration of our bond portfolio over the past several years to less than 2.5 years, while maintaining its high quality with an average rating of AA-. As a result, there has been less volatility relative to our peers in our book value from mark-to-market accounting and we are better positioned for a rising interest rate environment.    LOGO

As investment income is an important component of our economic model, we will continue to position our portfolio to take advantage of opportunities to manage the yield curve as well as the impact of potential inflation on book value.

 

 

 

8   W. R. Berkley Corporation


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    INDUSTRY BACKGROUND AND CORPORATE STRATEGY    

 

 

Our Long-Term Perspective Has Driven Superior Stockholder Value Creation

 

LOGO

 

Since our initial public offering, our growth in book value per share with dividends compounded has far outpaced the S&P 500® Index. Our long-term approach to our business and careful risk management have resulted in strong profitability, below average volatility and superior long-term value creation for our stockholders.    LOGO
  

Note: W. R. Berkley Corporation’s book value per share has been adjusted for stock dividends paid from 1975 to 1983. Stock dividends were 6% in each year from 1975 to 1978, 14% in 1979, and 7% in each year from 1980 to 1983. The Company has paid cash dividends each year since 1976, including special dividends paid in 2012, 2014, 2016-2019 and 2021.

 

 

 

We have delivered superior returns to stockholders over the past 20 years. The Company’s total stockholder return (“TSR”) over the past 20 years has exceeded by a wide margin the TSR of the S&P 500® Index and the S&P 500® Property & Casualty Insurance Index, as illustrated in the graph to the right.    LOGO
  

The S&P 500® Property and Casualty Insurance Index consists of Allstate Corporation, Chubb, Ltd., Cincinnati Financial Corporation, Loews Corporation, Progressive Corporation, The Travelers Companies, Inc., and W. R. Berkley Corporation (added Dec. 2019).

 

 

 

There is a positive correlation between long-term value creation and long-term total stockholder return, as shown by the accompanying graph. The correlation generally improves over long periods of time. We have been a top performer compared to our compensation peer group over the past 20 years.   

 

LOGO

 

2022 Proxy Statement   9

 

 


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    PROPOSAL 1: ELECTION OF DIRECTORS    

 

 

 

Proposal 1: Election of Directors

Our Directors and Director Nominees

 

LOGO

You are being asked to vote for the election of four directors. Five other directors are continuing in office. Detailed information about each director’s background, skills and areas of expertise can be found beginning on page 12.

 

  Name

 

 

Age

 

   

Director
Since

 

   

Occupation

and Experience

 

 

Term
Expiring

 

   

Independent

 

   

 

    Committee Memberships    

 

   

 

Other  

Public  
Company  
Boards  

 

 

AC

 

   

BEC

 

   

CC

 

   

NCGC

 

   

EC

 

 

Director Nominees Standing for Election

W. Robert Berkley, Jr.

    49       2001     President and Chief
Executive Officer of the
Company
    2023       No    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

        None  

Ronald E. Blaylock

    62       2001     Founder and Managing
Partner of GenNx360
Capital Partners; founder
and former Chairman
and Chief Executive
Officer of Blaylock &
Company, Inc.
    2025       Yes    

 

 

 

                   

 

 

 

  3  

(Pfizer Inc.,  
CarMax, Inc.  
and Advantage  
Solutions  
Inc.;  
Urban One,  
Inc. until  
2019)  

Mary C. Farrell

    72       2006     Chairman of the Howard
Gilman Foundation;
former Managing
Director at UBS
    2025       Yes    

 

 

 

          C                 None  

Mark L. Shapiro

    78       1974     Former Senior Consultant
to the Export-Import
Bank of the United
States; former Managing
Director of Schroder &
Co. Inc.
    2023       Yes       C/F          

 

 

 

              None  

(Boardwalk  
Pipeline  
Partners,  
LP  
until 2018)  

Directors Continuing in Office

William R. Berkley

    76       1967     Executive Chairman of
the Board of the
Company
    2024       No    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    C     None  

Christopher L. Augostini

    57       2012     Executive Vice
President—Business of
Emory University
    2024       Yes          

 

 

 

 

 

 

 

       

 

 

 

  None  

Mark E. Brockbank

    70       2001     Former Chief Executive
Officer of XL Brockbank
Ltd.
    2023       Yes    

 

 

 

 

 

 

 

             

 

 

 

  None  

María Luisa Ferré

    58       2017     President and Chief
Executive Officer of FRG,
LLC
    2023       Yes          

 

 

 

 

 

 

 

       

 

 

 

  1  

(Popular,
   Inc.)  

Jonathan Talisman

    62       2019     Founder and managing
partner of Capitol Tax
Partners
    2024       Yes          

 

 

 

 

 

 

 

       

 

 

 

  None  

Director Not Continuing in Office

Leigh Ann Pusey

    59       2018     Senior Vice President,
Corporate Affairs and
Communications, Eli Lilly
and Company
    2022       Yes                   None  
AC

Audit Committee

NCGC

Nominating and Corporate Governance Committee

BEC

Business Ethics Committee

EC

Executive Committee

CC

Compensation Committee

C

Chair

F

Audit Committee Financial Expert

 

 

 

 

10   W. R. Berkley Corporation


Table of Contents
 

 

    PROPOSAL 1: ELECTION OF DIRECTORS    

 

 

The Board of Directors, which currently has ten directors, is divided into three classes, each class generally having a term of three years. Each year the term of office of one class expires. This year the term of a class consisting of five directors expires with one director opting not to stand for re-election.

The Board of Directors intends that the shares represented by proxy, unless otherwise indicated therein, will be voted for the election of W. Robert Berkley, Jr. and Mark L. Shapiro as directors to hold office for a term of one year until the Annual Meeting in 2023 and until their successors are duly elected and qualified, and Ronald E. Blaylock and Mary C. Farrell as directors to hold office for a term of three years until the Annual Meeting in 2025 and until their respective successors are duly elected and qualified. There are no arrangements or understandings between the nominees for director and any other person pursuant to which the nominees were selected.

The persons designated as proxies reserve full discretion to cast votes for other persons in the event any such nominee is unable to serve. However, the Board of Directors has no reason to believe that any nominee will be unable to serve if elected. The proxies cannot be voted for a greater number of persons than four nominees.

Following the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors unanimously recommends a vote “FOR” all of the nominees for director.

The following table sets forth biographical and other information regarding each nominee and the remaining directors who will continue in office after the Annual Meeting.

 

2022 Proxy Statement   11

 

 


Table of Contents

 

    PROPOSAL 1: ELECTION OF DIRECTORS    

 

 

 

Director Nominees Standing for Election

 

 

W. Robert Berkley, Jr.

 

            

 

Ronald E. Blaylock

 

   

 

LOGO

 

 

 

Director Since: 2001

Age: 49

Occupation: President and Chief Executive Officer

Expiring Term: 2023

Independent: No

Committees: Executive

Other Public Company Directorships: None

     

 

LOGO

 

 

 

Director Since: 2001

Age: 62

Occupation: Founder and Managing Partner of GenNx360 Capital Partners

Expiring Term: 2025

Independent: Yes

Committees: Business Ethics, Compensation, Nominating and Corporate Governance

Other Public Company Directorships: Pfizer Inc., CarMax, Inc., and Advantage Solutions Inc.

 

 

Key Experience: President and Chief Executive Officer of the Company since October 2015 and Vice Chairman and President of Berkley International, LLC since May 2002 and April 2008, respectively. President and Chief Operating Officer of the Company from November 2009 to October 2015, Executive Vice President from August 2005 to November 2009, Senior Vice President — Specialty Operations from January 2003 to August 2005, and a variety of positions of increasing responsibility since September 1997. From July 1995 to August 1997, Mr. Rob Berkley was employed in the Corporate Finance Department of Merrill Lynch Investment Company. He serves on the Boards or is a Trustee of various charitable and educational organizations, including the W. R. Berkley Corporation Charitable Foundation. He serves on the Georgetown University Board of Trustees and the Board of Advisors of the McDonough School of Business at Georgetown. He also serves on the boards of Brunswick School and St. John’s University School of Risk Management, Insurance and Actuarial Science; Chairman of the Greenwich Hospital Board of Trustees; American Property Casualty Insurance Association (APCIA) and American Institute for Chartered Property Casualty Underwriters (The Institutes) Boards of Trustees; and is a member of the Yale New Haven Health Systems Investment Committee. He is the son of Mr. William R. Berkley.

 

Key Qualifications, Attributes or Skills: Mr. Rob Berkley’s substantial experience in all areas of the Company’s operations and of the insurance industry, as well as his service as a Director (and prior service as Chairman of the Board) of NCCI Holdings, Inc. (the nation’s largest provider of workers’ compensation and employee injury data and statistics), on the Board of Trustees of The Institutes and prior investment banking experience, enable him to bring to the Company’s Board of Directors insightful, working knowledge of the Company’s business and the insurance industry.

     

 

Key Experience: Founder and Managing Partner of GenNx360 Capital Partners, a private equity buyout firm, since 2006. Between 1993 and 2006, Mr. Blaylock was the Founder, Chairman and Chief Executive Officer of Blaylock & Company, Inc., an investment banking firm. Prior to that, he held senior management positions with PaineWebber Group and Citicorp. He currently serves on the Boards of Pfizer, Inc., CarMax, Inc. and Advantage Solutions Inc. He is currently a Trustee of Carnegie Hall and the New York University Stern School of Business. He was a director of Urban One, Inc. from 2001 to 2019, and a former member of the Board of Trustees of Georgetown University, American Ballet Theater, Covenant House, National Association of Basketball Coaches, Prep for Prep and Inner-City Scholarship Fund, and the Mebane Foundation.

 

Key Qualifications, Attributes or Skills: Mr. Blaylock’s founding and management of two financial services companies has provided him with valuable entrepreneurial business, leadership and management experience. As a result, he brings substantial financial expertise to the Company’s Board of Directors. In addition, his experience on the boards of directors of other public companies and non-profit organizations enables him to bring other public company leadership, operational and ESG perspectives and experience to the Company’s Board of Directors.

 

 

 

 

 

12   W. R. Berkley Corporation


Table of Contents
 

 

    PROPOSAL 1: ELECTION OF DIRECTORS    

 

 

 

Mary C. Farrell

 

            

 

Mark L. Shapiro

 

   

 

LOGO

 

 

 

Director Since: 2006

Age: 72

Occupation: Chairman of the Howard Gilman Foundation

Expiring Term: 2025

Independent: Yes

Committees: Business Ethics, Compensation (Chair), Executive, Nominating and Corporate Governance

Other Public Company Directorships: None

     

 

LOGO

 

 

 

Director Since: 1974

Age: 78

Occupation: Former Senior Consultant to the Export-Import Bank of the United States; former Managing Director at Schroder & Co. Inc.

Expiring Term: 2023

Independent: Yes

Committees: Audit (Chair), Business Ethics, Nominating and Corporate Governance, Executive

Other Public Company Directorships: None

 

 

Key Experience: Ms. Farrell is the Chairman and had served as President from 2009 to 2021, of the Howard Gilman Foundation. She has been a Director of Fidelity Strategic Advisor Funds since 2013. Ms. Farrell retired in July 2005 from UBS, where she served as a Managing Director, Chief Investment Strategist for UBS Wealth Management USA and Co-Head of UBS Wealth Management Investment Strategy & Research Group. Ms. Farrell is the Chairman of the Board of Yale New Haven Hospital and Vice Chairman of Yale New Haven Health System.

 

Key Qualifications, Attributes or Skills: Ms. Farrell’s career in investment banking, including serving in various leadership roles at UBS, provides valuable business experience and critical insights regarding investments, finance, strategic transactions, and diversity and inclusion. She brings considerable financial expertise to the Company’s Board of Directors, providing an understanding of financial statements, corporate finance, executive compensation and capital markets.

     

 

Key Experience: Since September 1998, Mr. Shapiro has been a private investor. From July 1997 through August 1998, Mr. Shapiro was a Senior Consultant to the Export-Import Bank of the United States. Prior thereto, he was a Managing Director in the investment banking firm of Schroder & Co. Inc. He is a trustee of The Greenacre Foundation and a member of the Brown University President’s Leadership Council. Mr. Shapiro was a director of Boardwalk Pipeline Partners, LP until 2018.

 

Key Qualifications, Attributes or Skills: Mr. Shapiro’s career in investment banking and finance provides valuable broad-based business experience and insights on the Company’s business. In addition, he brings considerable financial expertise to the Board of Directors, providing an understanding of accounting, financial statements and corporate finance. Mr. Shapiro has a professional working knowledge of the Company and its operations since the Company’s initial public offering in 1973, and his extensive service on the Company’s Board of Directors affords him a depth of understanding of the Company’s business, operations and culture.

 

 

 

2022 Proxy Statement   13

 

 


Table of Contents

 

    PROPOSAL 1: ELECTION OF DIRECTORS    

 

 

 

Directors Continuing in Office

 

 

William R. Berkley

 

          

 

Christopher L. Augostini

 

   

 

LOGO

 

 

 

Director Since: 1967

Age: 76

Occupation: Executive Chairman of the Board

Expiring Term: 2024

Independent: No

Committees: Executive

Other Public Company Directorships: None

     

 

LOGO

 

 

 

Director Since: 2012

Age: 57

Occupation: Executive Vice President — Business of Emory University

Expiring Term: 2024

Independent: Yes

Committees: Audit, Nominating and Corporate Governance

Other Public Company Directorships: None

 

 

Key Experience: Chairman of the Board since the Company’s formation in 1967 and Executive Chairman since October 2015. He served as Chief Executive Officer from 1967 to October 2015, President from March 2000 to November 2009 and held such positions at various times from 1967 to 1995. He serves on the Boards or is a Trustee of various charitable and educational organizations, including the W. R. Berkley Corporation Charitable Foundation, and Achievement First, and he is a Trustee Emeritus of the National Parks Conservation Association. He is Chair of the New York University Board of Trustees and has served in various capacities at New York University for almost three decades, including Chairman of the Board of Overseers of the Stern School of Business, and member of the Board of Trustees of the New York University Langone Medical Center, as well as Vice Chairman of the Board of Trustees at New York University. In addition, he has served as Vice Chairman of the Board of Directors of Georgetown University, where he helped create the Berkley Center for Religion, Peace, and World Affairs. He is the father of Mr. Rob Berkley.

 

Key Qualifications, Attributes or Skills: The founder of the Company, Mr. Wm. Berkley is widely regarded as one of the most distinguished leaders of the insurance industry. He provides the Company with strategic leadership, bringing to the Company’s Board of Directors deep and comprehensive knowledge of, and experience with, the Company and all facets of the insurance and reinsurance businesses. He has significant investment related experience, including oversight and management, since prior to his founding of the Company. His service as Executive Chairman of the Company creates a vital link between management and the Company’s Board of Directors, enabling the Company’s Board of Directors to perform its oversight function with the benefit of management’s insight on the business. In addition, his service on the Board of Directors provides the Company with effective, ethical and responsible leadership.

 

 

   

 

Key Experience: Mr. Augostini has served as Executive Vice President — Business of Emory University since July 2017. Previously, Mr. Augostini was Senior Vice President and Chief Operating Officer of Georgetown University, where previously he served in various positions, including as Chief Financial Officer, from 2000 to 2017; a member of New York City Mayor Rudolph Giuliani’s administration in various capacities, including chief of staff to the deputy mayor for operations, director of intergovernmental affairs, and deputy budget director from 1995 to 2000; and an analyst for the New York State General Assembly’s Higher Education Committee and its Ways and Means Committee in the late 1980s and early 1990s. He began his career conducting workforce and economic development research at the Nelson A. Rockefeller Institute of Government, the public policy arm of the State University of New York higher education system. Mr. Augostini serves as a member of the Board of Directors of Emory Health Care (EHC), Emory Innovations Inc., Clifton Casualty Insurance Company LTD, the Georgia Chamber of Commerce and EMTECH, Inc. He is a former member of the Joint Advisory Board of the Georgetown University/Qatar Foundation, and the Atlanta Midtown Alliance.

 

Key Qualifications, Attributes or Skills: Mr. Augostini’s extensive experience at senior levels of both a major university and in government enables him to provide valuable business, leadership and management insights to the Company’s Board of Directors. Mr. Augostini possesses operational, financial, management and investment expertise.

 

 
           

 

 

 

14   W. R. Berkley Corporation


Table of Contents
 

 

    PROPOSAL 1: ELECTION OF DIRECTORS    

 

 

 

Mark E. Brockbank

 

          

 

María Luisa Ferré

 

   

 

LOGO

 

 

 

Director Since: 2001

Age: 70

Occupation: Former Chief Executive Officer of XL Brockbank Ltd.

Expiring Term: 2023

Independent: Yes

Committees: Compensation, Nominating and Corporate Governance

Other Public Company Directorships: None

     

 

LOGO

 

 

 

 

Director Since: 2017

Age: 58

Occupation: President and CEO of FRG, LLC

Expiring Term: 2023

Independent: Yes

Committees: Audit, Nominating and Corporate Governance

Other Public Company Directorships: Popular, Inc.

 

 

Key Experience: Mr. Brockbank retired from active employment in November 2000. He served from 1995 to 2000 as Chief Executive of XL Brockbank Ltd., an underwriting management agency at Lloyd’s of London. He was a founder of the predecessor firm of XL Brockbank Ltd. and was a director of XL Brockbank Ltd. from 1983 to 2000. He serves as a director of the International Emerging Film Talent Association, Monaco (IEFTA).

 

Key Qualifications, Attributes or Skills: Mr. Brockbank’s service as Chief Executive of XL Brockbank Ltd. provides him with valuable entrepreneurial business, leadership and management experience, and particular knowledge of the insurance industry. He also brings significant business acumen to the Company’s Board of Directors, including a strong understanding of insurance and reinsurance risk evaluation, executive compensation and related areas.

