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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

Filed by the Registrant x  Filed by a Party other than the Registrant ¨

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¨	Preliminary Proxy Statement

 

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

 

x	Definitive Proxy Statement

 

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¨	Soliciting Material Pursuant to §240.14a-12

Prudential Financial, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

  

 

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2016 PROXY STATEMENT PRUDENTIAL FINANCIAL, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 10, 2016

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PRUDENTIAL’S SHAREHOLDER ENGAGEMENT PRACTICE Prudential’s shareholder engagement strategy is built on its commitment to create an open, candid, and interactive communication with our investors. Our company’s year round investor outreach ensures that management and the Board understand and consider the issues that are important to our shareowners.

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		Prudential Financial, Inc. 751 Broad Street, Newark, NJ 07102

 

 

March 22, 2016

Letter from the Board of Directors

to Our Shareholders

As the stewards of your Company, we continuously focus on achieving consistent performance over the long-term and creating value for our shareholders through prudent risk management, talent development, succession planning and a strong ethical culture. We are pleased to share our progress and perspectives regarding actions that we took for our shareholders in 2015.

BOARD RISK OVERSIGHT

The Board sets standards for managing risk and monitoring the management of those risks within the Company. The Risk Committee, which was developed in 2015, oversees the Company’s risk profile. The committee is comprised of the chairs of each of the other Board committees, which enables the directors to more closely coordinate the Board’s risk oversight function. The Risk Committee has metrics in place to monitor and review market, insurance, investment, and operational risk. Cybersecurity is also a critical priority for the entire Company. The Board routinely receives information regarding Prudential’s information technology systems and dedicates time in the board agenda for a discussion of cybersecurity and other important risk issues.

TALENT DEVELOPMENT AND SUCCESSION PLANNING

A diverse and inclusive mindset permeates every aspect of Prudential’s culture and way of doing business. We frequently discuss key talent indicators with management, engage in detailed succession planning and meet with potential future leaders within the Company. Our oversight ensures that Prudential fosters an employee community possessing a broad and diverse range of skills and perspectives to meet the needs of a growing multicultural market.

The Board is committed to a rigorous and comprehensive self-evaluation process. As part of this effort, our directors review and measure the Board’s performance, including areas where the Board believes it is functioning effectively, and importantly, areas where the Board believes it can improve.

In evaluating potential Board candidates, we highly value integrity, depth and breadth of experience, and diversity. Our directors represent diverse viewpoints, with a wide array of experiences, professions, skills and backgrounds. These qualities enable the Board to best fulfill its responsibilities for the long-term interests of our shareholders.

ENGAGEMENT OUTREACH

Continuous and transparent communication with our shareholders helps the Board and our senior management team gain useful feedback on a wide range of topics, including governance, compensation, Board composition and the Company’s operational performance. This information serves as the foundation for our policies and informs our business strategy.

Accountability to shareholders is not only a mark of good governance, but an important component of Prudential’s success. In 2015, we spent a great deal of time talking with shareholders about an array of issues, including proxy access. In the course of these discussions, we learned that many investors consider proxy access an important shareholder tool that should only be used sparingly in a last-resort situation. Based on this feedback, in March 2015, we adopted a proxy access policy. We believe that it complements our existing practices and further strengthens Prudential’s governance standards.

 

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		Letter from the Board of Directors

 

 

FOSTERING A STRONG ETHICAL CULTURE

The Board collaborates with management to establish and communicate the right ethical tone which guides our conduct and helps protect the Company’s reputation. Our commitment to strong ethical values and doing business the right way is reflected in the naming of Prudential as a 2015 World’s Most Ethical Company^® by the Ethisphere Institute. This recognition is bestowed only on organizations that demonstrate a culture of ethics and transparency at every level.

COMMUNITY COMMITMENT

In July 2015, the opening of Prudential’s office tower in Newark was the highlight of our Company’s 140^th anniversary. The tower’s grand opening also marked the launch of “20 Stories of Strength,” a campaign to celebrate the new building and commemorate the long history that Prudential shares with the city of Newark.

Prudential also invested $150 million in revitalization projects surrounding the new building as part of our Company’s reaffirmation of its commitment to Newark and a symbol of the bright future that lies ahead for the city and our Company.

YOUR VIEWPOINT IS IMPORTANT

We value your support, and we encourage you to share your opinions, suggestions, interests and concerns with us. You can do so by writing to us at the address below. You can also send an email to the independent directors at independentdirectors@ prudential.com or provide feedback on executive compensation via our website at www.prudential.com/executivecomp.

If you would like to write to us, you may do so by addressing your correspondence to Prudential Financial, Inc., Board of Directors, c/o Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, 751 Broad Street, 21st Floor, Newark, NJ 07102.

The Board of Directors of Prudential Financial, Inc.

 

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Dear Fellow Shareholders:

You are invited to the Annual Meeting of Shareholders on May 10, 2016, at 751 Broad Street, Newark, NJ, at 2:00 p.m. We hope that you will attend the meeting, but whether or not you attend, please designate the proxies on the proxy card to vote your shares.

We are excited that shareholder voting has increased each year and are again offering a voting incentive to registered shareholders. Because of your active participation, we have planted more than 645,000 trees through the incentive initiative.

Every shareholder’s vote is important. Thank you for your commitment to the Company and please vote your shares.

Sincerely,

 

 

John R. Strangfeld

Chairman and Chief Executive Officer

Prudential Financial, Inc.

751 Broad Street

Newark, NJ 07102

 

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Notice of Annual Meeting of Shareholders of

Prudential Financial, Inc.

 

Place: Prudential’s Corporate Headquarters 751 Broad Street Newark, NJ 07102 Date: May 10, 2016   Time: 2:00 p.m.				AGENDA:   •     Election of 13 directors named in the proxy statement;   •     Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2016;   •     Advisory vote to approve named executive officer compensation;   •     Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan;   •     Shareholder proposal regarding an independent Board Chairman, if properly presented at the meeting; and   •     Shareholders also will act on such other business as may properly come before the meeting or any adjournment or postponement thereof.
				Record date: You can vote if you were a shareholder of record on March 11, 2016.   If you are attending the meeting, you will be asked to present your admission ticket and valid, government-issued photo identification, such as a driver’s license, as described in the Proxy Statement.   By Order of the Board of Directors,     Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary   March 22, 2016   Prudential Financial, Inc. 751 Broad Street Newark, NJ 07102

 

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Summary Information

To assist you in reviewing the proposals to be acted upon at the Annual Meeting, we call your attention to the following information about the Company’s 2015 financial performance and key executive compensation actions and decisions, and corporate governance highlights. The following description is only a summary. For more complete information about these topics, please review the Company’s Annual Report on Form 10-K and this Proxy Statement.

Business⁽¹⁾

 

We reported after-tax adjusted operating income of $4.65 billion and earnings per share of Common Stock of $10.04 for 2015, compared to $4.36 billion and $9.21 per share of Common Stock for 2014. 2014 results were negatively impacted by market related and actuarial assumption updates while these items had a positive impact on 2015 results.(2)(3)
We reported book value, excluding accumulated other comprehensive income and the impact of foreign currency exchange rate remeasurement on net income or loss, of $73.59 per share of Common Stock as of December 31, 2015, compared to $64.75 per share as of year-end 2014. This increase included $1.35 from the restructuring of the Company’s former Closed Block Business. Based on U.S. generally accepted accounting principles (“GAAP”) as of December 31, 2015, we reported book value of $92.39 per share of Common Stock, compared to $88.80 per share as of year-end 2014.

We reported operating return on average equity based on after-tax adjusted operating income of 14.5% for 2015 compared to 14.8% for 2014, exceeding our long-term target of 13-14% in each year.(4)

 

(1)	Amounts attributable to Prudential Financial, Inc. (PFI); represents results of the Company’s former Financial Services Businesses for 2014.

(2)

Adjusted Operating Income (“AOI”) and earnings per share (“EPS”) are defined in the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement. We use EPS and return on equity (“ROE”), which are based on AOI, and book value excluding accumulated other comprehensive income and the impact of foreign currency exchange rate measurement on net income or loss as performance measures in our incentive compensation programs.

(3)

AOI is a non-GAAP measure of performance. For a description of how we calculate pre-tax AOI and for a reconciliation of pre-tax AOI to the nearest comparable GAAP measure, see the notes to the consolidated financial statements included in the Annual Report to Shareholders, which can be found on our website at www.prudential.com/governance. After-tax AOI is adjusted operating income before taxes, less the income tax effect applicable to pre-tax AOI, as publicly disclosed in our Quarterly Financial Supplements, also available on our website.

(4)	Excludes impact on attributed equity of accumulated other comprehensive income and foreign currency exchange rate remeasurement included in net income or loss.

 

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		Summary Information

 

 

The compensation of our NEOs reflects both our 2015 performance and the rigor of our executive compensation program.

 

Named Executive Officer		2015 Base Salary ($)				2015 Annual Incentive Award (as adjusted for mandatory deferrals)(1) ($)				2015 Long-Term Incentive Award Value(2) ($)				2015 Total Direct Compensation ($)
John R. Strangfeld		$	1,400,000			$	4,140,500			$	11,774,500			$	17,315,000
Robert M. Falzon		$	700,000			$	1,820,000			$	4,780,000			$	7,300,000
Mark B. Grier		$	1,190,000			$	3,570,000			$	9,530,000			$	14,290,000
Charles F. Lowrey		$	770,000			$	2,975,000			$	6,025,000			$	9,770,000
Stephen Pelletier		$	770,000			$	2,240,000			$	5,460,000			$	8,470,000

 

(1)

The following amounts are not included in the 2015 Annual Incentive Award column because they have been mandatorily deferred into the Book Value Performance Program: $1,774,500 for Mr. Strangfeld, $780,000 for Mr. Falzon, $1,530,000 for Mr. Grier, $1,275,000 for Mr. Lowrey, and $960,000 for Mr. Pelletier.

 

(2)	Represents long-term incentive awards granted in 2016 for 2015 performance. Amounts include portions of Annual Incentive Awards mandatorily deferred into the Book Value Performance Program.

Response to advisory vote and shareholder feedback

Approximately 82% of the votes cast at the 2015 Annual Meeting of Shareholders on the non-binding advisory vote on the compensation of our named executive officers were voted in support of our executive compensation program. Consistent with its strong commitment to engagement, communication, and transparency, the Compensation Committee continues to regularly receive feedback from investors and review our executive compensation program to ensure alignment between the interests of our senior executives and shareholders.

