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Section 1: DEF 14A (DEFINITIVE PROXY STATEMENT)

Definitive Proxy Statement
Table of Contents

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

    

STATE STREET CORPORATION

 

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

No fee required.

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)

Title of each class of securities to which transaction applies:

 

      

 

 

  (2)

Aggregate number of securities to which transaction applies:

 

      

 

 

  (3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

      

 

 

  (4)

Proposed maximum aggregate value of transaction:

 

      

 

 

  (5)

Total fee paid:

 

      

 

 

 

Fee paid previously with preliminary materials.

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

  (1)

Amount Previously Paid:

 

      

 

  (2)

Form, Schedule or Registration Statement No.:

 

      

 

  (3)

Filing Party:

 

      

 

  (4)

Date Filed:

 

      

 


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LOGO    

Joseph L. Hooley

Chairman

April 5, 2019

Dear Shareholder:

We cordially invite you to attend the 2019 annual meeting of shareholders of State Street Corporation. The meeting will be held at One Lincoln Street, 36th Floor, Boston, Massachusetts, on May 15, 2019, at 9:00 a.m. Eastern Time. The proxy statement and annual meeting provide an important opportunity for us to communicate with you as shareholders, and for you to communicate with us, on important topics such as our performance, corporate governance, the effectiveness of the Board of Directors and executive compensation. Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying notice of annual meeting and proxy statement. Whether or not you plan to attend the meeting, please carefully review the enclosed proxy statement and then cast your vote. We urge you to vote regardless of the number of shares you hold. To be sure that your vote will be received in time, please cast your vote by your choice of available means at your earliest convenience. Your vote is very important to us.

2018 marked the implementation of our CEO succession plan, and while I will be presiding at the 2019 annual meeting as Chairman of the Board, Ron O’Hanley will be joining me as our new Chief Executive Officer. It has been a privilege serving State Street and helping the Company evolve and grow over the past three decades, and it has been an honor leading this great organization for close to nine years. I am confident that with Ron’s leadership, State Street will continue its proud history of building a better future for the people and institutions we serve.

We look forward to seeing you at the annual meeting. Your continued interest in State Street is very much appreciated.

 

Sincerely,

LOGO

 

PLEASE NOTE: If you plan to attend the meeting, please allow time for registration and security clearance. You will be asked to present valid picture identification acceptable to our security personnel, such as a driver’s license or passport. If your State Street shares are held in “street name” through a broker, bank or other nominee, you should also bring proof of beneficial ownership (for further details, see “Meeting Admission” in the attached Notice of State Street Corporation 2019 Annual Meeting of Shareholders). For security purposes, you and your bags are subject to search prior to your admittance to the meeting, and no cameras, recording equipment, mobile phones or other electronic devices, large bags or packages are permitted in the meeting. Public fee-based parking is available at State Street’s headquarters at One Lincoln Street (entrance from Kingston Street). Other public fee-based parking near One Lincoln Street is available at the Hyatt Hotel (entrance from Avenue de LaFayette). South Station is the closest MBTA station to One Lincoln Street.

   

State Street Corporation

One Lincoln Street

Boston, MA 02111-2900


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LOGO

NOTICE OF STATE STREET CORPORATION 2019 ANNUAL MEETING OF SHAREHOLDERS

 

Date   

May 15, 2019

Time   

9:00 a.m., Eastern Time

Place   

One Lincoln Street, 36th Floor, Boston, Massachusetts

Purpose    1.   

To elect 12 directors

   2.   

To approve an advisory proposal on executive compensation

   3.   

To ratify the selection of Ernst & Young LLP as State Street’s independent registered public accounting firm for the year ending December 31, 2019

   4.   

To act upon such other business as may properly come before the meeting and any adjournments thereof

Record Date   

The directors have fixed the close of business on March 8, 2019, as the record date for determining shareholders entitled to notice of and to vote at the meeting.

Meeting Admission   

If you plan to attend the meeting, please allow time for registration and security clearance. You will be asked to present valid picture identification acceptable to our security personnel, such as a driver’s license or passport. If your State Street shares are held in “street name” through a broker, bank or other nominee, your name does not appear on our list of shareholders, and these proxy materials are being forwarded to you by your broker, bank or other nominee. If you hold in “street name” and wish to attend the annual meeting, in addition to a valid form of picture identification, you will be required to present a letter or account statement showing that you were a beneficial owner of our shares on the record date. For security purposes, you and your bags are subject to search prior to your admittance to the meeting. In addition, cameras, recording equipment, mobile phones or other electronic devices, large bags or packages will not be permitted in the meeting.

Voting by Proxy   

Please submit a proxy card or, for shares held in “street name,” voting instruction form, as soon as possible, so your shares can be voted at the meeting. You may submit your proxy card or voting instruction form by mail. If you are a registered shareholder, you may also vote electronically by telephone or over the Internet by following the instructions included with your proxy card or notice of Internet availability of proxy materials. If your shares are held in “street name,” you will receive instructions for the voting of your shares from your broker, bank or other nominee, which may permit telephone or Internet voting. Follow the instructions on the voting instruction form or notice of Internet availability of proxy materials that you receive from your broker, bank or other nominee to ensure that your shares are properly voted at the annual meeting.

 

By Order of the Board of Directors,
Jeffrey N. Carp
Secretary

April 5, 2019


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STATE STREET CORPORATION

One Lincoln Street, Boston, Massachusetts 02111

 

 

PROXY STATEMENT

SUMMARY INFORMATION

 

 
2019 Annual Meeting of Shareholders
   
Date:    May 15, 2019
   
Time:    9:00 a.m., Eastern Time
   
Place:   

State Street’s corporate headquarters

One Lincoln Street, Boston, Massachusetts (36th floor)

   

Record date:

 

  

March 8, 2019

 

The proxy statement and annual report, and the means to vote electronically, are available at www.proxyvote.com. To view this material, you must have available the 16-digit control number located on the notice mailed beginning on April 5, 2019, on the proxy card or, if shares are held in the name of a broker, bank or other nominee, on the voting instruction form.

More information about the annual meeting is described under the heading “General Information About the Annual Meeting.”

 

Voting Matters and Recommendations

 

  Item

   Board Recommendation

 

 

Election of Directors (see “Item 1—Election of Directors”)

  

 

 

FOR Each Director

 

Advisory Proposal on 2018 Executive Compensation    FOR
(see “Item 2—Approval of Advisory Proposal on Executive Compensation”)   

 

Ratification of Ernst & Young LLP as Independent Registered Public Accounting    FOR
Firm for 2019 (see “Item 3—Ratification of the Selection of the Independent Registered Public Accounting Firm”)   

 

The following summary provides general information about State Street Corporation, referred to as State Street, and highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider when deciding how to vote your shares. For further and more detailed information on the matters referenced below, prior to casting your vote, please carefully review the entire proxy statement and our 2018 annual report on Form 10-K. Our 2018 annual report on Form 10-K accompanies this proxy statement and was previously filed with the Securities and Exchange Commission, or SEC.



 

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About State Street

State Street Corporation is a financial holding company organized in 1969 under the laws of the Commonwealth of Massachusetts. State Street provides financial and managerial support to our legal and operating subsidiaries. Through our subsidiaries, including our principal banking subsidiary, State Street Bank and Trust Company, we provide a broad range of financial products and services to institutional investors worldwide. We refer to State Street Bank and Trust Company as State Street Bank or the Bank.

As of December 31, 2018, we had consolidated total assets of $244.63 billion, consolidated total deposits of $180.36 billion, consolidated total shareholders’ equity of $24.79 billion and 40,142 employees. We operate in more than 100 geographic markets worldwide, including the U.S., Canada, Europe, the Middle East and Asia.

We are a leader in providing financial services and products to meet the needs of institutional investors worldwide, with $31.62 trillion of assets under custody and administration and $2.51 trillion of assets under management as of December 31, 2018. Our clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.

In 2018, we continued to invest in differentiating capabilities to meet our clients’ ever-changing needs. We took an important strategic step with our acquisition of Charles River Development and made key executive hires and transitions, to continue advancing our multi-year strategy. Further, we maintained a sustained focus on risk excellence. While we made progress on our strategic initiatives, we are not satisfied with our 2018 financial performance. Weaker equity markets, particularly in the fourth quarter, and challenging market dynamics for our clients, drove ongoing fee compression and impacted servicing fee revenues. We also underperformed relative to our publicly disclosed guidance on fee revenue growth and fee operating leverage and our one-year total shareholder return trailed both our peer group median and the S&P Financial Index. We announced a record level of new servicing wins, with $1.9 trillion in new business commitments, increased net interest income by 16% over 2017, and grew both revenue and earnings while maintaining a strong capital position. Below is summary information of our 2018 consolidated corporate financial performance. Additional performance indicators are presented in “Compensation Discussion and Analysis—Executive Summary—2018 Corporate Performance.”

Financial Performance

Consolidated Financial Performance(1)

 

  ($ In millions, except per share data)   

2018

 

    

2017

 

    

Change

 

 

 

  Total fee revenue

 

   $

 

 9,305

 

 

 

   $

 

8,905

 

 

 

    

 

4.5%

 

 

 

 

  Revenue

 

  

 

 

 

 

11,982

 

 

 

 

  

 

 

 

 

11,170

 

 

 

 

  

 

 

 

 

7.3%

 

 

 

 

  Pre-tax margin

 

    

 

25.0%

 

 

 

    

 

26.0%

 

 

 

    

 

(100) bps

 

 

 

  Diluted earnings per share (EPS)

    

 

6.40

 

 

 

    

 

5.24

 

 

 

    

 

22.1%

 

 

 

 

  Return on average common equity (ROE)

     12.2%        10.6%        160 bps  
  (1)

In the first quarter of 2019, we plan to change our accounting method under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 323, Investments—Equity Method and Joint Ventures, for investments in low-income housing tax credit (LIHTC) investments from the equity method of accounting to the proportional amortization method of accounting. Financial results presented within this proxy statement do not reflect this change. For additional information, see our current report on Form 8-K dated March 5, 2019, on file with the SEC.

 

 

Total Shareholder Return (TSR)

 

        
     

State Street

 

    

Peer

Group Median(1)

 

    

S&P

Financial Index

 

 

  1-Year TSR

 

  

 

 

 

 

(33.97

 

 

)% 

 

  

 

 

 

 

(18.43

 

 

)% 

 

  

 

 

 

 

(13.04

 

 

)% 

 

  3-Year TSR

 

    

 

1.13

 

 

    

 

20.70

 

 

    

 

30.38

 

 

  (1)

Based on our 15-company compensation peer group; for more information on our compensation peer group see below under the heading, “Compensation Discussion and Analysis—Other Elements of Our Process—Peer Group and Benchmarking.”

 


 

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Board Composition Summary

Listed in the table below are the current members of State Street’s Board of Directors

 

       
  Director Nominee    Principal Occupation   

Other Public
Company
Boards (#)

 

   State Street Board Roles and Memberships
   

  Kennett F. Burnes*

  Director Since 2003

 

  

Retired Chairman, President and Chief Executive Officer, Cabot Corporation

 

   None   

Lead Director

Executive Committee

 

   

  Patrick de Saint-Aignan*

  Director Since 2009

  

Retired Managing Director and Advisory Director, Morgan Stanley

 

   None   

Examining and Audit Committee

Executive Committee

Risk Committee (Chair)

 

   

  Lynn A. Dugle*

  Director Since 2015

   Retired Chief Executive Officer and Chairman, Engility Holdings, Inc.    None   

Examining and Audit Committee

Executive Committee

Technology and Operations Committee (Chair)

 

   

  Amelia C. Fawcett*

  Director Since 2006

   Chairman, Kinnevik AB    1   

Executive Compensation Committee

Risk Committee

Technology and Operations Committee

 

   

  William C. Freda*

  Director Since 2014

   Retired Senior Partner and Vice Chairman, Deloitte, LLP    None   

Examining and Audit Committee (Chair)

Executive Committee

Risk Committee

 

   

  Joseph L. Hooley

  Director Since 2009

   Chairman of the Board, State Street Corporation    None   

Chairman

Executive Committee (Chair)

Risk Committee

 

   

  Sara Mathew*

  Director Since 2018

  

Retired Chairman and Chief Executive Officer, Dun & Bradstreet

   2   

Nominating and Corporate Governance Committee

Risk Committee

 

   

  William L. Meaney*

  Director Since 2018

   President, Chief Executive Officer and Director, Iron Mountain    1   

Nominating and Corporate Governance Committee

Technology and Operations Committee

 

   

  Ronald P. O’HanleyD

  Director Since 2019

 

  

President and Chief Executive Officer, State Street Corporation

 

   1    None
   

  Sean O’Sullivan*

  Director Since 2017

  

Retired Group Managing Director and Group Chief Operating Officer, HSBC Holdings, plc

 

   None   

Risk Committee

Technology and Operations Committee

 

   

  Richard P. Sergel*

  Director Since 1999

   Retired President and Chief Executive Officer, North American Electric Reliability Corporation    1   

Examining and Audit Committee

Executive Committee

Executive Compensation Committee (Chair)

Technology and Operations Committee

 

   

  Gregory L. Summe*

  Director Since 2001

   Managing Partner and Founder, Glen Capital Partners, LLC    1   

Executive Committee

Executive Compensation Committee

Nominating and Corporate Governance Committee (Chair)

 

 

*=Independent         D=First-Time Nominee


 

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Director Qualifications and Skills

State Street believes that our Board of Directors should have a diversity of qualifications, skill sets and experience that, when taken as a whole, best serve our company and our shareholders. Each of our directors has one or more of the following qualifications, skills or experience and, collectively, all of these qualifications are represented among our directors to form a depth of broad and diverse experiences to oversee our activities and operations:

 

    Global Financial Services

 

    Asset Management

 

    Leadership

 

    Governance

 

    Risk Management

 

    International Experience

 

    Legal and Regulatory Compliance

 

    Finance

    

    Technology

 

    Cybersecurity

 

    Global Operations

 

    Audit and Accounting

Corporate Governance Summary

Our Board of Directors is committed to strong corporate governance practices and is intent on maintaining State Street’s reputation for quality, integrity and high ethical standards. In addition to adhering to the Investor Stewardship Group’s Corporate Governance Framework, the following summarizes our corporate governance standards:

 

LOGO

Information about State Street’s corporate governance practices, is described under the heading “Corporate Governance at State Street.”



 

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Corporate Responsibility

State Street’s commitment to social and environmental responsibility and our belief in giving back to the communities in which we live and work are critical to our long-term success. We recognize that sustainable growth comes from operating with absolute integrity and in a way that respects our shareholders, clients, employees, communities and the environment. We firmly believe in the principles of sound governance and helping our clients succeed. We are dedicated to maintaining a global and inclusive workplace where employees feel valued and engaged. We believe we have a responsibility to enrich our communities, and to be a leader in environmental sustainability, both in the way we carry out our operations and in the products and services we offer. Corporate responsibility highlights and achievements for 2018 include the following:

 

 

LOGO

Overview of 2018 Executive Compensation Program

Sound Compensation and Corporate Governance Practices

State Street develops and implements a compensation program for our Named Executive Officers, or NEOs, and other executive officers, which aims to:

 

 

attract, retain and motivate superior executives

 

 

reward those executives for meeting or exceeding annual and long-term financial and strategic objectives

 

 

drive long-term shareholder value and financial stability

 

 

align incentive compensation with the risks and performance results experienced by our shareholders through the use of significant levels of deferred equity-based compensation

 

 

provide equal pay for work of equal value

 

 

achieve the preceding goals in a manner aligned with sound risk management and our corporate values

For each of our NEOs identified in the “Compensation Discussion and Analysis,” the Executive Compensation Committee, or Compensation Committee, determines the appropriate level of total compensation for the year. We engage our largest shareholders to understand their specific perspectives on our compensation and governance programs. For 2018, we engaged or requested engagement with shareholders representing more than 40% of our outstanding common stock.



 

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At State Street, compensation to our NEOs consists of two key elements:

 

 

Base Salary. Base salary is a relatively small portion of total compensation for the NEOs

 

 

Incentive Compensation. Incentive compensation is a variable amount, comprising

 

   

cash-based elements, awarded as an annual incentive both in immediate and deferred cash, and

 

   

equity-based elements, awarded as long-term incentives in the form of deferred shares and performance-based restricted stock units (RSUs)

A high percentage of each NEO’s total incentive compensation is delivered as an equity-based deferred long-term incentive, and a portion of each NEO’s annual cash-based incentive is also deferred. By paying a significant portion of our NEOs’ compensation in equity and by requiring vesting of that component over multiple years, the Compensation Committee emphasizes long-term performance and creates an incentive structure where both the rewards and risks of share ownership are shared by our executives and shareholders.

 

 

LOGO

 

LOGO

More information about executive compensation at State Street is described under the heading “Executive Compensation.”



 

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TABLE OF CONTENTS

 

SUMMARY INFORMATION

 

CORPORATE GOVERNANCE AT STATE STREET

  1

Governance Guidelines and Independence

  1

Standards of Conduct

  2

Board Composition and Director Selection Process

  2

Board Leadership Structure

  7

Meetings of the Board of Directors and Annual Shareholders Meeting

  8

Committees of the Board of Directors

  9

Non-Employee Director Compensation

  11

Related Person Transactions

  14

ITEM 1 – ELECTION OF DIRECTORS

  15

EXECUTIVE COMPENSATION

  28

Compensation Discussion and Analysis

  28

Compensation Committee Report

  52

CEO Pay Ratio Disclosure

  52

Alignment of Incentive Compensation and Risk

  53

Summary Compensation Table

  55

2018 Grants of Plan-Based Awards

  57

Outstanding Equity Awards at Fiscal Year-End, December 31, 2018

  60

2018 Stock Vested

  61

2018 Pension Benefits

  62

2018 Nonqualified Deferred Compensation

  64

Potential Payments upon Termination or Change of Control as of December 31, 2018

  66

ITEM 2 – APPROVAL OF ADVISORY PROPOSAL ON EXECUTIVE COMPENSATION

  72

EXAMINING AND AUDIT COMMITTEE MATTERS

  73

Examining and Audit Committee Pre-Approval Policies and Procedures

  73

Audit and Non-Audit Fees

  73

Report of the Examining and Audit Committee

  73

ITEM  3 – RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  75

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

  76

Questions and Answers About Voting

  76

Other Matters

  79

Proposals and Nominations by Shareholders

  79

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  80

Beneficial Owners

  80

Management

  81

Section 16(a) Beneficial Ownership Reporting Compliance

  81

APPENDIX A: EXCERPT FROM STATE STREET’S CORPORATE GOVERNANCE GUIDELINES

  A-1

 

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   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

CORPORATE GOVERNANCE AT STATE STREET

State Street is a financial holding company whose principal subsidiary is State Street Bank and Trust Company, or State Street Bank or the Bank. State Street and the Bank are each organized under the laws of the Commonwealth of Massachusetts. In accordance with Massachusetts law and State Street’s by-laws, our Board of Directors has responsibility for overseeing the conduct of our business. Our Board is committed to strong corporate governance practices and is intent on maintaining State Street’s reputation for quality, integrity and high ethical standards.

Governance Guidelines and Independence

State Street’s Board of Directors, in its role of overseeing the conduct of our business, is guided by our Corporate Governance Guidelines, or the Guidelines. Among other things, the Guidelines describe the role of the Board, its responsibilities and functions, the director qualification and selection process and the role of the Lead Director. The Guidelines also contain categorical standards for determining director independence under New York Stock Exchange, or NYSE, listing standards. In general, a director would not be independent under these standards if the director (and in certain circumstances, a member of the director’s immediate family) has, or in the past three years had, specified relationships or affiliations with State Street, its external or internal auditors or other companies that do business with State Street (including employment by State Street, receipt of a specified level of direct compensation from State Street—other than director fees—and compensation committee interlocks). The categorical standards also provide specified relationships that, by themselves, would not impair independence. The portion of the Guidelines addressing director independence is attached as Appendix A to this proxy statement. The full Guidelines are available under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com. In addition to the Guidelines, the charters for each principal committee of the Board are available in the same location on our website. Except as may be specifically incorporated by reference in this proxy statement, information on our website is not part of this proxy statement.

 

 

LOGO

Pursuant to the Guidelines, the Board undertook its annual review of director independence in early 2019. State Street, as a global financial institution and one of the largest providers of financial services to institutional investors, conducts business with many organizations throughout the world. Our directors or their immediate family members may have relationships or affiliations with some of these organizations. As provided in the Guidelines, the purpose of the director independence review was to determine whether any relationship or transaction was inconsistent with a determination that the director was independent. As a result of this review, the Board, after review and recommendation by the Nominating and Corporate Governance Committee, determined that all of our non-management directors, with the exception of Mr. Hooley, meet the categorical standards for independence under the Guidelines, have no material relationship with State Street (other than the role of director) and satisfy the qualifications for independence under listing standards of the NYSE. The Board had previously determined in 2018 that Linda A.