     

 

Key Experience: Ms. Ferré has served as President and CEO of FRG, LLC, a diversified family holding company with leading operations in media, real estate, contact centers and distribution in Puerto Rico, the United States and Chile, since 2001. She has been a Member of the Board of Directors of GFR Media, LLC since 2003 and was its Chair from 2006 to February 2016. Ms. Ferré is also the Publisher of El Nuevo Día newspaper and of Primera Hora newspaper since 2006. She has been a member of the Board of Directors of Popular, Inc. since 2004. Ms. Ferré has served as the President and Trustee of The Luis A. Ferré Foundation, Inc. since 2003. She has been the President of the Board of Directors of Multisensory Reading Center of PR, Inc. since 2012, as well as a member of the Latin American Caribbean Fund of The Museum of Modern Art since 2013 and a member of the Board of Directors of the Partnership for Modern Puerto Rico since 2019.

 

Key Qualifications, Attributes or Skills: Ms. Ferré possesses executive leadership experience and a deep understanding of business operations, ESG and diversity and inclusion issues, as well as management and oversight skills that allow her to make significant contributions to the Company’s Board of Directors. Her deep media and publishing experience enable her to provide thoughtful insight regarding the communication needs of the Company.

 

 
     

 

Director not Continuing in Office

 

 

 

Jonathan Talisman

 

           

 

Leigh Ann Pusey

 

   

 

LOGO

 

 

 

Director Since: 2019

Age: 62

Occupation: Founder and managing partner of Capitol Tax Partners

Expiring Term: 2024

Independent: Yes

Committees: Audit, Nominating and Corporate Governance

Other Public Company Directorships: None

     

 

LOGO

 

 

 

Director Since: 2018

Age: 59

Occupation: Senior Vice President, Corporate Affairs and Communications, Eli Lilly and Company

Expiring Term: 2025

Independent: Yes

Committees: Compensation, Nominating and Corporate Governance

Other Public Company Directorships: None

 

 

Key Experience: Mr. Talisman is a founder and managing partner of Capitol Tax Partners. Before forming Capitol Tax Partners in 2001, Mr. Talisman served as the Assistant Secretary for Tax Policy at the U.S. Treasury Department during the Clinton Administration. Previously, he had served at the Treasury Department as the Deputy Assistant Secretary for Tax Policy and the Tax Legislative Counsel, as the Chief Democratic Tax Counsel of the Senate Finance Committee and as Legislation Counsel to the Joint Committee on Taxation. Currently, Mr. Talisman serves on the Board of Advisors to the Tax Policy Center and was chair of the Formation of Tax Policy Committee, American Bar Association Tax Section. He also currently serves as an adjunct tax professor at Georgetown University Law Center. He was president of the board of directors at Adventure Theatre Musical Theatre Center for several years.

 

Key Qualifications, Attributes or Skills: Mr. Talisman’s founding and management of a noted government relations and tax policy firm, coupled with his extensive experience at senior levels of government, have provided him with a solid understanding of accounting, financial statements and tax matters that allow him to offer valuable business, leadership and management insights and expertise to the Company’s Board of Directors.

     

 

Key Experience: Ms. Pusey has been Senior Vice President, Corporate Affairs and Communications, Eli Lilly and Company since June 2017. She previously served as president and chief executive officer of the American Insurance Association (AIA) from 2009 to June 2017 following several other AIA leadership positions, including chief operating officer and senior vice president for government affairs from 2000 to 2009 and senior vice president of public affairs from 1997 to 2000. From 1995 to 1997, she served as director of communications for the Office of the Speaker of the U.S. House of Representatives, and from 1993 to 1994, she was the deputy director of communications for the Republican National Committee. From 1990 to 1992, Ms. Pusey served as special assistant and then deputy assistant to the president for the White House Office of Public Liaison. She currently serves as a board member of The Mind Trust. She previously served on the advisory board of The George Washington Graduate School of Political Management and the board of the Insurance Institute for Highway Safety and was a member of the U.S. Chamber of Commerce’s Committee of 100.

 

Key Qualifications, Attributes or Skills: Ms. Pusey possesses executive leadership experience and a deep understanding of the insurance business and governmental operations as well as management and oversight skills that allow her to make significant contributions to the Company’s Board of Directors. Her experience as a past president and CEO of the AIA enable her to provide thoughtful insight regarding the operations of the Company, including its approach to diversity and inclusion.

 

 

 

2022 Proxy Statement   15

 

 


Table of Contents

 

    PROPOSAL 2: AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION  TO INCREASE AUTHORIZED COMMON STOCK    

 

 

 

Proposal 2: Amendment of Restated Certificate of Incorporation to Increase Authorized Common Stock

The Board of Directors has unanimously voted to recommend that the stockholders adopt an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 750,000,000 shares to 1,250,000,000 shares. If the amendment is approved, the shares may be issued from time to time by the Board of Directors. It is not expected that further authorization from stockholders will be solicited for the issuance of any shares of common stock, except to the extent such authorization is required by law or by the rules of the New York Stock Exchange. Currently, there is no agreement, arrangement or understanding relating to the issuance or sale of the additional shares of common stock which would be authorized by the proposed amendment. Stockholders do not have, and the proposed amendment would not create, any preemptive rights.

The Company currently has 750,000,000 shares of common stock authorized. At March 31, 2022, there were 265,186,251 shares issued and outstanding, and 263,828,377 shares held in treasury. The Board of Directors believes it is desirable for the Company to have a sufficient number of shares of common stock available, as the occasion may arise, for possible future financings or acquisition transactions, stock dividends or splits (similar to the 3-for-2 stock splits effected in each of April 2019 and March 2022), stock issuances pursuant to employee benefit plans and other proper corporate purposes. Having such additional shares available for issuance in the future would give the Company greater flexibility by allowing shares to be issued without incurring the delay and expense of holding a special stockholders’ meeting.

The Board of Directors unanimously recommends a vote “FOR” this resolution.

 

 

 

16   W. R. Berkley Corporation


Table of Contents
 

 

    PROPOSAL 3: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION    

 

 

Proposal 3: Non-Binding Advisory Vote on Executive Compensation

We submit to our stockholders this non-binding advisory vote on the compensation of our “named executive officers” (“NEOs”), which gives stockholders a mechanism to convey their views about our compensation programs and policies. Although your vote on executive compensation is not binding on the Board of Directors or the Company, the Board of Directors values the views of our stockholders. The Board of Directors and Compensation Committee will review the results of the non-binding vote and consider them in addressing future compensation policies and decisions.

We believe that our executive compensation programs create a strong competitive advantage both for retaining talent and for creating long-term stockholder value. They reflect feedback from our stockholders over the preceding years, align the interests of our NEOs with those of our stockholders, and reward achievement of our strategic objectives. See “Compensation Discussion and Analysis — Executive Compensation Objectives, Philosophy and Design” on pages 43-44.

A substantial majority of our NEOs’ compensation is linked to Company performance and stockholder value over the long term.

 

  &#10147  

Annual cash incentive awards are performance-based and are primarily based on annual ROE, with additional consideration for non-financial goals and value creation items. See pages 45-47 and 55-56. Determination of an NEO’s annual cash incentive compensation award is based on the Company’s financial performance for the current year, the Company’s financial performance compared to peers, and the NEO’s contributions to long-term value creation. Annual cash incentive awards are also non-formulaic. In our industry, a formulaic short-term incentive award can encourage excessive risk-taking and imprudent short-term behavior to create near-term payouts at the expense of long-term value creation. Our annual cash incentive plan provides the Compensation Committee with flexibility to respond to market conditions and permits the application of judgment that is necessary to avoid creating incentives for our NEOs to engage in short-term oriented behavior in our industry that is detrimental to long-term value creation.

 

  &#10147  

Restricted Stock Units (“RSUs”) vest based on our ROE performance and use a series of rolling three-year performance periods, with the last period extending five years from the grant date. Additionally, for our NEOs and certain other senior executives, RSU awards include a mandatory deferral feature that delays settlement and delivery of shares until the executive’s separation from service with the Company, which further promotes a long-term perspective on performance. RSUs are also subject to recapture (i.e., clawback) if a recipient engages in misconduct during employment or breaches post-employment obligations during the one-year period following separation from the Company.

 

  &#10147  

Our Long-Term Incentive Plan (“LTIP”) further promotes our long-term approach to compensation incentives, as well as our emphasis on pay for performance, because LTIP awards remain outstanding over a five-year period and deliver targeted value only to the extent that the Company achieves the targeted or greater growth in book value per share.

 

  &#10147  

Consistent with good corporate governance practices, we do not provide our NEOs with employment agreements or cash severance agreements.

The non-binding advisory vote on this resolution is not intended to address any specific element of compensation; rather, the vote is intended to provide our stockholders the opportunity to approve, on an

 

2022 Proxy Statement   17

 

 


Table of Contents

 

    PROPOSAL 3: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION    

 

 

 

aggregate basis and in light of our corporate performance, the compensation program for our NEOs as described in this proxy statement. The following resolution is submitted for a stockholder vote at the Annual Meeting:

“RESOLVED, that the stockholders of the Company approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers listed in the 2021 Summary Compensation Table included in the proxy statement for the 2022 Annual Meeting, as such compensation is disclosed pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the section titled “Compensation Discussion and Analysis,” as well as the compensation tables and other narrative executive compensation disclosures thereafter.”

The Board of Directors unanimously recommends a vote “FOR” this resolution.

 

 

 

18   W. R. Berkley Corporation


Table of Contents
 

 

    PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRM    

 

 

Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm

KPMG LLP (“KPMG”) has been appointed by the Board of Directors as the independent registered public accounting firm to audit the financial statements of the Company for the fiscal year ending December 31, 2022. The appointment of this firm was recommended to the Board of Directors by the Audit Committee. The Board of Directors is submitting this matter to a vote of stockholders in order to ascertain their views. If the appointment of KPMG is not ratified, the Board of Directors will reconsider its action and will appoint auditors for the 2022 fiscal year without further stockholder action. Further, even if the appointment is ratified by stockholder action, the Board of Directors may at any time in the future in its discretion reconsider the appointment without submitting the matter to a vote of stockholders.

It is expected that representatives of KPMG will attend the Annual Meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.

Information on KPMG’s fees for 2021 and our pre-approval policy for services provided by the Company’s independent auditors is provided under “Audit and Non-Audit Fees” on page 79.

The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of KPMG LLP.

 

2022 Proxy Statement   19

 

 


Table of Contents

 

    EXECUTIVE OFFICERS    

 

 

 

Executive Officers

Each executive officer who does not also serve as a director is listed below. The executive officers are elected by the Board of Directors annually and serve at the pleasure of the Board of Directors. There are no arrangements or understandings between the executive officers and any other person pursuant to which the executive officers were selected. The information is provided as of April 18, 2022.

 

 

  Name

 

  

 

Age

 

 

 

Position

 

 

  Richard M. Baio

 

  

 

53

 

 

 

Executive Vice President — Chief Financial Officer

 

 

  Lucille T. Sgaglione

 

  

 

72

 

 

 

Executive Vice President

 

 

  James G. Shiel

 

  

 

62

 

 

 

Executive Vice President — Investments

 

 

  Philip S. Welt

 

  

 

62

 

 

 

Executive Vice President — General Counsel and Secretary

 

Richard M. Baio has served as Executive Vice President — Chief Financial Officer since February 2019, as Senior Vice President – Chief Financial Officer from May 2016 to January 2019, as Vice President when he joined the Company in May 2009 and as Treasurer from May 2009 to April 2021. He has more than 30 years of experience in the insurance and financial services industry, having served prior to joining the Company as a director in Merrill Lynch & Co.’s financial institutions investment banking group and as a partner in Ernst & Young’s insurance practice.

Lucille T. Sgaglione has served as Executive Vice President of the Company since December 2015. She joined the Company in 2010 as a Senior Vice President with oversight responsibility for several of the Company’s businesses and has 30 years of senior leadership experience in the commercial property casualty insurance industry.

James G. Shiel has served as Executive Vice President — Investments of the Company since June 2015, Senior Vice President — Investments from January 1997 to June 2015 and Vice President — Investments from January 1992. Since February 1994, Mr. Shiel has been President of Berkley Dean & Company, Inc., a subsidiary of the Company, which he joined in 1987.

Philip S. Welt has served as Executive Vice President — General Counsel since January 2019 and Corporate Secretary since June 2020. Mr. Welt joined the Company in 2004 as Vice President – Senior Counsel and was named Executive Vice President with oversight responsibility for certain of the Company’s businesses in 2011. Prior to joining the Company, he was an assistant general counsel – mergers and acquisitions at a major international insurer and a corporate associate with the New York law offices of Davis Polk & Wardwell. Mr. Welt is also a certified public accountant and was a senior manager at the accounting firm of Deloitte & Touche.

 

 

 

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Corporate Governance and Board Matters

Highlights

 

LOGO

 

          Majority Voting for Directors
          Majority of Independent Directors: 8 of 10 (7 of 9, following the Annual Meeting)
          Separate Chairman and CEO
          Diversified Tenure of Directors that balances board refreshment with benefit of experience of overseeing the Company over the full insurance cycle
          Regular Executive Sessions of Independent Directors with rotating presiding Director that provides for effective checks and balances to ensure the exercise of independent judgment by the Board of Directors
          Annual Board and Committee Self-Evaluations
          Independent Compensation Consultant Retained by Compensation Committee
          Risk Oversight by Full Board and Committees
          Enterprise Risk Management Committee reports regularly to the Board
          Environmental, Social and Governance (ESG) Committee reports regularly to the Board
          Rigorous Stock Ownership Requirements for Executives and Directors
          Anti-Hedging Policy
          Anti-Pledging Policy for shares satisfying NEOs’ ownership requirement
          Mandatory Deferral of Vested RSUs Until Separation from Service
          Compensation Clawback for long-term compensation plans
          Annual Equity Grant to Directors is a substantial portion of their compensation
          Statement of Business Ethics for the Board of Directors and Code of Ethics for Senior Financial Officers
 

 

   

 

 

 

  Robust Continuing Investor Outreach Program

Our Board of Directors is committed to sound and effective corporate governance practices. Accordingly, our Board of Directors has adopted written Corporate Governance Guidelines, which address, among other things:

 

  &#10147  

identification of director candidates;

 

  &#10147  

director qualification (including independence) standards;

 

  &#10147  

director responsibilities;

 

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  &#10147  

director access to management and independent advisors;

 

  &#10147  

employee, officer or other interested party communications with non-management members of the Board of Directors;

 

  &#10147  

director compensation;

 

  &#10147  

director orientation and continuing education;

 

  &#10147  

director election procedures;

 

  &#10147  

management succession; and

 

  &#10147  

annual performance evaluation of the Board of Directors.

Our Corporate Governance Guidelines are available on our website at www.berkley.com.

Director Independence and Involvement

 

    

The Board of Directors is currently composed of ten directors, all of whom, other than Messrs. Wm. Berkley and Rob Berkley, have been determined by the Board of Directors (1) to be independent in accordance with applicable New York Stock Exchange (“NYSE”) corporate governance rules and (2) not to have a material relationship with the Company which would impair their independence from management or otherwise compromise their ability to act as an independent director. Following the Annual Meeting, the Board will be comprised of nine directors, seven of whom are independent.

The Board of Directors held five meetings during 2021. All of the directors attended 100% of the meetings of the Board of Directors. Each director attended 100% of the meetings of the Board committees on which he or she served, except one director who attended 88% of such meetings. All of the directors attended the Company’s 2021 virtual Annual Meeting.

 

 

LOGO   LOGO

 

 

 

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Board Committees

 

LOGO

The Board of Directors has five standing committees: Audit, Business Ethics, Compensation, Nominating and Corporate Governance and Executive. The charters for the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are available on our website at www.berkley.com. The table below provides membership and meeting information for each of these committees for 2021.

 

 

Committees

 

    

Audit

 

  

Business

Ethics(1)

 

  

Compensation

 

  

 

Nominating and
Corporate
Governance(2)

 

  

Executive  

 

Meetings in 2021

   9    1    5    2    None

Committee Member

Christopher L. Augostini

   M          M   

William R. Berkley

               C

W. Robert Berkley, Jr.

               M

Ronald E. Blaylock

      M    M    M   

Mark E. Brockbank

         M    M   

Mary C. Farrell(3)

      M    C    M    M

María Luisa Ferré

   M          M   

Leigh Ann Pusey

         M    M   

Mark L. Shapiro

   C/F    M       M    M

Jonathan Talisman

   M              M     

 

M   Member

    

C    Chair

    

F  Audit Committee Financial Expert

(1) 

The chair of the Business Ethics Committee is selected by rotation among the members.

(2) 

The chair of the Nominating and Corporate Governance Committee is selected by rotation among the chair of the Audit Committee, the chair of the Compensation Committee and the non-management member of the Executive Committee who does not already chair another committee, if any.

(3) 

Effective February 2021, Ms. Farrell was appointed as a member of each of the Business Ethics Committee and the Executive Committee.

Audit Committee. The Audit Committee, which held nine meetings during 2021, is appointed by the Board of Directors to assist the Board of Directors in monitoring:

 

  &#10147  

the integrity of the financial statements of the Company;

 

  &#10147  

the independent auditors’ qualifications and independence;

 

  &#10147  

the performance of the Company’s internal audit function and independent auditors; and

 

  &#10147  

compliance by the Company with legal and regulatory requirements.

The Audit Committee has also adopted procedures to receive, retain and treat any complaints received regarding accounting, internal accounting controls or auditing matters and provide for the anonymous, confidential submission of concerns regarding these matters.

 

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Each member of the Audit Committee is independent under the rules of the Securities and Exchange Commission (the “SEC”) and the NYSE. The Board of Directors has identified Mr. Shapiro as a current member of the Audit Committee who meets the definition of an “audit committee financial expert” established by the SEC.