 

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		Summary Information

 

Corporate Governance Highlights

In 2015, we met with shareholders who hold a majority of our shares. During these meetings, shareholders were encouraged to identify potential Board candidates and share feedback on the Company, its governance practices and policies.

 

Boards of Directors and Committees

 

Name/Age		Independent		Director Since		Committee Membership				Other Public Boards
Thomas J. Baltimore Jr., 52		Yes		Oct. 2008		• Executive • Finance		• Investment (Chair) • Risk		2
Gilbert F. Casellas, 63		Yes		Jan. 2001		• Audit • Corporate Governance & Business Ethics (Chair)		• Executive • Risk		0
James G. Cullen, 73		Yes		Jan. 2001		• Finance		• Investment		4
Mark B. Grier, 63		No		Jan. 2008						0
Martina Hund-Mejean, 55		Yes		Oct. 2010		• Audit				0
Karl J. Krapek, 67		Yes		Jan. 2004		• Lead Independent Director (Since May 2014) • Compensation (Chair)		• Executive (Chair) • Risk (Chair)		1
Peter R. Lighte, 67		Yes		Mar. 2016		• Corporate Governance & Business Ethics		• Investment		0
George Paz, 60		Yes		Mar. 2016		• Audit				2
Sandra Pianalto, 61		Yes		Jul. 2015		• Corporate Governance & Business Ethics		• Finance		2
Christine A. Poon, 63		Yes		Sep. 2006		• Executive • Finance (Chair)		• Investment • Risk		3
Douglas A. Scovanner, 60		Yes		Nov. 2013		• Audit (Chair) • Executive		• Risk		0
John R. Strangfeld, 62		No		Jan. 2008		• Executive				0
Michael A. Todman, 58		Yes		Mar. 2016		• Compensation		• Finance		2

Annual Meeting Proposals

 

Proposal		Recommendation of Board
Election of Directors		FOR each of the nominees
Ratification of Auditors		FOR
Advisory vote to approve named executive officer compensation		FOR
Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan		FOR
Shareholder proposal regarding an independent Board Chairman		AGAINST

 

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Item 1–Election of Directors

Our Board of Directors has nominated 13 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each agreed to be named in this Proxy Statement and to serve if elected. All of the nominees are expected to attend the 2016 Annual Meeting. All 11 directors, then serving on the Board, attended the 2015 Annual Meeting.

Gordon Bethune and Constance Horner, both members of the Board, will have attained the age of 74 and will not stand for re-election. As a result, the Board will be reduced to 13 members immediately prior to the Annual Meeting.

We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause 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.

Director Criteria, Qualifications, Experience and Tenure

Prudential Financial is a financial services company that offers a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. The Corporate Governance and Business Ethics Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Committee reviews both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function. The Committee then compares those skills to the skills of the current directors and potential director candidates. The Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process, keeping in mind its commitment to diversity.

BOARD HIGHLIGHTS

 

 

 

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		Item 1—Election of Directors: Director Nominees

 

 

 

It is of critical importance to the Company that the Committee recruit directors who help achieve the goal of a well-rounded, diverse Board that functions collegially as a unit.

The Committee expects each of the Company’s directors to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for nomination to the Board, the Committee considers each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include attendance, past performance on the Board and contributions to the Board and their respective committees.

 

Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that covers the assessment for the full Board.

Director Nominees

 

 

		Thomas J. Baltimore, Jr.   Age: 52 Director Since: October 2008		Prudential Committees:   •   Executive   •  Finance   •   Investment (Chair)   •  Risk   Former Directorships Held During the Past Five Years:   •   Integra Life Sciences Corporation (August 2012)		Public Directorships:   •   RLJ Lodging Trust   •  Duke Realty Corporation

 

 

 

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		Gilbert F. Casellas   Age: 63 Director Since: January 2001 (Director of Prudential Insurance since April 1998)		Prudential Committees:   •   Audit   •  Corporate Governance and Business Ethics (Chair)   •   Executive   •  Risk

 

 

		James G. Cullen   Age: 73 Director Since: January 2001 (Director of Prudential Insurance since April 1994)		Prudential Committees:   •     Finance •    Investment       Former Directorships Held During the Past Five Years:   •     Johnson & Johnson (April 2015)		Public Directorships:   •     Agilent Technologies, Inc. (Non-Executive Chairman) •     Avinger Inc. •    Keysight Technologies •    NeuStar, Inc. (Non-Executive Chairman)

 

 

		Mark B. Grier   Age: 63 Director Since: January 2008		Prudential Committees:   •     None

 

 

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		Martina Hund-Mejean   Age: 55 Director Since: October 2010		Prudential Committees:   •     Audit

 

 

		Karl J.  Krapek   Age: 67 Director Since: January 2004 Lead Independent Director since May 2014		Prudential Committees:   •     Compensation (Chair)   •    Executive (Chair)   •     Risk (Chair)     Former Directorships Held During the Past Five Years:   •     Visteon Corporation (June 2012) •     The Connecticut Bank & Trust Company (April 2012)		Public Directorships:   •     Northrop Grumman Corporation

 

 

		Peter R. Lighte   Age: 67 Director Since: March 2016		Prudential Committees:   •     Corporate Governance and Business Ethics •     Investment

 

 

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		George Paz   Age: 60 Director Since: March 2016		Prudential Committees:   •     Audit		Public Directorships:   •     Express Scripts Holding Company   •    Honeywell International Inc.

 

 

		Sandra Pianalto   Age: 61 Director Since: July 2015		Prudential Committees:   •     Corporate Governance and Business Ethics   •    Finance		Public Directorships:   •     Eaton Corporation plc   •    The J.M. Smucker Company

 

 

		Christine A. Poon   Age: 63 Director Since: September 2006		Prudential Committees:   •     Executive   •    Finance (Chair)   •     Investment   •    Risk		Public Directorships:   •     Koninklijke Philips Electronics NV   •    Regeneron Pharmaceuticals   •     The Sherwin-Williams Company

 

 

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		Douglas A. Scovanner   Age: 60 Director Since: November 2013		Prudential Committees:   •     Audit (Chair)   •    Executive   •     Risk

 

 

		John R. Strangfeld   Age: 62 Director Since: January 2008 (Elected Chairman May 2008)		Prudential Committees:   •     Executive

 

 

		Michael A. Todman   Age: 58 Director Since: March 2016		Prudential Committees:   •   Compensation   •  Finance		Public Directorships:   •     Brown-Forman Corporation   •    Newell Rubbermaid, Inc.

 

 

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Corporate Governance

The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by a Board of Directors and committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and committee meetings and also through other communications with management.

The Board has adopted Corporate Governance Principles and Practices to provide a framework for the effective governance of the Company. The Corporate Governance Principles and Practices are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Principles and Practices, which includes the definition of independence adopted by the Board, the charters of the Corporate Governance and Business Ethics, Compensation and Audit Committees, the Lead Independent Director Charter, the Code of Business Conduct and Ethics and the Related Party Transaction Approval Policy can be found at www.prudential.com/governance. Copies of these documents also may be obtained from the Chief Governance Officer and Corporate Secretary.

Governance is a continuing focus at the Company, starting with the Board and extending to management and all employees. Therefore, the Board reviews the Company’s policies and business strategies and advises and counsels the CEO and the other executive officers who manage the Company’s businesses, including reviewing, on at least an annual basis, the Company’s strategic plans.

In addition, we solicit feedback from shareholders on governance and executive compensation practices and engage in discussions with various groups and individuals on governance issues and improvements.

Process for Selecting Directors

The Corporate Governance and Business Ethics Committee screens candidates and recommends candidates for nomination by the full Board. The Company’s By-laws provide that the size of the Board may range from 10 to 24 members. The Board’s current view is that the optimal size is between 10 and 15 members. Pursuant to succession planning, the Board has recently added four directors who were recommended by an independent third-party search firm. The Committee was assisted with its recruitment efforts by such firm, which recommended candidates that satisfied the Board’s criteria. The search firm also provided research and pertinent information regarding candidates, as requested.

Shareholder Nominations and Recommendations of Director Candidates

We amended our By-laws in March 2015 to permit a group of up to 20 shareholders who have owned at least 3% of our outstanding capital stock for at least three years to submit director nominees for up to 20% of the Board for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in our By-laws.

Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in our By-laws should follow the instructions under “Submission of Shareholder Proposals and Director Nominations” in this Proxy Statement.

Shareholders who wish to recommend candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director selection described under “Director Criteria, Qualifications, Experience and Tenure.”

 

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		Corporate Governance

 

 

 

 

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Letter from the Lead Independent Director

As your Lead Independent Director, it is a privilege to serve our shareholders with my fellow Board members. Prudential’s leading governance policies play a prominent role within our organization by helping us compete more effectively, achieve success, and build sustainable value for our shareholders.

The Board’s Strategic Oversight Role

Through the depth and diversity of our directors’ experience and expertise, our Board brings a thorough understanding of the Company’s businesses, and their underlying economics, competitive dynamics and other external factors, to its oversight role. Throughout the year, our directors are actively engaged in dialogue with Prudential’s senior business leaders. The Board approaches these discussions with an owner’s long-term mind-set and a focus on assessing new opportunities while also identifying potential forces that may adversely impact the Company.

Board Refreshment and Succession Planning

Our commitment to Board refreshment and succession planning is at the core of our ability to maintain our independence of thought and action. We undertake serious and deliberate consideration when evaluating our current directors’ skills and expertise. For prospective Board candidates, we seek individuals with skills that are complementary to our industry, the regulatory environment, and the company’s risk profile. As part of our Board succession planning, between July 2015 and February 2016 we elected four new directors, each with skills and experiences that will provide significant value to the Board, management and shareholders.

Committee Rotation

We routinely refresh our committees as a way to strengthen our members’ awareness of the issues, broaden their perspectives, and diversify each committee’s expertise. In 2015, we elected new chairs of our Audit and Corporate Governance and Business Ethics Committees.

Shareholder Engagement

Addressing the interests of our Company’s shareholders is another prominent focus for the Board. This year, the Board had the opportunity to engage with shareholders who held a majority of our shares, both individually and in a group setting, to discuss a number of important topics. We appreciate the honest feedback, the open exchange of ideas, and the opportunity to learn from one another. As a Board, we welcome and value dialogue with all of our stakeholders, and we work to reflect their recommendations in our practices and policies.

The Board remains committed to helping Prudential serve our customers, deliver excellent operating results and create attractive returns for our shareholders.