 

STATE STREET CORPORATION    1


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   Corporate Governance (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Hill, who served on the Board during 2018, was independent and in February 2019 the Board also confirmed Ms. Hill’s independence until the date of her retirement in October 2018. In making the independence determinations in 2019, the Board considered that the below identified individuals, or their respective family members, have the following relationships or arrangements that are deemed to be immaterial under the categorical standards for independence included in the Guidelines:

 

 

commercial or charitable relationships with an entity for which the State Street director or family member serves as a non-employee director, and with respect to which the director was uninvolved in negotiating such relationship (Mses. Hill and Mathew and Messrs. Burnes and Freda)

 

 

commercial relationships with an entity for which the State Street director or family member serves as an employee, consultant or executive officer where the director does not receive any special benefits from the transaction and the annual payments to or from the entity are equal to or less than the greater of $1 million or 2% of the consolidated gross annual revenues of the other entity during the most recent completed fiscal year (Ms. Hill and Messrs. Freda and Meaney)

In 2018, none of these commercial or charitable relationships with affiliated entities involved amounts paid or received by State Street exceeding the greater of $1 million or 0.8% of the affiliated entity’s annual gross revenue.

Standards of Conduct

We have a Standard of Conduct for Directors, which together with the Standard of Conduct for Employees, promotes ethical conduct and the avoidance of conflicts of interest in conducting our business. We also have a Code of Ethics for Senior Financial Officers (including the Chief Executive Officer), as required by the Sarbanes-Oxley Act and SEC rules. Each of these documents is available under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com. Only our Board may grant a waiver for directors, senior financial officers or executive officers from a provision of the Standard of Conduct for Directors, the Standard of Conduct for Employees or the Code of Ethics for Senior Financial Officers, and any waivers will be posted under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com.

Board Composition and Director Selection Process

In connection with nominating directors for election each year and evaluating the need for new director candidates as appropriate, including skill sets, diversity, specific business background and global or international experience, the Nominating and Corporate Governance Committee, with input from the entire Board and management, focuses on the Board’s capabilities and functioning as a whole.

 

 

LOGO

 

2    STATE STREET CORPORATION


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   Corporate Governance (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

In carrying out its responsibility to find the best qualified candidates for directors, the Nominating and Corporate Governance Committee will consider proposals for nominees from a number of sources, including recommendations from shareholders submitted upon written notice to the Chair of the Nominating and Corporate Governance Committee, c/o the Office of the Secretary of State Street Corporation, One Lincoln Street, Boston, Massachusetts 02111 (facsimile number (617) 664-8209). The Committee seeks to identify individuals qualified to become directors, consistent with the above criteria used by the Board for director candidates.

By following the procedures set forth under “General Information About the Annual Meeting—Proposals and Nominations by Shareholders,” shareholders also have the right under our by-laws to directly nominate director candidates and, in certain circumstances, to have their nominees included in State Street’s proxy statement.

Director Identification and Selection Process

The Board regularly reviews its composition and size to evaluate its overall effectiveness. The Nominating and Corporate Governance Committee, in conjunction with the Board, is responsible for reviewing the requisite skills and characteristics of director nominees and candidates for directors. Illustrated below is an overview of the process to identify the desired skills and experience of candidates as well as evaluate potential candidates for the Board.

LOGO

 

STATE STREET CORPORATION    3


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   Corporate Governance (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Annual Director, Board and Committee Evaluations

The Nominating and Corporate Governance Committee annually assesses each director’s contributions to the overall effectiveness of the Board. Based on its evaluation, the Board believes, each of the nominees has substantial achievement in his or her personal and professional pursuits and has talents, experience and integrity that will contribute to the best interests of State Street and to long-term shareholder value. The nominees as a group possess the skill sets, specific business background and global or international experience that the Board desires. The director nominee biographies set forth in this proxy statement under the heading “Item 1—Election of Directors” indicate each nominee’s qualifications, skills, experience and attributes that led the Board to conclude he or she should serve as a director of State Street.

 

LOGO

In addition, the Board of Directors and each committee conducts an annual self-evaluation of its performance and effectiveness. Directors complete a questionnaire evaluating the Board and each committee they serve on, specifically focusing on areas of potential improvement. The overall performance of the Board—including its contributions to State Street—and a compilation of director responses is reviewed and discussed by the Nominating and Corporate Governance Committee and the Board. Similarly, the performance of each committee, along with specific committee member responses, is reviewed and discussed by the respective committee. The Nominating and Corporate Governance Committee further assesses whether each of the Examining and Audit Committee, Executive Compensation Committee, Risk Committee, Nominating and Corporate Governance Committee and Technology and Operations Committee has a functioning self-evaluation process and reports its findings to the Board.

 

4    STATE STREET CORPORATION


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   Corporate Governance (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Diversity

State Street recognizes the importance of diversity with regard to the composition of the Board and strives to have a Board that provides diversity of thought and a broad range of perspectives. In an effort to achieve these objectives, the Nominating and Corporate Governance Committee and the Board consider a wide range of attributes when determining and assessing director nominees and prospective candidates including, but not limited to, gender, race, personal and professional backgrounds, tenure of Board service, national origin and age. The Nominating and Corporate Governance Committee and the Board believe the current Board composition reflects these desired attributes, which collectively best serve State Street and our key stakeholders. As noted above, the Nominating and Corporate Governance Committee considers diversity in its director candidate recommendations. However, the Committee does not assign specific weight to the various factors it considers and no particular criterion is a prerequisite for nomination.

 

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   LOGO

State Street’s Governance Standards Relative to the Investor Stewardship Group’s (ISG) Corporate Governance Framework1

 

ISG Principle (for U.S. Listed Companies)

 

  

State Street’s Governance Standards

 

   

Principle 1

Boards are accountable to shareholders

  

   All directors stand for shareholder election annually    
  

  

Majority voting standard in uncontested director elections, and incumbent directors not receiving majority support must tender their resignation for consideration by the Board

 

   
  

  

Proxy access for shareholders

 

 

  

 

    

  

Board annually reviews and approves Corporate Governance Guidelines to assist in the exercise of duties and responsibilities. These Guidelines, along with Board committee charters, standards of conduct and other governance information, are posted on State Street’s website

 

   

Principle 2

Shareholders should be entitled to voting rights in proportion to their economic interest

 

  

  

One class of common stock, with each share carrying equal voting rights (a “one-share, one-vote” standard)

 

   

 

1

ISG is an investor-led effort that includes some of the largest U.S.-based institutional investors and global asset managers, along with several of their international counterparts. State Street Global Advisors, State Street’s investment management line of business, is a member of ISG. The corporate governance framework articulates six principles that ISG believes are fundamental to good corporate governance at U.S. listed companies. The Principles reflect the common corporate governance beliefs of each ISG member and are designed to establish a foundational set of investor expectations about corporate governance practices in U.S. publicly-listed companies.

 

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ISG Principle (for U.S. Listed Companies)

 

  

State Street’s Governance Standards

 

   

Principle 3

Boards should be responsive to shareholders and be proactive in

order to understand their perspectives

      Process in place for shareholders and interested parties to communicate with Lead Director    
      Proactive annual shareholder engagement provides feedback to relevant Board committees    
         
             

Principle 4

Boards should have a strong, independent leadership structure

  

  

Strong independent Lead Director with clearly defined duties that are disclosed to shareholders

 

 

  

  

  

Annual public disclosure of the Board’s reasoning underlying its leadership structure and affirmation that the current leadership structure is appropriate

 

   
  

  

All principal Board committees have independent chairs

 

 

   

Principle 5

Boards should adopt structures and practices that enhance their effectiveness

  

  

10 of 12 directors are independent

 

   
  

  

Directors reflect a diverse mix of industry, regulatory, management, technology, risk and other experience and skills relevant to State Street’s businesses and strategies

 

   
  

  

3 out of 12 directors are women

 

   
  

  

Active Board refreshment with 6 new directors in the last 5 years

 

   
  

  

Key Board committees (Examining and Audit Committee; Executive Compensation Committee; Nominating and Corporate Governance Committee; and Technology and Operations Committee) are fully independent. State Street also has a Risk Committee, on which the Chairman serves along with 5 independent directors

 

   
  

  

Annual Board-level assessment of each director’s contributions, skills, committee assignments and tenure when analyzing the overall composition and effectiveness of the Board

 

   
  

  

Board has full and free access to officers and employees

 

   
    

  

During 2018, each of the incumbent directors attended at least 75% of the total of all meetings of the Board and committees on which the director served during his or her service as a director, and each of the 12 nominees for election attended the 2018 annual shareholder meeting

 

 

   

Principle 6

Boards should develop management incentive structures that are aligned with the long-term strategy of the company

  

  

Executive compensation program received over 95% shareholder support at the 2018 annual meeting of shareholders

 

   
  

  

Executive Compensation Committee evaluates corporate performance, individual performance and market, regulatory and shareholder considerations when making total compensation determinations for each member of State Street’s Management Committee, which includes all executive officers

 

   
     

•   Corporate performance is determined by assessing the company’s financial performance, achievement of strategic objectives and risk management performance

 

   
     

•   Individual performance assessments are determined based on the executive’s strategic, financial, risk excellence and leadership contributions

 

   
  

   Corporate and individual performance assessments for Named Executive Officers are described below under the heading “Compensation Discussion and Analysis”    

 

6    STATE STREET CORPORATION


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Board Leadership Structure

Leadership Transition

Consistent with the management succession plan approved by State Street’s Board of Directors and announced on November 7, 2017, Joseph L. Hooley retired as State Street’s Chief Executive Officer effective December 31, 2018. Mr. Hooley continues to serve as non-executive Chairman of State Street’s Board of Directors, and if re-elected as a director at the 2019 annual meeting of shareholders, will continue to serve in that role until his expected retirement as a director on December 31, 2019.

On January 1, 2019, Ronald P. O’Hanley began his service as President and Chief Executive Officer. Mr. O’Hanley has served as President since November 2017, following his service as Chief Executive Officer of State Street Global Advisors. State Street’s Board of Directors elected Mr. O’Hanley to serve as a director effective January 1, 2019.

Board Governance

As non-executive Chairman, Mr. Hooley presides at all meetings of the Board of Directors during which he is present and works with the Chief Executive Officer and independent Lead Director to establish the agendas for these meetings. Mr. Hooley also serves as a resource to senior management and the Board on a variety of matters, including strategy, operations and stakeholder relations.

State Street’s leadership structure also includes an independent Lead Director of the Board. This position is currently held by Kennett F. Burnes. Mr. Burnes was elected Lead Director in May 2018 for a term that expires in May 2019.

 

 

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Board Leadership Review Process

The Nominating and Corporate Governance Committee coordinates the annual independent Lead Director nomination and election process. In 2018, the Committee and Board engaged a third-party advisor to conduct a review of State Street’s current leadership structure relative to industry trends globally and to facilitate discussion among members of the Board on the current and desired leadership structure for State Street. After review and discussion among the independent directors, the Board of Directors believes that Mr. Hooley’s role as non-executive Chairman and Mr. O’Hanley’s role as President and Chief Executive Officer, together with a strong independent Lead Director, is currently the most effective leadership structure for State Street and is in the best interests of the Board, State Street and its shareholders. In connection with the expected retirement of Mr. Hooley as Chairman in December 2019, the Board will re-evaluate its leadership structure.

 

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In addition, the Board of Directors will continue to review the Board leadership structure at least annually to assess and determine the appropriate structure for the Company. The Board values the flexibility to permit frequent review and determination of the appropriate leadership structure based on the opportunities and circumstances impacting the Company at any given time. Among the factors considered by the Board in determining that the current leadership structure is the most appropriate are:

 

 

as our former Chief Executive Officer, and with his extensive work history in different roles at State Street, Mr. Hooley is well versed in our business and strategy and is thus well positioned to work with the Chief Executive Officer and independent Lead Director to focus our Board’s agenda on the key issues facing State Street

 

 

oversight of State Street is the responsibility of our Board as a whole, and this responsibility can be properly discharged with a strong, active and engaged independent Lead Director

 

 

the non-executive Chairman and Lead Director work together to play a strong and active role in the oversight of State Street’s business strategy and operational management

Communication with the Board of Directors

Shareholders and interested parties who wish to contact the Board of Directors or the Lead Director should address correspondence to the Lead Director in care of the Secretary. The Secretary will review and forward correspondence to the Lead Director or appropriate person or persons for response.

Lead Director of State Street Corporation

c/o Office of the Secretary

One Lincoln Street

Boston, MA 02111

In addition, State Street has established a procedure for communicating directly with the Lead Director, by utilizing a third-party independent provider, regarding concerns about State Street or its conduct, including complaints about accounting, internal accounting controls or auditing matters. An interested party who wishes to contact the Lead Director may use any of the following methods, which are also described on State Street’s website at www.statestreet.com:

 

LOGO      LOGO     

 

LOGO

From within the United States and Canada:      ATTN: State Street     

https://secure.ethicspoint.com/domain/media

/en/gui/55139/index.html

1-888-736-9833 (toll-free)      5500 Meadows Road, Suite 500  
      

Lake Oswego, OR 97035 USA

 

      

For country-specific phone numbers, please visit www.statestreet.com.

The Lead Director may forward to the Examining and Audit Committee, or to another appropriate group or department, for appropriate review, any concerns the Lead Director receives. The Lead Director periodically reports to the independent directors as a group regarding concerns received.

Meetings of the Board of Directors and Annual Shareholders Meeting

During 2018, the Board of Directors held 8 meetings, and each of the incumbent directors attended at least 75 percent of the total of all meetings of the Board and committees on which such director served. Although State Street does not have a formal policy regarding attendance of directors at the annual meeting, all directors are encouraged to attend. Each of the 12 directors on the Board at the time of our 2018 annual meeting attended the meeting.

 

8    STATE STREET CORPORATION


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Committees of the Board of Directors

The Board of Directors has the following principal committees to assist it in carrying out its responsibilities, and each operates under a written charter, a copy of which is available under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com. The charter for each committee, which establishes its roles and responsibilities and governs its procedures, is annually reviewed and approved by the Board.

Examining and Audit Committee

 

 

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Primary Responsibilities:

 

•    Responsible for the appointment (including qualifications, performance, independence and periodic consideration of retaining a different firm), compensation, retention, evaluation and oversight of the work of State Street’s independent registered public accounting firm, including sole authority for the establishment of pre-approval policies and procedures for all audit engagements and any non-audit engagements

 

•    Discusses with the independent auditor critical accounting policies and practices, alternative treatments of financial information, the effect of regulatory and accounting initiatives and other relevant matters

 

•    Oversees the operation of our system of internal controls covering the integrity of our consolidated financial statements and reports; compliance with laws, regulations, corporate policies; and the performance of corporate audit

 

•    Reviews the effectiveness of State Street’s compliance program and conducts an annual performance evaluation of the General Auditor and of the Chief Compliance Officer

 

•    Oversees the Company’s efforts to promote and advance a culture of compliance and ethical business practices

Independence: All members meet the independence requirements of the listing standards of the NYSE and the rules and regulations of the SEC and are considered financial experts (as defined by SEC rules).

Executive Committee

 

 

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Primary Responsibilities:

 

•    Authorized to exercise all the powers of the Board of Directors, except as otherwise limited by the laws of the Commonwealth of Massachusetts or the Committee’s charter

 

•    Reviews, approves and acts on matters on behalf of the Board of Directors at times when it is not practical to convene a meeting of the Board to address such matters

 

•    Depending on meeting activities, if any, periodically reports to the Board

Independence: All members, other than Mr. Hooley, meet the independence requirements of the listing standards of the NYSE and the rules and regulations of the SEC.

 

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Executive Compensation Committee

 

 

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Primary Responsibilities:

 

•   Oversees the operation of all compensation plans, policies and programs in which executive officers participate and certain other incentive, retirement, health and welfare and equity plans in which other employees participate

 

•   Oversees the alignment of our incentive compensation arrangements with the safety and soundness of State Street, including the integration of risk management objectives, related policies, arrangements and control processes, consistent with applicable regulatory rules and guidance

 

•   Acting together with the other independent directors, annually reviews and approves corporate goals and objectives relevant to the Chief Executive Officer’s compensation; evaluates the Chief Executive Officer’s performance; and reviews, determines and approves, in consultation with the other independent directors, the Chief Executive Officer’s compensation

 

•   Reviews, evaluates and approves the total compensation of all executive officers

 

•   Approves the terms and conditions of employment and any changes thereto, including any restrictive provisions, severance arrangements and special arrangements or benefits, of any executive officer

 

•   Adopts equity grant guidelines in connection with its overall responsibility for all equity plans and monitors stock ownership of executive officers

 

•   Appoints and oversees compensation consultants and other advisors retained by the Committee

Independence: All members meet the independence requirements of the listing standards of the NYSE and the rules and regulations of the SEC.

Nominating and Corporate Governance Committee

 

 

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Primary Responsibilities:

 

•   Assists the Board with respect to issues and policies affecting our governance practices, including management succession planning, identifying and recommending director nominees and shareholder matters

 

•   Recommends each committee’s composition and leads the Board in its annual review of the Board’s and each committee’s performance

 

•   Reviews and approves State Street’s related person transactions, reviews the amount and form of director compensation and reviews reports on regulatory, political and lobbying activities of State Street

 

Independence: All members meet the independence requirements of the listing standards of the NYSE and the rules and regulations of the SEC.

 

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Risk Committee

 

 

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Primary Responsibilities:

 

•   Oversees the operation of our global risk management framework, including the risk management policies for our operations

 

•   Reviews the management of all risk applicable to our operations, including credit, market, interest rate, liquidity, operational and business risks, as well as compliance and reputational risk

 

•   Oversees our strategic capital governance principles and controls, monitors capital adequacy in relation to risk and discharges the duties and obligations of the Board under applicable Basel, Comprehensive Capital Analysis and Review, Comprehensive Liquidity Assessment and Review and resolution and recovery planning requirements

 

•   Conducts an annual performance evaluation of the Chief Risk Officer

 

Independence: All members, other than Mr. Hooley, meet the independence requirements of the listing standards of the NYSE and the rules and regulations of the SEC.

Technology and Operations Committee

 

 

LOGO   

Primary Responsibilities:

 

•   Oversees technology and operational risk management and the role of these risks in executing the Company’s strategy in support of the Company’s global business requirements

 

•   Reviews material strategic initiatives from a technology and operational risk perspective

 

•   Reviews technology related risks, including corporate information security, cybersecurity and data management

 

Independence: All members meet the independence requirements of the listing standards of the NYSE and the rules and regulations of the SEC.

Non-Employee Director Compensation

General

The Nominating and Corporate Governance Committee annually reviews, and recommends to the Board, the form and amount of non-employee director compensation. In conducting its review, the Committee uses the same peer group the Executive Compensation Committee uses for executive compensation generally and, like the Compensation Committee, used the services of Meridian Compensation Partners for 2018. Information on State Street’s peer group and compensation consultant is described under the heading “Executive Compensation—Compensation Discussion and Analysis—Other Elements of Our Process.”

The Committee did not treat peer group data as definitive when determining non-employee director compensation. Rather, it referenced peer group compensation as well as trends in director compensation generally and within the industry and formed its own perspective on compensation for our non-employee directors. In 2018, the Committee made its recommendation to the Board, which, following the May 2018 annual meeting of shareholders, approved director compensation for all non-employee directors effective through the 2019 annual meeting of shareholders.

Mr. Hooley is the only director who was also one of our employees during 2018, and the determination of his compensation for his service as our Chief Executive Officer is described under the heading “Executive Compensation—Compensation Discussion

 

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and Analysis.” Mr. Hooley received no additional compensation for his service as a director during 2018. Mr. Hooley retired as Chief Executive Officer on December 31, 2018, and continues to serve as Chairman of the Board. Mr. Hooley’s compensation as non-executive Chairman of the Board for 2019 was approved by the Board on the recommendation of the Nominating and Corporate Governance Committee at its December 2018 meeting. In setting Mr. Hooley’s compensation, the independent directors of the Board, considered the planned role and responsibilities of the non-executive Chairman of the Board, including his continued involvement in strategic priorities and initiatives and participation in client and regulatory communications. The Committee also engaged Meridian Compensation Partners to provide compensation information on recent chief executive officer transitions into a non-executive Chairman role.

Compensation

Based on the Committee’s review of market practice, State Street changed its non-employee director compensation design for the 2018–2019 Board year by eliminating Committee meeting fees and Board meetings fees for the first 10 Board meetings attended. Annual retainers were also changed as follows:

 

   

Annual Retainer increased from $75,000 to $90,000

   

Annual Equity Award increased from $150,000 to $195,000

   

Lead Director Retainer decreased from $150,000 to $125,000

   

Examining and Audit Committee and Risk Committee Chair Retainers increased from $25,000 to $30,000

   

Executive Compensation Committee Chair Retainer increased from $20,000 to $25,000

   

Nominating and Governance Committee and Technology Committee Chair Retainers increased from $15,000 to $20,000

   

Examining and Audit Committee and Risk Committee Member Retainers increased from $15,000 to $20,000

Board and Committee meeting fees were paid to non-employee directors for meetings that were held between January 1, 2018 and May 15, 2018. During this period, the Lead Director did not receive any committee meeting fees, but received Board meeting fees.