The Audit Committee has determined to engage KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2022 and is recommending that our stockholders ratify this appointment at the Annual Meeting. See Proposal 4, Ratification of Appointment of Independent Registered Public Accounting Firm on page 19 of this proxy statement.

The report of our Audit Committee is found on page 78 of this proxy statement.

Compensation Committee. The Compensation Committee, which held five meetings during 2021, has overall responsibility for discharging the Board of Directors’ responsibilities relating to the compensation of the Company’s senior executive officers and directors.

Each member of the Compensation Committee is independent under the rules of the NYSE, is a “non-employee director,” as defined in Section 16 of the Securities Exchange Act of 1934, and is an “outside director,” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

The report of our Compensation Committee on executive compensation is found on page 63 of this proxy statement.

Compensation Consultant. During 2021, the Compensation Committee retained the services of an external executive compensation consultant, Meridian Compensation Partners, LLC (“Meridian”). The mandate of the external compensation consultant is to serve the Company and work for the Compensation Committee in its review of executive and director compensation practices, including the competitiveness of pay levels, executive compensation design issues, market trends, and technical considerations. The nature and scope of services provided by the external compensation consultant on the Compensation Committee’s behalf includes:

 

  &#10147  

competitive market pay analyses, including proxy data studies, board of directors pay studies, and market trends;

 

  &#10147  

ongoing support with regard to the latest relevant regulatory, technical, and accounting considerations impacting compensation and benefit programs;

 

  &#10147  

assistance with the redesign of any compensation or benefit programs, if desired or needed; and

 

  &#10147  

preparation for and attendance at selected Compensation Committee meetings.

The Compensation Committee did not direct the external compensation consultant to perform the above services in any particular manner or under any particular method. The Compensation Committee has the final authority to hire and terminate the external compensation consultant, and the Compensation Committee evaluates the external compensation consultant periodically.

In February 2022, the Compensation Committee assessed the independence of Meridian pursuant to SEC regulations, considering various factors bearing on adviser independence, including the six factors

 

 

 

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mandated by the SEC rules. The Compensation Committee concluded that Meridian is independent from the Company’s management and that no conflict of interest exists that would prevent Meridian from independently representing the Compensation Committee. The Compensation Committee also reviewed and was satisfied that there were no business or personal relationships between members of the Compensation Committee and the individuals at Meridian supporting the Compensation Committee. The Company does not engage Meridian for any services other than its services to the Compensation Committee.

Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee, which held two meetings during 2021, assists the Board of Directors in:

 

  &#10147  

identifying individuals qualified to become members of the Board of Directors (consistent with criteria approved by the Board of Directors);

 

  &#10147  

recommending that the Board of Directors select the director nominees for the next annual meeting of stockholders or for other vacancies on the Board of Directors;

 

  &#10147  

overseeing the evaluation of the Board of Directors and management;

 

  &#10147  

reviewing the corporate governance guidelines and the corporate code of ethics; and

 

  &#10147  

generally advising the Board of Directors on corporate governance and related matters.

All of the members of the Nominating and Corporate Governance Committee are considered independent under the rules of the NYSE. The chair of the Nominating and Corporate Governance Committee is selected by rotation among the chair of the Audit Committee, the chair of the Compensation Committee and the non-management member of the Executive Committee who does not already chair another committee, if any.

Identification of Director Candidates. The Committee may identify director candidates through the advice and assistance of internal and external advisors as it deems appropriate, and has the sole authority to retain and terminate a search firm to be used to identify director candidates on behalf of the Company.

 

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Qualifications of Director Candidates. The Company’s Corporate Governance Guidelines (the “Guidelines”) set forth certain qualifications and specific qualities that director candidates should possess. In accordance with the Guidelines, the Nominating and Corporate Governance Committee, in assessing potential director candidates, considers their independence, business, strategic and financial skills and other experience in the context of the needs of the Board of Directors as a whole, as well as a candidate’s service on the boards of directors of other public companies. The Guidelines further state that directors should:

 

    

The Nominating and Corporate Governance Committee and members of the Board identify well-qualified candidates who may have diverse skills or backgrounds needed for the Company to execute its strategic vision.

Over the last five years, we have refreshed 38% of the independent Board members, as well as 25% of the Compensation Committee, 38% of the Nominating and Corporate Governance Committee and 50% of the Audit Committee, improving the Board’s gender, age and diversity and enhancing the Board’s collective expertise—notably in communications, governmental operations, tax and other public company leadership and board experience.

 

  &#10147   bring to the Company a range of experience, knowledge and judgment;

 

  &#10147   have relevant business or other appropriate experience;

 

  &#10147   maintain an acceptable level of attendance, preparedness and participation with respect to meetings of the Board of Directors and its committees; and

 

  &#10147   demonstrate competence in one or more of the following areas: accounting or finance, business or management experience, insurance or investment industry knowledge, crisis management, or leadership and strategic planning.
 

In identifying and recommending director nominees, the Nominating and Corporate Governance Committee members may take into account such factors as they determine appropriate and will assess the qualifications of potential nominees and any potential conflicts with the Company’s interests. The Nominating and Corporate Governance Committee will also assess the contributions of the Company’s incumbent directors in connection with their potential re-nomination.

The Nominating and Corporate Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director nominees. In accordance with the Guidelines, when considering the overall composition of the Board of Directors, the Nominating and Corporate Governance Committee seeks a diverse and appropriate balance of members who have the experiences, qualifications, attributes and skills necessary to oversee a publicly traded, financially complex, growth oriented, international organization that operates in multiple regulatory environments. Candidates should have the highest standards of character and be committed to upholding the Company’s values and be independent,

 

 

 

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strong stewards of our investors’ capital. The Committee evaluates the types of backgrounds that are needed to strengthen and balance the Board of Directors based on the foregoing factors and nominates candidates to fill vacancies accordingly.

 

    

We value having directors with diverse perspectives and experience. Each of our directors has served in leadership roles and has significant experience in areas relevant to the Company. Jonathan Talisman was elected to the Board of Directors in 2019, following the addition of Leigh Ann Pusey in 2018 and María Luisa Ferré in 2017. The addition of these directors refreshed our Board while enhancing its diversity.

 

LOGO

LOGO     

 

 

 

 

Director Skills

 

    William R.
Berkley
  W. Robert
Berkley, Jr.
  Christopher
L. Augostini
  Ronald E.
Blaylock
  Mark E.
Brockbank
  Mary C.
Farrell
  María Luisa
Ferré
  Leigh Ann
Pusey
  Mark L.
Shapiro
  Jonathan  
Talisman  

Board of Directors / Senior Leadership Experience

  û   û   û   û   û   û   û   û   û   û

Insurance Industry Expertise

  û   û       û       û   û  

Finance & Reporting

  û   û   û   û     û   û     û   û

Risk Assessment & Management

  û   û   û   û   û   û   û   û   û   û

Start-ups/Entrepreneurial

  û   û     û   û     û       û

Investments

  û   û   û   û     û       û  

Distribution

  û   û       û       û    

Human Capital Management/Compensation

  û   û   û   û   û   û     û     û

Governance, Regulatory & Public Policy

  û   û   û       û   û   û   û   û

Environmental, Social & Governance Management

  û   û       û           û   û       û

The Nominating and Corporate Governance Committee will evaluate qualified director candidates recommended by stockholders in accordance with the criteria for director selection described above, on the same basis as any other candidates. Nominations for consideration by the Nominating and Corporate Governance Committee, together with a description of the nominee’s qualifications and other relevant information, should be sent to the attention of the Secretary, c/o W. R. Berkley Corporation, 475 Steamboat

 

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Road, Greenwich, Connecticut 06830. Stockholders may also follow the nomination procedures described under “Stockholder Nominations for Board Membership and Other Proposals” on page 93.

Other Standing Committees. During 2021, the Board of Directors had two other standing committees in addition to the committees set forth above: the Executive Committee and the Business Ethics Committee.

The Executive Committee is authorized to act on behalf of the Board of Directors during periods between Board of Directors meetings. It did not meet during 2021.

The Business Ethics Committee, which met once during 2021, administers the Company-wide business ethics program. The Business Ethics Committee reviews certain disclosures made by Company employees and directors under the Company’s Code of Ethics and Business Conduct and Statement of Business Ethics for the Board of Directors, determines if any issue presented raises an ethical concern and takes appropriate action, if any. The chair of the Business Ethics Committee is selected by rotation among the members.

 

 

 

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Additional Information Regarding the Board of Directors

 

LOGO

Board Leadership Structure. The Company’s By-Laws provide that the chairman of the Board of Directors may, but is not required to, be the chief executive officer or any other executive officer or non-executive officer of the Company. The Board of Directors regularly reviews and considers its leadership structure, including whether separation of the positions of chairman and chief executive officer is desirable.

 

The chairman and chief executive officer positions were separated in 2015 upon the appointment of Mr. Rob Berkley as President and Chief Executive Officer. This separation of roles allows the Chief Executive Officer to focus on executing the Company’s strategic plan, managing the Company’s operations and performance and providing
guidance to and oversight of senior management.

 

Mr. Wm. Berkley, Executive Chairman, founded the Company in 1967 and has been its Chairman of the Board since that time and also served as the Company’s Chief Executive Officer from 1967 to October 2015. He is also the Company’s largest stockholder with approximately 20% of the Company’s common stock.

 

Under Mr. Wm. Berkley’s strategic leadership, the Company has grown and prospered significantly, with Mr. Wm. Berkley being widely recognized for his extensive experience in and leadership of the insurance and reinsurance industries. In his role as Executive Chairman, Mr. Wm. Berkley helps the Board identify strategic priorities and investments, leads the Board in oversight and risk management responsibilities and facilitates and presides over Board meetings. The Board of Directors believes that his familiarity with the Company’s business and industry and his unique perspective on the Company’s culture and values position him well to understand the issues, opportunities and challenges the Company faces and to lead the Board in discussions and implementation of strategy.

 

The Board of Directors believes that the Company’s structure under Mr. Wm. Berkley’s leadership as Executive Chairman serves the Board and its stockholders well.

 
      
 

 

The presiding director at executive sessions of the Board of Directors, which are held at least annually, rotates among the Chairs of the Audit and Compensation Committees and the non-management members of the Executive Committee. The Board of Directors believes our structure provides different directors with diverse views the opportunity to act as independent lead and to guide the Board’s agenda, while facilitating collegiality among Board members. This structure and these processes provide the Company with more effective governance than having a fixed independent lead through effective checks and balances that ensure the exercise of independent judgment by the Board of Directors and the ability of the non-executive directors to work effectively in a board setting.

 

It provides each director with an equal stake in the Board’s actions and oversight role and makes them equally accountable to stockholders, while providing for effective checks and balances to ensure the exercise of independent judgment. This structure and these processes are reviewed periodically, including upon a change in directors.

 

 

 

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Executive Sessions. In accordance with applicable NYSE rules, the independent directors meet regularly in executive session, which serves to promote open discussion among these directors. The presiding director’s principal responsibilities include the following:

 

 

Executive Session Presiding Director’s Principal Responsibilities

 

&#10147 Provides leadership to the Board and to the non-executive directors and ensures the flow of information to and among the non-executive directors

 

&#10147 May call additional meetings of the non-executive directors as needed

&#10147 Acts as a liaison between executive directors and non-executive directors, serving as a key source of communication between the non-executive directors and the Executive Chairman and the President and Chief Executive Officer

 

&#10147 Works with Executive Chairman to propose major discussion items for Board

&#10147 Coordinates the agenda for, and leads executive sessions and meetings of non-executive directors

 

&#10147 Opportunity to consider and report on important matters without the presence of management

Board of Directors Self-Assessment. Our Board of Directors recognizes that a thorough, constructive evaluation process enhances its effectiveness and is an essential element of good corporate governance. Accordingly, the Board of Directors conducts an annual self-assessment to determine whether it and each of its committees has the right skills, experience and perspectives. Each year, each director completes an evaluation covering:

 

  &#10147  

Board and committee composition, including appropriateness and diversity of skills, background and experience;

 

  &#10147  

Key areas of focus and effectiveness of management oversight;

 

  &#10147  

Director performance, including knowledge of the Company and its business;

 

  &#10147  

Committee functions and effectiveness and quality of materials;

 

  &#10147  

Satisfaction with committee structure and performance of committee chairs;

 

  &#10147  

Board meeting process, including satisfaction with schedule, agendas, time allotted for topics and encouragement of open communication and robust discussion; and

 

  &#10147  

Access to management, experts and internal and external resources.

Responses are reviewed and presented to the Board of Directors for review and consideration.

Board Refreshment, Tenure and Diversity. We value having directors with diverse perspectives and experience. Each of the Company’s directors has served in leadership roles and has significant experience in areas relevant to the Company. We continue to actively seek qualified candidates who add value and diverse backgrounds, skills, experience and perspectives to further refresh the Board.

 

 

 

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Given the complexity and long-term nature of the Company’s business, the Company is best served by having a Board with an in-depth understanding of the Company and the insurance industry. Developing that expertise takes time, and the Board of Directors believes that directors who have overseen our business over the full insurance cycle are typically more effective. The addition of new directors in recent years provides for a period of transition with long-tenured directors. Their overlap provides the opportunity for education, mentorship and stability.

 

       

 

We have refreshed 38% of the independent Board members over the past five years, improving the Board’s diversity and enhancing the Board’s collective expertise – notably in communications, governmental operations, tax and other public company leadership and board experience.

 

Classified Board. Our classified Board is important to the Company’s philosophy of managing for the long term. Because the business cycle in the property casualty insurance industry can extend over many years, it can take new directors several years to gain a robust understanding of our business and our Company. As a result, staggered elections provide the Board of Directors with the ability to maintain the long-term perspective needed to drive success in our business.

 

The tenure of our directors is distributed across periods that could be considered in the insurance industry to be relatively short-term, medium-term and long-term, providing a balance of perspectives. The current average tenure of our independent directors is 20 years.

 

 

LOGO

 

 

 

 

 

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Board Role in Risk Oversight. Managing risk is a critical element of any property casualty insurance business. The Board of Directors believes that risk oversight is a key responsibility of the entire Board of Directors. Risk management is one of the core responsibilities of the President and Chief Executive Officer and the Executive Chairman and is a critical responsibility of every other senior officer of the Company and its businesses.

The strategic management of risk in an insurance business is a multi-level proposition. The Board of Directors has an active role, both as a whole and also at the committee level, in risk oversight. The Board of Directors and its committees receive periodic updates from members of senior management, including the Senior Vice President — Enterprise Risk Management, on areas of material risk to the Company, such as operational (including risks related to climate change, cyber security, technology and human capital management), financial, strategic, competitive, investment, reputational, cultural, legal, regulatory and environmental, social and governance (ESG) risks. Among other things, the Board of Directors as a whole oversees management’s assessment of business risks relating to the Company’s insurance operations and investment portfolio.

At the committee level:

 

  &#10147  

Our Audit Committee regularly reviews our financial statements, financial and other internal controls, and remediation of material weaknesses and significant deficiencies in internal controls, if any.

 

  &#10147  

Our Compensation Committee regularly reviews our executive compensation policies and practices and the risks associated with each. See “Discussion of Risk and Compensation Plans” on page 66.

 

  &#10147  

Our Nominating and Corporate Governance Committee considers issues associated with the independence of our Board of Directors, corporate governance and potential conflicts of interest.

While each committee is responsible for evaluating certain risks and risk oversight, the entire Board of Directors is regularly informed of risks relevant to the Company’s business, as described above.

Risk management is a core tenet for achieving appropriate risk-adjusted returns in our business and has been a driving principle since the Company was founded. As a key element of their duties, our senior executive officers are responsible for risks and potential risks as they arise in their various operational areas. In addition to reporting to the Board of Directors regarding the Company’s risk management, the Company’s Senior Vice President — Enterprise Risk Management also reports directly to the President and Chief Executive Officer. The Company’s Enterprise Risk Management Committee, which is composed of the President and Chief Executive Officer, Senior Vice President — Enterprise Risk Management, Executive Vice President — Investments, Executive Vice President — Chief Financial Officer, Executive Vice President — General Counsel and Secretary and Of Counsel and Assistant Secretary, meets quarterly, or more frequently as necessary, to review and monitor levels of risk of various types. In addition, our internal audit function directly reports to our Audit Committee on a quarterly basis, and more frequently to the extent necessary.

Our independent outside auditors regularly identify and discuss with our Audit Committee risks that may arise during their regular reviews of the Company’s financial statements and accounting matters, including those associated with executive compensation.

 

 

 

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Compensation Committee Interlocks and Insider Participation

 

LOGO

During 2021, the Compensation Committee was composed of Mmes. Farrell and Pusey and Messrs. Blaylock and Brockbank. No member of the Compensation Committee was, during 2021, an officer or employee of the Company or was formerly an officer of the Company, or had any relationship requiring disclosure by the Company as a related party transaction. No executive officer of the Company served on any board of directors or compensation committee of any other company for which any of the Company’s directors served as an executive officer at any time during 2021.

Code of Ethics

 

LOGO

We have a Code of Ethics and Business Conduct that has been in place for many years. This code applies to all of our officers and employees. It is a statement of our high standards for ethical behavior and legal compliance, and governs the manner in which we conduct our business. This code covers all areas of professional conduct, including employment policies, conflicts of interest, anti-competitive practices, intellectual property and the protection of confidential information, as well as adherence to the laws and regulations applicable to the conduct of our business. We have also adopted a Statement of Business Ethics for the Board of Directors.

We have adopted a Code of Ethics for our Senior Financial Officers. This code, which applies to our Chief Executive Officer, Chief Financial Officer and Controller, addresses the ethical handling of conflicts of interest, the accuracy and timeliness of SEC disclosure and other public communications and compliance with law.