I encourage you to watch a short video I prepared that provides our investors with additional perspective on the Board. You can access the video from the Corporate Governance section of our website at www.prudential.com/leadindependentdirector. We see this video as an important component of our shareholder engagement initiative.

On behalf of the entire Board, thank you for your support and vote of confidence.

 

				Karl J. Krapek Lead Independent Director

 

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		Corporate Governance

 

 

Board Risk Oversight

The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. In general, the committees oversee the following risks:

 

•

Audit Committee: risks related to financial controls, legal, regulatory and compliance issues, and the overall risk management governance structure and risk management function;

 

•

Finance Committee: risks related to capital and liquidity management, incurrence and repayment of borrowings, the capital structure of the enterprise, funding of benefit plans, and the levels of insurance reserves and policyholder dividends;

 

•

Investment Committee: investment risk, and the strength of the investment function;

 

•

Compensation Committee: the design and operation of the Company’s compensation programs so that they do not encourage unnecessary or excessive risk-taking;

 

•

Corporate Governance and Business Ethics Committee: the Company’s political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental, sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability; and

 

•

Risk Committee: the governance of significant risks throughout the Company, monitors its overall risk profile, and coordinates the risk oversight functions of the other Board committees.

In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, committees hold joint meetings when appropriate and address certain issues at the full Board level. During 2015, the full Board received a report from the Chief Risk Officer on the important strategic issues and risks facing the Company. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function.

In 2015, the Board also established a Risk Committee, comprised of the chairs of each of the other Board committees. The principal activities of the Risk Committee are to: oversee the Company’s assessment and reporting of material risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for risk assessment and risk management, including the related assumptions used across the Company’s businesses and material risk types; and receive reports from management on material and emerging risk topics that are reviewed by the Company’s internal management committees.

The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businesses to separate management and oversight. Employee appraisals evaluate employees with respect to risk and ethics.

We monitor the risks associated with our executive compensation program and individual compensation decisions on an ongoing basis. Each year management undertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking.

Moreover, senior management is subject to a share retention policy, and historically a large percentage of senior management compensation has been paid in the form of long-term equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk to earn the incentives provided under our compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage, and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

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		Corporate Governance

 

 

Succession Planning

The Board is actively engaged and involved in talent management. The Board reviews the Company’s “people strategy” in support of its business strategy at least annually. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer level.

In addition, the committees of the Board regularly discuss the talent pipeline for specific critical roles. High potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.

Communication with Directors

Shareholders and other interested parties may communicate with any of the independent directors, including Committee Chairs and the Lead Independent Director, by using the following address:

Prudential Financial, Inc.

Board of Directors

c/o Margaret M. Foran, Chief Governance Officer,

Senior Vice President and Corporate Secretary

751 Broad Street

Newark, NJ 07102

Email: independentdirectors@ prudential.com

Feedback on Executive Compensation: You can also provide feedback on executive compensation at the following website: www.prudential.com/executivecomp.

The Chief Governance Officer and Corporate Secretary of the Company reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Corporate Chief Ethics Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or other job-related inquiries; spam and overly hostile, threatening, potentially illegal or similarly unsuitable communications.

 

 

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		Corporate Governance

 

 

Committees of the Board of Directors

The Board has established various committees to assist in discharging its duties, including: Audit, Compensation, Corporate Governance and Business Ethics, Executive, Finance, Investment and Risk. The primary responsibilities of each of the committees are set forth below, together with their current membership and number of meetings. Committee charters can be found on our website at www.prudential.com/governance. Each member of the Audit, Compensation, and Corporate Governance and Business Ethics Committees has been determined by the Board to be independent for purposes of the NYSE Corporate Governance listing standards.

Audit Committee

The Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Company’s financial statements. The Audit Committee oversees risks related to financial controls and legal, regulatory and compliance matters, and oversees the overall risk management governance structure and risk management function. Among other things, the Audit Committee: (1) appoints the independent auditor and evaluates its independence and performance; (2) reviews the audit plans for and results of the independent audit and internal audits; and (3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements. The Board of Directors has determined that all of our Audit Committee members, Ms. Hund-Mejean, Messrs. Casellas, Paz, and Scovanner, are financially literate and are audit committee financial experts as defined by the SEC. The Audit Committee met 11 times in 2015.

Compensation Committee

The Compensation Committee oversees the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the CD&A. The Compensation Committee met six times in 2015.

Corporate Governance and Business Ethics Committee

The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding environmental stewardship and sustainability responsibility throughout the Company’s global businesses. The Corporate Governance and Business Ethics Committee met seven times in 2015.

Executive Committee

The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board by our By-laws or otherwise. The Executive Committee did not meet in 2015.

Finance Committee

The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, subsidiary structure and major capital expenditures. The Finance Committee met seven times in 2015.

Investment Committee

The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties. The Investment Committee met four times in 2015.

Risk Committee

The Risk Committee oversees the governance of significant risks throughout the enterprise, including by coordinating the risk oversight functions of each Board committee and seeing that matters are appropriately elevated to the Board. The Risk Committee met six times in 2015.

 

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		Corporate Governance

 

 

 

Certain Relationships and Related Party Transactions

The Company has adopted a written Related Party Transaction Approval Policy that applies:

 

•

to any transaction or series of transactions in which the Company or a subsidiary is a participant;

 

•

when the amount involved exceeds $120,000; and

 

•

when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest (other than solely as a result of being a director or trustee or in any similar position or a less than 10 percent beneficial owner of another entity).

The policy is administered by the Corporate Governance and Business Ethics Committee. The Committee will consider relevant facts and circumstances in determining whether or not to approve or ratify such a transaction, and will approve or ratify only those transactions that are, in the Committee’s judgment, appropriate or desirable under the circumstances.

In the ordinary course of business, we may from time to time engage in transactions with other corporations or financial institutions whose officers or directors are also Directors of Prudential Financial. In all cases, these transactions are conducted on an arm’s-length basis. In addition, from time to time executive officers and directors of Prudential Financial may engage in transactions in the ordinary course of business involving services we offer, such as insurance and investment services, on terms similar to those extended to employees of Prudential Financial and its subsidiaries and affiliates generally. The Corporate Governance and Business Ethics Committee has determined that certain types of transactions do not create or involve a direct or indirect material interest, including (i) any sales of financial services or products to a related party in the ordinary course of business on terms and conditions generally available in the market place (or at ordinary employee discounts, if applicable) and in accordance with applicable law and (ii) all business relationships between the Company and a 5% shareholder or a business affiliated with a director, director nominee or immediate family member of a director or director nominee made in the ordinary course of business on terms and conditions generally available in the market place and in accordance with applicable law.

Pursuant to our policy, the Corporate Governance and Business Ethics Committee determined that there were two transactions that qualified as related party transactions since the beginning of 2015. The brother of Robert Falzon, our Executive Vice President and Chief Financial Officer, Michael Falzon, is a Vice President for Infrastructure Systems Development. In 2015, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was approximately $440,000. The son-in-law of Barbara Koster, our Senior Vice President and Chief Information Officer, Joshua D. Howard, is an associate in Quantitative Management Associates, a subsidiary of the Company. In 2015, the total compensation paid to Mr. Howard, including salary and bonus, was approximately $130,000. In both cases the compensation is similar to the compensation of other employees holding equivalent positions. Neither individual is in the reporting chain of the executive officer.

 

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		Corporate Governance

 

 

 

Policy on Shareholder Rights Plan

We do not have a shareholder rights plan. The Board will obtain shareholder approval prior to adopting a future shareholder rights plan unless the Board, in the exercise of its fiduciary duties, determines that under the circumstances then existing, it would be in the best interests of the Company and our shareholders to adopt a rights plan without prior shareholder approval. If a rights plan is adopted by the Board without prior shareholder approval, the plan must provide that it will expire within one year of adoption unless ratified by shareholders.

Political Contributions and Lobbying Expenditure Oversight and Disclosure

The Corporate Governance and Business Ethics Committee reviews and approves an annual report on political activities, contributions and lobbying expenses. It monitors and evaluates the Company’s ongoing political strategy as it relates to overall public policy objectives for the next year and provides guidance to the Board. We provide on our website a description of our oversight process for political contributions and a summary of PAC contributions. We also include information on annual dues, assessments and contributions of $25,000 or more to trade associations and tax-exempt advocacy groups and a summary of Company policies and procedures for political activity. This disclosure is available at www.prudential.com/governance under the heading “Political Activity & Contributions.” Prudential received a top-five ranking in the 2015 CPA-Zicklin Index of Corporate Political Disclosure and Accountability.

 

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		Corporate Governance: Good Governance Practices

 

 

Environmental, Sustainability and Corporate Social Responsibility

The Corporate Governance and Business Ethics Committee has oversight of environmental issues and policies. In addition, three of our Board members sit on the Community Resources Oversight Committee, which oversees Prudential’s corporate social responsibility work. These directors inform the Company’s social responsibility efforts in strategic philanthropy, employee engagement, corporate community involvement and investing for social return.

 

 

 

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Item 2–Ratification of the Appointment of the

Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers” or “PwC”) as the Company’s independent registered public accounting firm (independent auditor) for 2016. We are not required to have the shareholders ratify the selection of PricewaterhouseCoopers as our independent auditor. We nonetheless are doing so because we believe it is a matter of good corporate practice.

If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers, but may nevertheless retain it as the Company’s independent auditor. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of Prudential Financial and its shareholders. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions by shareholders.

FEES PAID TO PRICEWATERHOUSECOOPERS LLP

The following is a summary and description of fees for services provided by PricewaterhouseCoopers in 2015 and 2014.

Worldwide Fees (In Millions)

 

Service		2015				2014
Audit(A)		$	50			$	47
Audit-Related(B)		$	4			$	4
Tax(C)		$	2			$	2
All Other			—				—
Total		$	56			$	53

 

(A)

The aggregate fees for professional services rendered for the integrated audit of the consolidated financial statements of Prudential Financial and, as required, audits of various domestic and international subsidiaries, the issuance of comfort letters, agreed-upon procedures required by regulation, consents and assistance with review of documents filed with the SEC.

 

(B)	The aggregate fees for assurance and related services including internal control and financial compliance reports, agreed-upon procedures not required by regulation, and accounting consultation on new accounting standards, acquisitions and potential financial reporting requirements.

 

(C)

The aggregate fees for services rendered by PricewaterhouseCoopers’ tax department for tax return preparation, tax advice related to mergers and acquisitions and other international, federal and state projects, and requests for rulings. In 2015, tax compliance and preparation fees totaled $1.6M and tax advisory fees totaled $0.5M, and in 2014, tax compliance and preparation fees totaled $1.7M and tax advisory fees totaled $0.6M.