For the 2018–2019 Board year (the period between the 2018 and 2019 annual meetings of shareholders), the non-employee directors, other than the Chairman of the Board, will receive the following compensation:

 

 

  Compensation Component

 

  

Value ($)

 

    

Vehicle(1)

 

    

 

 

Annual Retainer(2)

     $  90,000     

 

Cash or shares of State Street common stock

 

 

 

 

Annual Equity Award(2)

  

 

 

 

 

 

195,000

 

 

 

   Shares of State Street common stock  

 

 

Lead Director Retainer

  

 

 

 

 

 

125,000

 

 

 

   Cash or shares of State Street common stock  

 

Examining and Audit Committee and Risk Committee Chair Retainers

 

  

 

 

 

 

 

30,000

 

 

 

   Cash or shares of State Street common stock  

 

 

Executive Compensation Committee Chair Retainer

  

 

 

 

 

 

25,000

 

 

 

   Cash or shares of State Street common stock  

 

Nominating and Corporate Governance Committee and Technology and Operations Committee Chair Retainers

 

  

 

 

 

 

 

20,000

 

 

 

   Cash or shares of State Street common stock  

 

Examining and Audit Committee and Risk Committee Member Retainers

 

  

 

 

 

 

 

20,000

 

 

 

   Cash or shares of State Street common stock    
(1)

For non-employee directors elected at the annual meeting, all awards made in shares of State Street common stock are granted based on the closing price of our common stock on the NYSE on the date of the annual meeting that begins the period, rounded up to the nearest whole share, unless otherwise noted. Under the 2017 Stock Incentive Plan, with limited exceptions, the total value of all compensation components to a non-employee director cannot exceed $1.5 million in a calendar year.

(2)

The annual retainer and annual equity award are pro-rated for any non-employee director joining the Board after the annual meeting.

Non-employee directors also receive reimbursement of expenses incurred as a result of Board service.

For his service as a director and Chairman during 2019, Mr. Hooley received a $250,000 cash retainer on January 2, 2019. If he is re-elected as a director at the 2019 annual meeting of shareholders, Mr. Hooley will receive an equity award with a value of $250,000 made in shares of State Street common stock on that date. Mr. Hooley continues to be eligible for the health screening, company car and driver (including parking), and personal and home security that were available to him previously. He is also eligible for the life insurance and matching charitable contributions available to other State Street directors.

Pursuant to State Street’s Deferred Compensation Plan for Directors, non-employee directors may elect to defer the receipt of 0% or 100% of their (1) retainers, (2) annual equity award and/or (3) meeting fees. Non-employee directors also may elect to receive

 

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their retainers in cash or shares of State Street common stock. Non-employee directors who elect to defer the cash payment of their retainers or meeting fees may choose from four notional investment fund returns for such deferred cash. Deferrals of common stock are adjusted to reflect the hypothetical reinvestment in additional shares of common stock for any dividends or other distributions on State Street common stock. Deferred amounts will be paid (a) as elected by the non-employee director, on either the date of their termination of service on the Board or on the earlier of such termination and a future date specified, and (b) in the form elected by the non-employee director as either a lump sum or in installments over a two- to five-year period.

Director Stock Ownership Guidelines

Under our stock ownership guidelines, all non-employee directors are required to maintain a target level of stock ownership equal to 8 times the annual retainer of $90,000 for a total of $720,000. Non-employee directors must hold all net shares received until they reach the target ownership level. For purposes of these stock ownership guidelines, the value of shares owned is based on the closing price of our common stock on the NYSE on the date that we use for the beneficial ownership table below under the heading “Security Ownership of Certain Beneficial Owners and Management.” Non-employee directors are credited with all shares they beneficially own for purposes of the beneficial ownership table which includes all shares awarded as director compensation, including share awards that have been deferred. Non-employee directors are expected to attain the ownership level ratably over a five-year period.

Our Securities Trading Policy prohibits directors from short selling State Street securities, engaging in hedging transactions in State Street securities and engaging in speculative trading of State Street securities.

As of March 5, 2019, Mses. Dugle and Mathew and Messrs. Freda, Meaney and O’Sullivan exceeded the pro-rated expected level of ownership but are below the full target ownership level, and therefore subject to the holding requirement. Each of the other non-employee directors exceeded the full target level of ownership under the guidelines.

2018 Director Compensation

The following table shows the compensation our non-employee directors earned for their services in 2018:

 

    Name    Fees Earned
or Paid in
Cash(1)
($)
     Stock Awards(2)
($)
     All Other
Compensation(3)
($)
     Total
($)
 

       (a)

 

  

(b)

 

    

(c)

 

    

(g)

 

    

(h)

 

 

 

    Kennett F. Burnes

  

 

 

 

$218,000

 

 

  

 

 

 

$195,022

 

 

  

 

 

 

$40,700

 

 

  

 

$

 

453,722

 

 

 

    Patrick de Saint-Aignan

  

 

 

 

164,000

 

 

  

 

 

 

195,022

 

 

  

 

 

 

40,700

 

 

  

 

 

 

399,722

 

 

 

    Lynn A. Dugle

  

 

 

 

148,000

 

 

  

 

 

 

195,022

 

 

  

 

 

 

40,322

 

 

  

 

 

 

383,344

 

 

 

    Amelia C. Fawcett

  

 

 

 

134,000

 

 

  

 

 

 

195,022

 

 

  

 

 

 

—  

 

 

  

 

 

 

329,022

 

 

 

    William C. Freda

  

 

 

 

158,000

 

 

  

 

 

 

195,022

 

 

  

 

 

 

40,700

 

 

  

 

 

 

393,722

 

 

 

    Linda A. Hill(4)

  

 

 

 

106,500

 

 

  

 

 

 

195,022

 

 

  

 

 

 

27,935

 

 

  

 

 

 

329,457

 

 

 

    Sara Mathew(5)

  

 

 

 

117,750

 

 

  

 

 

 

207,588

 

 

  

 

 

 

—  

 

 

  

 

 

 

325,338

 

 

 

    William L. Meaney(5)

  

 

 

 

97,750

 

 

  

 

 

 

207,588

 

 

  

 

 

 

—  

 

 

  

 

 

 

305,338

 

 

 

    Sean P. O’Sullivan

  

 

 

 

126,500

 

 

  

 

 

 

195,022

 

 

  

 

 

 

—  

 

 

  

 

 

 

321,522

 

 

 

    Richard P. Sergel

  

 

 

 

156,000

 

 

  

 

 

 

195,022

 

 

  

 

 

 

13,733

 

 

  

 

 

 

364,755

 

 

 

 

    Gregory L. Summe

  

 

 

 

 

 

126,500

 

 

 

  

 

 

 

 

 

195,022

 

 

 

  

 

 

 

 

 

40,452

 

 

 

  

 

 

 

 

 

361,974

 

 

 

 

(1)

Includes meeting fees earned from January 1, 2018 until May 15, 2018 when the Board voted to eliminate committee meeting fees entirely and Board meeting fees for the first 10 meetings attended, as follows: $24,000 for Mr. de Saint-Aignan and Dame Amelia; $21,000 for Mr. Sergel; $18,000 for Ms. Dugle and Mr. Freda; $16,500 for Ms. Hill and Messrs. O’Sullivan and Summe; $3,000 for Mr. Burnes; and $1,500 for Ms. Mathew and Mr. Meaney.

(2)

On May 16, 2018, each non-employee director received 1,929 shares of State Street common stock valued at $195,022 based on the closing price of our common stock on the NYSE of $101.10. Stock awards to non-employee directors vest immediately, and there were no unvested non-employee director stock awards as of December 31, 2018.

(3)

Perquisites received in 2018 include director life insurance coverage and business travel accident insurance paid for by State Street ($700 for Messrs. Burnes, de Saint-Aignan, Freda and Sergel; $452 for Mr. Summe; $331 for Ms. Hill; $322 for Ms. Dugle). Charitable contributions by non-employee directors are eligible for a Company matching contribution of up to $40,000 per calendar year under the State Street matching gift program. Matching charitable contributions made on behalf of the non-employee directors during 2018 were $40,000 for Ms. Dugle and Messrs. Burnes, de Saint-Aignan, Freda and Summe; $16,000 for Ms. Hill; and $13,033 for Mr. Sergel. Perquisites for Ms. Hill include a retirement gift with a cost of $11,604 in recognition of her 18 years of service on the State Street Board. The amount of perquisites and other personal benefits for Messrs. Meaney and O’Sullivan as well as Dame Amelia and Ms. Mathew have not been reported because the total did not exceed $10,000.

(4)

Ms. Hill retired from the Board in October 2018. Amounts reported in the “Fees Earned or Paid in Cash” and “Stock Awards” columns reflect Board compensation earned in 2018 while Ms. Hill was serving as a director.

(5)

Ms. Mathew and Mr. Meaney joined the Board in March 2018 and received a pro-rated annual retainer of $6,250 in cash and a pro-rated annual equity award of 126 shares of State Street common stock with a total value of $12,566 based on the closing price of our common stock on the NYSE on March 29, 2018 of $99.73 for service prior to the 2018 annual meeting.

 

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   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Related Person Transactions

The Board has adopted a written policy and procedures for the review of any transaction, arrangement or relationship in which State Street is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors or 5% shareholders (or their immediate family members), who we refer to as “related persons,” has a direct or indirect material interest. A related person proposing to enter into such a transaction, arrangement or relationship must report the proposed related-person transaction to State Street’s Chief Legal Officer. The policy calls for the proposed related-person transaction to be reviewed and, if deemed appropriate, approved by the Nominating and Corporate Governance Committee. A related-person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Nominating and Corporate Governance Committee (or the Committee Chair) after full disclosure of the related person’s interest in the transaction. Whenever practicable, the reporting, review and approval will occur prior to the transaction. If advance review is not practicable or was otherwise not obtained, the Committee will review and, if deemed appropriate, ratify the related-person transaction. The policy also permits the Committee Chair to review and, if deemed appropriate, approve proposed related-person transactions that arise between Committee meetings, in which case they will be reported to the full Committee at its next meeting. Any ongoing related-person transactions are reviewed annually.

 

 

LOGO

The Nominating and Corporate Governance Committee may approve or ratify the related-person transaction only if the Committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, State Street’s best interests. The Committee may, in its sole discretion, impose such conditions as it deems appropriate on State Street or the related person in connection with approval of the related-person transaction.

In addition to the transactions that are excluded by the instructions to the SEC’s related-person transaction disclosure rule, the Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related-person transactions for purposes of this policy:

 

 

interests arising solely from the related person’s position as an executive officer, employee or consultant of another entity (whether or not the person is also a director of such entity) that is a party to the transaction, where (1) the related person and his or her immediate family members do not receive any special benefits as a result of the transaction and (2) the annual amount involved in the transaction equals less than the greater of $1 million or 2% of the consolidated gross revenues of the other entity that is a party to the transaction during that entity’s last completed fiscal year; or

 

 

a transaction that involves discretionary charitable contributions from State Street to a tax-exempt organization where a related person is a director, trustee, employee or executive officer, provided the related person and his or her immediate family members do not receive any special benefits as a result of the transaction, and further provided that, where a related person is an executive officer of the tax-exempt organization, the amount of the discretionary charitable contributions in any completed year in the last 3 fiscal years is not more than the greater of $1 million, or 2% of that organization’s consolidated gross revenues in the last completed fiscal year of that organization (in applying this test, State Street’s automatic matching of director or employee charitable contributions to a charitable organization will not be included in the amount of State Street’s discretionary contributions)

Based on information provided by the directors and executive officers, and obtained by the legal department, no related-person transactions are required to be reported in this proxy statement under applicable SEC regulations. In addition, neither State Street nor the Bank has extended a personal loan or extension of credit to any of its directors or executive officers.

 

14    STATE STREET CORPORATION


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

ITEM 1 – ELECTION OF DIRECTORS

 

LOGO

Each director elected at the 2019 annual meeting will serve until the next annual meeting of shareholders, except as otherwise provided in State Street’s by-laws or disclosed. Of the 12 director nominees, 10 are independent, non-management directors, as determined by the Board under the applicable definition in the NYSE listing standards and the State Street Corporate Governance Guidelines. One of the non-independent directors, Mr. Hooley, serves as the Chairman of State Street and, if re-elected at the annual meeting, is expected to retire as a director on December 31, 2019. The other non-independent director, Mr. O’Hanley, serves as the President and CEO of State Street.

Pursuant to State Street’s by-laws, on February 21, 2019, the Board fixed the number of directors at 12. Unless contrary instructions are given, shares represented by proxies solicited by the Board of Directors will be voted for the election of the 12 nominees listed below. We have no reason to believe that any nominee will be unavailable for election at the annual meeting. In the event that one or more nominees is unexpectedly not available to serve, proxies may be voted for another person nominated as a substitute by the Board or the Board may reduce the number of directors to be elected at the annual meeting. Information relating to each nominee for election as director is described below, including:

• age and period of service as a director of State Street

• business experience during at least the past five years (including directorships at other public companies)

• community activities

• other experience, qualifications, attributes or skills that led the Board to conclude the director should serve or continue to serve as a director of State Street

The Board of Directors recommends that shareholders approve each director nominee for election based upon the qualifications and attributes discussed below. See “Corporate Governance at State Street—Board Composition and Director Selection Process” for a further discussion of the Board’s process and reasons for nominating these candidates.

 

STATE STREET CORPORATION    15


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   Item 1 (continued)

 

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LOGO

 

Career Highlights

 

 

Retired Chairman, President and Chief Executive Officer, Cabot Corporation, an NYSE-listed manufacturer of specialty chemicals and performance materials (2001 to 2008); President (1995 to 2008)

 

 

Former Director, Watts Water Technologies, Inc., an NYSE-listed supplier of products for use in the water quality, water safety, water flow control and water conservation markets (2009 to 2015)

Qualifications and Attributes

Mr. Burnes’ significant experience in leading a global organization, with facilities and operations in approximately 20 countries, brings to State Street’s Board a focus on developing new products and new businesses in diverse, international environments. Prior to joining Cabot Corporation in 1987, he was a partner at the Boston-based law firm of Choate, Hall & Stewart where he practiced corporate and business law for nearly 20 years. Mr. Burnes obtained experience in evaluating complex legal issues that arise in the types of material transactions boards of directors are called on to consider, including mergers and acquisitions and financing transactions. Mr. Burnes serves as a trustee for the Dana Farber Cancer Institute, a director for More Than Words and chairman of the board of trustees at the New England Conservatory and the Schepens Eye Research Institute. Mr. Burnes holds both an LL.B. and B.A. degree from Harvard University.

 

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   Item 1 (continued)

 

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LOGO

 

Career Highlights

 

 

Retired Managing Director and Advisory Director, Morgan Stanley, an NYSE-listed global financial services company (1974 to 2007); firm-wide head of the company’s risk management function (1995 to 2002)

 

 

Director, Edaris Health, Inc., a private healthcare information technology company (2007 to present) (2007 to 2016 as Forerun, prior to name change to Edaris Health, Inc. in 2016); member of the Compensation Committee

 

 

Member of Supervisory Board, BH PHARMA, a private generic drug development company (2015 to present)

 

 

Former Director, Allied World Assurance Company Holdings AG, a former NYSE-listed specialty insurance and reinsurance company acquired by Fairfax Financial Holdings in 2017 (2008 to 2017); member of the Enterprise Risk Committee (Chairman), Compensation Committee, Audit Committee and Investment Committee

 

 

Former Director, Bank of China Limited, (2006 to 2008); member of the Audit Committee (Chairman), the Risk Policy Committee and the Personnel and Remuneration Committee

Qualifications and Attributes

Mr. de Saint-Aignan’s extensive experience in risk management, corporate finance, capital markets and firm management brings to the Board a sophisticated understanding of risk, particularly with respect to the implementation of risk and monitoring programs within a global financial services organization. Mr. de Saint-Aignan’s service on the board of directors and committees of several other companies gives him additional perspective on global management and governance. A dual citizen of the United States and France, he was honored with Risk Magazine’s Lifetime Achievement Award in 2004. Mr. de Saint-Aignan holds his B.B.A. degree from the Ecole des Hautes Etudes Commerciales and an M.B.A. from Harvard University.

 

STATE STREET CORPORATION    17


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   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

Retired Chief Executive Officer and Chairman, Engility Holdings, Inc., an NYSE-listed engineering and technology consulting company (2018 to 2019); Chief Executive Officer and Director (2016 to 2018); Director (2014 to 2018) (2014 to 2015 as TASC, prior to acquisition by Engility Holdings, Inc.; 2015 to 2018 as Engility Holdings, Inc., prior to acquisition by Science Applications International Corp. in 2019)

 

 

Former Corporate Vice President and President, Intelligence, Information and Services, Raytheon Company, an NYSE-listed defense contractor and electronics manufacturer (2004 to 2015); Vice President, Engineering, Technology and Quality, Network Centric Systems (2004 to 2009); Vice President, Support Engineering and Six Sigma (1997 to 1999)

 

 

Former Vice President, Product, Systems Software Division, ADC Telecommunications, Inc., a former Nasdaq-listed communications company acquired in 2010 by Tyco Electronics (2002 to 2004); General Manager, Cable Systems Division (1999 to 2002)

 

 

Former Vice President, Quality & Support Engineering, Texas Instruments, Inc., a Nasdaq-listed electronics manufacturer (1982 to 1997)

Qualifications and Attributes

As the former Chief Executive Officer and Chairman of Engility Holdings, a leading provider of integrated solutions and services for the U.S. government, Department of Defense, federal civilian agencies and international customers, Ms. Dugle brings to the Board valuable experience in leading the development of large businesses with a focus on information, technology and security matters. Her understanding of information and technology matters provides the Board with perspective as State Street continues to transform and digitize products and services. Prior to her role at Engility, Ms. Dugle was the president of Intelligence, Information and Services at Raytheon where she was responsible for the company’s advanced cyber solutions, cyber security services and information-based solutions. She also served as vice president of engineering, technology and quality for the former Network Centric Systems business at Raytheon and was responsible for the strategic direction, leadership and operations of the engineering, technology and quality functions. Prior to Raytheon, Ms. Dugle held executive positions at ADC Telecommunications with responsibility for leading teams across Europe, Middle East and Africa and the Asia-Pacific region. She holds B.S. and B.B.A. degrees from Purdue University and an M.B.A. with a concentration in international business from the University of Texas at Dallas.

 

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   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

Chairman, Kinnevik AB, a long-term oriented investment company (2018 to present); Deputy Chairman (2013 to 2018); Non-Executive Director (2011 to present); member of Remuneration Committee (Chair) and Governance, Risk and Compliance Committee (Chair)

 

 

Chairman, Standards Board for Alternative Investments (2011 to present) (2011 to 2017 as Hedge Fund Standards Board; 2017 to present as Standards Board for Alternative Investments) (U.K.), a global standard-setting body for the alternative investment industry

 

 

Former Non-Executive Director, HM Treasury, the British Government’s Economic & Finance Ministry (2012 to 2018)

 

 

Former Non-Executive Director, Millicom International Cellular S.A., an international telecommunications and media company (2014 to 2016); member of the Remuneration Committee (Chair) and Compliance and Business Practices Committee

 

 

Former Non-Executive Chairman, Guardian Media Group plc, a privately held diversified multimedia business in London (2009 to 2013); Non-Executive Director (2007 to 2013)

 

 

Former Vice Chairman and Chief Operating Officer of European Operations, Morgan Stanley, an NYSE-listed global financial services company (2002 to 2006) and Morgan Stanley International Limited, London (2006 to 2007); Vice President (1990 to 1992); Executive Director (1992 to 1996); Managing Director and Chief Administrative Officer for European Operations (1996 to 2002); Senior Adviser (2006 to 2007)

Qualifications and Attributes

Dame Amelia Fawcett, a dual American and British citizen, has many years of extensive and diverse financial services experience. At Morgan Stanley, she served in many roles including Vice Chairman and Chief Operating Officer of Morgan Stanley International and had responsibility for development and implementation of the company’s business strategy (including business integration), as well as oversight of the company’s operational risk functions, infrastructure support and corporate affairs. Prior to joining Morgan Stanley, she was an attorney at the New York-based law firm of Sullivan & Cromwell, practicing primarily in the areas of corporate and banking law in both New York and Paris. Her service on both the Court of Directors of the Bank of England (the Board of the British Central Bank) and the British Treasury provided her with valuable experience with the complex regulatory and compliance frameworks of the financial industry. Dame Amelia was awarded a CBE (Commander of the Order of the British Empire) and a DBE (Dame Commander of the Order of the British Empire) by the Queen, in both instances for services to the finance industry and in 2018 the Queen made her a Commander of the Royal Victorian Order for services as Chairman of The Prince of Wales’s Charitable Foundation. In addition, in 2004, she received His Royal Highness The Prince of Wales’s Ambassador Award recognizing responsible business activities that have a positive impact on society and the environment. Dame Amelia’s public policy experience and experience in the European banking markets provide a valuable international financial markets perspective to State Street. She formerly has served, or currently serves, in the capacity as chairman of the American Friends of the National Portrait Gallery, deputy chairman of the National Portrait Gallery, chairman of The Prince of Wales’s Charitable Foundation, deputy chairman and governor of the London Business School, a commissioner of the U.S.-U.K. Fulbright Commission and a trustee of Project Hope (current). Dame Amelia received a B.A. degree from Wellesley College and a J.D. degree from the University of Virginia.