Copies of our Code of Ethics and Business Conduct, Statement of Business Ethics for the Board of Directors and Code of Ethics for Senior Financial Officers can be found on our website at www.berkley.com. We intend to disclose amendments to these codes, and waivers of these policies for executive officers and directors, if any, on our website.

 

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Environmental, Social and Governance (ESG) Summary

 

LOGO

 

Our Company values, including “Everything Counts, Everyone Matters®” and “always do right” are a cornerstone of our success. Our businesses demonstrate our values and principles every day in the way they conduct their business, engage with team members and give back to their communities. We have always recognized that in order to achieve long-term success, we have an obligation to society and the sustainability of the world around us. Whether employing individuals with diverse backgrounds and demographics, giving back to the communities in which we live     
 

 

        

  

Doing the right thing for our people, our communities and our environment engenders the trust of our customers, distribution partners, employees and stockholders, enabling us to grow our business profitably and meet the diverse needs of our constituents. The simple concept of doing the right thing embodies the principles that guide the way we do business. It is embedded in our culture and exemplified by our employees every day.

and work, or managing our impact on the environment and working with our insureds to help them manage their environmental impact, corporate responsibility has been embedded in our culture from the founding of the Company. Our Board of Directors believes that these values are critical to delivering superior long-term results to our stockholders.

Our Board of Directors believes that oversight of ESG issues is a key responsibility of the entire Board of Directors. It is a critical responsibility of the President and Chief Executive Officer and every other senior officer of the Company and its businesses. The Company annually reports on climate risk to the National Association of Insurance Commissioners (NAIC).

The Company’s ESG management committee, composed of the President and Chief Executive Officer and several other Company senior executives, regularly reports to our Board of Directors. The ESG committee is responsible for ESG issues and meets quarterly, or more frequently as necessary, to review ESG goals and progress.

In addition, in 2021 the Company released its updated Sustainability Report, which can be found on the Investor Relations page of our corporate website. Similar reports are expected to be released periodically going forward.

We identify our most important environmental and social issues for reporting and review ESG disclosures from a set of insurance peers; review frameworks such as GRI, SASB and TCFD; and review guidance and reports from ESG raters, such as Sustainalytics and MSCI. This process enables us to evaluate the scope for certain disclosures deemed to be important. We then interview senior leadership and subject matter experts within our Company and review policies, guidelines, management reports, data systems, and other areas for information for reporting in each category.

 

 

 

34   W. R. Berkley Corporation


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    CORPORATE GOVERNANCE AND BOARD MATTERS    

 

 

The table below outlines ESG areas the Company considers to be of importance:

 

 

ENVIRONMENTAL, SOCIAL AND GOVERNANCE ISSUES

 

 

 

LOGO

 

 

Human Capital Management

 

 

&#10147 Employment practices

 

&#10147 Employee engagement

 

&#10147 Professional and leadership training and development

 

&#10147 Diversity, inclusion and anti-discrimination

 

&#10147 Innovation

 

&#10147 Employee well-being

 

 

 

LOGO

 

 

Community Involvement and Engagement

 

 

&#10147 Volunteerism and charitable giving

 

&#10147 Expanding opportunities

 

&#10147 Collaboration with community organizations

 

&#10147 Leadership in charitable organizations

 

 

 

LOGO

 

 

Ethics & Compliance

 

 

&#10147 Anti-money laundering, corruption, and bribery policies

 

&#10147 Code of Ethics and Business Conduct

 

&#10147 Whistleblower and non-retaliation policies and hotline

 

&#10147 Training and compliance resources

 

&#10147 Tax transparency

 

 

 

LOGO

 

 

Customer Privacy & Data Security

 

 

&#10147 Data security and privacy policies

 

&#10147 Training and compliance

 

&#10147 Data protection systems and audits

 

&#10147 Governance and controls

 

&#10147 Third party risk assessment

 

 

 

LOGO

 

 

Public Policy

 

 

&#10147 Policies on lobbying and political involvement

 

&#10147 Membership and senior leadership positions in trade organizations

 

&#10147 Corporate federal government affairs function

 

 

 

LOGO

 

 

Environment and Energy

 

 

&#10147 Energy and water conservation

 

&#10147 Recycling programs

 

&#10147 Physical plant

 

&#10147 Travel

 

 

 

LOGO

 

 

Climate Risk

 

 

&#10147 Risk management governance

 

&#10147 Weather risk measurement and management

 

&#10147 Climate change risk modeling and analysis

 

&#10147 Loss control services for clients

 

&#10147 Disaster recovery plans

 

&#10147 Climate change opportunities

 

&#10147 Climate risk measurement and reporting

 

 

 

LOGO

 

 

Products and Services

 

 

&#10147 Businesses that specialize in ESG areas

 

&#10147 Insurance products that address client ESG risks

 

&#10147 Small business insurance

 

&#10147 Educational, engagement or loss control programs

 

&#10147 Customer experience and service

 

 

 

LOGO

  Responsible Investing  

 

&#10147 Investment policies

 

&#10147 Risk mitigation and reporting

 

&#10147 Exclusions or limitations for investing in certain countries or issuers

 

&#10147 ESG sector investments

 

 

2022 Proxy Statement   35

 

 


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    CORPORATE GOVERNANCE AND BOARD MATTERS    

 

 

 

Board Oversight of Human Capital Management and Corporate Culture

 

LOGO

 

Our Board of Directors believes that our people are our greatest asset and that our corporate culture is the most important intangible value driver of our superior long-term risk-adjusted returns and growth in stockholder value.

 

Human Capital Management: We are focused on creating a respectful, rewarding, diverse, and inclusive work environment that allows our employees to build meaningful careers. The success of these human capital management objectives is essential to our strategy, as it is our people who drive our success. The Board has identified the elements of corporate culture necessary to achieving our goals and their key drivers. With full Board oversight of Risk Management, among other activities, and regular interactions with employees beyond corporate senior management, Board members have visibility into and receive timely feedback on human capital management and cultural issues that may affect our business. Detailed information on Human Capital Management can be found in our Sustainability Report located in the Investor Relations portion of our corporate website.

Our Board of Directors engages with our senior leadership team, including our Senior Vice President – Human Resources, on a periodic basis across a range of human capital management issues, including succession planning and development, compensation, benefits, talent recruiting and retention, engagement, diversity and inclusion, and employee feedback.

 

LOGO

Corporate Culture: The Board of Directors has recognized Accountability, People-Oriented Strategy, Responsible Financial Practices, Risk-Adjusted Returns and Transparency as the elements of corporate culture necessary for the Company to achieve success. Our culture unifies our employees across our decentralized business model, ensures we are positioned to serve our diverse clients globally and propels the Company’s continuous evolution. We are committed to fostering a unifying culture and encouraging innovation across our enterprise. Our culture encompasses the beliefs that (i) specialized knowledge and having a customer-centric focus are competitive advantages and (ii) an environment that promotes integrity, embraces the commitment to “always do right,” fosters entrepreneurship and innovation, and values making thoughtful decisions for the long-term benefit of our enterprise. While there is no one “Berkley” way, each of our businesses has its own culture that embodies a shared set of values that define our enterprise. Our structure, with more than 50 distinct businesses, facilitates prompt identification of and appropriate action with respect to addressing individual business or cultural issues arising within a particular business, without affecting the larger enterprise. Furthermore, our businesses are overseen by senior corporate business managers and senior corporate functional managers, including actuarial, claims, underwriting, compliance and finance, providing a governance oversight structure that makes it easier to identify such issues. Because our Board of Directors diligently exercises its risk management oversight through, among other activities, regular

 

 

 

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interactions with employees beyond corporate senior management, our directors have visibility into and receive timely feedback on cultural issues that may affect our business.

As significant owners of our Company who are required to hold their shares until separation from service (See page 74), each of our directors has a vested interest in cultivating talent and perpetuating a culture that facilitates the execution of our long-term objectives. In addition, the contributions to long-term value creation component of our Annual Incentive Compensation Plan links human capital management and culture to NEO compensation.

Communications with Non-Management Directors

 

LOGO

A stockholder who has an interest in communicating with management or non-management members of the Board of Directors may do so by directing the communication to the General Counsel, c/o W. R. Berkley Corporation, 475 Steamboat Road, Greenwich, Connecticut 06830. With respect to communications to non-management members of the Board of Directors, the General Counsel will provide a summary of all appropriate communications to the addressed non-management directors and will provide a complete copy of all such communications upon the request of any addressed Director.

Information about the Company, including with respect to its corporate governance policies and copies of its SEC filings, is available on our website at www.berkley.com. Our filings with the SEC are also available on the SEC’s website at www.sec.gov.

 

2022 Proxy Statement   37

 

 


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    TRANSACTIONS WITH MANAGEMENT AND OTHERS    

 

 

 

Transactions with Management and Others

As described above, the Company has adopted a Code of Ethics and Business Conduct that applies to all Company employees and a Statement of Business Ethics for the Board of Directors (together, the “Statements”), each of which is administered by the Business Ethics Committee. The Statements address, among other things, transactions in which the Company is or will be a party and in which any employee or director (or members of his or her immediate family, as such term is defined by the NYSE rules) has a direct or indirect interest. The Statements require full and timely disclosure to the Company of any such transaction. Company management initially determines whether a disclosed transaction requires review by the Business Ethics Committee. Based on its consideration of all of the relevant facts and circumstances, the Business Ethics Committee decides whether or not to approve such transaction and approves only those transactions that are not contrary to the best interests of the Company. If the Company becomes aware of an existing transaction which has not been approved, the matter will be referred to the Business Ethics Committee. The Business Ethics Committee will evaluate all available options, including ratification, revision or termination of such transaction.

During 2021, one of the Company’s non-officer employees performed services for Interlaken Capital, Inc. (“Interlaken”), a company substantially owned and controlled by Mr. Wm. Berkley, the Company’s Executive Chairman. Interlaken separately compensates any Company employees for providing such services. The transactions between the Company and Interlaken have been previously approved by our independent Business Ethics Committee in accordance with the procedures described above.

From time to time, institutional investors, such as large investment management firms, mutual fund management organizations and other financial organizations, become beneficial owners (through aggregation of holdings of their affiliates) of 5% or more of voting securities of the Company and, as a result, are considered a “related person.” These organizations may provide services to the Company or its benefit plans. In addition, the Company may provide insurance coverage to these organizations. In 2021, the following transaction occurred with investors who reported beneficial ownership of 5% or more of the Company’s voting securities:

BlackRock, Inc., which beneficially owns more than 5% of the Company’s common stock, provides, on an arm’s length basis, investment management software to the Company for which the Company paid fees to BlackRock of approximately $1.35 million during 2021. As BlackRock is not an officer, employee or director of the Company, the Statements do not require approval of this arrangement by the Business Ethics Committee.

 

 

 

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Compensation Discussion and Analysis

Table of Contents

 

LOGO

 

Introduction      40  
Executive Compensation Policies and Practices      41  
Stockholder Outreach      42  
Executive Compensation Objectives, Philosophy and Design      43  
Additional Design Information      45  

Annual Cash Incentive Awards

     45  

Long-Term Incentives

     47  

Deferred Compensation

     49  

Benefit Replacement

     50  

Supplemental Benefits Agreement with the Executive Chairman

     50  
Use of Market and Peer Group Data      51  
Executive Compensation Decisions During the Last Year - Highlights      53  

General Approach

     54  

Base Salary

     54  

Annual Cash Incentive Awards

     55  

Long-Term Incentives

     57  
Severance and Change in Control Benefits      60  
Other Policies and Considerations      61  

 

2022 Proxy Statement   39

 

 


Table of Contents

 

    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

Compensation Discussion and Analysis

Introduction

 

LOGO

This Compensation Discussion and Analysis provides material information about the Company’s compensation policies, objectives and decisions regarding our NEOs as well as perspective for investors on the amounts disclosed in the Summary Compensation Table and other tables, footnotes and narratives that follow.

This Compensation Discussion and Analysis and the tables that follow cover the compensation paid in 2021 to the following five NEOs:

 

  &#10147  

W. Robert Berkley, Jr.: President and Chief Executive Officer (“CEO” or “Mr. Rob Berkley”);

 

  &#10147  

William R. Berkley: Executive Chairman of the Board (“Executive Chairman” or “Mr. Wm. Berkley”);

 

  &#10147  

Richard M. Baio: Executive Vice President — Chief Financial Officer (“CFO”);

 

  &#10147  

Lucille T. Sgaglione: Executive Vice President; and

 

  &#10147  

James G. Shiel: Executive Vice President — Investments.

 

 
  

Our NEO compensation reflects our performance-based philosophy and our emphasis on the long term. The substantial majority of compensation for our CEO and all other NEOs is long-term and linked to Company performance and the creation of stockholder value.

 

LOGO

 

 

&#10147 Annual cash incentive award is directly linked to performance as described on pages 55-56.

 

&#10147 Performance-based RSUs are earned based on ROE performance over a period that is longer than our liability duration of approximately 4 years. They are also mandatorily deferred until separation from service.

 

&#10147 Long Term Incentive Plan (“LTIP”) awards are directly linked to growth in book value over five years, which is longer than our liability duration of approximately 4 years.

 

  Compensation

values reflected in the above illustration are based on 2021 base salary, the annual cash incentive award for 2021, the potential maximum value of the LTIP award for the 2021-2025 performance period, and the potential maximum value of the 2021 performance-based RSU grant.

 

 

 

 

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Talent and expertise are the ultimate differentiators in our business. The combined expertise of our people in underwriting, risk management, claims handling and investing has delivered outstanding long-term risk-adjusted returns. Our compensation programs appropriately balance short-term with long-term incentives and our long-term incentive compensation awards vest after periods that are longer than the average duration of our liabilities. In addition, NEOs and other senior executives must hold their restricted stock units (“RSUs”) until separation from service, and the RSUs are subject to clawback in the event the recipient engages in misconduct or breaches post-employment obligations, which expire one year after separation. This is a distinct model that separates us from many of our competitors.

Executive Compensation Policies and Practices

 

LOGO

We are committed to executive compensation practices that drive long-term value creation and mitigate risk, and that align the interests of our executives with the interests of our stockholders. Below is a summary of best practices that we have implemented and practices that we avoid, with the goal of promoting the best long-term interests of the Company and our stockholders.

 

 

What We Emphasize

 

 

 

What We Avoid

 

 

   Pay for performance

 

û   Employment agreements

 

   Incentivize and reward long-term value creation

 

û   Separate severance agreements or guaranteed cash severance

 

   Vested RSUs are mandatorily deferred until separation from service

 

û   Liberal share recycling

 

   Robust share ownership for senior executives

 

û   Stock options

 

   Non-formulaic performance-based annual cash incentive award program that mitigates risk of short-term oriented behavior

 

û   Tax gross-ups on perquisites

 

   Capped maximum NEO annual cash incentive awards

 

û   Dividend equivalents paid on unearned or unvested RSUs

 

   Clawback policy covering all LTIP and RSU awards that is triggered based on:

 

•   Executive engaging in misconduct as is defined in award agreements

 

•   Executive choosing to breach post- employment obligations

 

û   Hedging or derivative transactions on the Company’s stock by executive officers or directors

 

   Restrictions on pledging Company stock by NEOs

 
 

   Independent compensation consultant

 
 

   Capped payout for LTIP awards

 
 

   Modest perquisites

 
 

   Double-trigger vesting on change in control

 

 

2022 Proxy Statement   41

 

 


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    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

Stockholder Outreach

 

LOGO

 

Compensation Committee Response to Say-on-Pay Advisory Vote Results and Investor Feedback. Last year, the Company’s say-on-pay vote was approved, receiving affirmative support of 95.6% of the shares voted. Our enhanced outreach, disclosure and presentation have resulted in strong say-on-pay support, particularly among our largest stockholders and those with whom we have engaged. We strive to maintain an open dialogue with our stockholders.

 

In 2021, we again reached out to many of our stockholders, representing over 77% of the outstanding shares of the Company not held by

  

 

 

LOGO

 

Total votes cast “for” divided by total votes “for” and “against”

management. We virtually met, spoke to or corresponded with stockholders representing 44% of the outstanding shares of the Company not held by management, including several who declined meetings. Many of those that declined to speak with us indicated that they were satisfied with our prior outreach.

The predominant message we received from our outreach was that, in general, our investors appreciate the alignment of our executive compensation programs with stockholder interests and of our governance practices with the unique nature of the property casualty insurance business, as well as our responsiveness to emerging issues. A small number of investors indicated a preference for aligning certain governance practices with their specific guidelines even as they recognize that one size does not fit all. However, they did not consider these to be voting issues, and there were no requests for modifications to our compensation programs or governance practices. Much of our outreach discussion centered on environmental and social issues, including climate risk and diversity and inclusion. These topics are discussed in our Sustainability Report, which can be found on our Investor Relations website.

 

 

 

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Executive Compensation Objectives, Philosophy and Design

 

LOGO

Our philosophy for our executive compensation program is to provide an attractive, flexible and market competitive program tied to performance that is closely aligned with the interests of our stockholders through the creation of stockholder value. Our program is designed to recognize and reward the achievements of our executives and to attract, retain and motivate our leaders in a competitive environment. Executive compensation for our NEOs generally includes the following components:

 

 

Annual Cash Compensation

 

 

 

Competitive Fixed Market-Based Compensation

 

Key Principle: Provides base salary and benefits that are market competitive to facilitate our ability to attract and retain high-caliber individuals with the leadership abilities and experience necessary to develop and execute business strategies and build long-term stockholder value.

 

 

 

Role of Element:

 

&#10147 Attracts and retains NEOs

 

&#10147 Provides a fixed level of compensation for NEO services provided during the year

   

Performance-Based Annual Cash Incentive Award

 

Key Principle: Annually rewards NEOs for delivering performance consistent with the Company’s long-term objectives. A non-formulaic pay-for-performance program primarily based on ROE that uses negative discretion permits the application of judgment necessary to align payouts with a holistic assessment of performance for the year in the context of the environment and its long-term implications for the business.