PricewaterhouseCoopers also provides services to domestic and international mutual funds and limited partnerships not consolidated by Prudential Financial, but which are managed by Prudential Financial. PricewaterhouseCoopers identified fees related to audit and tax services paid by these entities of $14M in 2015 and $14M in 2014.

The Audit Committee has advised the Board of Directors that in its opinion the non-audit services rendered by PricewaterhouseCoopers during the most recent fiscal year are compatible with maintaining their independence.

PwC has been the Company’s independent auditor since 2001.

 

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		Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

 

 

In accordance with the Securities Exchange Act of 1934, as amended, independent audit partners are subject to rotation requirements limiting their number of consecutive years of service to our Company to no more than five. The process for selecting the Company’s lead audit partner includes Company management and the Audit Committee Chairman vetting the independent auditor’s candidates, and final concurrence on the individual is done in consultation with the full Committee.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the independent auditor. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the independent auditor’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the general pre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis. The policy requires specific pre-approval of all other permitted services. The independent auditor is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its Chairman the authority to address requests for pre-approval of services with fees up to a maximum of $250,000 between Audit Committee meetings if the Chief Auditor deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee, and the Chairman must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the independent auditor.

All Audit, Audit-Related, Tax and All Other services described above were approved by the Audit Committee before services were rendered.

 

 

 

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		Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

 

REPORT OF THE AUDIT COMMITTEE

Four non-management directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board. The Board has determined that each member of the Committee has no material relationship with the Company under the Board’s independence standards and that each is independent and financially literate under the listing standards of the NYSE and under the SEC’s standards relating to independence of audit committees.

In addition, the Board of Directors has determined that all of our Audit Committee members, Messrs. Casellas, Paz and Scovanner and Ms. Hund-Mejean, satisfy the financial expertise requirements of the NYSE and have the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC.

Management is responsible for the preparation, presentation and integrity of the financial statements of Prudential Financial and for maintaining appropriate accounting and financial reporting policies and practices, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Prudential Financial’s independent registered public accounting firm (independent auditor), PricewaterhouseCoopers, is responsible for auditing the consolidated financial statements of Prudential Financial and expressing an opinion as to their conformity with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (“PCAOB”).

In performing its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements of Prudential Financial as of and for the year ended December 31, 2015 and Management’s Annual Report on Internal Control Over Financial Reporting with management and Prudential Financial’s independent auditor. The Audit Committee also discussed with Prudential Financial’s independent auditor the matters required to be discussed by the independent auditor with the Audit Committee under the rules adopted by the PCAOB.

The Audit Committee received from the independent auditor the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence, and has discussed with the independent auditor its independence.

The Audit Committee has discussed with, and received regular status reports from, Prudential Financial’s Chief Auditor and independent auditor on the overall scope and plans for their audits of Prudential Financial, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. The Audit Committee meets with the Chief Auditor and the independent auditor, with and without management present, to discuss the results of their respective audits, in addition to private meetings with the Chief Financial Officer, Chief Risk Officer, General Counsel, Chief Actuary and Chief Compliance Officer. In determining whether to reappoint PricewaterhouseCoopers as Prudential Financial’s independent auditor, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the firm’s independence and objectivity, PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the Lead Audit Partner, historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, and the results of a management survey of PwC’s overall performance, data related to audit quality and performance, including recent PCAOB inspection reports on the firm, and the appropriateness of PwC’s fee, both on an absolute basis and as compared with its peers.

In addition, the Audit Committee reviewed and amended its Charter and received reports as required by its policy for the receipt, retention and treatment of financial reporting concerns received from external and internal sources.

Based on the reports and discussions described in this report and subject to the limitations on the roles and responsibilities of the Audit Committee referred to above and in its Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of Prudential Financial and Management’s Annual Report on Internal Control Over Financial Reporting be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 for filing with the SEC.

THE AUDIT COMMITTEE

Douglas A. Scovanner (Chairman)

Gilbert F. Casellas

Martina Hund-Mejean

George Paz*

 

*	Mr. Paz was elected to the Audit Committee effective March 9, 2016.

 

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Item 3–Advisory Vote to Approve

Named Executive Officer Compensation

The Board is committed to excellence in governance and recognizes the interest our shareholders have in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are being asked to approve a non-binding advisory resolution on the compensation of our named executive officers, as reported in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our 2015 executive compensation program and policies for our named executive officers through the following resolution:

RESOLVED, that the shareholders of Prudential approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement.

This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and practices relating to the named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our named executive officers. Because your vote is advisory, it will not be binding upon the Board. The Board will, however, as it has done in prior years, take into account the outcome of the “Say on Pay” vote when considering future compensation arrangements.

The Board has adopted a policy providing for annual “Say on Pay” advisory votes. Accordingly, the next “Say on Pay” vote will occur in 2017.

 

 

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Item 4–Approval of the Prudential Financial, Inc.

2016 Omnibus Incentive Plan

We currently maintain our Omnibus Incentive Plan (the “Omnibus Plan” or “2003 Omnibus Plan”) and our Deferred Compensation Plan for Non-Employee Directors (the “Director Plan”), which have not had additional share authorizations since they were approved by shareholders in 2003. Accordingly, the number of shares remaining available under the Omnibus Plan and the Director Plan may be insufficient to meet the Company’s compensation goals in the coming years. To ensure that the Company has an adequate number of shares available for compensation to its directors, employees and agents, we are asking our shareholders to approve the Prudential Financial, Inc. 2016 Omnibus Incentive Plan (the “2016 Omnibus Plan”). The 2016 Omnibus Plan will increase the number of shares of Common Stock available for issuance to eligible directors, employees and agents by 23,000,000 shares.

This approval will also act as shareholder approval of the material terms of the performance goals for which performance-based compensation is to be paid under the 2016 Omnibus Plan to obtain the deduction available under Section 162(m) of the Internal Revenue Code for performance-based compensation (as described below).

The Board approved the 2016 Omnibus Plan, subject to shareholder approval. The Board believes that stock-based compensation aligns the interests of recipients with those of shareholders, encourages decisions and rewards performance that contributes to the long-term growth of the Company’s business and enhances shareholder value. If shareholders decline to approve the 2016 Omnibus Plan, the Company will have less flexibility to provide competitive compensation, which will limit its ability to attract, motivate and retain the caliber of employees we believe is necessary to deliver sustained high performance to our shareholders and customers. The 2016 Omnibus Plan will be effective upon its approval by the shareholders of the Company at our Annual Meeting on May 10, 2016.

We will not grant any new awards under the 2003 Omnibus Plan after the effective date of the 2016 Omnibus Plan. However, we expect to continue to grant awards to our non-employee directors under the Director Plan if sufficient shares remain available.

The following table sets forth certain information about the Omnibus Plan and the Director Plan, and the increase in shares for the 2016 Omnibus Plan.

 

Number of outstanding Options as of February 29, 2016		11,912,935
Weighted average exercise price of the outstanding Options		$65.84
Weighted average remaining contractual term of the outstanding Options		5.19 years
Number of outstanding Restricted Units, as of February 29, 2016		5,158,896
Number of outstanding Performance Shares, as of February 29, 2016(1)		1,145,518
Shares Available Under the Omnibus Plan, as of February 29, 2016		2,858,408
Shares Available Under the Director Plan, as of February 29, 2016		53,159
Additional shares requested for approval pursuant to this Proposal		23,000,000
Estimated(2) total number of shares available for issuance under the 2016 Omnibus Plan		25,858,408

 

(1)	Represents the number of Performance Shares that would be received based on maximum performance.

(2)	As may be increased as a result of share withholding and forfeited awards granted under the Omnibus Plan or decreased due to new grants under the Omnibus Plan prior to the effective date of the 2016 Omnibus Plan.

Based on our current equity compensation practices and stock price, we expect the proposed share reserve will be sufficient to fund the Company’s equity compensation under the plan for the next four to five years.

Burn Rate and Dilution/Overhang

Two measures that our Compensation Committee has considered in assessing our equity grant practices are burn rate and dilution/overhang.

 

•

Burn Rate. Burn rate is a measure of share usage and it quantifies the rate at which a company is utilizing its share reserve by expressing the number of equity awards granted as a percentage of the weighted-average undiluted number of shares of Common Stock outstanding during the year. Burn rate typically does not take into account cancellations and other shares returned to the share reserve. Over the past three fiscal years, our annual burn rate with regard to our Omnibus Plan has averaged 0.79% (0.72% in 2015).

 

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		Item 4—Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan

 

 

 

•

Dilution/Overhang. Another measure used to quantify the cumulative impact of our equity compensation practices is a dilution analysis commonly referred to as “overhang.” Overhang is typically calculated as the number of shares related to outstanding equity awards, plus the number of shares available in the share reserve, divided by the fully diluted number of shares of Common Stock outstanding at the end of the year (i.e., outstanding shares and equity awards plus our remaining share reserve). Our overhang with regard to our Omnibus Plan as of December 31, 2015 was 5.22%. If the 2016 Omnibus Plan is approved, our overhang would increase to approximately 9.05% based on the number of shares of Common Stock outstanding on February 29, 2016. The potential dilution from the 2016 Omnibus Plan, expressed as the percentage obtained by dividing the estimated number of shares in the share reserve by the number of shares of Common Stock outstanding as of February 29, 2016, would be approximately 5.85%. Actual dilution from the 2016 Omnibus Plan may be lower because shares issued for awards other than Options and SARs reduce the share reserve by two shares for every one share issued.

Executive Officer Grants, Burn Rate and Dilution/Overhang for the Past Three Fiscal Years

 

		2015 (%)				2014 (%)				2013 (%)				Average (%)
Percentage of Equity Awards Granted to Executive Officers			21.44				22.38				22.36				22.06
Burn Rate			0.72				0.53				1.10				0.79
Dilution/Overhang			5.22				6.03				6.95				6.07

 

Key Terms of the 2016 Omnibus Plan

The following is a summary of provisions of the 2016 Omnibus Plan. Some of these provisions are described in greater detail below, and the summary and descriptions are qualified by reference to the complete text of the 2016 Omnibus Plan included in this Proxy Statement as Appendix A.