 

STATE STREET CORPORATION    19


Table of Contents

   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

Retired Senior Partner and Vice Chairman, Deloitte, LLP, a global professional services firm (2011 to 2014); Managing Partner of Client Initiatives (2007 to 2011); member of U.S. Executive Committee

 

 

Chairman, Hamilton Insurance Group, a global insurance and reinsurance company (2014 to present); Director (2014 to 2017); Chairman (2017 to present)

 

 

Director, Guardian Life Insurance Company, a mutual life insurance company (2014 to present)

 

 

Former Director, Deloitte Touche Tohmatsu Limited (2007 to 2013); member of Risk Committee (Chairman) (2011 to 2013) and Audit Committee (Chairman) (2008 to 2011)

Qualifications and Attributes

As senior partner and vice chairman of Deloitte, LLP, Mr. Freda served Deloitte’s most significant clients and maintained key relationships, acting as a strategic liaison to the marketplace as well as to professional and community organizations. Mr. Freda joined Deloitte in 1974 and built a distinguished record of service during his 40-year career, having served on a wide range of multinational engagements for many of Deloitte’s largest and most strategic clients. Mr. Freda brings to the Board key insight and perspective on risk management, international expansion and client relationships gained through his extensive experience interacting with audit committees, boards of directors and senior management. He serves as a trustee of Bentley University. Previously, Mr. Freda has served as the chairman of Catholic Community Services, the United Way of Essex and West Hudson and the AICPA Insurance Companies Committee and was a U.S. Representative to the International Accounting Standards Committee’s Insurance Steering Committee. Mr. Freda received a B.S. in accounting from Bentley University.

 

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   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

Chairman, State Street Corporation (2011 to present); Chief Executive Officer (2010 to 2018); President and Chief Operating Officer (2008 to 2014)

 

 

Former President and Chief Executive Officer, Boston Financial Data Services (1990 to 2000)

 

 

Former President and Chief Executive Officer, National Financial Data Services (1988 to 1990)

Qualifications and Attributes

Mr. Hooley retired from his role as the Chief Executive Officer of State Street, effective December 31, 2018, and currently serves as the non-executive Chairman of the Board of State Street. He served as Chief Executive Officer from March 2010 to December 2018 and President and Chief Operating Officer from April 2008 to December 2014. From 2002 to April 2008, Mr. Hooley served as Executive Vice President and head of the Investor Services Division of State Street and, in 2006, was appointed Vice Chairman and Global Head of Investment Servicing and Investment Research and Trading of State Street. Mr. Hooley was elected to serve on the Board of Directors in October 2009, and he was appointed Chairman of the Board in January 2011. His leadership experience and core understanding of State Street’s full range of services brings to the Board a detailed, innovative and thorough perspective on State Street’s key operations, strategic initiatives and client relationships globally. He is a director on the board of Boys & Girls Clubs of Boston and the President’s Council of the Massachusetts General Hospital. He received a B.S. degree from Boston College.

 

STATE STREET CORPORATION    21


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   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

Retired Chairman and Chief Executive Officer, Dun & Bradstreet Corporation, an NYSE-listed international commercial data and analytics provider (2010 to 2013); President and Chief Operating Officer (2007 to 2009); Chief Financial Officer (2001 to 2007)

 

 

Non-Executive Chairman, Federal Home Loan Mortgage Company, a government-sponsored firm operating in the secondary residential mortgage market (2019 to present); Director (2013 to present); member of Audit Committee (Chair), Executive Committee and Nominating and Governance Committee

 

 

Director, Campbell Soup Company, an NYSE-listed consumer food producer (2005 to April 2019); member of Audit Committee (Chair) and Finance and Corporate Development Committee

 

 

Former Director, Shire Plc, a Nasdaq-listed FTSE 25 biopharmaceutical company (2015 to 2019; prior to acquisition by Takeda Pharmaceutical Company Limited in 2019); Chair of Audit and Risk Committee and member of Compliance and Nomination and Governance Committee

 

 

Former Director, Avon Products, Inc., an NYSE-listed beauty, household and personal care products manufacturer (2014 to 2016)

 

 

Former Vice President of Finance, ASEAN, Australasia and India, Procter and Gamble Company, an NYSE-listed international manufacturer of consumer goods (2000 to 2001); Controller and Chief Financial Officer, Baby-Care and Paper Products (1998 to 2000); other various positions through her 18-year tenure

Qualifications and Attributes

In her prior role as chairman and chief executive officer of Dun & Bradstreet Corporation, Ms. Mathew led the company’s transformation from a data collection business into an innovative provider of data analytics and insights. Prior to her role as chairman and chief executive officer, she served as president and chief operating officer, overseeing the company’s consumer segments, and chief financial officer where she initiated and managed the redesign of the company’s accounting processes and controls. Before joining Dun & Bradstreet Corporation, Ms. Mathew held various positions at Procter and Gamble Company within finance, accounting, investor relations and brand management. Her deep background in finance, technology, corporate strategy and operations, combined with her experiences leading and overseeing a diverse assortment of international consumer-focused companies and transformational initiatives, allows Ms. Mathew to provide a unique, innovative and global perspective to State Street. Ms. Mathew received a B.S. degree in physics, mathematics and chemistry from the University of Madras, India and an M.B.A. degree in finance and marketing from Xavier University.

 

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   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

President, Chief Executive Officer and Director, Iron Mountain, Inc., an NYSE-listed information management and data backup and recovery company (2013 to present)

 

 

Former Director, Qantas Airways, an Australian Securities Exchange-listed airline (2012 to 2018); member of the Safety, Health, Environment and Security Committee and the Remuneration Committee

 

 

Former Chief Executive Officer, Zuellig Group, a privately owned long-term holding company based in Hong Kong (2004 to 2012)

Qualifications and Attributes

Mr. Meaney, a citizen of the United States, Switzerland and Ireland, has extensive domestic and international business experience across both established and emerging markets. As the president and chief executive officer of Iron Mountain, he has continued to lead the company as it evolves and expands its secure storage and digital transformation offerings. Before joining Iron Mountain, Mr. Meaney was the chief executive officer of Zuellig Group, where he was responsible for a diverse portfolio of Asia Pacific businesses that spanned a variety of heavily regulated and consumer-based industries, including health care, agriculture, pharmaceuticals and materials handling. He has held several senior positions throughout the airline industry, including chief commercial officer of Swiss International Airlines and executive vice president of South African Airways, founded and managed his own consulting firm and served as an operations officer with the U.S. Central Intelligence Agency. Mr. Meaney provides State Street’s Board with an acute global viewpoint on corporate strategy and business expansion founded upon his background in leading and developing large U.S. and international companies. Mr. Meaney is a member of both the FM Global advisory board and President’s Council of Massachusetts General Hospital and is a former trustee of Rensselaer Polytechnic Institute and Carnegie Mellon University. He holds a B.S. degree from Rensselaer Polytechnic Institute and an M.B.A. from Carnegie Mellon University.

 

STATE STREET CORPORATION    23


Table of Contents

   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

President and Chief Executive Officer, State Street Corporation (2019 to present); President and Chief Operating Officer (2017 to 2019); Vice Chairman (2017); Chief Executive Officer and President, State Street Global Advisors (2015 to 2017)

 

 

Director, Unum Group, an NYSE-listed provider of financial protection benefits in the United States and United Kingdom (2015 to present); member of the Human Capital Committee and Governance Committee

 

 

Former President of Asset Management & Corporate Services, Fidelity Investments, Inc., a multinational financial services corporation (2010 to 2014)

 

 

Former Chief Executive Officer and President, BNY Mellon Asset Management (2007 to 2010)

Qualifications and Attributes

Mr. O’Hanley joined State Street in 2015 to lead State Street’s investment management business as the Chief Executive Officer and President of State Street Global Advisors. Since that time, he has held several senior leadership positions within the Company, serving as Vice Chairman from January 2017 to November 2017 and President and Chief Operating Officer from November 2017 to February 2019. Effective January 1, 2019, Mr. O’Hanley began his service as Chief Executive Officer and as a member of the Board of Directors. His extensive leadership, executive management and operational experience over the last three decades in asset management and global financial services provides the Board with the experience necessary to help navigate the Company’s strategic priorities on data management, client experience and technology enhancement. Mr. O’Hanley received a B.A. degree from Syracuse University and an M.B.A. from Harvard Business School.

 

24    STATE STREET CORPORATION


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   Item 1 (continued)

 

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LOGO

Career Highlights

 

 

Retired Group Managing Director and Group Chief Operating Officer, HSBC Holdings, plc., an NYSE-listed banking and financial services organization (2011 to 2014); Executive Director and Chief Technology and Services Officer, HSBC Bank plc. (2007 to 2010); other various positions throughout his 34-year tenure

Qualifications and Attributes

As the Group Managing Director and Group Chief Operating Officer of HSBC Holdings, plc., Mr. O’Sullivan led the bank’s global operations and information technology functions, with worldwide responsibilities for business transformation, organizational restructuring and operational effectiveness. Prior to assuming the role of Group Managing Director and Group Chief Operating Officer, Mr. O’Sullivan held various positions throughout HSBC in the U.S., Canada and Europe. His long tenure at HSBC provided him with valuable experience with the operational and technology challenges faced by a large, global financial institution as well as the management of overall company effectiveness and efficiency, including development of a global approach to expense management and operational risk management. Mr. O’Sullivan is a member of the Information Technology Advisory Committee at the University of British Columbia and a former trustee of the York University Foundation. He is a dual citizen of Canada and the U.K. and received a B.A. degree from the Ivey School of Business at Western University.

 

STATE STREET CORPORATION    25


Table of Contents

   Item 1 (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

LOGO

Career Highlights

 

 

Retired President and Chief Executive Officer, North American Electric Reliability Corporation, NERC, a self-regulatory organization for the bulk electricity system in North America (2005 to 2009)

 

 

Director, Emera, Inc., a Toronto Stock Exchange-listed energy and services company (2010 to present)

 

 

Former President and Chief Executive Officer, New England Electric System (and its successor company, National Grid USA), an NYSE-listed electric utility (1998 to 2004)

Qualifications and Attributes

Mr. Sergel’s responsibilities as chief executive officer of the North American Electric Reliability Corporation included imposing statutory responsibility and regulating the industry through adoption and enforcement of standards and practices. To do so, he led NERC to establish the first set of legally enforceable standards for the U.S. bulk power system. Prior to joining NERC, he spent 25 years with the New England Electric System, where he oversaw the merger with National Grid in 2000. His extensive practical and technical expertise in navigating the energy market through regulatory change and major transactions offers the Board important perspective on the evolving financial services industry and regulatory environment. Mr. Sergel served in the United States Air Force reserve from 1973 to 1979 and has served as a director of Jobs for Massachusetts and the Greater Boston Chamber of Commerce. He is a former trustee of the Merrimack Valley United Way and the Worcester Art Museum, prior chairman of the Consortium for Energy Efficiency and was a member of the Audit Committee for the Town of Wellesley, Massachusetts. Mr. Sergel received a B.S. degree from Florida State University, an M.S. from North Carolina State University and an M.B.A. from the University of Miami.

 

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   Item 1 (continued)

 

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LOGO

Career Highlights

 

 

Managing Partner and Founder, Glen Capital Partners, LLC, an alternative asset investment fund (2013 to present)

 

 

Former Managing Director and Vice Chairman of Global Buyout, Carlyle Group, a Nasdaq-listed global asset manager (2009 to 2014)

 

 

Former Chairman, Chief Executive Officer and President, PerkinElmer, Inc., an NYSE-listed developer and producer of life science equipment and services (1998-2009)

 

 

Director, NXP Semiconductors, a Nasdaq-listed semiconductor manufacturer (2010 to present) (Director, 2010 to 2015 and Chairman, 2013 to 2015 as Freescale Semiconductor, Inc., prior to its acquisition by NXP Semiconductors in 2015; 2015 to present as NXP Semiconductors)

 

 

Former Director, LMI Aerospace, a Nasdaq-listed designer and provider of aerospace structures (2014 to 2017)

Qualifications and Attributes

Mr. Summe has extensive management experience leading large and complex corporate organizations in evolving environments. While vice chairman of Carlyle Group, he was responsible for buyout funds in financial services, infrastructure, Japan, the Middle East and African markets and served on the firm’s operating and investment committees. His experience in private equity has afforded him a deepened exposure to understanding varied business models, practices, strategies and environments and assessing value in varied international regions. During his tenure as chairman and chief executive officer at PerkinElmer, Mr. Summe led the company’s transformation from a diversified defense contractor to a technology leader in health sciences. Prior to joining PerkinElmer, Mr. Summe held leadership positions at AlliedSignal (now Honeywell), General Electric and McKinsey & Co. Mr. Summe holds B.S. and M.S. degrees in electrical engineering from the University of Kentucky and the University of Cincinnati, respectively, and an M.B.A. with distinction from the Wharton School of the University of Pennsylvania. He is also in the Engineering Hall of Distinction at the University of Kentucky.

 

STATE STREET CORPORATION    27


Table of Contents

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

 

  

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

In this compensation discussion and analysis, or CD&A, we describe our approach to executive compensation, including our philosophy, design, process and risk alignment. We also describe compensation decisions for 2018 for the following named executive officers, or NEOs, who served in the following positions during 2018:

 

 

Joseph L. Hooley — Chairman and Chief Executive Officer

 

 

Eric W. Aboaf — Executive Vice President and Chief Financial Officer

 

 

Ronald P. O’Hanley — President and Chief Operating Officer

 

 

Jeff D. Conway — Executive Vice President and Global Head of Operations and Business Transformation (Global Delivery)

 

 

Karen C. Keenan — Executive Vice President and Chief Administrative Officer

Mr. Hooley retired as our Chief Executive Officer on December 31, 2018, and was succeeded by Mr. O’Hanley on January 1, 2019. Mr. Conway is leaving State Street on or before June 1, 2019.

In this CD&A, references to the Compensation Committee, or to the Committee, are references to the Executive Compensation Committee of the Board of Directors.

CD&A Table of Contents

 

    

 Page 

 

 

  Executive Summary

 

   

 

  28

 

 

 

   Shareholder Outreach and “Say-on-Pay”

 

   

 

  33

 

 

 

  Compensation Philosophy

 

   

 

  33

 

 

 

  Compensation Design Elements

 

   

 

  34

 

 

 

  Compensation Committee Process Concerning Risk Alignment

 

   

 

  35

 

 

 

  2018 Compensation Decisions

 

   

 

  36

 

 

 

  Prior Year Performance-Based RSU Awards

 

   

 

  45

 

 

 

  Other Elements of Our Process

 

   

 

  45

 

 

 

  Tax Deductibility of Executive Compensation

 

   

 

48

 

 

 

  Other Elements of Compensation

 

   

 

  48

 

 

 

  Executive Equity Ownership Guidelines, Practices and Policies

 

   

 

  50

 

 

 

 

Executive Summary

2018 Corporate Performance

In 2018, we continued to invest in differentiating capabilities to meet our clients’ ever-changing needs. We took an important strategic step with our acquisition of Charles River Development and made key executive hires and transitions, to continue advancing our multi-year strategy. Further, we maintained a sustained focus on risk excellence. While we made progress on our strategic initiatives, we are not satisfied with our 2018 financial performance. Weaker equity markets, particularly in the fourth quarter, and challenging market dynamics for our clients, drove ongoing fee compression and impacted servicing fee revenues. We also underperformed relative to our publicly disclosed guidance on fee revenue growth and fee operating leverage and our one-year total shareholder return trailed both our peer group median and the S&P Financial Index. We announced a record level of new servicing wins, with $1.9 trillion in new business commitments, increased net interest income by 16% over 2017, and grew both revenue and earnings while maintaining a strong capital position. The Committee considered these indicators in evaluating 2018 corporate performance for compensation purposes. Additional factors considered by the Committee are described under the heading “2018 Compensation Decisions—Corporate Performance.”

 

 

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   Executive Compensation (continued)

 

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Financial Performance

Consolidated Financial Performance(1)

 

($ In millions, except per share data)

 

  

2018

 

    

2017

 

    

Change

 

 

  Total fee revenue

 

   $

 

9,305

 

 

 

   $

 

8,905

 

 

 

    

 

4.5%

 

 

 

  Revenue

 

    

 

11,982

 

 

 

    

 

11,170

 

 

 

    

 

7.3%

 

 

 

  Pre-tax margin

 

    

 

25.0%

 

 

 

    

 

26.0%

 

 

 

    

 

(100) bps

 

 

 

  Diluted earnings per share (EPS)

 

    

 

6.40

 

 

 

    

 

5.24

 

 

 

    

 

22.1%

 

 

 

  Return on average common equity (ROE)

 

    

 

12.2%

 

 

 

    

 

10.6%

 

 

 

    

 

160 bps

 

 

 

(1)

In the first quarter of 2019, we plan to change our accounting method under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 323, Investments—Equity Method and Joint Ventures for investments in low-income housing tax credit (LIHTC) investments from the equity method of accounting to the proportional amortization method of accounting. Financial results presented within this proxy statement do not reflect this change. For additional information, see our current report on Form 8-K dated March 5, 2019, on file with the SEC.

Revenue, EPS and ROE all increased in 2018 from 2017, whereas pre-tax margin decreased in 2018 from 2017, as shown in the table above.

Total Shareholder Return (TSR)

 

     

State Street

 

 

Peer

Group

Median(1)

 

  

S&P

Financial

Index

 

  1-Year TSR

 

      

 

(33.97)

 

 

     

 

(18.43)

 

 

      

 

(13.04)%

 

 

 

  3-Year TSR

 

      

 

1.13

 

%

 

     

 

20.70

 

%

 

      

 

30.38%

 

 

 

(1)

Based on our 15-company compensation peer group; for more information on our compensation peer group see below under the heading, “Other Elements of Our Process—Peer Group and Benchmarking.”

Strategic Objective Performance

We made progress on several important strategic objectives during 2018. These included:

 

 

Completed the acquisition of Charles River Development, a provider of investment management front office tools and solutions. Charles River presents an opportunity for State Street to deploy an interoperable front-to-back office investment servicing solution

 

 

Reorganized our sales, product and service delivery operations to create a global, integrated service model

 

 

Continued the digitization of our business to deliver tangible benefits to our clients, while delivering approximately $245 million of net pre-tax program savings in 2018 through footprint optimization and the deployment of technology to improve process efficiencies

 

 

Implemented a fully redesigned, more rigorous performance management process for all employees

 

 

Executed our announced Chief Executive Officer transition in accordance with plan

For further details on these and other initiatives, see below under the headings “2018 Compensation Decisions—Corporate Performance” and “2018 Compensation Decisions—Individual Performance and Compensation Decisions.”

Additional Performance Notes

Capital

 

 

We declared total quarterly common stock dividends of $1.78 per share in 2018, or approximately $665 million, compared to total quarterly common stock dividends of $1.60 per share, or approximately $596 million, in 2017

 

 

In the first quarter of 2018, we acquired 3.3 million shares of common stock at an aggregate cost of approximately $350 million under our prior common stock purchase program approved by the Board. To finance, in part, our acquisition of Charles River Development, we did not repurchase any common stock in the remainder of 2018. We resumed common stock repurchases in 2019 under our present, announced plan permitting repurchases of up to $600 million through June 30, 2019



 

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Our regulatory capital levels remained well above current regulatory minimum requirements in 2018:

 

  Capital Ratio

 

State Street Corporation

December 31, 2018(1)

 

 

2018 Minimum Requirements

Including Capital Conservation Buffer

and G-SIB Surcharge(2)

 

  Common Equity Tier 1 Risk-Based Capital

 

 

 

11.7

 

%

 

 

 

7.5%

 

 

 

  Tier 1 Risk-Based Capital

 

 

 

15.5

 

%

 

 

 

9.0%

 

 

 

  Total Risk-Based Capital

 

 

 

16.3

 

%

 

 

 

11.0%

 

 

 

  Tier 1 Leverage

 

 

 

7.2

 

%

 

 

 

4.0%

 

 

 

(1)

Calculated in conformity with the “standardized approach” provisions of the Basel III final rule issued by the Board of Governors of the Federal Reserve System in July 2013.

(2)

Minimum common equity tier 1 risk-based capital, minimum tier 1 risk-based capital and minimum total risk-based capital presented include the transitional capital conservation buffer as well as the estimated transitional G-SIB surcharge that were phased-in beginning January 1, 2016 through January 1, 2019 based on an estimated 1.5% surcharge in all periods.

CCAR Results

Under Federal Reserve rules, we must submit an annual capital plan to the Federal Reserve, taking into account the results of separate stress tests designed by us and by the Federal Reserve. We completed the Federal Reserve’s 2018 Comprehensive Capital Analysis and Review, or CCAR process, and received a conditional non-objection to our 2018 capital plan, requiring State Street to enhance the management and analysis of counterparty exposures under stress, which we subsequently satisfied.

Other Matters

State Street’s 2018 performance is reviewed in greater detail, along with relevant risks associated with our business, results of operations and financial condition, in our annual report on Form 10-K, which accompanies this proxy statement and was previously filed with the Securities and Exchange Commission, or SEC.