 

Role of Element:

 

&#10147 Provides focus on short-term performance measures linked to the Company’s long-term success and stockholder value creation

 

&#10147 Mitigates risk of short-term oriented behavior that is detrimental to long-term value creation

 

 

 

Long-Term Incentive Compensation

 

 

 

Mandatorily Deferred Performance-Based

Restricted Stock Units

 

Key Principle: Rewards executives for the long-term performance of the Company. Longer performance periods are better suited to the cyclicality of our business. Mandatory deferral promotes long-term alignment of NEOs’ financial interests with stockholders through the risks and rewards of long-term common stock ownership.

 

Role of Element:

 

&#10147 Increases NEO stock ownership

 

&#10147 Provides focus on ROE over a longer period than our approximately 4-year loss reserve duration

 

&#10147 Encourages teamwork and decision-making to further the Company’s long-term best interests

 

&#10147 Encourages NEO retention through overlapping vesting periods

 

&#10147 Discourages excessive risk taking through mandatory deferrals and clawback provisions set forth in award agreements

 

 

   

Long-Term Incentive Plan (LTIP) Awards

 

Key Principle: Rewards executives for the long-term performance of the Company. Allows NEOs to realize a portion of long-term compensation at established intervals, providing liquidity to our executives as they have no ability to monetize vested RSUs until they leave the Company.

 

 

Role of Element:

 

&#10147 Places focus on growth in book value, a primary driver of stockholder value, over a longer period than our approximately 4-year loss reserve duration

 

&#10147 Encourages teamwork and decision-making to further the Company’s long-term best interests

 

&#10147 Encourages NEO retention through overlapping performance periods

 

&#10147 Discourages excessive risk taking through the extended performance period and clawback provisions set forth in award agreements

 

 

 

2022 Proxy Statement   43

 

 


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    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

 

Benefits and Perquisites

 

 

Benefit Replacement Plan

 

 

&#10147 Makes up for the Code limits on Company contributions to the Company’s tax-qualified profit-sharing plan.

 

&#10147 Allows for equal treatment of all employees who participate in the tax-qualified profit-sharing plan.

 

&#10147 Provides a competitive compensation element designed to attract and retain NEOs.

 

 

 

Deferred Compensation Plan*

 

 

&#10147 Allows NEOs to defer receipt of all or part of their base salary, annual cash incentive award and excess profit-sharing payments. No such deferrals were permitted during 2021, but are again available to be made in 2022.

 

&#10147 Enhanced current year cash flow to the Company in a cost-effective manner.

 

 

Additional Benefits

 

 

&#10147 Provides coverage for officers, including the NEOs, in the areas of life, travel accident, and long-term disability insurance.

 

&#10147 Provides a competitive compensation element designed to attract and retain NEOs.

 

 

Personal Use of Company Aircraft

(CEO and Executive Chairman only)

 

 

&#10147 Enhances security and personal safety of the CEO and the Executive Chairman.

 

&#10147 Enhances productivity of the CEO and the Executive Chairman.

 

 

Supplemental Benefits Agreement (a legacy arrangement with Executive Chairman only)

 

 

&#10147 Provides continued health insurance benefits and certain perquisites to the Executive Chairman after employment ends.

 

&#10147 Provides consideration in exchange for a non-compete agreement with the Executive Chairman

 

 

Other

 

Director Compensation (CEO

and Executive

Chairman only)

 

 

&#10147 Compensates the CEO and the Executive Chairman, who are also members of the Board of Directors, for responsibilities and duties that are separate and distinct from their responsibilities as officers.

 

 

*

The Deferred Compensation Plan was frozen as of January 1, 2021. After evaluating how to improve the plan’s benefits, while lowering its cost to the Company, on November 5, 2021 the Board approved the amendment and restatement of the Deferred Compensation Plan for Officers, effective as of December 1, 2021.

 

 

 

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Additional Design Information

 

LOGO

 

Annual Cash Incentive Awards. At the beginning of each year, the Compensation Committee determines maximum potential awards for the CEO and certain other NEOs for that same year ending December 31. Actual award amounts under the Amended and Restated Annual Incentive Compensation Plan (the “Annual Incentive Compensation Plan”) for the NEOs are determined early in the following year by applying negative discretion to the maximum award based on the Company’s annual performance for the year. Under the Company’s Annual Incentive Compensation Plan, the Compensation Committee evaluates the Company’s performance across a number of measures. The primary performance measure considered is ROE, as it provides the most complete picture of the Company’s performance in a given year and across time periods.

    

Annual cash incentive awards are performance-based and primarily based on annual ROE, with additional consideration for non-financial goals and value creation items. Annual cash incentive awards are non-formulaic. In our industry, a formulaic short-term incentive award can encourage excessive risk taking and imprudent short-term behavior to create near-term payouts at the expense of long-term value creation.

Negative Discretion provides the Compensation Committee with flexibility to respond to market conditions and unusual circumstances and permits the application of judgment that is necessary to avoid creating incentives for our NEOs to engage in short-term oriented behavior that in our industry is detrimental to long-term value creation.

 

 
       

The Compensation Committee also considers other measures that inform the evaluation of ROE performance. As a property casualty insurance company, we have earnings streams from both underwriting activity and investment activity, and depend upon prudent capital management, strategic business and investment decisions and an appropriate long-term focus to maximize risk-adjusted return. These other measures are generally consistent from year to year. However, the Compensation Committee has the discretion to add, remove or change the degree of emphasis on certain measures, depending upon the business and economic environment.

 

 

Determination of an NEO’s annual cash incentive compensation award is based on the Company’s financial performance for the current year, the Company’s financial performance compared to peers, and the NEO’s contributions to long-term value creation.

 

 

2022 Proxy Statement   45

 

 


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&#10147  

 

ROE. Our long-term goal of 15% ROE has remained consistent for our entire 50-year plus history. Although 15% is a demanding hurdle for a property casualty insurance company in a historically low interest rate environment, the Compensation Committee believes it remains appropriate as a long-term goal in order to challenge management to maximize stockholder value.

      
 

 

Over the long term, changes in annual cash incentive awards have followed the same trend as changes in annual ROE.

 

 

LOGO

 

 

  &#10147  

Combined Ratio. Combined ratio is a key measure of underwriting profitability. A combined ratio below 100% indicates that an insurance company’s underwriting activities are profitable. The appropriate combined ratio target for a company depends upon its mix of business. Companies that are concentrated in businesses characterized by low frequency and high severity (such as property catastrophe reinsurance) will generally target a very low annual combined ratio absent a major event, so that the earnings in low-catastrophe years can offset the severity of loss from a significant event in other years. Such companies typically demonstrate a high degree of volatility in their underwriting results. Companies that have a higher frequency of loss, with less severity (as is often the case with casualty business) may target a relatively higher combined ratio and their results tend to be less volatile. A comparison to an industry benchmark automatically adjusts for competitive conditions and allows us to better gauge our performance relative to our competitors.

Because our business is predominately low-limit casualty insurance, the Compensation Committee considers our combined ratio target of 95% or lower (absent a major catastrophe) to be stringent, yet achievable. While an even lower combined ratio would be necessary to achieve a 15% ROE in the current low interest rate environment, the Compensation Committee recognizes that our willingness to walk away from inadequately priced business requires us to accept a higher expense ratio at times, and thus a higher combined ratio. A combined ratio target that is too stringent would fail to incentivize proper underwriting discipline.

The Compensation Committee also considers our combined ratio as compared to the property casualty insurance industry as a whole, to account for cyclical changes derived from competitive conditions, as well as the impact of catastrophe events on the industry and our Company. The Compensation Committee also recognizes that in times of below average catastrophe activity, our outperformance compared to the industry will temporarily narrow.

 

  &#10147  

Net Investment Income. The Compensation Committee expects consistent income from fixed-maturity securities, while maintaining a high-quality portfolio, combined with a duration that provides flexibility in an uncertain interest rate environment. The Compensation Committee also

 

 

 

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recognizes that investments designed to generate capital gains may produce less annual income, and this income may be less predictable, but such investments are designed to generate a higher total return over the life of the investment. In addition, while investment funds and the merger arbitrage portfolio inherently have greater variability than fixed-maturity securities, the Company expects they will generate a higher average yield over time.

 

  &#10147  

Net Realized Gains on Investment Sales. The Compensation Committee considered the low interest rate environment of the last several years, noting the Company’s response by allocating an increased portion of the investment portfolio to assets designed to generate capital gains and above average total returns.

 

  &#10147  

Growth in Earnings Per Share. The Company measures growth in earnings per share while being mindful of capital management. We do not target a specific percentage growth in earnings per share so as not to improperly incentivize irresponsible growth in premiums written, particularly in competitive or weak pricing environments. The absence of a specific growth target also allows the Compensation Committee to consider variability in income from investment funds, realized gains and catastrophe losses.

 

  &#10147  

Growth in Book Value Per Share Before Dividends and Share Repurchases. After giving effect to capital management and changes in accumulated other comprehensive income, growth in book value per share before dividends and share repurchases should be broadly in line with ROE. When we are generating more capital than can be reinvested in the business, the excess capital is returned to stockholders.

 

  &#10147  

Investments in New Businesses. Of the Company’s 56 businesses, 7 have been acquired and 49 have been started internally. We believe that starting new businesses when the best talent can be attained is better for long-term value creation than buying businesses that may have unknown balance sheet issues, add goodwill to the balance sheet, or be culturally incompatible. Disruptions in the market due to financial difficulties, changes in strategic direction at other companies and mergers or acquisitions typically provide the best opportunities to find talented individuals who share our long-term vision. The Compensation Committee expects the number of businesses started in any given year to vary depending upon available opportunities, and recognizes that start-up costs can negatively impact earnings for a period of time.

 

  &#10147  

Consistency Among Members of the Management Team. A significant amount of turnover in senior management can disrupt operations and detract from long-term focus. Recognizing that retaining and developing talent is difficult in today’s competitive job market, the Compensation Committee looks to incentivize retention of talented executives.

Performance is evaluated through a review of financial performance for the current year, a comparison of the annual results to the results of the Company’s compensation peer companies, and contributions to long-term value creation.

Long-Term Incentives. The Company’s long-term incentive programs for the NEOs generally consists of two components:

 

  &#10147  

Performance-based RSUs under the Company’s 2018 Stock Incentive Plan; and

 

  &#10147  

Cash-denominated performance units under the LTIP.

 

2022 Proxy Statement   47

 

 


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    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

The long-term incentive compensation programs have been designed to vest after periods that are longer than the average duration of the Company’s liabilities to align the executives’ interests with those of the stockholders. The programs support the Company’s focus on long-term performance through multiple overlapping three- or five-year performance cycles for RSU and LTIP awards. These performance-based RSU and LTIP awards (as well as the mandatory deferral feature of vested RSU awards whereby shares are not delivered until separation from service) encourage our NEOs to achieve and sustain longer-term Company performance goals. These awards also align NEOs’ financial interests with those of the Company’s stockholders, as a significant portion of their annual compensation is tied directly to the value of our stock or metrics that are highly correlated with the value of our stock. The mandatory deferral feature of the RSUs also ties a significant portion of each NEO’s personal net worth to the value of our stock.

Performance-Based RSUs. Our NEOs are awarded performance-based RSUs that are earned, or not, based on ROE performance. The performance-based RSUs consist of three tranches that vest, if earned, after three separate, but overlapping, three-year performance periods, with the final tranche vesting only after five years. The diagram below explains the structure and performance periods for awards made in 2021.

 

 

LOGO

We believe it is important for executives to be fully aligned with our stockholders. This alignment includes our dividend policy. Therefore, our performance-based RSU awards generally include dividend equivalent rights with respect to vested shares. RSUs start vesting after the third year, so we believe that it is important for RSU recipients to also share in the dividends generated by those shares at the same time. However, no dividend equivalents will be paid if the underlying shares do not vest.

 

 

Mandatory Deferral and Clawback: Key Features of Our RSUs and Critical Differentiators. After vesting, settlement of the RSUs is deferred (on a mandatory basis) and shares are not delivered until 90 days following the executive’s separation from service with the Company (subject to a six-month delay to comply with Section 409A of the Code). This mandatory deferral applies to our NEOs and other senior executives (a group of approximately 81 in total). We believe this deferral feature is unique to the Company’s program compared to peer companies. Executives have no ability to monetize vested RSUs until separation from service. The amounts deferred remain at risk in the event of a decline in the value of the Company’s stock. Dividend equivalent payments are made only after RSUs vest.

The mandatory deferral feature reinforces our executives’ incentive to maximize long-term stockholder value, as the value of the deferred shares cannot be realized until separation from service and the accumulated value can grow to represent a significant portion of an executive’s personal net worth.

 

 

 

 

48   W. R. Berkley Corporation


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Clawback. RSU-based compensation can be recaptured (clawed back) if a recipient engages in misconduct as defined in award agreements during employment or breaches post-employment obligations during the one-year period following separation from the Company.

Restrictions on Pledging. Shares used in fulfillment of the stock ownership guidelines may not be pledged or otherwise encumbered. In addition, vested but mandatorily deferred shares may not be pledged since they are not delivered until after separation from service.

Prohibition on Hedging. Our NEOs, other senior officers and directors are prohibited from hedging or similar transactions (such as prepaid variable forward contracts, equity swaps, collars, and exchange funds) with respect to the Company’s stock except as may be expressly permitted by the Company’s Executive Chairman of the Board, Chief Executive Officer, President or General Counsel. This prohibition has never been waived.

 

LTIP Awards. The 2019 Long-Term Incentive Plan is a cash-based long-term incentive plan. LTIP awards are performance units that grow in value based on one or more performance measures selected by the Compensation Committee and are settled, to the extent earned, in cash at the end of the performance period. The performance measure for current outstanding LTIP awards is the average annual increase in book value per share, as adjusted, during a five-year performance period.

For LTIP awards currently outstanding, the hurdle for maximum payout of awards has been set at 12.5%. The Compensation Committee believes a 12.5% average annual growth rate provides a reasonable performance goal that reflects insurance market conditions and the interest rate environment. Because of the rigor of the performance target for LTIP awards as demonstrated by these results, several of our LTIP awards have paid out generally at less than the maximum potential value. (See page 59.) The Compensation Committee annually reviews the growth rate for new grants to set an appropriately rigorous performance target in light of interest rates and other conditions.

LTIP-based compensation can be recaptured (clawed back) for up to two years after settlement if a recipient engages in misconduct as defined in award agreements during employment or breaches post-employment obligations.

Deferred Compensation. The Company maintains a Deferred Compensation Plan for Officers, in which the NEOs could participate on a voluntary basis through December 31, 2020, and again may participate beginning on and after December 1, 2021. The Board froze the plan effective January 1, 2021 to restructure the plan and improve the plan’s benefits, while lowering its cost to the Company. On November 5, 2021, the Board approved the amendment and restatement of the Deferred Compensation Plan for Officers, effective as of December 1, 2021, and unfroze the plan at that time. Under the amended plan, officers are able to elect to defer all or a portion of their base salary, annual cash incentive award or bonus, and excess profit-sharing payments for any year. Amounts deferred on or before December 31, 2020 accrued a reasonable rate of interest, as determined annually by the Compensation Committee on an annual basis. For 2021, the Compensation Committee determined to accrue interest on the deferred amounts at the 1-year LIBOR rate plus fifty basis points. Pursuant to the amended plan, all amounts deferred into the plan will be credited for earnings and losses based on deemed investment in one or more funds, as selected by the eligible officer participant among the options determined by the Company, for all

 

2022 Proxy Statement   49

 

 


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    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

periods commencing on and after December 1, 2021. At the time of the deferral election, amounts could be deferred until any date on or before the officer’s separation from service. At the officer’s election made at the time of deferral, the Company will pay the deferred amounts either in a lump sum or in no more than five annual installments beginning generally within 60 days of a date prior to or on the date of the officer’s separation from service (subject to a six-month delay to comply with Section 409A of the Code). The amounts deferred are not secured or funded by the Company in any manner and therefore remain at risk in the event of an adverse financial impact to the Company. The Non-Qualified Deferred Compensation for 2021 table and the associated narrative and footnotes on pages 70-71 provide additional information on the plan and NEO participation.

Benefit Replacement. The Company maintains a Benefit Replacement Plan, which provides participants with an annual payment equal to the amount they would have otherwise received under the Company’s tax-qualified profit sharing plan absent the limitations imposed by the Code on amounts that can be contributed under the tax-qualified profit sharing plan. This payment is made annually in a lump sum, as permitted in 2021. Additional information on the amounts paid under this plan can be found in the “All Other Compensation” column of the Summary Compensation Table and the associated footnotes on pages 66-67.

The Benefit Replacement Plan ensures that the full value of the intended benefits under the tax-qualified profit sharing plan is provided to the NEOs and, as such, supports the Company’s ability to attract talented executives and retain current NEOs.

Supplemental Benefits Agreement with the Executive Chairman. The Company has a Supplemental Benefits Agreement with Mr. Wm. Berkley, originally dating to 2004 and amended since then to comply with Section 409A of the Code and, in 2013, to terminate the retirement benefit that was originally included and subsequently liquidated. The remaining benefits to be provided to Mr. Wm. Berkley (and his spouse, as applicable) under the agreement, as amended, are as follows:

 

  &#10147  

continued health insurance coverage (including coverage for his spouse) for the remainder of his or her life, as applicable;

 

  &#10147  

continued use of a Company plane and a car and driver for a period beginning with termination of employment and ending with the latest to occur of the second anniversary of such termination, the date he ceases to be Chairman of the Board, or the date he ceases to provide consulting services to the Company;

 

  &#10147  

office accommodations and secretarial support; and

 

  &#10147  

payment of any excise tax imposed upon the Executive Chairman under Section 4999 of the Code (plus payment of additional taxes incurred as a result of the Company’s payment of excise taxes), in the event of a change in control. As noted on pages 71-72, if a change in control and termination of the Executive Chairman’s employment had occurred on December 31, 2021, no excise tax would have been triggered.