 

Purpose:		Foster and promote the long-term financial success of the Company and materially increase shareholder value by aligning the interests of shareholders and employees.
Eligible Participants:		Any individual who is a non-employee director of the Company or either an employee of, or an insurance agent (whether or not a common law employee or a full-time life insurance salesperson under the Internal Revenue Code (the “Code”)) of, the Company or any subsidiary. As of December 31, 2015, approximately 50,000 individuals would have been eligible to participate in the 2016 Omnibus Plan, including all of our non-employee directors and executive officers.
Award Types:		Options, SARs, Restricted Units, Restricted Stock, Dividend Equivalents, Performance Units, Performance Shares, and Annual Incentive Awards (each, an “Award”)
Share Reserve:		•   23,000,000 shares of Common Stock, plus: •   The number of shares available for awards under the Omnibus Plan as of the effective date of the 2016 Omnibus Plan, which is estimated to be 2,858,408 shares (based on grants and forfeitures through February 29, 2016, and as may be decreased or increased due to grants and forfeitures under the Omnibus Plan prior to the effective date of the 2016 Omnibus Plan).
Share Counting:		Shares issued in connection with Options and SARs are counted against the share reserve as one share for every one share issued; for Awards other than Options and SARs, any shares issued are counted against the share reserve as two shares for every one share issued.

 

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		Item 4—Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan

 

 

Share Recycling		Shares of Common Stock subject to an Award granted under the 2016 Omnibus Plan or the Omnibus Plan that are not issued because the Award expires or, is cancelled, terminated, forfeited or settled without issuance of Common Stock (including, but not limited to, shares tendered or withheld to exercise outstanding Options or SARs and shares tendered or withheld for taxes on Awards) will be added back to the share reserve (with specified exceptions after the tenth anniversary of the 2016 Omnibus Plan’s effective date).
Minimum Vesting		Options and SARs will have a vesting schedule of at least one year from the date of grant. (However, Options or SARs in respect of up to 5% of the share reserve may be granted without this requirement.)
Director Compensation Limit		The amount of cash and equity-based compensation to non-employee directors is limited to $600,000 in a compensation year, as measured based on the grant date value (for equity-based compensation).
Plan Expiration		Either (a) the date when no more shares of Common Stock are available for issuance under the 2016 Omnibus Plan, or, if earlier, (b) the date the Plan is terminated by the Board of Directors.

Administration

The Compensation Committee of the Board of Directors, or such other committee as the Board of Directors may designate (the “Committee”), will administer the 2016 Omnibus Plan with the authority to, among other things, interpret the 2016 Omnibus Plan, determine eligibility for, grant and determine the terms of Awards, and to do all things necessary or appropriate to carry out its provisions and purposes. The Committee may delegate to any member of the Board, employee or group of directors or employees any portion of its authority and powers with respect to Awards to participants who are not directors or executive officers. Only the Committee may exercise authority in respect of Awards granted to directors or executive officers.

The Committee may condition the grant of any Award on a recipient’s agreement not to compete, not to solicit the Company’s employees and customers and not to disclose confidential information, as well as compliance with clawback policies.

Shares Deliverable Under the Plan

The shares to be delivered under the 2016 Omnibus Plan may consist, in whole or in part, of Common Stock purchased by the Company for the purpose of granting Awards, treasury Common Stock or authorized but unissued Common Stock not reserved for any other purpose.

Compliance with Code Section 162(m)

The 2016 Omnibus Plan has various limits that apply to individual and aggregate Awards, designed in part to comply with the requirements of Code Section 162(m) governing the deductibility of compensation paid to executive officers of a publicly traded company. Among other requirements, Code Section 162(m) provides that to preserve deductibility, shareholders must approve the material terms of “performance-based compensation” for participants who are “covered employees” within the meaning of Code Section 162(m) (the “Covered Employees”), which terms include the eligible employees, the business criteria serving as the performance goal and the maximum amount payable (or the applicable formula).

For Annual Incentive Awards to Covered Employees, the performance condition and maximum limitation are that the amount payable to a Covered Employee in any year may not exceed four-tenths of one percent (0.4%) of Adjusted Operating Income for the fiscal year ended prior to the year in which payment is due.

For awards of Restricted Stock, Restricted Units, Performance Shares, Performance Units and associated Dividend Equivalents to Covered Employees, the performance condition is that Adjusted Operating Income must be positive in at least one fiscal year during which the Award is outstanding for at least 276 days of that year, and the maximum limitation is that the amount payable to a Covered Employees in any year may not exceed four-tenths of one percent (0.4%) of the highest amount of Adjusted Operating Income for any of the three fiscal years ended prior to the year payment on those Awards is due. For purposes of the 2016 Omnibus Plan, “Adjusted Operating Income” means the Company’s total pre-tax adjusted operating income as reported in our Quarterly Financial Supplement.

The number of Options and SARs that may be granted to any participant in the 2016 Omnibus Plan may not exceed an aggregate of 2,500,000 Options and SARs during any three-year period.

 

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Options

Options entitle the recipient to purchase shares of Common Stock at a specified exercise price. Options may be granted in the form of incentive stock options qualifying for special tax treatment under Code Section 422 (“ISOs”) and nonstatutory stock options (“Nonstatutory Options”). Options must be granted with an exercise price at least equal to the fair market value of a share of Common Stock on the date of grant, and generally may not be exercisable for more than 10 years after the date of grant. No Option that is intended to be an ISO may be granted after the tenth anniversary of the date the 2016 Omnibus Plan becomes effective. Unless the Committee otherwise determines, Options generally become exercisable in one-third increments on each of the first three anniversaries of the date of grant.

For purposes of the 2016 Omnibus Plan, “fair market value” generally means, on any given date, the price of the last trade, regular way, in the Common Stock on the date on the NYSE. If there are no trades on the relevant date, the “fair market value” for that date means the closing price on the immediately preceding date on which Common Stock transactions were reported.

The Committee does not have the power or authority to reduce the exercise price of outstanding Options, to grant new Options in substitution for or upon the cancellation of Options previously granted or to cash out outstanding Options for an amount greater than the spread between the fair market value and the exercise price, other than with shareholder approval, in connection with the assumption of awards upon a change of control or for certain adjustments in capitalization (as described below).

Stock Appreciation Rights

A SAR is a contractual right granted to the participant to receive, either in cash or Common Stock, an amount equal to the appreciation of one share of Common Stock from the date of grant. SARs may be granted as freestanding Awards, or in tandem with other types of grants. Unless the Committee otherwise determines, the terms and conditions applicable to (i) SARs granted in tandem with Options will be substantially identical to the terms and conditions applicable to the tandem Options, and (ii) freestanding SARs will be substantially identical to the terms and conditions that would have been applicable were the grant of the SARs a grant of Options. SARs that are granted in tandem with an Option may only be exercised upon surrender of the right to exercise the Option for an equivalent number of shares. The Committee may cap any SAR payable in cash.

Restricted Stock, Restricted Units and Dividend Equivalents

A share of Restricted Stock is a share of Common Stock that is subject to certain transfer restrictions and forfeiture provisions for a specified period of time. A Restricted Unit is an unfunded, unsecured right (which may be subject to forfeiture or transfer restrictions) to receive cash or a share of Common Stock at the end of a specified period of time. A Dividend Equivalent represents an unfunded and unsecured promise to pay an amount equal to all or any portion of the regular cash dividends that would be paid on a specified number of shares of Common Stock if such shares were owned by the Award recipient. Dividend Equivalents may be granted in connection with a grant of Restricted Units, Performance Shares or Performance Units valued by reference to a share of Common Stock. The Committee may, in its discretion, pay the value of Restricted Units and Dividend Equivalents in Common Stock, cash or a combination of both.

Unless otherwise determined by the Committee, the restrictions on Restricted Stock and Restricted Units will generally lapse on the third anniversary of the date of grant. Similarly, unless otherwise determined by the Committee, Dividend Equivalents paid with respect to Restricted Units, Performance Shares or Performance Units valued by reference to Common Stock will be determined based on the number of shares of Common Stock that become payable or that determine the value to be paid in respect of the Award taking into account, for the Performance Shares and Performance Units, the level of performance achieved.

Generally, a participant will, subject to specified restrictions and conditions, have all the rights of a shareholder with respect to shares of Restricted Stock, including but not limited to, the right to vote and the right to receive dividends. A participant will not have the rights of a shareholder with respect to Restricted Units or Dividend Equivalents.

Annual Incentive Awards

At the direction of the Committee, Awards with a performance cycle of one year or less may be made to participants and, unless determined otherwise by the Committee, shall be paid in cash based on achievement of specified performance goals.

 

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Performance Units

Performance Units are Awards of units, payable in cash or Common Stock. The number of units may be determined over a performance cycle based on the satisfaction of performance goals, and the value of Performance Units may correspond to the value of a specified number of shares of Common Stock or other property specified by the Committee, or may be a stated dollar value specified by the Committee.

Performance Shares

Performance Shares are Awards of units denominated in Common Stock. The number of the units may be determined over a performance cycle based on the satisfaction of performance goals. Performance Shares are payable in Common Stock.

Treatment of Awards on Termination of Employment

Under the 2016 Omnibus Plan, generally, unless the Committee determines otherwise as of the date of a grant of any Award or thereafter, Awards are treated as follows upon a participant’s termination of service, regardless of the Award’s otherwise applicable terms.

Resignation. If a participant voluntarily terminates service from the Company or any Affiliate:

 

•

Annual Incentive Awards: If the termination occurs before authorization of the payment of an Annual Incentive Award, the participant forfeits all rights to payment; and

 

•

All other Awards (including associated Dividend Equivalents): All other outstanding (and unexercised) Awards and associated Dividend Equivalents credited to the participant are forfeited.

Termination for Cause. If a participant’s service is terminated for “cause”:

 

•

Annual Incentive Awards: All rights to payment for Annual Incentive Awards are forfeited; and

 

•

All other Awards (including associated Dividend Equivalents): All other outstanding (and unexercised) Awards and associated Dividend Equivalents credited to the participant are forfeited, and the Committee may require that the participant disgorge any profit, gain or benefit from any Award exercised or paid to the participant up to 12 months prior to the participant’s termination.

For purposes of the 2016 Omnibus Plan, “cause” includes dishonesty, fraud or misrepresentation; inability to obtain or retain appropriate licenses; violation of any rule or regulation of any regulatory or self-regulatory agency or of any policy of the Company or any subsidiary; commission of a crime; breach of a written covenant or agreement not to misuse property or information; or any act or omission detrimental to the conduct of the Company’s or any subsidiary’s business in any way.