2018 Corporate and NEO Performance Evaluations

Corporate Performance

In determining our NEOs’ compensation for 2018, the Compensation Committee evaluated State Street’s overall corporate performance. This evaluation included a structured assessment of corporate performance based on three discrete scorecards that capture State Street’s annual performance against financial, strategic and risk management objectives. Despite strong strategic performance and appropriate risk management, the Committee determined that State Street’s overall performance was Below Expectations, driven primarily by our 2018 financial performance. The Committee’s conclusions are shown below:

 

Corporate Performance Scorecards

 

 

2018 Committee Evaluation

 

Financial Performance

 

 

Below Expectations

 

Strategic Objectives Performance

 

 

Above Expectations

 

Risk Management Performance

 

 

At Expectations

 

Overall Performance

 

 

Below Expectations

 

NEO Performance and Compensation

For 2018, the Compensation Committee awarded markedly lower annual and long-term incentives relative to target for all NEOs. NEO awards reflect their individual performance, as described in more detail under the heading “2018 Compensation Decisions—Individual Performance and Compensation Decisions,” as well as the Committee’s decision to apply a broad-based downward adjustment to incentive awards relative to target for all members of State Street’s Management Committee, based on their accountability for our financial performance, as described in more detail under the heading “2018 Compensation Decisions—Corporate Performance.” For similar reasons, our other Executive Vice Presidents also received, on average, markedly lower incentive compensation relative to 2017.

The Compensation Committee awarded our NEOs annual incentives ranging from 61% to 84% of target for 2018 and long-term incentive awards ranging from 58% to 78% of target, resulting in total incentives awarded for 2018 ranging from 59% to 76% of target and representing a marked decrease from awards for 2017.



 

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For example, Mr. Hooley was awarded total incentive compensation of $8,717,600 for 2018, down 41% from 2017. This represented overall incentive compensation for 2018 at 67% of target, including annual incentives at 64% of target and long-term incentives at 68% of target, as shown in the chart below:

 

 

LOGO



 

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Sound Compensation and Corporate Governance Practices

Our NEO compensation practices are designed to support good governance and avoid incentivizing excessive risk-taking. We regularly review and refine our governance practices considering several factors, including feedback from ongoing engagement with our shareholders.

 

LOGO

 

 

LOGO



 

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New Compensation Program Features

We made the following enhancements to NEO compensation policies and practices in 2018:

 

 

LOGO

 

Shareholder Outreach and “Say-on-Pay”

In reviewing compensation design and governance practices, the Compensation Committee considers market practice and regulatory guidance, as well as other factors, including shareholder feedback. The Committee receives feedback from our shareholders through two primary channels:

 

 

Shareholder Outreach. We engage with our largest shareholders to understand their perspectives on our compensation and governance programs. For 2018, we engaged or requested engagement with shareholders representing more than 40% of our outstanding common stock

 

 

“Say-on-Pay.” At our annual shareholder meeting, we ask our shareholders to approve a non-binding advisory proposal on executive compensation. At our 2018 annual meeting, our shareholders approved the proposal with over 95% of the votes cast

Based on the results of our “say-on-pay” vote and shareholder outreach, the Committee believes that our shareholders support our overall executive compensation program. For the 2018 compensation year, we therefore continued many of the elements of our existing compensation program, such as maintaining a high level of equity and deferral for incentive compensation awards to our NEOs, as well as emphasizing pay for performance and alignment with shareholder interests. One area of specific discussion we had with several of our shareholders over the past few years involved the design of our performance-based RSUs. These discussions, together with long-term strategic and other considerations, informed the changes to the design of these awards, as described above.

Compensation Philosophy

State Street’s compensation program for NEOs and other executive officers aims to:

 

 

attract, retain and motivate superior executives

 

 

reward those executives for meeting or exceeding annual and long-term financial and strategic objectives

 

 

drive long-term shareholder value and financial stability

 

 

align incentive compensation with the risks and performance results experienced by our shareholders through the use of significant levels of deferred equity-based compensation

 

 

provide equal pay for work of equal value

 

 

achieve the preceding goals in a manner aligned with sound risk management and our corporate values

 

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Compensation Design Elements

Elements of Compensation. Key elements of our total compensation program for our NEOs for 2018 are described below.

 

 

LOGO

 

(1)

For more information, see the discussion under “Other Elements of Compensation—Recourse Mechanisms” below.

(2)

Includes a fixed allowance paid to Mr. Conway during early 2018 while he was subject to U.K. remuneration regulations.

(3)

Additional detail on the terms of outstanding performance-based RSUs granted for prior years is found in the discussion under “Prior-Year Performance-Based RSU Awards” below and in our 2016 to 2018 proxy statements.

(4)

Prior to granting the performance-based RSU award, the Compensation Committee reviews factors that affect performance measures during the performance period and which will be excluded from the performance measure calculation, such as: acquisitions, dispositions and similar transactions and related securities issuances and expenses; changes in accounting principles, tax or banking law or regulations; litigation or regulatory settlements arising from events that occurred prior to the performance period; and restructuring charges and expenses. In addition, the Committee retains the discretionary right to disregard any calculation adjustment that would result in an increase to average ROE or average pre-tax margin, and to reduce the payout under the performance award for other material items or events.

(5)

The DSAs and a portion of the performance-based RSUs awarded to Mr. Conway are subject to a 12-month post-vest holding period to reflect the portion of 2018 while he was subject to U.K. remuneration regulations.

Restrictive Covenants. Each of our deferred incentive compensation awards includes restrictive covenants concerning non-competition, non-solicitation, confidentiality and non-disparagement.

 

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Compensation Committee Process Concerning Risk Alignment

For 2018, we continued our focus on aligning incentive compensation with appropriate risk management principles. We provide incentives that are designed not to encourage unnecessary or excessive risk-taking and have established related process controls and oversight. These features include:

 

 

Compensation Committee Interaction and Overlap with Risk Committee and Examining and Audit Committee. Members of the Compensation Committee regularly communicate with the Board’s Risk Committee and its Examining and Audit Committee to integrate input from these other committees into compensation decisions. A member of these other committees also currently serves on the Compensation Committee

 

 

Corporate Risk Summary Review. The Compensation Committee periodically reviews a corporate risk scorecard, prepared by the Chief Risk Officer and confirmed by the Risk Committee, assessing firm-wide risk in several categories

 

 

Annual Compensation Risk Review. The Compensation Committee annually meets with our Chief Human Resources Officer, Chief Risk Officer and Chief Compliance Officer to evaluate our compensation programs and review the:

 

   

alignment of State Street’s compensation plans with its safety and soundness

 

   

activities of a multi-disciplinary control function committee created by management to formally review and assess incentive compensation arrangements throughout the organization

 

   

identification of executive officers and other employees whose roles or activities may expose State Street to material amounts of risk (referred to as “material risk-takers”)

 

   

mechanisms in place for monitoring risk performance and, where appropriate, implementing risk-based adjustments to incentive compensation

 

 

Risk-Based Adjustments to Incentive Compensation. We use a two-pronged process for risk-based adjustments to incentive compensation awards for material risk-takers. This process allows for, as appropriate, both: (1) adjustments at the time awards are made (“ex ante” adjustments) and (2) adjustments after the awards are made (“ex post” adjustments) through recoupment of incentive compensation that has already been awarded via forfeiture (before vesting and delivery) or clawback (after vesting and delivery). For more information, see the discussion under “Other Elements of Compensation—Recourse Mechanisms” below

 

 

Emphasis on Deferral and Equity-Based Compensation. We maintain significant levels of deferred compensation and equity-based compensation for our executives and we continue to deliver a higher percentage of our NEOs’ incentive compensation in the form of deferred compensation relative to our historical peer group. Combined, these elements align an executive’s compensation with the risks and performance results experienced by our shareholders. The high level of deferral places a significant amount of compensation at risk for ex post adjustments in specified circumstances

 

 

Metrics and Targets for Performance-Based RSUs Aligned to Long-Term Goals. We determine metrics for performance-based RSUs that align NEO compensation with our long-term goals. Each year, we assess target and payout ranges for new awards to our executive officers and set targets that are challenging, but achievable, which mitigates excessive risk-taking incentives. In setting targets and payout ranges, the Committee considers publicly-stated guidance and projections, current-year results and peer company financial results, among other factors

For a further discussion of the risk alignment of our compensation practices, see below under the heading “Alignment of Incentive Compensation and Risk.”

 

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2018 Compensation Decisions

Total Compensation Approach

The Compensation Committee evaluates individual compensation for our NEOs and other executive officers by looking at total direct compensation, consisting of base salary and incentive compensation. The Committee evaluates base salary and incentive compensation levels at least annually, and makes adjustments when appropriate.

Base Salary. Base salary is a relatively small portion of total compensation for the NEOs.

None of the NEOs received a base salary increase in 2018 or early 2019. The Committee expects to re-evaluate Mr. O’Hanley’s base salary rate later in 2019, and will consider, among other factors, his salary in comparison to other Chief Executive Officers in our 15-company peer group.

In addition to base salary, Mr. Conway received a fixed allowance in early 2018 totaling U.S. $511,218 based on his role as Chief Executive Officer of Europe, the Middle East and Africa (EMEA), which he held prior to being appointed to his current role as Head of Global Delivery. Applicable regulatory requirements in the U.K. limit the amount of variable compensation that may be granted to specified employees. Mr. Conway ceased being subject to these requirements in April 2018 and no longer received a fixed allowance thereafter.

Incentive Compensation. Incentive compensation is a variable amount, comprising

 

 

cash-based elements, awarded as an annual incentive both in immediate and deferred cash, and

 

 

equity-based elements, awarded as long-term incentives in the form of deferred shares and performance-based RSUs

A high percentage of each NEO’s total incentive compensation is delivered as an equity-based deferred long-term incentive, and a portion of each NEO’s annual cash-based incentive is also deferred. By paying a significant portion of our NEOs’ compensation in equity and by requiring vesting of that component over multiple years, the Committee emphasizes long-term performance and creates an incentive structure where both the rewards and risks of share ownership are shared by our executives and shareholders.

Setting Individual Compensation Targets. The Compensation Committee establishes annual and long-term incentive compensation targets for NEOs, as well as other executive officers at the beginning of each year. The targets are based upon an assessment of each executive’s role and responsibilities, performance trend, competitive and market factors and internal equity.

In early 2018, the Committee established compensation targets for each NEO’s annual and long-term incentive with resulting target total compensation as follows:

 

  Name   

Base

Salary Rate

     Target Incentive Compensation(1)      Target Total
Compensation
 
   Annual      Long-Term      Total  
   

 

  Joseph L. Hooley

 

  

 

$

 

 

1,000,000

 

 

 

 

  

 

$

 

 

3,000,000

 

 

 

 

  

 

$

 

 

10,000,000

 

 

 

 

  

 

$

 

 

13,000,000

 

 

 

 

  

 

$

 

 

14,000,000

 

 

 

 

  Eric W. Aboaf(2)

 

    

 

700,000

 

 

 

    

 

2,000,000

 

 

 

    

 

3,800,000

 

 

 

    

 

5,800,000

 

 

 

    

 

6,500,000

 

 

 

  Ronald P. O’Hanley

 

    

 

800,000

 

 

 

    

 

3,400,000

 

 

 

    

 

6,300,000

 

 

 

    

 

9,700,000

 

 

 

    

 

10,500,000

 

 

 

  Jeff D. Conway(2)(3)

 

    

 

961,218

 

 

 

    

 

1,336,667

 

 

 

    

 

2,480,000

 

 

 

    

 

3,816,667

 

 

 

    

 

4,777,885

 

 

 

  Karen C. Keenan(2)

 

    

 

450,000

 

 

 

    

 

1,500,000

 

 

 

    

 

2,800,000

 

 

 

    

 

4,300,000

 

 

 

    

 

4,750,000

 

 

 

 

(1)

The Committee retains the ability to deviate from the amounts and forms of compensation shown as it deems appropriate.

(2)

The promotion award granted to Mr. Aboaf in February 2018 and described in our 2018 proxy statement was not considered in setting his annual and long-term incentive targets and is therefore excluded from this table. The special recognition awards granted to Mr. Conway and Ms. Keenan described under “Other Elements of Compensation—Other Awards and Agreements” also were not considered in setting annual and long-term incentive targets and are therefore excluded from this table.

(3)

The Committee established a different pay mix for Mr. Conway for 2018 relative to the other NEOs to reflect the fixed allowance he was paid while he was subject to jurisdiction-specific requirements in the U.K. for a portion of 2018 (included in the Base Salary Rate column). In April 2018, the Committee adjusted Mr. Conway’s target incentive compensation to reflect the length of time he was paid such fixed allowance. No change was made to Mr. Conway’s target total compensation.

Determining Individual Compensation Awards. The Compensation Committee determines the final annual and long-term incentive awards to be made for each performance year based on a subjective evaluation of many factors, including corporate performance, individual performance and market, regulatory and shareholder considerations.

 

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  Element   Determining Incentive Compensation Awards
  Annual Incentive  

•   Reflects State Street’s and the executive’s performance for the year

•   Corporate and individual annual performance evaluations include scorecard-based assessments of strategic, financial and risk management performance

•   Varies within a range of 0 – 200% of target

  Long-Term Incentive  

•   Reflects State Street’s long-term performance trend and the core responsibilities associated with the executive’s role over time, including actions or behaviors that provide long-term value to State Street, such as:

—  the executive’s impact on State Street’s long-term performance trend;

—  the executive’s leadership behaviors as measured by factors such as diversity and inclusion, talent development, employee engagement and personal leadership qualities (e.g., enterprise thinking and encouraging professional challenge); and

—  the executive’s achievements in a given year that are particularly significant to the long-term success of State Street and are not captured in annual results

•   Historically varies within a range of 80 – 120% of target, but may be reduced below or exceed this range in the Committee’s discretion

Compensation Assessment Framework

Following the end of the performance year, the Compensation Committee determines the appropriate level of total compensation for each NEO. This determination is based on a subjective evaluation of many factors, including corporate performance, individual performance and market, regulatory and shareholder considerations. In evaluating these factors and making compensation decisions for 2018 for the NEOs, the Committee used the following framework:

 

 

LOGO

Performance assessed under this framework drives incentive compensation determinations relative to each NEO’s targets. In evaluating performance, the Committee may consider additional factors or give greater or less weight to any factor. Additional detail on the roles of Messrs. Hooley and O’Hanley in making incentive compensation determinations for 2018 is provided under “Other Elements of Our Process—Roles of the Committee and the CEO.”

Corporate Performance

 

 

LOGO

Framework Evaluation. As referenced above, the corporate performance framework uses a structured evaluation of three discrete, multi-factor scorecards, which contain both quantitative and qualitative metrics, and cover:

 

 

financial performance

 

 

performance against strategic objectives

 

 

risk management performance, including the risk management performance of significant individual business lines and functions

The Compensation Committee considered the financial, strategic objectives and risk management performance scorecards in July and December 2018, as well as the final 2018 scorecards in early 2019. The full Board of Directors also received an additional interim financial performance scorecard update in September 2018. The Committee’s overall evaluation of corporate performance, balancing positive and negative performance outcomes in each of these scorecards, is a primary driver of incentive compensation decisions for our NEOs.

 

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In 2018, we continued to invest in differentiating capabilities to meet our clients’ ever-changing needs. We took an important strategic step with our acquisition of Charles River Development and made key executive hires and transitions, to continue advancing our multi-year strategy. Further, we maintained a sustained focus on risk excellence. While we made progress on our strategic initiatives, we are not satisfied with our 2018 financial performance. Weaker equity markets, particularly in the fourth quarter, and challenging market dynamics for our clients, drove ongoing fee compression and impacted servicing fee revenues. We also underperformed relative to our publicly disclosed guidance on fee revenue growth and fee operating leverage and our one-year TSR trailed both our peer group median and the S&P Financial Index. We announced a record level of new servicing wins, with $1.9 trillion in new business commitments, increased net interest income by 16% over 2017, and grew both revenue and earnings while maintaining a strong capital position. However, in spite of strong strategic performance and appropriate risk management, the Committee determined that State Street’s overall performance was Below Expectations, driven primarily by our 2018 financial performance.

A brief description of each of the three performance scorecards follows:

 

  Performance Scorecard   2018 Performance Highlights  

2018 Committee

Evaluation

  Financial Performance

 

  Key Areas Reviewed:

  • Revenue

  • EPS

  • ROE

  • TSR

 

•  Despite revenue and EPS growth, which were both above the median of our 15-company compensation peer group,(1) our overall financial performance was disappointing

•  Fee operating leverage and overall operating leverage(2) were negative and our pre-tax margin of 25.0% declined 100 basis points relative to 2017; fee revenue growth also declined and expense growth increased relative to 2017

•  ROE was slightly below the median of our peer group(1)

•  TSR declined compared to 2017 and was in the bottom quartile of our peer group(1)

  Below Expectations

  Strategic Objectives Performance

 

  Key Areas Reviewed:

  • Deepen our client relationships

  • Execute our growth strategy through focused investment

  • Execute our digital strategy

  • Develop our talent and improve organizational effectiveness

  • Strengthen risk excellence

  • Achieve our financial commitments

 

•   Completed the acquisition of Charles River Development, a provider of investment management front office tools and solutions. Charles River presents an opportunity for State Street to deploy an interoperable front-to-back office investment servicing solution

•   Reorganized our sales, product and service delivery operations to create a global, integrated service model

•   Continued the digitization of our business to deliver tangible benefits to our clients, while delivering approximately $245 million of net pre-tax program savings in 2018 through footprint optimization and the deployment of technology to improve process efficiencies

•   Implemented a fully redesigned, more rigorous performance management process for all employees

•   Executed our announced Chief Executive Officer transition in accordance with plan

  Above Expectations

  Risk Management Performance

 

  Key Areas Reviewed:

  • Financial risk

  • Non-financial risk

  • Business unit risks

  • Capital/stress testing

  • Regulatory posture

 

•   Performance across the majority of top risk exposures was in line with the firm’s risk tolerance

•   Business unit performance generally met expectations of the firm’s risk excellence initiatives

•   Completed the Federal Reserve’s 2018 CCAR process and received a conditional non-objection to our 2018 capital plan, requiring State Street to enhance the management and analysis of counterparty exposures under stress, which we subsequently satisfied

  At Expectations

  Overall Performance

 

  Key Areas Reviewed:

  • Financial performance

  • Strategic objectives performance

  • Risk management performance

 

   Reflects the Committee’s assessment of corporate performance based on each of the performance summaries above

   Financial performance was the key driver of the Committee’s overall rating for 2018

  Below Expectations

 

(1)

Our 15-company compensation peer group is described below under the heading, “Other Elements of Our Process—Peer Group and Benchmarking.”

(2)

Fee operating leverage represents the difference between the percentage change in total fee revenue and the percentage change in total expenses, in each case relative to the prior year period. Overall operating leverage represents the difference between the percentage change in total revenue and the percentage change in total expenses, in each case relative to the prior year period.

 

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Individual Performance and Compensation Decisions

 

 

LOGO

In addition to State Street’s overall performance described above, the Committee also considered each NEO’s individual performance in determining the NEO’s total compensation. Accordingly, the Committee reviewed performance scorecards derived from our corporate performance goals and tailored to each NEO in the following areas: strategic; financial; risk management; and leadership and talent. Performance highlights and total compensation decisions for 2018 are described in each of the summaries below.

 

Joseph L. Hooley

2018 Performance Highlights

 

Strategic

 

 

Financial

 

 

Risk Excellence

 

 

Leadership & Talent

 

•  Invested in differentiated capabilities and growth

 

—  Positioned to deploy an interoperable front-to-back office investment servicing solution with the acquisition of Charles River Development

—  Reorganized U.S. exchange-traded fund (ETF) distribution; expanded share in European ETFs and U.S. low cost ETFs

 

•  Reorganized our sales, product and service delivery operations to create a global, integrated service model to better deliver a seamless client experience

 

•  Continued to execute our multi-year strategy

 

—  Continued to re-engineer core processes in support of our planned end-to-end operating model

 

•  Overall financial performance did not meet expectations, but included some highlights relative to 2017

 

•  Grew revenue and announced new business wins in a challenging market environment

 

—  Grew revenue 7.3%

—  Announced a record $1.9 trillion in servicing business wins(1)

 

•  Maintained a strong capital position, improving our Tier 1 Risk-Based Capital ratio

 

•  Accelerated impact of our multi-year strategy to digitize our business, delivering approximately $245 million in 2018 net pre-tax savings

 

•  Took steps to strengthen risk management

 

—  Integrated non-financial risk assessments to create a holistic view of business line risk and controls

—  Implemented an enterprise-wide technology platform to facilitate risk assessments and reporting

—  Launched a new Speak-Up Line to encourage employees and other stakeholders to raise concerns

—  Reorganized enterprise resiliency to drive execution across technology and the businesses

 

•  Completed the Federal Reserve’s 2018 CCAR process with a conditional non-objection to our 2018 capital plan, which we subsequently satisfied

 

•  Executed planned Chief Executive Officer transition

 

•  Hired key executives, including hiring an executive to lead our client engagement and onboarding

 

•  Improved senior management diversity and established new three- and five-year corporate diversity targets

 

•  Implemented new company-wide performance management process

 

•  Centralized and improved employee learning and onboarding processes

 

•  Initiated assessment of management organizational design and effectiveness

 

Compensation for 2018

 

 

•  Mr. Hooley was awarded total compensation of $9,717,600 for 2018, down from $15,750,000 for 2017. His annual incentives were at 64% of target and his long-term incentives were at 68% of target, such that overall incentive compensation of $8,717,600 was awarded for 2018, representing 67% of target.