In exchange for these benefits, the agreement prohibits Mr. Wm. Berkley from competing against the Company for two years following his resignation of employment other than for “good reason,” during which time Mr. Wm. Berkley has agreed to be available to provide consulting services to the Company.

Additional detail on the agreement is provided under “Executive Compensation — Potential Payments Upon Termination or Change in Control” on pages 71-74.

 

 

 

50   W. R. Berkley Corporation


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Use of Market and Peer Group Data

 

LOGO

The Compensation Committee annually reviews and analyzes market data on total direct executive compensation. Total direct compensation (defined as base salary, annual cash incentive awards, and the potential value of long-term incentive awards granted) for the NEOs is compared to the amounts paid or granted to individuals holding comparable positions at our peer companies.

In 2021, the Compensation Committee reviewed with its independent compensation consultant, Meridian, the composition of the peer group to be used for compensation market data, considering the Company’s size and market positioning relative to potential peer companies as well as the impact of changes due to acquisitions. The Compensation Committee decided to remove from the peer group The Progressive Corporation and to add The Allstate Corporation and Kemper Corporation.

 

&#10147 Alleghany Corporation

  

&#10147 Everest Re Group, Ltd.

&#10147 The Allstate Corporation

  

&#10147 Fidelity National Financial, Inc.

&#10147 American Financial Group, Inc.

  

&#10147 The Hartford Financial Services Group, Inc.

&#10147 Arch Capital Group Ltd.

  

&#10147 Kemper Corporation

&#10147 Axis Capital Holdings Limited

  

&#10147 Markel Corporation

&#10147 Chubb Limited

  

&#10147 RenaissanceRe Holdings Ltd.

&#10147 CNA Financial Corporation

  

&#10147 The Travelers Companies, Inc.

 

    

The Compensation Committee believes that the peer group should be comprised primarily of property casualty insurance underwriters. Further, the Compensation Committee believes that the peer group it has identified for the Company is appropriate because it includes companies across a wide range of market capitalization, as well as those who are also members of the S&P 500®, with whom the Company competes for business, capital and senior executive talent. The companies included in our compensation peer group, shown above, represent direct competitors of the Company for both business and executive talent and are believed to provide a reasonable assessment of industry market pay levels.

 

 

The Compensation Committee reviews market data, together with performance data, for our peer companies to evaluate the overall alignment of total direct compensation paid and relative performance. In addition, the Compensation Committee also reviews broader industry survey data as an additional reference point. However, market data is only one of many factors considered in setting future compensation awards. We do not target a specific percentile for any pay component or for our total direct compensation, nor do we target any particular mix of base salary, annual cash incentive awards, and long-term incentive compensation. Our executives’ actual pay is determined primarily by Company operational and financial performance.

 

 

2022 Proxy Statement   51

 

 


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The adjacent graphs plot relative rankings of three-year performance versus CEO pay for the Company and its compensation peer group. The graph on the top utilizes total stockholder return (TSR) to measure performance, while the graph in the middle utilizes return on equity (ROE) and the graph on the bottom utilizes growth in book value per share.* The graphs highlight our strong alignment between pay and performance relative to our peer group.

The Company utilizes ROE and growth in book value per share in its compensation programs. We believe that they are more appropriate indicators of management performance than stock price and that over the long term, stock price will reflect the value created through strong ROE and growth in book value per share.

 

 

*

Compensation is based on proxy Summary Compensation Table disclosures. Where peer 2021 compensation has not been disclosed as of April 15, 2022 (2 company(ies) in our compensation peer group), estimated values have been used, based on forward and/or historical disclosures. Financial and market data has been standardized across companies. Total stockholder return (“TSR”) is defined as stock price appreciation plus reinvested dividends. Book value per share growth is defined as common stockholders’ equity plus the value of dividends and share repurchases divided by common shares outstanding. Return on equity is defined as net income over beginning of year common stockholders’ equity. TSR and book value per share calculations reflect three-year annualized growth rates; return on equity calculations reflect a three-year average.

LOGO

 

LOGO

 

LOGO

 

 

 

 

52   W. R. Berkley Corporation


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Executive Compensation Decisions During the Last Year

 

LOGO

 

LOGO

Highlights

The performance targets in our compensation plans were not adjusted for the COVID-19 pandemic and its related economic impacts in 2021.

Salaries increased by 4% in November 2021 for our NEOs to reflect general market movement in the competitive market for talented executives. Annual Cash Incentive awards for 2021 performance increased by 57% for our CEO and Executive Chairman, reflecting the significant increase in the Company’s ROE from 8.7% to 16.2%. Cash incentive awards for our CFO increased by 33% and for all other NEOs increased by 40% in comparison to 2020, reflecting the Company’s strong performance and the individual contributions of the NEOs to that performance. These awards were determined principally by evaluating the Company’s ROE. Other metrics are utilized to inform the Compensation Committee about the industry-specific and general economic environment in which these results were achieved.

The potential dollar value of performance-based RSUs granted to our NEOs increased by 7.3% compared to 2020, and the potential value of LTIP awards was unchanged. These awards are intended primarily to motivate future long-term performance rather than to differentiate and reward recent performance, so the amounts granted tend not to vary with short-term performance as much as annual incentive awards do. These amounts are at risk and actual amounts earned may be less than their maximum value, depending upon our future performance.

 

 

 

2022 Proxy Statement   53

 

 


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General Approach. The Compensation Committee makes the determinations concerning NEO compensation. The CEO and the Executive Chairman make initial recommendations to the Compensation Committee with respect to compensation for NEOs other than themselves. The Compensation Committee then makes the final determination.

Base Salary. Base salaries for NEOs in 2021 were increased by 4% from 2020, beginning on November 1, 2021, to reflect general market movement in the competitive market for talented executives.

Mr. Rob Berkley’s annual salary was set at $1 million effective June 1, 2016 in conjunction with his transition into the CEO role. His salary had not increased since then, at his request, until November 1, 2021 when it was set at $1,040,000 by the Committee.

Mr. Wm. Berkley has received a base salary of $1 million since January 1, 2000; his salary had not increased since then, at his request, until November 1, 2021 when it was set at $1,040,000 by the Committee.

Mr. Shiel’s base salary was set at $650,000 in 2015 and remained the same until November 1, 2021 when it was set at $676,000. Ms. Sgaglione’s base salary was set at $650,000 in 2017 and remained the same until November 1, 2021 when it was set at $676,000. Mr. Baio’s annual base salary was increased to $650,000 in 2020 to bring his salary in line with the other NEOs who are executive vice presidents and was similarly set at $676,000 on November 1, 2021.

  

Executive Chairman’s Compensation Reflects the Importance of His Ongoing Role

 

As Executive Chairman, Mr. Wm. Berkley maintains an active and significant presence in the Company. He continues to provide executive services to the Company by working with senior management to source, evaluate and implement strategic business and investment opportunities that promote long-term stockholder value creation. He was instrumental in developing our total return investment strategy and in identifying opportunities that have resulted in significant realized gains. In addition, he continues to work actively to recruit and develop talent, enhance intellectual capital and corporate culture and provide corporate memory. In conjunction with the CEO, he directs government and industry outreach to inform public policy, provides industry thought leadership and contributes to stockholder outreach. He also provides direction concerning strategic leadership issues.

Nevertheless, his compensation has decreased by 23% since 2015, reflecting the increasing responsibilities of Mr. Rob Berkley in managing the operations of the Company since assuming the CEO role. The Compensation Committee considers the level of Mr. Wm. Berkley’s compensation annually.

 

LOGO

Compensation values are based on 2021 base salary, the annual cash incentive award payment for 2021, the potential maximum value of the LTIP award for the 2021-2025 performance period, and the potential maximum value of the 2021 performance-based RSU grant.

 

 

 

            Name   

2021 Annual

Base Salary(1)

  

2020 Annual    

Base Salary    

Mr. Rob Berkley

     $ 1,040,000      $ 1,000,000      

Mr. Wm. Berkley

     $ 1,040,000      $ 1,000,000

Mr. Baio

     $ 676,000      $ 650,000

Ms. Sgaglione

     $ 676,000      $ 650,000

Mr. Shiel

     $ 676,000      $ 650,000

 

(1)

As of November 1, 2021; until that date, 2020 annual base salaries remained in effect.

 

 

 

54   W. R. Berkley Corporation


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Annual Cash Incentive Awards.

After the close of the year, the Compensation Committee, with the input of the CEO and the Executive Chairman and performance information for the Company’s compensation peer group provided by Meridian, evaluated the Company’s performance across all established measures. Overall, the Compensation Committee determined that the Company’s performance in 2021 was strong despite industry-wide catastrophe losses and continuing low interest rates.

For awards for the CEO and Executive Chairman, the Compensation Committee considered ROE and the supplemental performance measures set forth below. The CEO and the Executive Chairman made recommendations to the Compensation Committee concerning annual incentive payments for the NEOs other than themselves. These awards were based on an evaluation of the Company’s ROE and supplemental performance measures (primarily in comparison to the compensation peer group and industry), and the award levels relative to prior-year award payouts. Each NEO’s individual accomplishments and contributions to the Company’s results were also evaluated. This additional subjective evaluation is not based on any specific pre-determined criteria and generally will not impact the award levels, either positively or negatively, except in cases of extraordinary performance. No adjustments based on extraordinary individual performance were made to the annual cash incentive award amounts.

 

2022 Proxy Statement   55

 

 


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    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

Observations regarding performance in relation to the principal criteria considered by the Compensation Committee to assist its annual cash incentive award decision-making are summarized in the table below:

 

   

 

Objective

 

  

 

2021

Observations

 

 

 

2021

Performance

 

  ROE (1)  

15% ROE

over the long term

   The Company performed strongly, reporting profitable growth in an improving rate and economic environment, despite a high level of industry-wide catastrophe losses and continued low interest rates.   16.2%

compared
to 8.7% in 2020

  Combined

  Ratio

  95% or less (absent a major catastrophe) and better than the industry average over the long term    Record underwriting income. The Company’s combined ratio was 10.0 points better than the property casualty insurance industry of 99.6%. (2)   89.6% compared to
94.9% in 2020 (and
10.0 points better
than
industry)

  Net

  Investment

  Income

  Stable fixed-maturity portfolio income and higher long-term alternative asset yield    Income from alternative assets drove a 15% increase in net investment income. Fixed-maturity income declined as the Company maintained a portfolio duration of 2.4 years. The fixed-maturity portfolio is positioned to manage the uncertain interest rate environment.   $672MM
compared to
$584MM in 2020;
Fixed-maturity
yield
2.2%

  Net Realized

  Gains On

  Investment

  Sales

  A regular stream of capital gains from alternative investments, within acceptable risk limits    The Company realized gains on the sales of certain investments, including the sale of a private equity investment and properties in New York and Florida.   $145MM
compared to
$99MM in 2020
(pre-tax)

  Earnings

  Per Share(3)

  Year over year growth    Earnings per diluted share increased compared to 2020 due to record underwriting results and strong net investment income.   $3.66 compared to
$1.87 in 2020

  Growth in

  Book Value

  Per Share

  Before

  Dividends and

  Share

  Repurchases

  Year over year growth before changes in accumulated other comprehensive income (“AOCI”)    Positively affected by operating earnings and net realized gains on investment sales. Short fixed-maturity investment duration lessened the impact of rising interest rates on book value.   12.5% growth
compared to 10.5%
in
2020

  Investments In

  New

  Businesses

  and

  Opportunities

  Creatively address new businesses and opportunities when market conditions permit    Formed two new insurance businesses, Berkley Management Protection and Berkley Small Business Solutions.   Two new
businesses

  Management

  Consistency

  Stability among senior management and smooth transitions   

Effected smooth successions in key leadership positions. Continued to enhance management, leadership and succession development programs. Company’s continued response to COVID-19 pandemic indicated operational resiliency and strong utilization of the business continuity program.

 

  No unplanned
turnover in senior
positions
(1) 

ROE data based on beginning of year stockholders’ equity.

(2) 

Property casualty insurance industry combined ratio data from A.M. Best.

(3) 

Earnings per share reflects the 3-for-2 common stock split effected on March 23, 2022.

The Company’s 2021 16.2% ROE contributed to a five-year average ROE that ranked in the 74th percentile of our compensation peer group.

The annual cash incentive awards paid for 2021 are summarized in the table below:

 

Name     

2021 Annual Cash

Incentive Award

     2020 Annual Cash
Incentive Award
    

Change          

From 2020          

  Mr. Rob Berkley      $4,250,000      $2,700,000      57%    
  Mr. Wm. Berkley      $4,250,000      $2,700,000      57%    
  Mr. Baio      $   700,000      $   525,000      33%    
  Ms. Sgaglione      $   700,000      $   500,000      40%    
  Mr. Shiel      $   700,000      $   500,000      40%    

 

 

 

56   W. R. Berkley Corporation


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Long-Term Incentives.

In general, the performance-based RSU awards, as well as the LTIP awards, are sized taking into consideration that (i) the purpose of the awards is primarily to incentivize future performance rather than to differentiate and reward immediate past performance, so they will not vary significantly in grant date terms from year to year, and (ii) NEOs with similar level of responsibility should receive similarly sized awards.

Performance-Based Restricted Stock Units. RSU awards with performance-based vesting conditions were made to our NEOs in 2021. Each of the NEOs received a target number of performance-based RSUs divided into three tranches. Each tranche may be earned based on the Company’s three-year average ROE performance for the three-year periods ending on each of June 30, 2024, 2025, and 2026, compared to the rate on the five-year U.S. Treasury Note (“T-Note”) as of July 1, 2021, as follows:

 

Excess ROE (1)
(
i.e. , Average ROE Less the T-Note Rate)
   Percentage of Target RSUs
That Will Be Earned
Less than 500 basis points    0%
500 basis points    80%
633 basis points    90%
766 basis points    100% (target)
900 or more basis points    110%
(1)

For any Excess ROE performance between 500 and 900 basis points, linear interpolation will be used to determine the vesting fraction. For performance-based RSU awards, “Average ROE” is defined as net income from continuing operations divided by beginning-of-year stockholders’ equity, measured quarterly and averaged over the performance period.

The Compensation Committee chose ROE as the performance measure for 2021 performance-based RSU awards because it is a key performance indicator in our industry closely watched by investors. The Compensation Committee believes that using ROE for both these performance-based RSUs and as a primary metric to determine annual cash incentive awards is appropriate because the metric is well aligned with stockholder interests and because the Compensation Committee believes there is adequate balance with other performance criteria in both the Annual Incentive Compensation Plan (through the Compensation Committee’s use of negative discretion and review of multiple supplemental measures) and the long-term plan (with the LTIP focus on book value). The Compensation Committee decided to keep the same payout scale for the 2021 awards that has been used since 2015. Under this payout scale, any excess ROE less than 500 basis points over the July 1 T-Note rate, for the year of grant, would result in no payout.

 

2022 Proxy Statement   57

 

 


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    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

In 2021, the target number of performance-based RSU awards to our NEOs were as follows (more detail is found in the 2021 Grants of Plan-Based Awards table on pages 67-68):

 

Name    Target Number
of 2021
Performance-Based
RSUs Awarded(1)
  

Grant Date Fair Value

of Target Number

of 2021

Performance-Based

RSUs Awarded

  

Grant Date Fair Value    

of Target Number    

of 2020    

Performance-Based    

RSUs Awarded    

  Mr. Rob Berkley    70,617    $3,500,000    $3,250,000    
  Mr. Wm. Berkley    70,617    $3,500,000    $3,250,000    
  Mr. Baio    10,089    $   500,000    $   475,000    
  Ms. Sgaglione    10,089    $   500,000    $   475,000    
  Mr. Shiel    10,089    $   500,000    $   475,000    
(1)

Reflects the 3-for-2 common stock split effected on March 23, 2022.

In 2021, the following performance-based RSU grants vested at 110% of target level performance: (i) the third tranche of the 2016 grant, (ii) the second tranche of the 2017 grant and (iii) the first tranche of the 2018 grant. All of these vested awards have been mandatorily deferred. (More detail is found in the Stock Vested in 2021 table on page 70).

LTIP Awards. Cash-denominated LTIP awards were granted in 2021 and will be earned based on growth in book value per share over the 2021-2025 period. The 2021 awards were structured similarly to awards made in prior years: units have no value at grant, but may gain in value during the subsequent five-year period based on growth in book value per share. If book value per share were to remain unchanged or decrease at the end of the five-year period, the earned value of an award would be zero. For the 2021 awards, the maximum LTIP unit value of $100 will be earned only for a 12.5% average annual increase in book value per share (as defined in the 2021 LTIP agreement), which implies a value for book value per share of $63.83 (from an opening value of $35.42), by the end of 2025 (not adjusted for the 3-for-2 common stock split effected on March 23, 2022). The Compensation Committee elected to set the performance requirement at 12.5% for the 2021 LTIP award, as it did in 2020, given the extended period of historically low interest rates. The Compensation Committee reviews the growth rate annually for new grants to set an appropriately rigorous performance target in light of interest rates and other factors and believes this performance hurdle is appropriate because it:

 

  &#10147  

Represents a challenging performance goal relative to actual book value per share growth in recent years to achieve the potential maximum value;

 

  &#10147  

Reflects the current operating environment for property casualty insurance companies; and

 

  &#10147  

Motivates our NEOs to pursue long-term goals aligned with stockholders’ interests while avoiding incentives for our NEOs to take excessive risks in the prevailing low interest rate environment.