Approved Retirement. If a participant’s employment terminates by reason of “Approved Retirement”:

 

•

Annual Incentive Awards: The participant will receive a pro-rated Annual Incentive Award based on actual achievement of the performance goals for the applicable performance cycle;

 

•

Options/SARs: All outstanding Options and SARs shall become immediately exercisable in full and may be exercised by the participant at any time prior to the expiration of the term of the Options or within five years following the participant’s Approved Retirement, whichever period is shorter;

 

•

Restricted Stock/Restricted Units (including associated Dividend Equivalents): Any restrictions will lapse as to outstanding Restricted Stock, Restricted Units and associated Dividend Equivalents and payment will generally be made within 74 days following the termination of employment (subject to any further delay as may be required to comply with the provisions of Code Section 409A); and

 

•

Performance Units/Performance Shares (including associated Dividend Equivalents): On the 60th day following the end of the applicable performance cycle, the participant will receive a prorated payment for outstanding Performance Units and Performance Shares based on actual achievement of the performance goals for the performance cycle.

 

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For purposes of the 2016 Omnibus Plan, “Approved Retirement” generally means termination of a participant’s employment, other than for “cause”: (i) on or after the normal retirement date or any early retirement date established under any defined benefit pension plan maintained by the Company or a subsidiary and in which the participant participates, or (ii) on or after attaining age 55 and completing at least five years of service (or a longer period of service, as the Committee shall determine from time to time).

Death or Disability. The 2016 Omnibus Plan also has default provisions for the treatment of Awards following termination of a participant’s service due to death or disability that have the effect of providing the beneficiaries of the deceased participant or the disabled participant the full benefit of the participant’s outstanding Awards, regardless of the period of service completed prior to the date of the termination. All Options and SARs would immediately become exercisable in full, all Restricted Stock would become vested, all Restricted Units and any Dividend Equivalents credited with respect thereto would become vested and payable, and all Performance Shares and Performance Units, and any Dividend Equivalents credited with respect thereto would vest and be payable at target.

Termination for Other Reasons. If a participant’s service terminates for any reason other than resignation, termination for cause, approved retirement, death or disability:

 

•

Annual Incentive Awards: If the termination occurs before authorization of the payment of an Annual Incentive Award, the participant forfeits all rights to payment;

 

•

Options/SARs: Options/SARs that are exercisable on the date of termination may be exercised at any time prior to the expiration date of the term of the Options or the 90th day following termination, whichever period is shorter;

 

•

Restricted Stock/Restricted Units (including associated Dividend Equivalents): Restrictions will lapse as to a prorated portion of outstanding Restricted Stock, Restricted Units and associated Dividend Equivalents and payment will generally be made within 74 days following the termination (subject to any further delay as may be required to comply with the provisions of Code Section 409A); and

 

•

Performance Units/Performance Shares (including associated Dividend Equivalents): The participant will receive a prorated payment for outstanding Performance Units, Performance Shares and associated Dividend Equivalents based on target achievement of the performance goals for the performance cycle within 74 days following the termination (for Covered Employees payment will be based on actual achievement of the performance goals and will be made after completion of the performance cycle).

Non-Transferability of Awards

Generally, no Awards granted under the 2016 Omnibus Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. The Committee may, in the Award agreement or otherwise, permit transfers of Nonstatutory Options, SARs, Restricted Stock and Restricted Units to certain family members.

Adjustment in Capitalization

If certain corporate events occur, such as a change in capitalization, merger, spin-off, stock split, stock dividend, extraordinary cash dividend or similar event affecting the Common Stock (an “adjustment event”), the Committee shall adjust appropriately (a) the aggregate number and kind of shares of Common Stock available for Awards, (b) the aggregate limitations on the number of shares that may be awarded as a particular type of Award or that may be awarded to any particular participant in any particular period, and (c) the aggregate number and kind of shares subject to outstanding Awards and the respective exercise prices or base prices applicable to outstanding Awards, in the manner determined by the Committee. To the extent deemed equitable and appropriate by the Committee, and subject to any required action by the Company’s shareholders, with respect to any “adjustment event” that is a merger, consolidation, reorganization, liquidation, dissolution or similar transaction, any Award granted under the 2016 Omnibus Plan shall be deemed to pertain to the securities and other property, including cash, which a holder of the number of shares of Common Stock covered by the Award would have been entitled to receive in connection with such an adjustment event.

 

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Change of Control

Upon the occurrence of a change of control of the Company, outstanding Awards will generally be treated as follows, regardless of the Award’s otherwise applicable terms:

 

•

No acceleration of vesting or exercisability, cancellation, cash payment or other settlement will occur with respect to any outstanding Awards if the Committee reasonably determines in good faith prior to the change of control that the Awards will be honored or assumed or equitable replacement awards will be made by a successor employer immediately following the change of control, and that such replacement awards will vest and payments will be made if a participant is involuntarily terminated without cause.

 

•

If the Committee reasonably determines in good faith that Awards will not be honored or assumed and equitable replacement awards will not be made by a successor employer immediately following the change of control, then (i) any Option and SAR will become fully exercisable, (ii) the restrictions for each share of Restricted Stock and each Restricted Unit will lapse and (iii) any Performance Share or Unit (that is not converted as described below) will be considered to have vested at target levels. The Committee may, in its discretion, provide for cancellation of each Award in exchange for a cash payment per share based upon the change of control price.

 

•

Unless the Committee otherwise determines, prior to a change of control, Performance Shares and Units for which 50% of the performance period has elapsed and for which the Committee determines that performance is reasonably capable of being assessed will be converted into Restricted Units based on performance until the date of the change of control. Performance Shares and Units for which less than 50% of the performance period has elapsed or for which performance is not reasonably capable of being assessed will be converted into Restricted Units based on the assumption that the Awards will be earned at target.

For purposes of the 2016 Omnibus Plan, “change of control” means: (i) the acquisition, directly or indirectly, of Company securities representing at least 25% of the combined voting power of the outstanding securities of the Company by any “person” (within the meaning of Section 3(a)(9) of the Exchange Act); (ii) within any 24-month period, a change in the majority of the Board in existence at the beginning of such period; or (iii) the consummation of certain mergers, consolidations, recapitalizations or reorganizations, share exchanges, divisions, sales, plans of complete liquidation or dissolution, or other dispositions of all or substantially all of the Company’s assets, which have been approved by shareholders, if the Company’s shareholders do not hold a majority of the voting power of the surviving, resulting or acquiring corporation immediately thereafter.

Amendment/Termination

The Board of Directors may, at any time amend, modify, suspend or terminate the 2016 Omnibus Plan, in whole or in part, without notice to or the consent of any participant or employee; provided, however, that any amendment which would (i) increase the number of shares available for issuance under the 2016 Omnibus Plan, (ii) lower the minimum exercise price at which an Option (or the base price at which a SAR may be granted) or take any other action that would be prohibited under the 2016 Omnibus Plan that would have the effect of lowering the exercise price (or base price), or (iii) change the individual Award limits shall be subject to shareholder approval. No amendment, modification or termination of the 2016 Omnibus Plan may in any manner adversely affect any previously granted Award, without the consent of the participant.

New Plan Benefits; Market Value of Securities

Awards under the 2016 Omnibus Plan are based on the discretion of the Committee and/or the Company’s achievement of performance targets, and it is not currently possible to determine the amounts of future Awards. Accordingly, it is not possible to determine the amounts that will be received by employees participating in the 2016 Omnibus Plan in the future. As of March 11, 2016, the closing price of our common stock was $73.55 per share.

U.S. Federal Income Tax Implications

The following is a brief summary of the U.S. federal income tax consequences applicable to certain Awards granted under the 2016 Omnibus Plan, based upon the federal income tax laws in effect on the date of this Proxy Statement. This summary is not intended to be exhaustive, and the exact tax consequences may vary depending on each participant’s particular situation.

Options and SARs. A recipient of an Option or SAR will not have taxable income upon the grant of the Option or SAR. Upon the exercise of a Nonstatutory Option or SAR, a participant generally will recognize compensation taxable as ordinary income in an

 

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amount equal to the difference between the fair market value of the shares on the date of exercise and the exercise price. Any gain or loss recognized upon any later disposition of the shares generally will be a capital gain or loss. The tax basis of the shares generally will be equal to the fair market value of the shares on the exercise date.

Upon the exercise of an ISO, the acquisition of shares will not result in taxable income to the participant, except possibly for purposes of the alternative minimum tax. The gain or loss recognized by the participant on a later sale or other disposition of the shares will either be long-term capital gain or loss or ordinary income, depending upon whether the participant holds the shares for the legally required period of two years from the date of grant and one year from the date of exercise. If the shares are not held for the legally required period, the participant will recognize ordinary income equal to the lesser of (i) the difference between the fair market value of the shares on the date of exercise and the exercise price, or (ii) the difference between the sales price and the exercise price, and the balance of the participant’s gain, if any, will be taxed as short-term or long-term capital gain, as the case may be.

Restricted Stock. A recipient of Restricted Stock will not have taxable income upon the grant of the Restricted Stock, unless the participant elects to be taxed at the time the Restricted Stock is granted rather than when it becomes vested. The shares of Restricted Stock will generally be subject to tax upon vesting as ordinary income equal to the fair market value of the shares at the time of vesting less the amount paid for the shares, if any.

Restricted Units, Performance Units, Performance Shares. A participant is not deemed to receive taxable income when a Restricted Unit, Performance Unit or Performance Share is granted. When the Awards (and Dividend Equivalents, if any) are settled and paid, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of shares received less the amount paid for the Awards, if any.

The Company generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an Award. The Company generally is not entitled to a tax deduction relating to amounts that are taxable as capital gain to a participant. However, Code Section 162(m) can limit the federal income tax deductibility of compensation paid to Covered Employees. Under Code Section 162(m), the general rule is that annual compensation paid to any of these Covered Employees will be deductible only to the extent that it does not exceed $1 million. However, we can preserve the deductibility of certain compensation in excess of $1 million if the compensation qualifies as “performance-based compensation” by complying with certain conditions imposed by the Code Section 162(m) rules, including the establishment of a maximum number of shares with respect to which Awards may be granted to any one employee during one fiscal year, as described above under “Compliance with Code Section 162(m).” The rules and regulations promulgated under Section 162(m), however, are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to so qualify. As such, there can be no assurance that any compensation awarded or paid under the 2016 Omnibus Plan will be deductible under all circumstances.

 

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Item 5–Shareholder Proposal Regarding an

Independent Board Chairman

In accordance with SEC rules, we have set forth below a shareholder proposal, along with the supporting statement of the shareholder proponent. The Company is not responsible for any inaccuracies it may contain. The shareholder proposal is required to be voted on at our Annual Meeting only if properly presented. As explained below, our Board unanimously recommends that you vote “AGAINST” the shareholder proposal.