 

 

LOGO

 

(1)

Newly announced servicing asset mandates for 2018 include a significant amount of assets contracted in the fourth quarter of 2017 for which we received client consent to disclose in the first quarter of 2018. Servicing mandates are presented on a gross basis; therefore, also do not include the impact of clients who terminate or reduce their relationship with State Street (or provide notice thereof) during the period, which from time to time may be significant. New business in assets to be serviced is reflected in our assets under custody and/or administration (AUC/A) after we begin servicing the assets. As such, only a portion of any new asset servicing mandates may be reflected in our AUC/A as of December 31, 2018.

 

STATE STREET CORPORATION    39


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   Executive Compensation (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Eric W. Aboaf

 

2018 Performance Highlights

 

As Chief Financial Officer and head of our Global Strategy function, Mr. Aboaf responded to emerging challenges in the revenue environment with strong leadership

 

•  Exceeded 2017 revenue, EPS and ROE, but overall financial performance did not meet expectations

 

•  Mitigated the challenging revenue environment with increased focus on expense management, including achieving approximately $245 million in net pre-tax savings through our multi-year strategy to digitize our business

 

•  Implemented process improvements in financial reporting

 

•  Completed the Federal Reserve’s 2018 CCAR process with a conditional non-objection to our 2018 capital plan, which we subsequently satisfied

 

•  Effectively progressed talent development, employee engagement and diversity initiatives in the Finance function

 

Compensation for 2018

 

•  Mr. Aboaf was awarded total compensation of $4,848,000 for 2018, down from $6,367,000 for 2017. His annual incentives were at 78% of target and his long-term incentives were at 68% of target, such that overall incentive compensation of $4,148,000 was awarded for 2018, representing 72% of target. Note that this excludes the promotion award granted to Mr. Aboaf in February 2018 and described in our 2018 proxy statement. As described elsewhere in this proxy statement, the promotion award was not considered in setting Mr. Aboaf’s annual or long-term incentive targets or determining his incentive compensation awards for 2018.

   LOGO

 

 

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   Executive Compensation (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Ronald P. O’Hanley

 

2018 Performance Highlights

 

As President and Chief Operating Officer, Mr. O’Hanley led the acquisition of Charles River Development and progressed in his transition to Chief Executive Officer

 

•  Reorganized our sales, product and service delivery operations to create a global, integrated service model

 

•  Executed our growth strategy through key acquisitions, including Charles River Development (a provider of investment management front office tools and solutions) and BestX (a provider of transaction cost analytics to support ‘best execution’ in foreign exchange markets)

 

•  Advanced technology transformation through private cloud, new data architecture and microservices environment

 

•  Improved control environment through continued progress on efficiency and effectiveness of first line ownership of risk

 

•  Led development of a multi-year strategic plan and executed key strategic and organizational changes, demonstrating leadership through transparent communications around the need for enterprise-level change

 

•  In light of industry dynamics, including fee compression, in late 2018 initiated a new organizational streamlining program expected to deliver underlying expense savings in 2019 by optimizing organizational design and effectiveness

 

Compensation for 2018

 

  

•  Mr. O’Hanley was awarded total compensation of $8,038,600 for 2018, down from $9,779,000 for 2017. His annual incentives were at 68% of target and his long-term incentives were at 78% of target, such that overall incentive compensation of $7,238,600 was awarded for 2018, representing 75% of target.

  

LOGO

 

 

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   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Jeff D. Conway

 

2018 Performance Highlights

 

As Head of Global Delivery, Mr. Conway transitioned his responsibilities as Chief Executive Officer of EMEA and reorganized the leadership of the Global Delivery organization

 

•  Defined target state operating model for the Global Delivery organization to become more integrated across our global footprint

 

•  Built and deployed daily client operational performance views for improved escalation and transparency to senior leaders

 

•  Strengthened Global Delivery’s control environment and focus on risk excellence

 

•  Enhanced organizational communications through town hall speaker series, improving employee engagement

 

Compensation for 2018

 

  

•  Mr. Conway was awarded total compensation of $3,200,556 for 2018. His annual incentives were at 61% of target and his long-term incentives were at 58% of target, such that overall incentive compensation of $2,239,338 was awarded for 2018, representing 59% of target. Note that this excludes the special recognition award granted to Mr. Conway in July 2018 and described under “Other Elements of Compensation—Other Awards and Agreements.” As described elsewhere in this proxy statement, the special recognition award was not considered in setting Mr. Conway’s annual or long-term incentive targets or determining his incentive compensation awards for 2018.

  

LOGO

 

For further information on Mr. Conway’s fixed allowance,
see page 36

 

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   Executive Compensation (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

Karen C. Keenan

 

2018 Performance Highlights

 

As Chief Administrative Officer, Ms. Keenan led enterprise-wide initiatives to improve internal controls and data governance and further progressed compliance initiatives

 

•  Successfully led enterprise-wide initiatives to strengthen regulatory compliance and improve internal controls and data governance

 

•  Improved the efficiency and effectiveness of the risk management framework

 

•  Demonstrated strong talent management, strengthening the Compliance and Business Controls organizations through internal mobility and external hires

 

•  Managed expenses through effective hiring and headcount strategy and disciplined use of outsourced professional services

 

Compensation for 2018

 

  

•  Ms. Keenan was awarded total compensation of $3,714,000 for 2018. Her annual incentives were at 84% of target and her long-term incentives were at 71% of target, such that overall incentive compensation of $3,264,000 was awarded for 2018, representing 76% of target. Note that this excludes the special recognition award granted to Ms. Keenan in February 2018 and described under “Other Elements of Compensation—Other Awards and Agreements.” As described elsewhere in this proxy statement, the special recognition award was not considered in setting Ms. Keenan’s annual or long-term incentive targets or determining her incentive compensation awards for 2018.

  

LOGO

 

 

Additional Factors and Individual Compensation Decisions

 

 

LOGO

In addition to the corporate and individual performance factors summarized above, the Committee also considered the market competitiveness of compensation in finalizing its 2018 compensation decisions. For 2018, the Committee decided to award markedly lower annual incentives and long-term incentives relative to target for all NEOs. NEO awards reflect their individual performance, as described in more detail under the heading “2018 Compensation Decisions—Individual Performance and Compensation Decisions,” as well as the Committee’s decision to apply a broad-based downward adjustment to all senior management incentive awards relative to target for 2018, based on our financial performance, as described in more detail under the heading “2018 Compensation Decisions—Corporate Performance.”

 

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   Executive Compensation (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

The Compensation Committee’s total compensation decisions for 2018 for the NEOs relative to their targets are presented in the table below.

 

       Annual Incentive        Long-Term Incentive  

  Named Executive

  Officer

         

•   Consists of immediate cash and
DVAs    

    
 
         

•   Consists of DSAs and performance-
based RSUs

   
 
    

Actual

 

      

Target

 

      

Actual

 

      

Target

 

 

 

  Joseph L. Hooley

 

    

 

 

 

 

$1,917,600

 

 

 

 

    

 

 

 

 

$3,000,000

 

 

 

 

    

 

 

 

 

$6,800,000

 

 

 

 

    

 

 

 

 

$10,000,000

 

 

 

 

 

  Eric W. Aboaf(1)

 

    

 

 

 

 

1,564,000

 

 

 

 

    

 

 

 

 

2,000,000

 

 

 

 

    

 

 

 

 

2,584,000

 

 

 

 

    

 

 

 

 

3,800,000

 

 

 

 

 

  Ronald P. O’Hanley

 

    

 

 

 

 

2,312,000

 

 

 

 

    

 

 

 

 

3,400,000

 

 

 

 

    

 

 

 

 

4,926,600

 

 

 

 

    

 

 

 

 

6,300,000

 

 

 

 

 

  Jeff D. Conway(1)(2)

 

    

 

 

 

 

812,028

 

 

 

 

    

 

 

 

 

1,336,667

 

 

 

 

    

 

 

 

 

1,427,310

 

 

 

 

    

 

 

 

 

2,480,000

 

 

 

 

 

  Karen C. Keenan(1)

 

    

 

 

 

 

1,264,800

 

 

 

 

    

 

 

 

 

1,500,000

 

 

 

 

    

 

 

 

 

1,999,200

 

 

 

 

    

 

 

 

 

2,800,000

 

 

 

 

 

(1)

The promotion award granted to Mr. Aboaf in February 2018 and described in our 2018 proxy statement was not considered in setting his annual and long-term incentive targets and is therefore excluded from this table. The special recognition awards granted to Mr. Conway and Ms. Keenan described under “Other Elements of Compensation—Other Awards and Agreements” also were not considered in setting annual and long-term incentive targets and are therefore excluded from this table.

(2)

Reflects Mr. Conway’s rebalanced target incentive compensation for 2018. In April 2018, the Committee adjusted Mr. Conway’s target incentive compensation to reflect the length of time he was paid a fixed allowance while he was subject to U.K. remuneration regulations. No change was made to Mr. Conway’s target total compensation.

The Compensation Committee’s total compensation decisions for 2018 for the NEOs are presented in the table below. The table below is intended to help shareholders understand the process and philosophy the Committee used in determining NEO compensation for 2018 performance. Note (1) to the table below describes the relationship between the amounts reported in the table below and those amounts reported in the Summary Compensation Table (as required by SEC rules) and related tables. While the table below summarizes how the Committee views annual compensation, it is not a substitute for the tables and disclosures required by SEC rules.

 

  Named Executive

  Officer

 

  

Year

 

    

Annual Base
Salary

 

     Annual Incentive
Awards
     Long-Term Incentive
Awards
    

Total
Compensation

 

 
  

Immediate
Cash

 

    

DVAs

 

    

Performance-
Based RSUs

 

    

DSAs

 

 

 

  Joseph L. Hooley

 

  

 

 

 

 

2018

 

 

 

 

  

 

$

 

 

1,000,000

 

 

 

 

  

 

$

 

 

871,741

 

 

 

 

  

 

$

 

 

1,045,859

 

 

 

 

  

 

$

 

 

4,080,000

 

 

 

 

  

 

$

 

 

2,720,000

 

 

 

 

  

 

$

 

 

9,717,600  

 

 

 

  

 

 

 

 

2017

 

 

 

 

  

 

 

 

 

1,000,000

 

 

 

 

  

 

 

 

 

3,087,500

 

 

 

 

  

 

 

 

 

1,662,500

 

 

 

 

  

 

 

 

 

6,000,000

 

 

 

 

    

 

4,000,000

 

 

 

  

 

 

 

 

15,750,000  

 

 

 

  

 

 

 

 

2016

 

 

 

 

  

 

 

 

 

1,000,000

 

 

 

 

  

 

 

 

 

625,000

 

 

 

 

  

 

 

 

 

1,875,000

 

 

 

 

  

 

 

 

 

6,000,000

 

 

 

 

  

 

 

 

 

4,000,000

 

 

 

 

  

 

 

 

 

13,500,000  

 

 

 

 

  Eric W. Aboaf

 

  

 

 

 

 

2018

 

 

 

 

  

 

 

 

 

700,000

 

 

 

 

  

 

 

 

 

414,773

 

 

 

 

  

 

 

 

 

1,149,227

 

 

 

 

  

 

 

 

 

1,550,400

 

 

 

 

  

 

 

 

 

1,033,600

 

 

 

 

  

 

 

 

 

4,848,000  

 

 

 

  

 

 

 

 

2017

 

 

 

 

  

 

 

 

 

700,000

 

 

 

 

  

 

 

 

 

1,103,810

 

 

 

 

  

 

 

 

 

1,463,190

 

 

 

 

  

 

 

 

 

1,860,000

 

 

 

 

  

 

 

 

 

1,240,000

 

 

 

 

  

 

 

 

 

6,367,000  

 

 

 

 

  Ronald P. O’Hanley

 

  

 

 

 

 

2018

 

 

 

 

  

 

 

 

 

800,000

 

 

 

 

  

 

 

 

 

723,887

 

 

 

 

  

 

 

 

 

1,588,113

 

 

 

 

  

 

 

 

 

2,955,960

 

 

 

 

  

 

 

 

 

1,970,640

 

 

 

 

  

 

 

 

 

8,038,600  

 

 

 

  

 

 

 

 

2017

 

 

 

 

  

 

 

 

 

800,000

 

 

 

 

  

 

 

 

 

1,695,920

 

 

 

 

  

 

 

 

 

2,248,080

 

 

 

 

  

 

 

 

 

3,021,000

 

 

 

 

  

 

 

 

 

2,014,000

 

 

 

 

  

 

 

 

 

9,779,000  

 

 

 

  

 

 

 

 

2016

 

 

 

 

  

 

 

 

 

800,000

 

 

 

 

  

 

 

 

 

393,500

 

 

 

 

  

 

 

 

 

2,176,500

 

 

 

 

  

 

 

 

 

3,180,000

 

 

 

 

  

 

 

 

 

2,120,000

 

 

 

 

  

 

 

 

 

8,670,000  

 

 

 

  Jeff D. Conway

  

 

 

 

 

2018

 

 

 

 

  

 

 

 

 

961,218

 

 

 

 

  

 

 

 

 

223,957

 

 

 

 

  

 

 

 

 

588,071

 

 

 

 

  

 

 

 

 

856,386

 

 

 

 

  

 

 

 

 

570,924

 

 

 

 

  

 

 

 

 

3,200,556  

 

 

 

  Karen C. Keenan

  

 

 

 

 

2018

 

 

 

 

  

 

 

 

 

450,000

 

 

 

 

  

 

 

 

 

326,445

 

 

 

 

  

 

 

 

 

938,355

 

 

 

 

  

 

 

 

 

1,199,520

 

 

 

 

  

 

 

 

 

799,680

 

 

 

 

  

 

 

 

 

3,714,000  

 

 

 

 

(1)

The compensation described in the table above, which summarizes how the Committee evaluates annual total compensation, differs from the compensation described in the Summary Compensation Table beginning on page 55 in the following respects:

 

Annual Base Salary. The table above reflects the year-end annual base salary rate applicable for each NEO. Column (c) in the Summary Compensation Table presents the amount of base salary actually earned by each NEO during the relevant year. The table above and column (c) in the Summary Compensation Table both include Mr. Conway’s fixed allowance received while he was subject to U.K. regulatory requirements during 2018.

 

DVAs. The table above reflects the value of deferred cash compensation awarded by the Committee for 2018. Unlike the awards granted for 2016 and 2017, these awards for 2018 were not adjusted on the date of grant to reflect a notional investment return of a money market instrument. The table above does not reflect these adjustments to the awards, which are reflected in the DVAs shown for 2016 and 2017 in the Summary Compensation Table. In addition, the table above does not reflect any dividends credited on DVAs outstanding during 2018, which are described in note (4) to the Summary Compensation Table.

 

Long-Term Incentive Awards. The Compensation Committee grants long-term incentive equity awards based on the prior year’s performance. In the table above, equity awards are shown for the year of performance (e.g., equity granted in 2019 for 2018 performance is shown as 2018 compensation). Under applicable SEC rules, the Summary Compensation Table presents equity awards in the year in which they are granted (e.g., equity granted in 2018 for 2017 performance will be shown as 2018 compensation).

 

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   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

 

Other Awards. The promotion award granted to Mr. Aboaf in February 2018 and described in our 2018 proxy statement and the special recognition awards granted to Mr. Conway and Ms. Keenan described under “Other Elements of Compensation—Other Awards and Agreements” were not considered in setting annual and long-term incentive targets or determining annual and long-term incentive awards and are therefore excluded from the Total Compensation column in this table. Such awards consist solely of equity-based components, which, under applicable SEC rules, are presented in the Summary Compensation Table in the year in which the awards are granted.

 

Total Compensation. The amounts disclosed above differ from the amounts reported in column (j) of the Summary Compensation Table due to the different methodologies discussed in the notes above. Additionally, this table excludes several items required to be included in the Summary Compensation Table that State Street does not view as primary components of regular annual compensation and therefore were not considered in setting annual and long-term incentive targets or determining annual and long-term incentive awards, such as the change in pension value (which is due solely to variances in actuarial computations over time).

Prior Year Performance-Based RSU Awards

Performance-based RSUs granted to our NEOs, as described above under “Compensation Design Elements—Elements of Compensation,” are subject to the achievement of pre-established performance metrics. Our performance-based RSUs outstanding or that vested during 2018 are described below:

 

Performance
Year(1)

 

 

Year of Grant

 

 

Performance
Period

 

 

Performance Metric Target

 

 

Potential
Payout

 

 

Payout Achieved(2)

 

    

 

2014

 

 

 

2015

 

 

 

2015 – 2017

 

 

 

Average ROE of 9% for the 2015 to 2017 performance period

 

 

 

0 – 100%

 

 

 

100% in February 2018 based on an average adjusted ROE of 11.62%(3)

 

 

 

2015

 

 

 

2016

 

 

 

2016 – 2018

 

 

 

Average ROE of 11% for the 2016 to 2018 performance period

 

 

 

0 – 120%

 

 

 

105.7% in March 2019 based on an average adjusted ROE of 12.13%

 

 

 

2016

 

 

 

2017

 

 

 

2017 – 2019

 

 

 

Average ROE of 11% for the 2017 to 2019 performance period

 

 

 

0 – 140%

 

 

 

To be approved by the Compensation Committee in February 2020(4)

 

 

 

2017

 

 

 

2018

 

 

 

2018 – 2020

 

 

 

Average ROE of 13% for the 2018 to 2020 performance period

 

 

 

0 – 150%

 

 

 

To be approved by the Compensation Committee in February 2021(4)

 

 

 

(1)

For additional information about the terms of these awards, see the discussion below under “Other Elements of Compensation—Other Awards and Agreements,” the narrative discussion following the 2018 Grants of Plan-Based Awards Table on page 58, the Outstanding Equity Awards at Fiscal Year-End, December 31, 2018 Table on page 60 and our prior year proxy statements.

(2)

ROE achievement is subject to adjustment for pre-established, objectively determinable factors. For the 2014 and 2015 performance year awards, the Committee approved adjustments to the ROE calculation to account for changes in tax and banking laws, acquisitions, dispositions and related securities issuances and expenses, merger and integration expenses, restructuring expenses, and settlements related to events that occurred prior to the performance period. In addition, all awards are subject to the Compensation Committee’s ability to exercise negative discretion in determining the payout achieved, as well as recourse mechanisms described in more detail under “Other Elements of Compensation—Recourse Mechanisms.”

(3)

The number of shares acquired upon vesting of these performance-based RSUs for each of our NEOs is contained in the 2018 Stock Vested Table on page 61.

(4)

Based on satisfaction of the performance criteria as certified by the Compensation Committee following the end of the performance period.

In addition, Mr. Aboaf received performance-based RSUs in 2016 in connection with the commencement of his employment at State Street. This award had an average ROE target of 11% for the 2017 to 2018 performance period and paid out at 108.2% based on an average ROE of 12.63%, as adjusted for the same items noted in footnote 2 above.

Other Elements of Our Process

Roles of the Committee and the CEO

The Compensation Committee has direct responsibility for our executive officer compensation plans, policies and programs. The Committee performs these responsibilities for the Chief Executive Officer in consultation with the other independent directors. In making compensation decisions for the other NEOs, the Committee considers the recommendations of our Chief Executive Officer, as well as input from the other independent directors.

For 2018, the Committee’s compensation decisions for Mr. Hooley, our former Chief Executive Officer, included input from the other independent directors of the Board. The Committee’s compensation decisions for 2018 for Mr. O’Hanley, our current Chief Executive Officer, included input from our former Chief Executive Officer as well as the other independent directors of the Board. In making compensation decisions for the other NEOs for 2018, the Committee considered the recommendations of our current Chief Executive Officer, as well as input from the other independent directors.

 

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   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

In early 2018, the Compensation Committee established compensation targets for each NEO’s annual and long-term incentive. The Committee then met eight times from July 2018 through March 2019 regarding 2018 NEO compensation and related topics and evaluated a broad range of corporate performance factors, individual performance updates, market information, regulatory updates and input from our shareholder engagement efforts, as well as its pay-for-performance practices and the results of our annual shareholder meeting, including “say-on-pay” results. The Committee also considered evolving trends, practices, guidance and requirements in the design, regulation, risk-alignment and governance of compensation matters in the U.S. and other jurisdictions, including Europe and Asia. During these meetings, the Committee received regular updates, including from the Committee’s independent compensation consultant, on these and other matters, particularly with respect to the financial services industry.

Peer Group and Benchmarking

The Compensation Committee reviews market data from our peer group as one factor in determining executive compensation. The Committee also considers peer group data in structuring the design of its executive compensation programs.