 

 

 

58   W. R. Berkley Corporation


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In 2021, the NEOs were granted LTIP awards in the following amounts (more detail is found in the 2021 Grants of Plan-Based Awards table on pages 67-68):

 

  Name   Number of 2021
LTIP Units Granted
  

Number of 2020    

LTIP Units Granted    

  Mr. Rob Berkley   35,000    35,000    
  Mr. Wm. Berkley   35,000    35,000    
  Mr. Baio     4,500      4,500    
  Ms. Sgaglione     4,500      4,500    
  Mr. Shiel     4,500      4,500    

The 2021 LTIP award amounts remained the same as the amounts awarded in 2020.

The levels of performance required to produce a maximum payout have proven to be rigorous. For the last four completed LTIP cycles, the payouts as a percentage of maximum potential value were as follows:

 

 

 

   2014 – 2018
Cycle
    

2015 – 2019

Cycle

     2016 – 2020
Cycle
    

2017 – 2021

Cycle

 

  Payout (%

  of Maximum)

     84%        100%        93%        98%  

For LTIP awards currently outstanding, the accrued payout values as of December 31, 2021 as a percentage of the maximum potential value are summarized as follows:

 

 

 

    2018 – 2022  
Cycle
   

  2019 – 2023  

Cycle

   

  2020 – 2024  

Cycle

   

  2021 – 2025  

Cycle

 

  Years Completed in 5-Year Cycle

    4       3       2       1  

  Accrued Value as of December 31,

  2021 (% of Maximum)

    76.6     49.2     32.9     21.6

Accruals for amounts earned under open LTIP cycles are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table in the year that the amounts are earned (as required by SEC rules, even though the awards are not paid out until the end of the cycle, and may be forfeited). The values for 2021 in the Summary Compensation Table on pages 66-67 include amounts earned in 2021 under the five performance cycles that were open during the year.

 

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    COMPENSATION DISCUSSION AND ANALYSIS    

 

 

 

Severance and Change in Control Benefits

 

LOGO

The Company generally does not have any contracts, agreements, plans or arrangements that provide for severance or similar payments to the NEOs at, following, or in connection with any termination of employment (other than the benefits noted above in the discussion of the Executive Chairman’s Supplemental Benefits Agreement). However, the following agreements provide for certain benefits upon specific termination events:

 

 

Termination Event

 

 

 

Treatment

 

 

  Death or Disability

 

 

&#10147Performance-Based RSUs: Vest pro-rata based on the portion of the performance period completed, assuming target performance.

&#10147LTIP: Earned value determined as of the last completed fiscal year-end, and distributed in cash within 90 days.

 

  Termination for Cause

 

 

&#10147All Awards: Forfeit unvested portion.

 

  Other Termination (For

  change in control, see

  paragraphs below)

 

&#10147Performance-Based RSUs: Forfeit unvested portion.

&#10147LTIP: For termination due to eligible retirement or by the Company for other than cause, earned value determined as of the last completed fiscal-year end, and distributed in cash within 90 days. For other terminations, forfeit.

The prospect of a change in control of the Company can cause significant distraction and uncertainty for executive officers, including the NEOs. Therefore, the Compensation Committee believes that appropriate change in control provisions are important tools for aligning executive officers’ interests with those of stockholders, in change in control scenarios. These provisions allow our executive officers to focus on strategic transactions that are in the best interest of our stockholders without undue concern regarding the effect of such transactions on their continued employment.

RSU and LTIP awards include “double trigger” treatment upon a change in control. If the holder’s employment is terminated by the Company without “cause” or by the holder for “good reason” (each as defined in the award agreements) within 18 months following the change in control, the unvested RSUs will vest (in an amount corresponding to an assumed achievement of “target” performance, for performance-based RSUs) and the value of LTIP awards will be determined and fixed as of the end of the fiscal year prior to the termination. However, in the limited circumstances that LTIP awards are not assumed or substituted in connection with a change in control, then the value of LTIP awards will be determined and fixed as of the end of the fiscal year prior to the change in control.

For additional detail, see “Executive Compensation — Potential Payments Upon Termination or Change in Control” on pages 71-74 below.

 

 

 

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Other Policies and Considerations

 

LOGO

The Company maintains other policies and practices related to executive compensation and governance, including the following:

 

  &#10147  

Stock Ownership. Our NEOs are required to hold shares in the following amounts:

 

    CEO: 10 times base salary

 

    Executive Chairman: 10 times base salary

 

    Other NEOs: 3 times base salary
    

The Board’s policy requires significant stock ownership by our NEOs, and prohibits pledging of shares used to satisfy our NEO stock ownership requirements or hedging.

 

 

All of our NEOs hold stock well in excess of their guideline amounts as noted in the following table.

Eligible Shares Owned for Purposes of Stock Ownership Guidelines

 

 

  Name

 

 

 

 

  Guideline  

 

 

 

 

Guideline
  (# of Shares)(1)  

 

 

 

 

  Eligible Shares Owned
   – as of 4/18/2022(2)

 

 

 

 

  Eligible Shares Owned  

(% of Guideline)

 

 

  Mr. Rob Berkley   10x base salary       149,791       3,595,007       2,400%  
  Mr. Wm. Berkley   10x base salary       149,791       44,195,981       29,505%  
  Mr. Baio   3x base salary       29,209       109,920       376%  
  Ms. Sgaglione   3x base salary       29,209       118,226       405%  
  Mr. Shiel   3x base salary       29,209       624,247       2,137%  

 

  (1)

Share amounts reflect the 3-for-2 common stock split effected on March 23, 2022. Based on the April 18, 2022 closing stock price of $69.43 as reported by the NYSE.

  (2)

Based on shares that are owned by the NEO (as described below), less any pledged shares.

Shares counting toward meeting these ownership guidelines include: shares that are owned by the executive; shares that are beneficially owned by the executive, such as shares in “street name” through a broker or shares held in trust; shares underlying vested deferred RSUs; and other unvested or vested deferred equity awards denominated in common stock, excluding pledged shares and unvested performance-based RSUs. An executive has five years from the date of becoming an NEO to come into compliance with the guidelines.

 

  &#10147  

Tax and Accounting Considerations. When reviewing compensation matters, the Compensation Committee considers the anticipated tax and accounting treatment of various payments and benefits to the Company and, when relevant, to its executives. As a result of passage of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”), compensation in excess of $1 million paid to our NEOs will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The Compensation Committee does not limit executive compensation to the amount deductible under the Code. Rather, it considers the available alternatives and acts to preserve the deductibility of compensation to the extent reasonably practicable and consistent with its other compensation objectives. As noted above, RSU awards are mandatorily deferred upon vesting, so

 

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tax-deductibility of awards granted prior to November 2, 2017 may be preserved even for legacy time-vested awards based on grandfathering of the agreements.

Section 409A of the Code requires programs that allow executives to defer a portion of their current income — such as the Deferred Compensation Plan for Officers — to meet certain requirements regarding risk of forfeiture and election and distribution timing (among other considerations). Section 409A of the Code requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Accordingly, as a general matter, it is the Company’s intention to design and administer its compensation and benefits plans and arrangements for all of its employees and other service providers, including its NEOs, so that they are either exempt from, or satisfy the requirements of, Section 409A of the Code.

The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718, Compensation — Stock Compensation, which requires the Company to recognize compensation expense for share-based payments (including RSUs).

 

 

 

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    COMPENSATION COMMITTEE REPORT    

 

 

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Compensation Committee

Mary C. Farrell, Chairwoman

Ronald E. Blaylock

Mark E. Brockbank

Leigh Ann Pusey

April 29, 2022

The above report of the Compensation Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

 

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    DISCUSSION OF RISK AND COMPENSATION PLANS    

 

 

 

Discussion of Risk and Compensation Plans

The Company has implemented a variety of practices, policies, and incentive design features that are intended to discourage employees from taking unnecessary or excessive risks. As a result, the Compensation Committee believes that risks arising from the Company’s compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company. These practices, policies and incentive design features include:

 

  &#10147  

Multi-year equity vesting and multi-year performance periods (discussed on pages 47-49 of this proxy statement).

 

  &#10147  

Non-formulaic performance-based annual cash incentive awards (discussed on pages 43-47 of this proxy statement).

 

  &#10147  

Clawback practices (discussed on pages 48-49 of this proxy statement).

 

  &#10147  

Stock ownership guidelines for NEOs (discussed on page 61 of this proxy statement).

 

  &#10147  

Review of pledging of shares by Executive Chairman (discussed below).

 

  &#10147  

Unsecured and unfunded deferred compensation program (discussed on pages 49-50 of this proxy statement).

 

  &#10147  

Prohibition on hedging and restrictions on pledging of shares held by executives (discussed on page 49 of this proxy statement).

 

  &#10147  

Mandatory deferral of vested RSUs (with shares not being delivered until separation from service) for all NEOs and other senior officers (discussed on page 48 of this proxy statement).

 

As part of its contribution to risk oversight, the Compensation Committee annually reviews the pledging of shares by the Executive Chairman and reports to the Board of Directors. The Compensation Committee has noted that Mr. Wm. Berkley:

 

1)  Has not sold a share of the Company’s stock since 1969, other than in connection with cashless exercises of stock options or to cover taxes on vested restricted stock units from time to time,

 

2)  Has a strong track record of managing his pledged shares through all economic environments, including the 2008-2009 financial crisis; he has never been required to sell any shares.

         

 

Our policy prohibits pledging of shares used in fulfillment of stock ownership guidelines. No NEO other than Mr. Wm. Berkley who is our founder and Executive Chairman has ever pledged any shares. The pledging is a unique circumstance given that he is the Company’s founder and served as its Chairman for 55 years.

 

 

His pledging actions are not designed to shift or hedge any economic risk associated with his ownership of the Company’s shares. He has pledged shares from time to time because he did not want to reduce his significant ownership stake and weaken his alignment with the Company’s stockholders.

 

 

 

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Mr. Wm. Berkley has significantly reduced the number of shares pledged over the past years. This reduction in his pledged holdings totals approximately 28.5 million shares*, or an approximately 69% decline, since 2011, including approximately 6.6 million shares* since 2017. Moreover, his unpledged holdings total more than 44 million shares* with an approximate market value of $3.07 billion as of April 18, 2022, which represents 295 times the Company’s stock ownership guidelines for the Executive Chairman. The Compensation Committee and the Board of Directors review this issue annually and are comfortable that, due to Mr. Wm. Berkley’s overall financial position, including the approximately 44 million unpledged shares* that represent more than 77% of his total ownership, his pledging of a portion of his shares does not create a material risk to the Company. Recognizing the steps Mr. Wm. Berkley has taken to significantly reduce the number of his pledged shares and his very substantial amount of unpledged shares, the Compensation Committee has determined that requiring Mr. Wm. Berkley to eliminate his pledging could have an adverse impact on the Company and its stockholders if he were to sell the shares. Accordingly, the Compensation Committee reaffirmed its belief that it would be counterproductive for the Company’s Executive Chairman to sell shares of the Company to further reduce his pledged shares.

 

* Share amounts reflect the 3-for-2 common stock splits effected on April 2, 2019 and March 23, 2022.

 

Shares pledged represent 4.6% of total shares outstanding as of April 18, 2022, down from 13.0% as of March 2011.

LOGO

 

 

 

 

 

 

 

 

 

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    EXECUTIVE COMPENSATION    

 

 

 

Executive Compensation

Summary Compensation Table

 

LOGO

The following table sets forth the cash and non-cash compensation awarded to and earned during 2021 by the Chief Executive Officer of the Company, the Chief Financial Officer of the Company and the three other highest paid executive officers of the Company in 2021, 2020 and 2019.

Summary Compensation Table

 

Name and

Principal Position(1)

  Year    

Salary

($)(2)

   

Bonus

($)

   

Stock

Awards

($)(3)

   

Non-Equity

Incentive Plan

Compensation

($)(4)

   

All Other

Compensation

($)

   

Total

($)

  W. Robert Berkley, Jr.

    2021       1,006,667             3,850,030       8,776,200       514,408 (5)(6)      14,147,305  

President and Chief

    2020       1,000,000             3,575,058       4,999,850       407,820       9,982,728  

Executive Officer

    2019       1,000,000             3,575,014       5,939,145       503,772       11,017,931  
  William R. Berkley     2021       1,006,667             3,850,030       8,776,200       647,575 (5)(6)      14,280,472  

Executive Chairman

    2020       1,000,000             3,575,058       4,999,850       578,948       10,153,856  

of the Board

    2019       1,000,000             3,575,014       6,154,926       559,084       11,289,025  
  Richard M. Baio     2021       654,333             550,004       1,213,038       65,854 (6)      2,483,229  

Executive Vice President —

    2020       646,667             522,529       755,240       52,153       1,976,589  

Chief Financial Officer

    2019       625,000             522,564       786,551       56,730       1,990,846  
  James G. Shiel     2021       654,333             550,004       1,281,940       65,854 (6)      2,552,131  

Executive Vice President —

    2020       650,000             522,529       795,695       52,420       2,020,644  

Investments

    2019       650,000             522,564       902,551       58,980       2,134,095  
  Lucille T. Sgaglione     2021       654,333             550,004       1,281,940       65,644 (6)      2,551,921  

Executive Vice President

    2020       650,000             522,529       783,013       52,210       2,007,752  
    2019       650,000       500,000       522,564       339,345       58,822       2,070,731  
(1)

This column reflects each NEO’s principal position as of the date of this proxy statement.

(2)

Any amounts deferred, whether pursuant to a plan established under Section 401(k) of the Code or otherwise, are included for the year in which earned.

(3)

This column represents the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation.

    

For 2021, all of the stock awards reported in the Stock Awards column are performance-based RSUs. The grant date fair value of performance-based RSUs is based on the probable outcome of the performance-related component. The amounts in the table above assume that on the grant date of the awards the highest level of performance was probable and therefore such amounts represent the maximum potential value of the awards. For performance-based RSUs, fair value is calculated using the average of the high and low prices of the Company’s common stock reported by the NYSE on the date of grant. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.

    

For additional information relating to the valuation assumptions with respect to the prior year grants, refer to note 22 of the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC. These amounts reflect the Company’s accounting expense for these awards and do not necessarily correspond to the actual value that will be recognized by the NEOs, which depends on the extent to which the RSUs are earned and the market value of the Company’s common stock on a date in the future when the RSUs are settled.

(4)

This column includes the dollar amount of annual cash incentive awards earned by Messrs. Rob Berkley, Wm. Berkley, Baio and Shiel and Ms. Sgaglione for performance during 2021 under the Annual Incentive Compensation Plan of $4.25 million, $4.25 million, $0.7 million, $0.7 million and $0.7 million, respectively. These awards were paid in March 2022. This column also includes the dollar amounts contingently earned during 2021 with respect to awards granted to each of the NEOs prior to 2022 pursuant to the LTIP, subject to the terms and conditions of the individual LTIP agreements. See the 2021 Grants of Plan-Based Awards table below for information relating to the Annual Incentive Compensation Plan. For additional information on the LTIP, refer to note 23 of the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.

(5) 

This amount includes (i) Company director fees of $91,500 and 3,978 vested shares of the Company’s common stock awarded to directors on June 15, 2021 (as adjusted to reflect the 3-for-2 stock split effective on March 23, 2022), having a grant date fair value of $200,067 (calculated using the closing price of the Company’s common stock reported on the NYSE on the day preceding the date of grant), payable to each of Messrs. Rob Berkley and Wm. Berkley; (ii) the incremental cost to the Company related to personal use of Company-owned aircraft by Mr. Rob Berkley of $121,755 and Mr. Wm. Berkley of $130,136; and (iii) for Mr. Wm. Berkley only, secretarial and administrative assistant expenses of $124,995. To increase productivity and for reasons of security and personal safety, the Board of Directors has required Messrs. Rob Berkley and Wm. Berkley to use Company-owned or non-commercial aircraft for all air travel. The methodology used to calculate the cost to the Company is based on the aggregate incremental variable trip-related costs, including the cost of fuel, on-board catering, landing and parking fees, flight crew travel expenses, and ground transportation costs. Since the corporate

 

 

 

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aircraft are used primarily for business travel, the methodology excludes fixed costs which do not change based on usage, such as pilots’ and other employees’ salaries, purchase costs of the aircraft, aircraft maintenance, and hangar expenses.

(6) 

For Messrs. Rob Berkley, Wm. Berkley, Baio and Shiel and Ms. Sgaglione, this amount includes Company contributions to the Profit-Sharing Plan of $29,000 each, and payments under the Benefit Replacement Plan of $71,667, $71,667, $36,433, $36,433, and $36,433, respectively. For each of Messrs. Rob Berkley, Baio and Shiel this amount includes premiums of $420 for term life insurance and for Mr. Wm. Berkley and Ms. Sgaglione it includes premiums of $210 for term life insurance. Pursuant to SEC rules, dividend equivalents on vested and deferred RSUs are not required to be reported because the amounts of future dividends are factored into the grant date fair value of the awards (and such dividend equivalents have been excluded from the amounts reported under the column “All Other Compensation”).