William Steiner, 112 Abbottsford Gate, Piermont, New York 10968, beneficial owner of 100 shares of Common Stock, is the proponent of the following shareholder proposal. The proponent has advised us that a representative will present the proposal and related supporting statement at the Annual Meeting.

Independent Board Chairman

Shareholders request our Board of Directors to adopt as policy, and amend our governing documents as necessary, to require the Chair of the Board of Directors, whenever possible, to be an independent member of the Board. The Board would have the discretion to phase in this policy for the next CEO transition, implemented so it does not violate any existing agreement. If the Board determines that a Chair who was independent when selected is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chair. This proposal requests that all the necessary steps be taken to accomplish the above.

It is the responsibility of the Board of Directors to protect shareholders’ long-term interests by providing independent oversight of management. By setting agendas, priorities and procedures, the Chairman is critical in shaping the work of the Board.

A board of directors is less likely to provide rigorous independent oversight of management if the Chairman is the CEO, as is the case with our Company. Having a board chairman who is independent of the Company and its management is a practice that will promote greater management accountability to shareholders and lead to a more objective evaluation of management.

According to the Millstein Center for Corporate Governance and Performance (Yale School of Management), “The independent chair curbs conflicts of interest, promotes oversight of risk, manages the relationship between the board and CEO, serves as a conduit for regular communication with shareowners, and is a logical next step in the development of an independent board.” (Chairing the Board: The Case for Independent Leadership in Corporate North America, 2009.)

An NACD Blue Ribbon Commission on Directors’ Professionalism recommended that an independent director should be charged with “organizing the board’s evaluation of the CEO and provide ongoing feedback; chairing executive sessions of the board; setting the agenda and leading the board in anticipating and responding to crises.” A blue-ribbon report from The Conference Board echoed that position.

A number of institutional investors said that a strong, objective board leader can best provide the necessary oversight of management. Thus, the California Public Employees’ Retirement System’s Global Principles of Accountable Corporate Governance recommends that a company’s board should be chaired by an independent director, as does the Council of Institutional Investors.

An independent director serving as chairman can help ensure the functioning of an effective board. Please vote to enhance shareholder value: Independent Board Chairman—Proposal 5

 

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		Item 5—Shareholder Proposal Regarding an Independent Board Chairman

 

 

Board of Directors’ Statement in Opposition to the Proposal

Your Board recommends a vote against this proposal because it believes it is in the best interests of our shareholders for the Board to have the flexibility to determine the best person to serve as Board Chair, whether that person is an independent director or the CEO.

 

•

Every year, the Governance Committee reviews and makes a recommendation on the appropriate governance framework for Board leadership. The Committee takes into consideration governance best practices and the facts and circumstances of our Board.

 

•

The Governance Committee has most recently determined that Board leadership is provided through the combination of a unified Chair and CEO, a clearly defined and significant lead independent director role, active and strong committee chairs, and independent-minded, skilled, engaged, diverse and committed directors.

Our Board believes that its current structure and governance allows it to provide effective challenge and oversight of management.

 

•

We have a lead independent director with significant responsibilities that are described in detail in this proxy statement, including approval of all Board agendas and information sent to the Board. We also refer you to the lead independent director’s letter which is contained in this proxy statement, as well as the lead independent director’s video and Lead Director Charter at www.prudential.com/governance. Mr. Krapek’s skills, experience, commitment and the time he devotes to serve his role all make him well qualified to serve as our lead independent director.

 

•

Our non-management directors meet regularly in executive sessions that are chaired by our lead independent director with no member of management present. Non-management directors use these executive sessions to discuss matters of concern, as well as evaluations of the CEO and senior management, management and Board successions, matters to be included on Board agendas, and additional information the Board would like management to provide to them, as well as other relevant matters.

 

•

The Chairs and all members of the Board committees are independent directors. These chairs shape the agenda and information presented to their committees. Oversight of critical issues within these committees is owned by the independent directors.

 

•

All Directors have full access to all members of management and all employees on a confidential basis.

 

•

Our Board proactively asks for feedback from shareholders and has met with shareholders in various settings.

The proposed policy would unduly impair the Board’s flexibility to annually elect the individual it deems best suited to serve as Board Chair. Shareholders of Prudential are best served when the Board has the flexibility to elect the individual it deems best suited to serve as Board Chair at any particular time, depending on the circumstances. Our Board believes that a clearly defined and significant lead independent director role, independent and strong committee chairs, experienced, diverse and committed directors, and frequent executive sessions provide a framework for effective direction and oversight by the Board.

 

 

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Voting Securities and Principal Holders

Beneficial Ownership

The following table shows all entities that are the beneficial owners of more than 5% of the Company’s Common Stock:

 

Name and Address of Beneficial Owner		Amount and Nature				Percent of Class
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055			34,926,805	(1)			7.8%
The Vanguard Group 100 Vanguard Boulevard, Malvern, PA 19355			27,101,483	(2)			6.03%
Wellington Management Company LLP 280 Congress Street, Boston, MA 02210			22,654,780	(3)			5.05%

 

(1)

Based on information as of December 31, 2015 contained in a Schedule 13G/A filed with the SEC on February 10, 2016 by BlackRock, Inc. The Schedule 13G/A indicates that BlackRock, Inc. has sole dispositive power with respect to all of the shares and sole voting power with respect to 29,336,252 of the shares.

 

(2)

Based on information as of December 31, 2015 contained in a Schedule 13G/A filed with the SEC on February 10, 2016 by the Vanguard Group. The Schedule 13G/A indicates that The Vanguard Group has sole dispositive power with respect to 26,218,926 of the shares, shared dispositive power with respect to 882,557 of the shares, sole voting power with respect to 833,931 of the shares, and shared voting power with respect to 45,600 of the shares.

 

(3)

Based on information as of December 31, 2015 contained in a Schedule 13G filed with the SEC on February 11, 2016 by Wellington Management Group LLP, Wellington Group Holdings LLP and Wellington Investment Advisors Holdings LLP. The Schedule 13G indicates that each Wellington entity has shared dispositive power with respect to all of the shares and shared voting power with respect to 8,068,494 of the shares.

To our knowledge, except as noted above, no person or entity is the beneficial owner of more than 5% of our Common Stock.

The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 11, 2016, by:

 

•

each Director and Named Executive Officer; and

 

•

all Directors and Executive Officers of the Company as a group.

 

Name of Beneficial Owner		Common Stock				Number of shares Subject to Exercisable Options				Total Number of Shares Beneficially Owned1				Director Deferred Stock Units / Additional Underlying Units 2,3,4				Total Shares Beneficially Owned Plus Underlying Units				Percent of Class
Thomas J. Baltimore, Jr.			250								250				32,647				32,897				*
Gordon M. Bethune			13,935								13,935				1,778				15,713				*
Gilbert F. Casellas			500								500				28,591				29,091				*
James G. Cullen			2,033								2,033				42,264				44,297				*
Constance J. Horner			6,720								6,720				8,164				14,884				*
Martina Hund-Mejean			128								128				13,054				13,182				*
Karl J. Krapek			1,007								1,007				42,182				43,189				*
Peter R. Lighte			80								80				2,133				2,213				*
George Paz			0								0				2,130				2,130				*
Sandra Pianalto			0								0				1,712				1,712				*
Christine A. Poon			9,788								9,788				12,811				22,599				*
Douglas A. Scovanner			12,000								12,000				9,241				21,241				*
Michael A. Todman			0								0				2,133				2,133				*
John R. Strangfeld			333,439	5			1,210,080				1,543,519				349,767				1,893,286				*
Mark B. Grier			346,143				323,850				669,993				250,876				920,869				*
Robert Falzon			32,008				63,873				95,881				114,592				210,473				*
Charles F. Lowrey			56,789				478,267				535,056				154,689				689,745				*
Stephen Pelletier			7,542				69,244				76,786				171,495				248,281				*
All directors and executive officers as a group (24 persons)			988,535				2,717,515				3,705,970				1,674,551				5,380,601				1.2%

*	Less than 1%.

 

(1)	Individual directors and executive officers as well as all directors and executive officers as a group beneficially own less than 1% of the shares of Common Stock outstanding, as of March 11, 2016.

 

(2)

Includes the following number of shares or share equivalents in deferred units through the Deferred Compensation Plan for Non-Employee Directors and the Prudential Insurance Company of America Deferred Compensation Plan, as to which no voting or investment power exists: Mr. Baltimore, 32,647; Mr. Bethune, 1,778; Mr. Casellas, 28,591; Mr. Cullen, 42,264; Ms. Horner, 8,164; Ms. Hund-Mejean 13,054; Mr. Krapek, 42,182; Mr. Lighte, 2,133; Mr. Paz, 2,130; Ms. Pianalto, 1,712; Ms. Poon, 12,811; Mr. Scovanner, 9,241; Mr. Todman, 2,133; Mr. Strangfeld, 40,341; and Mr. Pelletier, 30,885.

 

(3)

Includes the following shares representing the target number of shares to be received upon the attainment of ROE goals under the performance share program described under “Compensation Discussion and Analysis”: Mr. Strangfeld, 101,443; Mr. Grier, 82,564; Mr. Falzon, 36,401; Mr. Lowrey, 51,445; and Mr. Pelletier, 43,637.

 

(4)	Includes the following unvested stock options: Mr. Strangfeld, 207,983; Mr. Grier, 168,312; Mr. Falzon, 78,191; Mr. Lowrey, 103,244; and Mr. Pelletier, 96,973.

 

(5)	Includes 4,400 shares held by the John and Mary K. Strangfeld Foundation.

 

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		Voting Securities and Principal Holders

 

 

Equity Compensation Plan Information

The following table provides information as of December 31, 2015 regarding securities authorized for issuance under our equity compensation plans. All outstanding awards relate to our Common Stock.

 

		(a)						(b)						(c)
		Number of securities to be issued upon exercise of outstanding options, warrants and rights						Weighted average exercise price of outstanding options, warrants and rights						Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in (a))
Equity compensation plans approved by security holders-Omnibus Plan			16,020,277	(1)				$	66.18	(2)					7,947,141
Equity compensation plans approved by security holders-Director Plan			144,744						N/A						53,159
Equity compensation plans approved by security holders-PSPP(3)			N/A						N/A						16,056,764
Total equity compensation plans approved by security holders			16,165,021						N/A						24,057,064
Equity compensation plans not approved by security holders			0						N/A						0
Grand Total			16,165,021						N/A						24,057,064

 

(1)

Represents 10,926,146 outstanding Options, 4,354,286 outstanding Restricted Units and 739,845 outstanding Performance Shares as of December 31, 2015 under our Omnibus Plan. The number of Performance Shares are the target amount awarded, reduced for cancellations and releases through December 31, 2015. The actual number of shares the Compensation Committee will award at the end of each performance period will range between 0% and 150% of the target for awards granted for performance periods prior to 2014 and between 0% and 125% thereafter, based upon a measure of the reported performance of the Company relative to stated goals. The outstanding Performance Units will be settled only in cash and do not reduce the number of shares authorized under the Omnibus Plan, and so they are not reflected in this table.