We consider few companies to be true comparators for the specific scope of our primary business activities, so we include in our peer group our direct competitors and other companies with which we compete in some aspects of our businesses and for executive talent. The group also varies in size and the nature of applicable regulation, including status (like State Street) as a systemically important financial institution. The Compensation Committee, with the assistance of its independent compensation consultant, periodically reviews the composition of our peer group to ensure it continues to serve as an appropriate market reference for executive compensation purposes. Accordingly, in September 2018, the Committee made the following changes relative to our 2017 peer group:

 

2017 Peer Group

  LOGO  

Removed from
2017 Peer Group

  LOGO  

Added to
Current Peer Group

  LOGO  

Current Peer Group

 

Ameriprise Financial, Inc.

 

   

 

Morgan Stanley

 

   

 

The Charles Schwab Corporation

 

   

 

Ameriprise Financial, Inc.

 

 

The Bank of New York Mellon Corporation

 

   

 

Wells Fargo & Company

 

   

 

Intercontinental Exchange, Inc.

 

   

 

The Bank of New York Mellon Corporation

 

BlackRock, Inc.

 

       

 

Invesco Ltd.

 

   

 

BlackRock, Inc.

 

 

Capital One Financial Corporation

 

       

 

Prudential Financial, Inc.

 

   

 

Capital One Financial Corporation

 

 

Franklin Resources, Inc.

 

       

 

S&P Global Inc.

 

   

 

The Charles Schwab Corporation

 

 

The Goldman Sachs Group, Inc.

 

           

 

Franklin Resources, Inc.

 

 

JPMorgan Chase & Co.

 

           

 

The Goldman Sachs Group, Inc.

 

 

Morgan Stanley

 

           

 

Intercontinental Exchange, Inc.

 

 

Northern Trust Corporation

 

           

 

Invesco Ltd.

 

 

The PNC Financial Services Group, Inc.

 

           

 

JPMorgan Chase & Co.

 

 

U.S. Bancorp

 

           

 

Northern Trust Corporation

 

 

Wells Fargo & Company

 

           

 

The PNC Financial Services Group, Inc.

 

           

 

Prudential Financial, Inc.

 

           

 

S&P Global Inc.

 

           

 

U.S. Bancorp

 

 

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   Executive Compensation (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

The Compensation Committee’s review included an evaluation of relevant industry sectors; peer size, including revenue and market capitalization; business model; and regulatory oversight. In making the changes noted above, the Committee focused on the following:

 

 

Reflecting State Street’s current business model and strategic direction

 

 

Intercontinental Exchange, Inc., Invesco Ltd., Prudential Financial, Inc. and S&P Global Inc. each have a strong global scope, aligning with our current business model

 

 

Intercontinental Exchange, Inc. and S&P Global Inc. enhance the technology focus within the peer group, reflecting our long-term strategy

 

 

Maintaining a balance between larger and smaller companies relative to State Street, as measured by assets, market capitalization and revenues

 

 

Wells Fargo & Company and Morgan Stanley, which we removed from our peer group, are each significantly larger than State Street

 

 

The Charles Schwab Corporation is of similar size to State Street

 

 

Intercontinental Exchange, Inc., Invesco Ltd. and S&P Global Inc., are all smaller than State Street, providing balance with larger companies in the peer group

 

 

Continuing to include companies with which State Street competes for executive talent and which face similar regulatory requirements

In addition, for 2018 pay decisions, the Committee eliminated the use of a subset of the 2017 peer group in evaluating compensation for the Chief Executive Officer position because the Committee believes that the current peer group represents an appropriate comparator set for all of the NEO positions.

During 2018, the Committee reviewed peer group compensation data from public sources, supplemented with data from multiple compensation surveys. This survey data generally covered large financial services companies with whom we may compete for executive talent. In evaluating the market data, the Committee considers total compensation to consist of base salary and incentive compensation. In addition to the market data, the Committee received regular updates during 2018 and the first quarter of 2019 regarding identified market trends and compensation actions at major financial services institutions.

The Committee recognized that the peer group companies vary in size and business lines and that the nature of executive roles varies by company. Therefore, the Committee did not treat peer group data as definitive when determining executive compensation for 2018. Rather, it referenced peer group compensation data and performance data, but formed its own perspective on compensation for our NEOs based on its subjective evaluation of many factors, including those described under the heading “2018 Compensation Decisions—Total Compensation Approach.”

Compensation Consultant

The Compensation Committee directly retains Meridian Compensation Partners to provide compensation consulting to the Committee. Meridian regularly participated in meetings and executive sessions of the Committee. Meridian did not provide any other services to State Street during 2018.

The Committee believes the consultant’s primary representatives advising the Committee should be independent of management and the Committee for the consultant to provide appropriate advice on compensation matters. Therefore, the Committee adopted a policy requiring an annual assessment of compensation consultant independence based on the requirements of the NYSE. In December 2018, the Committee reviewed the independence of Meridian and its primary representatives under the policy. Following its review, the Committee determined the primary representatives of Meridian to be independent and that no conflicts of interest were raised by the services of Meridian or its primary representatives.

The Committee reviews data prepared by Willis Towers Watson PLC and McLagan Partners as part of its consideration of compensation matters. Each of these companies, engaged by our Global Human Resources group based on its specialized expertise in the financial services industry, has provided other services to State Street in the past and may do so in the future.

 

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Tax Deductibility of Executive Compensation

Section 162(m) of the U.S. Internal Revenue Code limits to $1 million the U.S. federal income tax deductibility of compensation paid to certain executive officers. Historically, Section 162(m) provided an exemption for performance-based compensation that met specific requirements. The Tax Cuts and Jobs Act of 2017 repealed this exemption for performance-based compensation with respect to taxable years beginning after December 31, 2017, but provided a transition rule for compensation provided under a written binding contract in effect on November 2, 2017 and not materially modified after that date. Because of the uncertainties as to the scope and application of the transition relief, no assurances can be given that compensation intended to satisfy the requirements for exemption under Section 162(m) will, in fact, be deductible.

The Compensation Committee continues to believe that shareholder interests are best served by not restricting its discretion and flexibility in structuring compensation programs, even though such programs will result in non-deductible compensation expenses. Therefore, the Committee has approved compensation for 2018 for our NEOs that will not be fully deductible.

Other Elements of Compensation

Other Awards and Agreements

In 2018, Messrs. Aboaf and Conway and Ms. Keenan each received special performance-based awards in addition to those described above under the heading “2018 Compensation Decisions—Individual Performance and Compensation Decisions.”

 

 

As described in State Street’s 2018 proxy statement, the Committee granted Mr. Aboaf a promotion award in February 2018 in connection with the expansion of his role to include responsibility for our Global Strategy function in addition to his existing responsibilities as our Chief Financial Officer.

 

 

Mr. Conway’s responsibilities increased in support of the implementation of our leadership transition announced in November 2017 with his appointment as Head of Global Delivery. Prior to this appointment, Mr. Conway served as Chief Executive Officer of EMEA. In recognition of his new responsibilities, the Committee granted Mr. Conway a special recognition award in July 2018, once he fully assumed his new role.

 

 

Ms. Keenan received a special recognition award in February 2018 to reflect the importance of her role to the long-term success of State Street. Among other contributions, Ms. Keenan strengthened our internal controls framework through increased oversight by senior management committees and improved data governance across the enterprise.

These awards were each valued at $2,000,000 and granted entirely in the form of performance-based RSUs, which are subject to the same performance metrics and vest in the same manner as the incentive compensation awards for 2017 made to our prior year NEOs in February 2018, as described in our 2018 proxy statement and under the heading “Narrative Disclosure Accompanying Grants of Plan-Based Awards Table” below.

In addition, in connection with Mr. Conway’s departure from State Street on or before June 1, 2019, we entered into an agreement described in more detail under the heading “Potential Payments upon Termination or Change of Control as of December 31, 2018” below.

Recourse Mechanisms

The incentive compensation awards to our NEOs are subject to recourse mechanisms, including ex ante adjustment, forfeiture and clawback, which may be applied jointly or separately, as appropriate. These awards are also subject to any compensation recovery or similar requirements under applicable laws, rules and regulations and related State Street policies and are interpreted and administered accordingly. This approach is intended to comply with applicable banking regulations and regulatory guidance on incentive compensation. In 2017, the Compensation Committee reviewed the terms of these recourse mechanisms in light of evolving market practices and extended the forfeiture and clawback provisions applicable to NEOs to all employees at the Executive Vice President level and broadened the circumstances that may result in forfeiture or clawback. The Committee may continue to adjust its approach for future incentive compensation awards as it deems appropriate.

Ex Ante Adjustment. Before awards are made for a given compensation year, all incentive compensation awards for our NEOs, including deferred incentive compensation awards and the immediate cash incentive, are subject to downward adjustment, in whole or in part, upon the occurrence of specified events. The Compensation Committee, in its discretion, determines whether this ex ante adjustment is appropriate. The events for which ex ante adjustment may occur include:

 

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if the executive’s actions exposed State Street to inappropriate risks that resulted in a “Significantly Below Expectations” rating on any of the factors on State Street’s corporate multi-factor risk scorecard, which guides State Street’s risk assessment process, or

 

 

if the executive incurred significant or repeated compliance or risk-related violations of State Street’s policies

Forfeiture. Before vesting and delivery to the executive, all deferred incentive compensation awards to our NEOs, including performance-based RSUs, DSAs and DVAs, allow reduction or cancellation of the award, in whole or in part, upon the occurrence of specified events. The Compensation Committee, in its discretion, determines whether forfeiture is appropriate. The events for which forfeiture may occur include:

 

 

if the executive’s actions exposed State Street to inappropriate risks, including in a supervisory capacity, that resulted or could reasonably be expected to result in material losses that are or would be substantial in relation to State Street’s or a relevant business unit’s revenue, capital and overall risk tolerance

 

 

if the executive engaged in fraud, gross negligence or any misconduct, including in a supervisory capacity, that was materially detrimental to the interests or business reputation of State Street or any of its businesses

 

 

if the executive engaged in conduct that constituted a violation of State Street policies and procedures or our Standard of Conduct in a manner which either caused or could have caused reputational harm that is material to State Street or either placed or could have placed State Street at material legal or financial risk

 

 

if, as a result of a material financial restatement contained in an SEC filing, or miscalculation or inaccuracy in the determination of performance metrics, financial results or other criteria used in determining the amount of the award, the executive would have received a smaller or no award, or

 

 

if the executive’s employment is terminated by State Street for gross misconduct

Clawback. All amounts delivered to our NEOs as incentive compensation awards, including immediate cash incentive awards, performance-based RSUs, DSAs and DVAs, contain clawback provisions providing for the repayment of those amounts, in whole or in part, upon the occurrence of specified events. The Compensation Committee, in its discretion, determines whether clawback is appropriate, making that determination within four years (in the case of performance-based RSUs) or three years (in the case of all other forms of incentive compensation) of the award’s grant date. The events for which clawback may occur include:

 

 

if the executive engaged in fraud or willful misconduct, including in a supervisory capacity, that resulted in financial or reputational harm that is material to State Street and resulted in termination of the executive’s employment, or

 

 

if, as a result of the occurrence of a material financial restatement by State Street contained in a filing with the SEC or miscalculation or inaccuracy in financial results, performance metrics, or other criteria used in determining the amount of the award, the executive would have received a smaller or no award

Retirement Benefits

Our NEOs are eligible to participate in our 401(k) defined contribution retirement plan available to our U.S.-based employees generally. For 2018, the plan included a matching employer contribution of 6% up to Internal Revenue Code limits. We also maintain a frozen qualified defined benefit pension plan for certain U.S. employees that provides benefits based on an account balance that is increased annually by interest credits. Messrs. Hooley and Conway are the only NEOs who participate in this plan; however, no additional annual pay credits are provided to their accounts.

Because pension benefits under our U.S. qualified defined benefit plan are limited by Internal Revenue Code restrictions, we maintain two supplemental pension programs, both of which are frozen. One was designed to make up for lost contributions due to Internal Revenue Code limits and was frozen along with the qualified defined benefit pension plan. Messrs. Hooley and Conway are the only NEOs who participate in this plan. The second was originally designed to provide Executive Vice Presidents and above with competitive retirement benefits to encourage their continued employment based upon a specified percentage of compensation. It was later changed to include two separate benefit components: (1) a traditional defined benefit component, in which Messrs. Hooley and Conway participate, which was substantially frozen in 2007 with all accruals ending in 2017; and (2) a defined contribution component, which was frozen in January 2017 following an executive supplemental retirement plan market analysis, and in which Messrs. Hooley and Conway and Ms. Keenan participate.

These plans are described in further detail below under the heading “2018 Pension Benefits.”

 

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Deferred Compensation

We maintain a nonqualified deferred compensation plan that allows NEOs and other senior employees to defer base salary and/or a portion of annual incentive awards otherwise payable in immediate cash. Participants receive a return based on one or more notional investment options selected by the participant. Currently, the investment options available to our NEOs include three money market funds, three index funds, a State Street common stock fund and several other international investment options. The nonqualified deferred compensation plan supplements deferrals made under our tax-qualified 401(k) plan. We provide these nonqualified deferred compensation benefits because many companies of our size provide a similar benefit to their senior employees. This plan is described below under the heading “2018 Nonqualified Deferred Compensation.”

Perquisites

We provide our NEOs a modest level of perquisites, such as financial planning, annual physicals and personal liability coverage. In addition, the Board provided Messrs. Hooley and O’Hanley with an executive security package consisting of a driver and other security benefits due to their 2018 roles. These security measures, along with the parking benefits provided to our other NEOs, promote the effectiveness of our senior executives, allowing them greater opportunity to focus their attention on our business operations and activities. We also provided Mr. Conway with customary expatriate benefits related to his service in the U.K. through late June 2018. These expatriate benefits included items such as: allowances for goods, services, and housing; tax preparation and advisory services; and tax equalization payments. In limited circumstances, our NEOs have combined personal travel with business travel at no incremental cost to us. We do not provide a tax gross-up for the income attributable to any perquisite for our NEOs, other than for certain expatriate benefits and standard relocation benefits.

Change-of-Control Agreements

Under a long-standing program, we have change-of-control agreements in place with each of our NEOs. We provide these agreements because we believe providing some protection in the event of a change of control is necessary to attract and retain high quality executives and to help address potential distractions during the period leading up to a possible change of control. On December 13, 2018, State Street entered into amended and restated change of control agreements with each of our NEOs that reduce the amount of bonus-attributable payments in the event of qualifying terminations of employment following a change of control.

Our change-of-control arrangements are further described below under the heading “Potential Payments upon Termination or Change of Control as of December 31, 2018.”

Executive Equity Ownership Guidelines, Practices and Policies

State Street believes executive stock ownership is key to aligning our executives’ interests with those of our shareholders. It also incentivizes our executives to meet our financial, strategic and risk management objectives. Therefore, we maintain the following practices, policies and guidelines.

Stock Ownership Guidelines. Our stock ownership guidelines apply to all members of our Management Committee, including our NEOs. These guidelines require executives to own shares of common stock with a value equal to the multiple of the relevant executive’s annual base salary shown below. Guideline levels are phased in over a period of five years, with the first year starting on the first January 1 after the person becomes an executive officer. The executive is expected to attain the ownership level ratably over five years and is deemed to satisfy the guideline if that ratable ownership level is met.

Our Stock Ownership Guidelines also include a holding requirement. Under this requirement, during the five-year phase-in period, each executive must hold 50% of the number of net shares received from a vesting event until the ownership requirement is met. Following the five year phase-in period, if the ownership guideline is not met, a 100% holding requirement applies until the ownership guideline is satisfied. As of March 5, 2019, the holding requirement does not apply to any of the NEOs, other than Mr. Aboaf, as each exceeds their full (not ratable) ownership guideline. Mr. Aboaf joined our Management Committee in December 2016 and exceeds his ratable ownership guideline, but is subject to the holding requirement described above, as he does not yet exceed his full ownership guideline.

 

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  Name

 

 

  

Common Stock Ownership
Guideline Multiple of
Annual Base Salary

 

 

  

Executive Exceeds  

Ownership  

Guideline  

 

 

 

  Joseph L. Hooley(1)

 

 

  

 

7

 

 

  

 

 

 

 

  Eric W. Aboaf

 

 

  

 

5

 

 

  

 

On a Pro Rata Basis

 

 

 

  Ronald P. O’Hanley

 

 

  

 

7

 

 

  

 

 

 

 

  Jeff D. Conway

 

 

  

 

3

 

 

  

 

 

 

 

  Karen C. Keenan

 

 

  

 

5

 

  

 

 

 

 

(1)

Mr. Hooley retired as our Chief Executive Officer on December 31, 2018 and is no longer subject to our Management Committee Stock Ownership Guidelines.

The level of ownership is calculated on March 5, 2019, the same date used for the Security Ownership of Certain Beneficial Owners and Management Table below, and by reference to the closing price of our common stock on the NYSE on that date. Ownership includes shares directly owned, DSAs and earned performance-based RSUs (all on an after-tax basis), including shares held under our 401(k) retirement plan and vested shares in other retirement plans, but excludes unearned performance-based RSUs. This calculation differs from the calculation of shares under applicable SEC rules for purposes of the Security Ownership of Certain Beneficial Owners and Management Table.

On December 31, 2018, Mr. Hooley exceeded his Management Committee stock ownership guideline of seven times base salary. Following his retirement as Chief Executive Officer on that date, Mr. Hooley became subject to our director stock ownership guidelines, which he exceeded as of March 5, 2019. Mr. O’Hanley’s stock ownership guideline increased from five times base salary to seven times base salary on January 1, 2019 when he assumed the role of Chief Executive Officer. As noted in the table above, the stock ownership of each NEO exceeded the expected level of ownership and is in compliance with any applicable holding requirements under these guidelines.

Securities Trading Policy; No Hedging or Speculative Trading; Rule 10b5-1 Plans. State Street has a Securities Trading Policy that contains specific provisions and trading restrictions. The policy assists our directors, executive officers and other designated employees with access to sensitive information in complying with U.S. federal securities laws when trading in State Street securities. The policy prohibits short selling State Street securities, engaging in hedging transactions in State Street securities and engaging in speculative trading in State Street securities. The policy permits individuals, including our NEOs, to enter into trading plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934. Rule 10b5-1 allows executives to prearrange sales of their company’s securities in a manner designed to avoid initiating stock transactions while in possession of material non-public information. Our NEOs and other executive officers may, from time to time, adopt trading plans under Rule 10b5-1 and effect transactions in our securities under those plans. The Securities Trading Policy is in addition to the requirement in our Standard of Conduct that all employees’ trading activities must be in compliance with applicable law and may not be made on the basis of material non-public information.

Equity Grant Guidelines. The Compensation Committee adopted Equity Grant Guidelines, as described below:

 

 

Annual Equity Award Grants. Annual grants of equity awards to our employees are typically made by the Committee on the date of a scheduled meeting of the Committee or the Board of Directors to be held in February or March of each year following the public release of financial results for the prior fiscal year. Pursuant to authority delegated by the Board, and subject to any limitations that the Board or the Committee may establish, another committee of the Board (which may consist of a single member) may make annual grants to persons other than executive officers on the date of the scheduled meeting in February or March

 

 

Other Equity Award Grants. Grants of equity awards to NEOs and other executive officers in connection with new hires, promotions, special recognition, retention or other special circumstances are made by the Committee. Awards to other individuals may be made either by the Committee or, subject to any limitations that the Board or the Committee may establish, a committee of the Board composed of (1) the Chairman of the Board, (2) the Chief Executive Officer, if a member of the Board, (3) the Committee Chair or (4) the Committee Chair along with any other member of the Committee. This type of award may be granted on the date of a scheduled meeting of the Committee, a scheduled meeting of the Board or the last business day of a calendar month

 

 

The exercise price for all stock options and stock appreciation rights will be the NYSE closing price of State Street’s common stock on the date of grant

 

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Except for the setting of the March 2019 meeting to occur after our public release of 2018 annual earnings, there was no program, plan or practice of timing equity awards in coordination with the release of material non-public information.

Other Executive Compensation Information

Compensation Committee Report

The Compensation Committee furnishes the following report:

The Committee has reviewed and discussed the Compensation Discussion and Analysis with State Street management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by,

Richard P. Sergel, Chair

Amelia C. Fawcett

Gregory L. Summe

CEO Pay Ratio Disclosure

The following sets out a reasonable estimate under applicable SEC regulations of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of our other employees. The methodology and the material assumptions, adjustments and estimates we used in identifying our median employee and calculating that employee’s annual total compensation are set forth below. This methodology and the material assumptions, adjustments and estimates may differ materially from those applied by other companies, including other financial services companies, under applicable SEC regulations. As a result, the information below may not be comparable to similar information disclosed by other companies. In addition, the value of health and welfare benefits paid by State Street can vary significantly, depending on the employee’s annual benefits elections. The 2017 median employee’s benefits elections differed from the elections of the 2018 median employee, resulting in a substantially lower amount of health and welfare benefits included in the annual total compensation of the median employee for 2018. Accordingly, the information below may not be comparable to the information we disclosed for 2017.