Plan-Based Awards

 

LOGO

The following table shows (which reflects the 3-for-2 common stock split effected on March 23, 2022) information regarding awards granted to the NEOs in 2021 (portions of which are reflected to the extent required in the Summary Compensation Table):

2021 Grants of Plan-Based Awards –

 

  Name

 

 

Units

(#)

 

 

Plan Name

(Grant Date)

 

 

 

Estimated Possible and
Future Payouts Under
Non-Equity Incentive
Plan Awards
Maximum

($)

 

 

 

Estimated Possible and Future Payouts

Under Equity Incentive Plan Awards

 

Grant Date

    Fair Value of    

Performance-

Based RSU

Awards(3)

($)

 

 

Threshold

(#)

 

 

Target

(#)

 

 

Maximum

(#)

 

  W. Robert Berkley, Jr.

     

       Annual Incentive

       Compensation Plan

      10,000,000 (1)                 
      35,000  

       2019 Long Term Incentive

       Plan

      3,500,000 (2)                 
      70,617  

       2018 Stock Incentive Plan

       (08/15/2021 Grant Date)

          56,494       70,617       77,679       3,850,030

 

  William R. Berkley

     

       Annual Incentive

       Compensation Plan

      10,000,000 (1)                 
      35,000  

       2019 Long Term Incentive

       Plan

      3,500,000 (2)                 
      70,617  

       2018 Stock Incentive Plan

       (08/15/2021 Grant Date)

          56,494       70,617       77,679       3,850,030

 

  Richard M. Baio

     

       Annual Incentive

       Compensation Plan

      1,227,976 (1)                 
      4,500  

       2019 Long Term Incentive

       Plan

      450,000 (2)                 
      10,088  

       2018 Stock Incentive Plan

       (08/15/2021 Grant Date)

          8,071       10,088       11,098       550,004

 

  James G. Shiel

     

       Annual Incentive

       Compensation Plan

      1,227,976 (1)                 
      4,500  

       2019 Long Term Incentive

       Plan

      450,000 (2)                 
      10,088  

       2018 Stock Incentive Plan

       (08/15/2021 Grant Date)

          8,071       10,088       11,098       550,004

 

  Lucille T. Sgaglione

     

       Annual Incentive

       Compensation Plan

      1,227,976 (1)                 
      4,500  

       2019 Long Term Incentive

       Plan

      450,000 (2)                 
        10,088  

       2018 Stock Incentive Plan

       (08/15/2021 Grant Date)

                8,071       10,088       11,098       550,004
(1) 

Because of the nature of these awards, there is no target or minimum threshold performance level for an award. As such, the “Threshold” and “Target” columns have been omitted from this table. These amounts represented the potential maximum value of the annual cash incentive awards for 2021 under the Annual Incentive Compensation Plan (“AICP”), which was, for each of Messrs. Rob Berkley and Wm. Berkley, 1.5% of the Company’s pre-tax income, as defined in the AICP, and for each of Messrs. Baio and Shiel and Ms. Sgaglione, 0.1% of the Company’s pre-tax

 

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income as defined in the AICP, in each case subject to a cap of $10 million per individual. The amount of annual cash incentive award actually awarded for the year, however, is determined by the Compensation Committee, which may exercise discretion to pay less (but not more) than the maximums. For 2021, the Compensation Committee exercised its discretion to award lesser amounts under the plan and the actual amount of annual cash incentive awards paid to Messrs. Rob Berkley, Wm. Berkley, Baio and Shiel for their performance during 2021 under the AICP was $4.25 million, $4.25 million, $0.7 million, $0.7 million and $0.7 million, respectively (representing 42.5%, 42.5%, 57.0%, 57.0% and 57.0%, respectively, of their maximum potential awards), and such amounts are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.

(2) 

Each of these LTIP awards had no value at the time of grant. Because of the nature of the LTIP award design, there is no target or minimum threshold performance level. As such, the “Threshold” and “Target” columns have been omitted from this table. In order to earn the maximum value for each LTIP unit, a 12.5% average annual increase in book value per share, as defined in the LTIP agreement, must be attained over the five-year period. The future payout value for each LTIP unit is determined by multiplying the amount by which the ending per-share book value of the Company’s common stock exceeds the beginning per-share book value of the Company’s common stock over the five-year performance period by a factor of 3.52, subject to a maximum per-LTIP unit value of $100.00. The aggregate dollar value of the award to each NEO at payout will be the product of that per-LTIP unit value and the number of LTIP units awarded to the NEO. The dollar value of the awards will be paid to the executives at the end of the five-year performance period, subject to earlier payout of the earned value (i) upon death or a termination of employment on account of disability or eligible retirement, by the Company without cause, or, following a change in control, by the NEO for good reason, or (ii) upon a change in control if the LTIP units are not assumed or substituted in connection with such change in control, in each case where such earned value will be based on the per-LTIP unit value as of the end of the fiscal year immediately preceding the year in which such death, termination or change in control occurs. An NEO’s LTIP units will be forfeited if certain continued employment conditions are not satisfied through the end of the performance period. An NEO’s LTIP units may also be forfeited or subject to recapture if such executive engages in misconduct or violates certain provisions of the award during the performance period and for two years following the end of the performance period.

(3) 

This column represents the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation. The performance-based RSUs provide an opportunity for NEOs to receive shares of the Company’s common stock if a performance measure is met for three separate three-year performance periods (over five years) beginning in 2021, 2022, and 2023. For each performance period, if the minimum performance measure is not met, no award is earned. If at least the minimum performance requirement is attained, award payouts can range from 80% to 110% of the target number of shares. The grant date fair value of performance-based RSUs is based on the probable outcome of the performance-related component. The amounts in the table above assume that on the grant date of the awards the highest level of performance was probable and therefore such amounts represent the maximum potential value of the awards. For performance-based RSUs, fair value is calculated using the average of the high and low prices of the Company’s common stock reported on the NYSE on the date of grant. These performance-based RSUs vest, to the extent earned, at the end of each three-year performance period, with a total period of five years required for awards to vest in full. After vesting, settlement of the RSUs is mandatorily deferred until 90 days following the NEO’s separation from service with the Company (subject to a six-month delay to comply with Section 409A of the Code). For additional information regarding performance-based RSUs, see above under the heading “Compensation Discussion and Analysis — Additional Design Information — Long Term Incentives” on pages 47-49.

    

For additional information relating to the valuation assumptions with respect to the grants, refer to note 23 of the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC. These amounts reflect the Company’s accounting expense for these awards and do not necessarily correspond to the actual value that will be received by the NEOs.

Outstanding Equity Awards

 

LOGO

The following table (which reflects the 3-for-2 common stock split effected on March 23, 2022) provides information on the holdings of unvested stock awards by the NEOs as of December 31, 2021. This table includes only stock awards, as no NEO held any option awards as of December 31, 2021. Each equity grant is shown separately for each NEO. The market value of the stock awards is based on the closing market price of the Company’s stock as of December 31, 2021, which was $82.39 as reported on the NYSE (or, as adjusted for the 3-for-2 common stock split effected on March 23, 2022, $54.9267).

 

 

 

68   W. R. Berkley Corporation


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    EXECUTIVE COMPENSATION    

 

 

Outstanding Equity Awards at Fiscal 2021 Year-End

 

  Name   

Stock

Award

Grant

Date

    

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)

    

Market Value

of Shares or

Units of

Stock That

Have Not

Vested

($)

    

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

(#)(1)

  

Equity

Incentive

Plan Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

($)

 
  W. Robert Berkley, Jr.      08/15/2017              35,494        1,949,568  
     08/15/2018              63,843        3,506,683  
     08/15/2019              68,774        3,777,499  
     08/15/2020              79,574        4,370,707  
     08/15/2021              70,616        3,878,704  
  William R. Berkley      08/15/2017              35,494        1,949,568  
     08/15/2018              63,843        3,506,683  
     08/15/2019              68,774        3,777,499  
     08/15/2020              79,574        4,370,707  
     08/15/2021              70,616        3,878,704  
  Richard M. Baio      08/15/2017              3,551        195,017  
     08/15/2018              7,860        431,724  
     08/15/2019              10,053        552,178  
     08/15/2020              11,631        638,852  
     08/15/2021              10,088        554,101  
  James G. Shiel      08/15/2017              5,189        284,987  
     08/15/2018              9,333        512,631  
     08/15/2019              10,053        552,178  
     08/15/2020              11,631        638,852  
     08/15/2021              10,088        554,101  
  Lucille T. Sgaglione      08/15/2017              5,189        284,987  
     08/15/2018              9,333        512,631  
     08/15/2019              10,053        552,178  
     08/15/2020              11,631        638,852  
 

 

     08/15/2021       

 

 

 

 

 

    

 

 

 

 

 

     10,088        554,101  
(1) 

Represents performance-based RSUs, which represent the right to receive one share of common stock, subject to vesting and continued employment requirements. These performance-based RSUs will vest, to the extent earned, at the end of one remaining three-year performance period (over five years) for awards granted in 2017, at the end of two remaining separate three-year performance periods (over five years) for awards granted in 2018, and at the end of three separate three-year performance periods (over five years) for awards granted in 2019, 2020 and 2021, provided the NEO remains employed by the Company on the relevant vesting date. For each performance period, at least a portion of these performance-based RSUs will be earned if a minimum performance requirement is met for that performance period. If the minimum performance requirement is not met, no award will be earned. If at least the minimum performance requirement is attained, award payouts can range from 80% to 110% of the target number of shares. After vesting, settlement of the RSUs is mandatorily deferred until 90 days following the NEO’s separation from service with the Company (subject to a six-month delay to comply with Section 409A of the Code). The number of the performance-based RSUs reported in the table above have been calculated based on target performance level.

 

2022 Proxy Statement   69

 

 


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    EXECUTIVE COMPENSATION    

 

 

 

Option Exercises and Stock Vested

 

LOGO

We have not awarded stock options since 2004. No NEO holds any option awards, and during the year ended December 31, 2021, no NEO exercised any stock options. The following table shows the stock awards (i.e., RSUs) that vested for all the NEOs during 2021, which have been adjusted to reflect the 3-for-2 split stock effective on March 23, 2022.

Stock Vested in 2021

 

  Name   

Number of Shares

(RSUs) Acquired on

Vesting(#)

   

Pre-Tax Value   

Realized on   

Vesting($)   

  W. Robert Berkley, Jr.      119,925 (1)      5,879,197 (1) 
  William R. Berkley      119,925 (1)      5,879,197 (1) 
  Richard M. Baio      12,452 (1)      611,166 (1) 
  James G. Shiel      17,259 (1)      859,340 (1) 
  Lucille T. Sgaglione      15,321 (1)(2)      753,025 (1) 
(1) 

Represents the aggregate of performance-based RSUs granted on August 5, 2016 that vested at 110% of target level of performance on August 5, 2021 and performance-based RSUs granted on August 15, 2017 and August 15, 2018, respectively, that vested at 110% of target level of performance on August 15, 2021 (for which the receipt of the vested shares has been mandatorily deferred until the earlier of the respective NEOs separation from service or a change of control, except for shares withheld to pay Medicare taxes), when the market price of the Company’s stock was $48.15 per share on August 5, 2021 and $49.563 per share on August 16, 2021 (in each case as adjusted to reflect the 3-for-2 split stock effective on March 23, 2022). For additional information regarding the deferred RSUs held by the NEOs as of December 31, 2021, see “—Nonqualified Deferred Compensation” below.

(2) 

Includes 2,988 RSUs granted on August 5, 2016 that vested on August 5, 2021 when the market price of the Company’s stock was $48.15 per share (as adjusted to reflect the 3-for-2 split stock effective on March 23, 2022).

Non-Qualified Deferred Compensation

 

LOGO

The table below provides information on the year-end balances of amounts deferred in prior years by the NEOs under the Deferred Compensation Plan for Officers.

Non-Qualified Deferred Compensation for 2021

 

  Name   

Executive
Contributions
in last FY

($)

    

Aggregate

Earnings in

Last FY

($)(1)

    

Aggregate   

Balance at   

Last FYE   

($)(1)(2)   

  W. Robert Berkley, Jr.                     
  William R. Berkley             28,252        2,869,237  
  Richard M. Baio                     
  James G. Shiel             16,215        1,646,811  
  Lucille T. Sgaglione             1,737        176,408  
(1) 

These amounts are accrued, but are not secured or funded by the Company.

 

 

 

70   W. R. Berkley Corporation


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    EXECUTIVE COMPENSATION    

 

 

(2) 

Does not include the following vested RSUs (the receipt of which has been mandatorily deferred until the earlier of the respective NEO’s separation from service or a change in control and which reflect the 3-for-2 common stock split effected on March 23, 2022): Mr. Rob Berkley — 1,791,511 RSUs; Mr. Wm. Berkley — 4,748,649 RSUs; Mr. Baio — 96,592 RSUs; Mr. Shiel — 383,647 RSUs, and Ms. Sgaglione — 112,915 RSUs. These RSUs are fully vested, but delivery of the underlying shares has been mandatorily deferred until the NEO’s separation of service from the Company in order to align the NEO’s financial interests with those of the Company’s stockholders during the NEO’s employment.

The amounts set forth in the table above were deferred pursuant to the Company’s Deferred Compensation Plan for Officers in which the NEOs are eligible to participate on a voluntary basis. Under the plan, participants are able to elect to defer all or a portion of their base salary, annual cash incentive award, and excess profit-sharing contribution for any year. Prior to the amendment and restatement of the plan on November 5, 2021, amounts deferred into the plan on and before December 31, 2020 accrued at a reasonable rate of interest, as determined annually by the Compensation Committee. For 2021, the Compensation Committee determined to accrue interest on the deferred amounts at the 1-year LIBOR rate plus fifty basis points. For all periods commencing on and after December 1, 2021, amounts deferred into the plan will be credited for earnings and losses based on deemed investment in one or more funds, as selected by the eligible officer participant among the options determined by the Company. At the time of the deferral election, amounts were able to be deferred until any date on or before the officer’s separation from service. At the officer’s election made at the time of deferral, the Company will pay the deferred amounts either in a lump sum or in no more than five annual installments beginning generally within 60 days of a date which is prior to or on the date of the officer’s separation from service (subject to a six-month delay to comply with Section 409A of the Code).

Potential Payments Upon Termination or Change in Control

 

LOGO

Except as described in “Compensation Discussion and Analysis — Severance and Change in Control Benefits” above with respect to RSUs and LTIP awards, the Company does not have any contracts, agreements, plans or arrangements that provide for severance payments to the NEOs at, following, or in connection with any termination of employment. None of the NEOs has an employment agreement with the Company, and none of them, other than Mr. Wm. Berkley, has a change in control agreement with the Company. The information below describes and quantifies certain compensation that would become payable under existing plans and arrangements if a change in control had occurred or if an NEO’s employment had terminated on December 31, 2021. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event and the Company’s stock price.

During the two-year period following Mr. Wm. Berkley’s termination as provided in the Supplemental Benefits Agreement or, if longer, the period that he performs consulting services to the Company or remains Chairman of the Board, he will be entitled to continue to receive certain perquisites, including continued use of a Company plane and a car and driver, in a manner consistent with his prior use of such perquisites. Additionally, for so long as Mr. Wm. Berkley requests, following such termination, the Company is required to provide him with office accommodations and support, including secretarial support, in a manner consistent with that provided prior to such termination. The Company estimates the cost associated with the benefits that are to be provided during the two-year period set forth above to be $507,000 per annum, and that the cost associated with the benefits to be provided upon request would be $212,000 per annum. After his termination, Mr. Wm. Berkley and his spouse are also entitled to receive

 

2022 Proxy Statement   71

 

 


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    EXECUTIVE COMPENSATION    

 

 

 

lifetime health insurance coverage for which the Company estimates the actuarial present value of the cost to be $319,000. The estimated benefit to Mr. Wm. Berkley under the Supplemental Benefits Agreement described above, had he become entitled to receive such benefits upon a change in control occurring on December 31, 2021, does not include any gross-up as provided under the agreement because Mr. Wm. Berkley would not have been subject to the excise tax under Section 4999 of the Code.

The Supplemental Benefits Agreement prohibits Mr. Wm. Berkley from competing against the Company for two years following his resignation of employment other than for “good reason,” during which time Mr. Wm. Berkley has agreed to be available to provide consulting services to the Company.

Please see “Compensation Discussion and Analysis — Severance and Change in Control Benefits” above (including the table on page 60), for a description of the effects, with respect to all the NEOs, of a change in control or termination of employment as described in the various plan documents.

The following table provides the value, based upon the Company’s stock price, of RSUs that would become vested (but not the value of any already vested and deferred RSUs that would be settled), as well as the value of all performance units awarded under the LTIP (A) upon a change in control, (B) upon a change in control and termination, (C) if the NEO had died or become disabled or (D) if the NEO had a qualified retirement or was terminated by the Company for a reason other than cause, in each case as of December 31, 2021.

 

 

 

72   W. R. Berkley Corporation


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    EXECUTIVE COMPENSATION    

 

 

Potential Termination or Change in Control Payments Under RSUs and the LTIP

 

  Name   

RSUs

($)(1)

    

LTIP

($)(2)

    

Total

($)

 
  W. Robert Berkley, Jr.         

  Change in Control

                    

  Change in Control and Termination

     17,483,158        5,220,250        22,703,408  

  Death or Disability

     8,679,528        5,220,250        13,899,778  

  Qualified Retirement or Other than for Cause Termination

            5,220,250        5,220,250  
  William R. Berkley         

  Change in Control

                    

  Change in Control and Termination

     17,483,158        5,220,250        22,703,408  

  Death or Disability

     8,679,528        5,220,250        13,899,778  

  Qualified Retirement or Other than for Cause Termination

            5,220,250        5,220,250  
  Richard M. Baio         

  Change in Control

                    

  Change in Control and Termination

     2,371,843        535,275        2,907,118  

  Death or Disability

     1,127,052        535,275        1,662,327  

  Qualified Retirement or Other than for Cause Termination

            535,275        535,275  
  James G. Shiel         

  Change in Control

                    

  Change in Control and Termination

     2,542,720        671,175        3,218,895  

  Death or Disability

     1,267,425        671,175        1,938,600  

  Qualified Retirement or Other than for Cause Termination

            671,175        671,175  
  Lucille T. Sgaglione         

  Change in Control

                    

  Change in Control and Termination

     2,542,720        671,175        3,213,896  

  Death or Disability

     1,267,425        671,175        1,938,600  

  Qualified Retirement or Other than for Cause Termination

            671,175