For 2018, we estimate that:

 

   

the median of the annual total compensation of all employees of State Street (other than Mr. Hooley), was $68,527; and

 

   

the annual total compensation of Mr. Hooley was $16,119,826

Based on the foregoing, the ratio of the annual total compensation of Mr. Hooley to the median of the annual total compensation of all other employees is estimated to be 235 to 1.

Given changes to our employee population in 2018, we identified our median employee—the employee at the midpoint of our employee population—based on our employee population as of December 1, 2018. State Street employees are generally eligible for base pay and incentive pay. We therefore analyzed our employee population based on these compensation elements for full year 2018. We annualized the base pay of all full and part-time employees in our employee population who were hired during 2018. Similarly, for all such employees who did not receive incentive pay in 2018 due solely to their date of hire, we used a consistent methodology to impute annualized incentive pay based on each employee’s level and function. For the median employee, we combined all forms of compensation that would have been reported in the “Total” column (column (j)) of the Summary Compensation Table had disclosure of the median employee’s compensation been required in that table and then added health and welfare benefits paid by State Street.

For Mr. Hooley, we used the amount reported in the “Total” column (column (j)) of our Summary Compensation Table on page 55 and then, for consistent comparability to our median employee, added health and welfare benefits paid by State Street.

 

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Alignment of Incentive Compensation and Risk

We align incentive compensation with appropriate risk management principles, such as providing incentives that do not encourage unnecessary or excessive risk-taking and establishing additional process controls and oversight where appropriate. We utilize broad and integrated processes to maintain this alignment, including to:

 

 

conduct risk-based reviews of incentive plan design

 

 

identify individuals whose activities may expose State Street to material amounts of risk

 

 

apply risk-based adjustments to compensation

 

 

implement specific Board committee review of selected control function compensation (e.g., Board-level Risk Committee review of Chief Risk Officer and Enterprise Risk Management department compensation)

 

LOGO

 

 

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LOGO

As a result of these reviews and processes, we believe that our compensation policies and practices for employees do not create risks that are reasonably likely to have a material adverse effect on us. We will continue to monitor developments in this area and may, as we believe appropriate, make related adjustments to our compensation practices.

 

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Summary Compensation Table

 

  Name and Principal

  Position

  (a)

 

Year
(b)

 

Salary(1)

($)

(c)

 

Bonus(2)
($)

(d)

 

Stock
Awards(3)

($)

(e)

 

Non-Equity
Incentive Plan
Compensation(4)

($)

(g)

 

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(5)

($)

(h)

 

All Other
Compensation(6)

($)

(i)

 

Total

($)

(j)

 

 

Total without
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings*

($)

 

 

  Joseph L. Hooley**

 

 

 

2018

 

 

 

 

$1,000,000

 

 

 

 

$—  

 

 

 

 

$9,999,982

 

 

 

 

$1,967,353

 

 

 

 

$3,007,770

 

 

 

 

$127,420

 

 

$

 

16,102,525

 

 

$

 

13,094,755

 

  Chairman and Chief

  2017   1,000,000   —     10,000,028   4,842,269   3,524,957   113,406   19,480,660   15,955,703

  Executive Officer

 

 

 

2016

 

 

 

 

980,769

 

 

 

 

—  

 

 

 

 

8,999,997

 

 

 

 

2,596,750

 

 

 

 

2,014,620

 

 

 

 

99,705

 

 

 

 

14,691,841

 

 

 

 

12,677,221

 

 

 

  Eric W. Aboaf

 

 

 

2018

 

 

 

 

700,000

 

 

 

 

—  

 

 

 

 

5,099,903

 

 

 

 

1,585,609

 

 

 

 

—  

 

 

 

 

52,711

 

 

 

 

7,438,223

 

 

 

 

7,438,223

 

  Executive Vice

  President and Chief

  Financial Officer

 

 

 

2017

 

 

 

 

700,000

 

 

 

 

892,500

 

 

 

 

1,657,398

 

 

 

 

2,648,207

 

 

 

 

—  

 

 

 

 

237,246

 

 

 

 

6,135,351

 

 

 

 

6,135,351

 

 

 

  Ronald P. O’Hanley**

 

 

 

2018

 

 

 

 

800,000

 

 

 

 

—  

 

 

 

 

5,034,952

 

 

 

 

2,378,391

 

 

 

 

—  

 

 

 

 

123,322

 

 

 

 

8,336,665

 

 

 

 

8,336,665

 

  President and Chief

  Operating Officer

 

 

 

2017

2016


 

800,000

784,615


 

—  

—  


 

5,299,912

4,769,962


 

4,068,768

2,682,307


 

—  

—  


 

79,215

55,948


 

10,247,895

8,292,832


 

10,247,895

8,292,832


 

  Jeff D. Conway**

 

 

 

2018

 

 

 

 

961,218

 

 

 

 

—  

 

 

 

 

4,274,872

 

 

 

 

814,740

 

 

 

 

—  

 

 

 

 

783,973

 

 

 

 

6,834,803

 

 

 

 

6,834,803

 

  Executive Vice

  President and Global

  Head of Operations

  and Business

  Transformation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Karen C. Keenan

 

 

 

2018

 

 

 

 

450,000

 

 

 

 

—  

 

 

 

 

4,374,875

 

 

 

 

1,300,657

 

 

 

 

—  

 

 

 

 

28,261

 

 

 

 

6,153,793

 

 

 

 

6,153,793

 

  Executive Vice

  President and Chief

  Administrative Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Amounts in this column show total compensation, as determined under applicable SEC rules and reported in column (j), minus the change in pension value reported in column (h). This is provided to illustrate the effect that the year-over-year change in pension value had on total compensation as determined under applicable SEC rules and to highlight the effect of the Executive Compensation Committee’s (ECC) decisions on total compensation year-over-year. The change in pension value reflects external variables that are unrelated to the Company’s performance. Refer to the compensation table included in the “Compensation Discussion and Analysis” on page 44 for the ECC’s compensation decisions for each NEO. The amounts reported in the Total without Change in Pension Value and Nonqualified Deferred Compensation Earnings column differ from the amounts reported in the Total column (column (j)) and are not a substitute for total compensation calculated in accordance with SEC rules.

**

Mr. Hooley retired as our Chief Executive Officer on December 31, 2018, and was succeeded by Mr. O’Hanley on January 1, 2019. Mr. Conway is leaving State Street on or before June 1, 2019.

(1)

For 2018, includes Mr. Conway’s salary ($450,000) and a fixed allowance paid in cash to Mr. Conway while he was subject to U.K. remuneration regulations ($511,218).

(2)

Reflects a cash payment made in connection with Mr. Aboaf’s commencement of employment with State Street to compensate him for the loss of incentive compensation from his prior employer.

(3)

Amounts represent the grant date fair value of DSA and performance-based RSUs. The fair value of each award is computed in accordance with GAAP (FASB ASC 718), using the assumptions stated in note 18 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018. The amounts included for the 2018 performance-based RSUs reflect target level performance, as reflected in the 2018 Grants of Plan-Based Awards table. Based on the grant date value and assuming that performance results in the maximum number of shares vesting, each NEO’s 2018 performance-based RSUs would have a maximum payout as follows: Mr. Hooley – 88,880 shares and value of $8,999,563; Mr. Aboaf – 57,179 shares and value of $5,789,672; Mr. O’Hanley – 44,751 shares and value of $4,531,272; Mr. Conway – 55,486 shares and value of $5,260,341; and Ms. Keenan – 50,735 shares and value of $5,137,183. Based on the grant date value and assuming that performance results in the maximum number of shares vesting, each previously disclosed NEO’s 2017 performance-based RSUs would have a maximum payout as follows: Mr. Hooley – 113,468 shares and value of $8,400,036; Mr. Aboaf – 18,807 shares and value of $1,392,282; and Mr. O’Hanley – 60,137 shares and value of $4,451,942. Based on the grant date value and assuming that performance results in the maximum number of shares vesting, each previously disclosed NEO’s 2016 performance-based RSUs would have a maximum payout as follows: Mr. Hooley – 129,427 shares and value of $6,480,030; and Mr. O’Hanley – 68,633 shares and value of $3,434,395.

(4)

Represents the immediate and deferred cash (granted in DVAs) portions of incentive compensation, as well as dividends credited on DVAs outstanding during 2018, as shown in the table below. DVAs are units that receive a notional investment return of a money market instrument. During the deferral period, DVAs are credited with additional notional units based on the return of the State Street Institutional U.S. Government Money Market Fund if the monthly dividend rate is at least equal to 0.001 per unit. These dividends vest and are paid at the same time and in the same form as the related DVA unit. (The State Street Institutional U.S. Government Money Market Fund return first exceeded the monthly rate of 0.001 per unit in January 2018. The monthly rate of return was below the monthly threshold of 0.001 for 2017 and 2016.)

 

STATE STREET CORPORATION    55


Table of Contents

   Executive Compensation (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

 

    2018 Non-Equity Incentive Plan Compensation

  Name

 

 

Immediate Cash

($)

 

 

DVAs

($)

 

 

Dividends Credited on
Outstanding DVAs

($)

 

 

Total

($)

 

 

  Joseph L. Hooley

 

   

 

 

 

 

$871,741

 

 

 

   

 

 

 

 

$1,045,859

 

 

 

   

 

 

 

 

$49,753

 

 

 

   

 

 

 

 

$1,967,353  

 

 

 

 

  Eric W. Aboaf

 

   

 

 

 

 

414,773

 

 

 

   

 

 

 

 

1,149,227

 

 

 

   

 

 

 

 

21,609

 

 

 

   

 

 

 

 

1,585,609  

 

 

 

 

  Ronald P. O’Hanley

 

   

 

 

 

 

723,887

 

 

 

   

 

 

 

 

1,588,113

 

 

 

   

 

 

 

 

66,391

 

 

 

   

 

 

 

 

2,378,391  

 

 

 

 

  Jeff D. Conway

 

   

 

 

 

 

223,957

 

 

 

   

 

 

 

 

588,071

 

 

 

   

 

 

 

 

2,712

 

 

 

   

 

 

 

 

814,740  

 

 

 

 

  Karen C. Keenan

 

   

 

 

 

 

326,445

 

 

 

   

 

 

 

 

938,355

 

 

 

   

 

 

 

 

35,857

 

 

 

   

 

 

 

 

1,300,657  

 

 

 

 

(5)

Because our deferred compensation plans do not provide above-market earnings, no earnings are included in this column. The amounts in this column represent the change in the actuarial present value of the accumulated benefits under our qualified and nonqualified defined benefit pension plans. The plans are frozen and none of the NEOs are receiving additional credits under the plans. Messrs. Hooley and Conway are the only NEOs eligible to participate in our defined benefit pension plans. For 2018, the change in value presented in the Summary Compensation Table above reflects a year-over-year update to applicable actuarial calculation assumptions from December 31, 2017 to December 31, 2018, including an increase in the discount rate assumption for the State Street Retirement Plan (Retirement Plan), the Management Supplemental Retirement Plan (MSRP) and the Executive Supplemental Retirement Plan defined benefit provisions (ESRP-DB), as well as formula-driven changes due to the NEOs being older and closer to retirement. The aggregate change in pension value was negative for Mr. Conway due to the change in discount rate; the aggregate change in pension value was positive for Mr. Hooley primarily due to his retirement date becoming known for purposes of the MSRP and ESRP-DB. The table below describes the change in pension value for 2018, as presented in the Summary Compensation Table above for Mr. Hooley, highlighting the split between (i) the amount attributable to change in age and proximity to retirement and (ii) the amount attributable to the actuarial present value effect of the increase in discount rates and known timing of payment. The change in pension value presented in the Summary Compensation Table above and in the following table represents actuarial calculations based upon assumptions on the relevant dates to the extent relevant factors are unknown. The actuarial present value of the accumulated pension benefits calculated on future dates may increase or decrease, based on assumptions applicable on those future dates and on formula-driven changes due to the executive’s age at the time.

 

    2018 Change in Pension Value

 

 

  Name

 

 

Due to Age and
Proximity to Retirement(A)
($)

 

   

Due to Change in
Assumptions(B)

($)

 

   

Total

($)

 

 

  Joseph L. Hooley

  $ 764,405     $ 2,243,365     $ 3,007,770   

  Jeff D. Conway

    116,815       (404,886     (288,071 )  
  (A) 

The change in pension value due to an additional year of age was quantified by comparing (i) the December 31, 2017 present value of pension benefits with (ii) the present value of pension benefits calculated on December 31, 2018 while holding the December 31, 2017 discount rate and mortality assumptions constant. Since the plans were frozen as of December 31, 2010, there were no service accruals during 2018. The increase in value reflects the effects on the present value calculation of pension benefits of the NEO having aged one additional year closer to normal retirement age (65).

  (B) 

The change in pension value due to changes in assumptions was quantified by comparing (i) the present value of pension benefits calculated as of December 31, 2018 based on the December 31, 2018 discount rate, form of payment and mortality assumptions and (ii) subtracting from that the relevant amounts attributable to older age and proximity to retirement, as set forth in footnote (A) above. The increase in discount rate assumption for each plan resulted in a decrease in pension value for Mr. Conway. For Mr. Hooley, however, because he retired on December 31, 2018, his MSRP and ESRP-DB reflect final benefit calculations rather than assumption-based calculations. Because the Retirement Plan payment commencement is elective rather than fixed like the MSRP and ESRP-DB, no change in payment timing is reflected for that benefit.

 

(6)

The following table describes the amounts set forth for 2018 in the “All Other Compensation” column:

 

  Name    Executive
Security(A)
     International
Assignment(B)
     Company
Contributions
to Defined
Contribution
Plans(C)
     Charitable
Donations and
Matching
Contributions(D)
     Other
Benefits(E)
     Total  

 

  Joseph L. Hooley

 

  

 

$

 

 

46,302

 

 

 

 

  

 

$

 

 

—  

 

 

 

 

  

 

$

 

 

27,750

 

 

 

 

  

 

$

 

 

30,000

 

 

 

 

  

 

$

 

 

23,368

 

 

 

 

  

 

$

 

 

127,420  

 

 

 

 

 

  Eric W. Aboaf

 

  

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

27,750

 

 

 

 

  

 

 

 

 

15,000

 

 

 

 

  

 

 

 

 

9,961

 

 

 

 

  

 

 

 

 

52,711  

 

 

 

 

 

  Ronald P. O’Hanley

 

  

 

 

 

 

16,811

 

 

 

 

  

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

27,750

 

 

 

 

  

 

 

 

 

55,000

 

 

 

 

  

 

 

 

 

23,761

 

 

 

 

  

 

 

 

 

123,322  

 

 

 

 

 

  Jeff D. Conway

 

  

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

723,362

 

 

 

 

  

 

 

 

 

27,750

 

 

 

 

  

 

 

 

 

25,000

 

 

 

 

  

 

 

 

 

7,861

 

 

 

 

  

 

 

 

 

783,973  

 

 

 

 

 

  Karen C. Keenan

 

  

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

16,500

 

 

 

 

  

 

 

 

 

—  

 

 

 

 

  

 

 

 

 

11,761

 

 

 

 

  

 

 

 

 

28,261  

 

 

 

 

 

56    STATE STREET CORPORATION


Table of Contents

   Executive Compensation (continued)

 

   2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

 

 

 

  (A) 

The Board approved an executive security package that provides a car and driver and residential security for Mr. Hooley and Mr. O’Hanley. Car and driver values for Mr. Hooley of $44,662 and Mr. O’Hanley of $16,811 are calculated by allocating the total cost of the car and driver between non-business and business use by mileage traveled. Also includes the cost of security at Mr. Hooley’s residence, reflecting invoice amounts for alarm monitoring and maintenance.

  (B) 

Expatriate benefits received by Mr. Conway related to his service in the U.K. through late June 2018, which included items such as: allowances for goods, services, and housing; tax preparation and advisory services; and $547,795 of tax equalization payments.

  (C) 

Company contributions to savings plans: (1) $16,500 to the Salary Savings Program (SSP) for each NEO; and (2) $11,250 to the Management Supplemental Savings Plan (MSSP) for Messrs. Hooley, Aboaf, O’Hanley and Conway.

  (D) 

Messrs. O’Hanley and Conway each directed contributions of $25,000 under our Executive Leadership program, which allows Executive Vice Presidents serving on non-profit boards to annually recommend a financial contribution from the State Street Foundation to the non-profit of up to $25,000. In addition, matching contributions in excess of the $10,000 benefit available to all State Street employees were made in the name of Messrs. Hooley ($30,000), Aboaf ($15,000) and O’Hanley ($30,000) under our matching gift program, which will match contributions made by employees to eligible charitable and educational organizations in accordance with specified annual limits.

  (E) 

Includes financial planning/ tax services for Mr. Aboaf of $6,000 and Mr. O’Hanley of $12,000, parking benefits for Messrs. Hooley and O’Hanley and Ms. Keenan of $7,800 and for Mr. Conway of $3,900, personal liability coverage of $1,227 for each NEO and executive health screening of $2,734 for each NEO. Also includes retirement gifts for Mr. Hooley in recognition of his service as Chief Executive Officer with a cost of $11,607, which includes a $10,000 charitable donation made on his behalf.

The table above does not include any amounts for personal travel in connection with business travel by our NEOs because there was no aggregate incremental cost to the Company.

2018 Grants of Plan-Based Awards

 

              Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
    Estimated Future Payouts
Under Equity Incentive
Plan Awards
    All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)
    Grant Date
Fair Value
of Stock
and Option
Awards(2)
($)
 

  Name

  (a)

 

Award

(b)

 

Grant
Date

 

   

Threshold
($)
(c)

 

   

Target
($)
(d)

 

   

Maximum
($)
(e)

 

   

Threshold
(#)
(f)

 

   

Target
(#)
(g)

 

   

Maximum
(#)
(h)

 

 
 

(i)

 

   

(j)

 

 

  Joseph L. Hooley

 

2018 Annual Incentive

 

           

 

$   —  

 

 

 

  $

 

3,000,000

 

 

 

  $

 

6,000,000

 

 

 

   

 

—  

 

 

 

   

 

 

—  

 

 

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

  $

 

—    

 

 

 

 

Performance-Based RSU(3)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

29,627

 

 

 

   

 

59,253

 

 

 

   

 

88,880

 

 

 

   

 

—  

 

 

 

   

 

5,999,959  

 

 

 

   

Deferred Stock Award (DSA)(4)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

39,143

 

 

 

   

 

4,000,023  

 

 

 

 

  Eric W. Aboaf

 

 

2018 Annual Incentive

 

     

 

   —  

 

 

 

   

 

2,000,000

 

 

 

   

 

4,000,000

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—    

 

 

 

 

Performance-Based RSU(3)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

9,184

 

 

 

   

 

18,368

 

 

 

   

 

27,552

 

 

 

   

 

—  

 

 

 

   

 

1,859,944  

 

 

 

 

Performance-Based RSU(5)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

9,876

 

 

 

   

 

19,751

 

 

 

   

 

29,627

 

 

 

   

 

—  

 

 

 

   

 

1,999,986  

 

 

 

   

Deferred Stock Award (DSA)(4)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

12,134

 

 

 

   

 

1,239,973  

 

 

 

 

  Ronald P. O’Hanley

 

 

2018 Annual Incentive

 

     

 

   —  

 

 

 

   

 

3,400,000

 

 

 

   

 

6,800,000

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—    

 

 

 

 

Performance-Based RSU(3)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

14,917

 

 

 

   

 

29,834

 

 

 

   

 

44,751

 

 

 

   

 

—  

 

 

 

   

 

3,020,991  

 

 

 

 

Deferred Stock Award (DSA)(4)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

19,708

 

 

 

   

 

2,013,961  

 

 

 

 

  Jeff D. Conway

 

 

2018 Annual Incentive

 

           

 

   —  

 

 

 

   

 

1,336,667

 

 

 

   

 

2,673,334

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—    

 

 

 

 

Performance-Based RSU(3)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

7,441

 

 

 

   

 

14,881

 

 

 

   

 

22,322

 

 

 

   

 

—  

 

 

 

   

 

1,444,201  

 

 

 

 

Deferred Stock Award (DSA)(4)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

4,422

 

 

 

   

 

429,155  

 

 

 

 

Deferred Stock Award (DSA)(4)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

3,759

 

 

 

   

 

401,536  

 

 

 

   

Performance-Based RSU(5)

 

   

 

7/18/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

11,055

 

 

 

   

 

22,109

 

 

 

   

 

33,164

 

 

 

   

 

—  

 

 

 

   

 

1,999,980  

 

 

 

 

  Karen C. Keenan

 

 

2018 Annual Incentive

 

         —         1,500,000       3,000,000       —         —         —         —         —      
 

Performance-Based RSU(3)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

7,036

 

 

 

   

 

14,072

 

 

 

   

 

21,108

 

 

 

   

 

—  

 

 

 

   

 

1,424,931  

 

 

 

 

Performance-Based RSU(5)

 

   

 

2/26/2018

 

 

 

   

 

   —  

 

 

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

9,876

 

 

 

   

 

19,751

 

 

 

   

 

29,627

 

 

 

   

 

—  

 

 

 

   

 

1,999,986&nbs