 

(2)	Represents the weighted average exercise price of the Options disclosed in column (a). The weighted average remaining contractual term of these Options is 4.72 years.

 

(3)

The Prudential Financial, Inc. Employee Stock Purchase Plan is a qualified Employee Stock Purchase Plan under Section 423 of the Code, pursuant to which up to 26,367,235 shares of Common Stock were authorized for issuance, all of which have been registered on Form S-8. Under the plan, employees may purchase shares based upon quarterly offering periods at an amount equal to the lesser of (1) 85% of the closing market price of the Common Stock on the first day of the quarterly offering period, or (2) 85% of the closing market price of the Common Stock on the last day of the quarterly offering period.

Compliance With Section 16(a) of the Exchange Act

Each Director, executive officer of the Company and greater than 10% beneficial owner of Common Stock is required to report to the SEC, by a specified date, his or her transactions involving our Common Stock. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required to be filed, the Company believes that during 2015 all reports required by Section 16(a) were timely filed.

 

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Compensation of Directors

The Corporate Governance and Business Ethics Committee reviews the compensation of our non-employee Directors periodically (generally every three years) and recommends changes to the Board, when it deems appropriate.

The following table describes the components of the non-employee Directors’ compensation for 2015:

 

Compensation Element		Director Compensation Program
Annual Retainer		$150,000, which may be deferred, at the Director’s option
Annual Equity Retainer		$150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting)
Board and Committee Fees		None
Chair Fee		$35,000 for the Audit and Risk Committees $30,000 for the Compensation Committee $20,000 for all other committees*
Lead Independent Director Fee		$50,000
Meeting Fee for members of the Company’s Community Resources Oversight Committee**		$1,250 per meeting
New Director Equity Award (one-time grant)		$150,000 in restricted stock units that vest after one year
Stock Ownership Guideline		Ownership of Common Stock or deferred stock units that have a value equivalent to six times the annual cash retainer; to be satisfied within six years of joining the Board***

 

*	Includes any non-standing committee of the Board that may be established from time to time, but excluding the Executive Committee.

 

**

This is a committee comprised of members of management and the Board. This Committee typically meets on a separate day following the Board and Board committee meetings. The non-employee Directors on this Committee currently consist of Mr. Casellas, Ms. Poon and Ms. Horner. The Community Resources Oversight Committee met three times in 2015.

 

***

As of December 31, 2015, each of our non-employee Directors satisfied this guideline, with the exception of Ms. Pianalto, who joined the Board in July 2015, and Messrs. Lighte, Paz and Todman, who joined the Board in March 2016. For purposes of the stock ownership guideline, once a non-employee Director satisfies his or her stock ownership level, the Director will be deemed to continue to satisfy the guideline without regard to fluctuation in the value of the Common Stock owned by the Director.

The Company maintains a Deferred Compensation Plan for Non-Employee Directors (the “Plan”). Since 2011, 50% of the annual Board and committee retainer has been awarded in restricted stock units that vest after one year (or if earlier, on the date of the next Annual Meeting). A non-employee Director can elect to invest the cash portion of his or her retainer, fees and equity retainer upon vesting in accounts under the Plan that replicate investments in either shares of our Common Stock or the Fixed Rate Fund, which accrues interest in the same manner as funds invested in the Fixed Rate Fund offered under the Prudential Employee Savings Plan (“PESP”). The Plan provides for distributions to commence upon termination of Board service or while a Director remains on the Board.

Each Director receives dividend equivalents on the restricted stock units contained in his or her deferral account under the Plan, which are equal in value to dividends paid on our Common Stock. The dividend equivalents credited to the account are then reinvested in the form of additional share units.

Under the Director compensation program, if a non-employee Director satisfies the stock ownership guideline, the restricted stock units granted as the annual equity retainer are payable upon vesting in cash or shares of our Common Stock (at the Director’s option), and may be deferred beyond vesting at the Director’s election. If a Director does not satisfy the stock ownership guideline, the restricted stock units are automatically deferred until termination of Board service.

 

 

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		Compensation of Directors

 

 

2015 Director Compensation

 

		Fees Earned or Paid in
Name		Cash($)				Stock Awards($)(1)				All Other Compensation(2)				Total($)
Thomas J. Baltimore, Jr.			170,000				150,000								320,000
Gordon M. Bethune			150,000				150,000								300,000
Gilbert F. Casellas			165,417				150,000								315,417
James G. Cullen			150,000				150,000				5,000				305,000
Constance J. Horner			162,083				150,000				2,600				314,683
Martina Hund-Mejean			150,000				150,000				5,000				305,000
Karl J. Krapek			265,000				150,000				5,000				420,000
Peter R. Lighte3			0				0								0
George Paz3			0				0								0
Sandra Pianalto			75,000				150,000				5,000				230,000
Christine A. Poon			173,750				150,000								323,750
Douglas A. Scovanner			170,417				150,000								320,417
Michael A. Todman3			0				0								0
James A. Unruh			77,083				0								77,083

 

(1)

Represents amounts that are in units of our Common Stock. The amounts reported represent the aggregate grant date fair value of the restricted stock units granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. As of December 31, 2015, the aggregate balance in each of the non-employee Directors’ accounts in the Deferred Compensation Plan denominated in units (which includes all deferrals from prior years) and the year-end values were as follows: Mr. Baltimore: 32,177 and $2,619,529.57; Mr. Bethune: 1,778 and $144,746.98; Mr. Casellas: 28,591 and $2,327,593.31; Mr. Cullen: 42,264 and $3,440,712.24; Ms. Horner: 8,164 and $664,631.24; Ms. Hund-Mejean: 13,054 and $1,062,726.14; Mr. Krapek: 45,252 and $3,683,965.32; Ms. Pianalto: 1,712 and $139,373.92; Ms. Poon: 12,811 and $1,042,943.51; and Mr. Scovanner: 8,673 and $706,068.93.

 

(2)	Represents amounts for 2015 matching charitable contributions.

 

(3)	Messrs. Lighte, Paz and Todman joined the Board in March 2016.

 

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Compensation Discussion and Analysis

In this section, we describe the material components of our executive compensation program for our NEOs, whose compensation is set forth in the 2015 Summary Compensation Table and other compensation tables contained in this Proxy Statement:

 

 

 

(1)	Amounts attributable to Prudential Financial, Inc. (PFI); represents results of the Company’s former Financial Services Businesses for 2014.

(2)

AOI is a non-GAAP measure of performance. For a description of how we calculate pre-tax AOI and for reconciliation of pre-tax AOI to the nearest comparable GAAP measure, see the notes to the consolidated financial statements included in the Annual Report to Shareholders, which can be found on our website at www.prudential.com/governance. After-tax AOI is adjusted operating income before taxes, less the income tax effect applicable to pre-tax AOI, as publicly disclosed in our Quarterly Financial Supplements, also available on our website.

 

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		Compensation Discussion and Analysis: Executive Summary

 

Executive Compensation Highlights

The Committee has instituted a number of changes to our executive compensation program over the last five years to align with evolving competitive and governance practices and to strengthen the link to performance and rigor of our program. These changes include:

 

 

 

 

 

(1)

30% of the Annual Incentive Awards were mandatorily deferred into the Book Value Performance Program.

(2)

Represents long-term awards granted in 2016 and 2015 for 2015 and 2014 performance, respectively.

 

 

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		Compensation Discussion and Analysis: Executive Summary

 

 

Consideration of Most Recent “Say on Pay” Vote

Following our 2015 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executive compensation (“Say on Pay”) that was held at the meeting with respect to the 2014 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 82% of the votes cast on the proposal were voted in support of the compensation of our NEOs. After careful consideration, and given the extensive changes we made in the past, the Committee did not make any changes to our executive compensation program and policies as a result of the most recent Say on Pay advisory vote.

Opportunity for Shareholder Feedback

The Committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their views to the Committee as described under “Communication with Directors” in this Proxy Statement. In addition, the advisory vote on the compensation of the NEOs provides shareholders with an opportunity to communicate their views on our executive compensation program.

You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of the NEOs (see “Item 3 — Advisory Vote to Approve Named Executive Officer Compensation”). This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision.

 

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		Compensation Discussion and Analysis

 

 

Philosophy and Objectives of Our Executive Compensation Program

The philosophy underlying our executive compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our shareholders, customers, and communities where we have a strong presence. Our executive compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements.

Overall, the same principles that govern the compensation of all our salaried employees apply to the compensation of our executive officers. Within this framework, we observe the following principles:

 

 

2015 Incentive Programs

To ensure a strong link between our incentive compensation opportunities and our short-term and longer term objectives, we use two specific programs: our Annual Incentive Program and our Long-Term Incentive Program.

 

•

Annual Incentive Program. The Annual Incentive Program is designed to reward strong financial and operational performance that furthers our short-term strategic objectives. Financial performance is primarily determined based on EPS achievement relative to our externally disclosed EPS targets.

 

•

Long-Term Incentive Program. Our Long-Term Incentive Program consists of three parts that incentivize long-term value creation: performance shares and units that primarily reward the achievement of our long-term ROE goals and increases in the market value of our Common Stock; stock options that reward increases in the market value of our Common Stock; and book value units that reward increases in book value per share.

 

How We Make Compensation Decisions

Role of the Compensation Committee

The Committee is responsible to our Board for overseeing the development and administration of our compensation and benefits policies and programs. The Committee, which consists of three independent directors, is responsible for the review and approval of all aspects of our executive compensation program. Among its duties, the Committee is responsible for formulating the compensation recommendations for our CEO and approving all compensation recommendations for our officers at the senior vice president level and above, including:

 

•

annual review and approval of incentive program design, goals and objectives for alignment with compensation and business strategies;

 

•

evaluation of individual performance results in light of these goals and objectives;

 

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•

evaluation of the competitiveness of each executive officer’s total compensation package; and

 

•

approval of any changes to the total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities, and payouts and retention programs.

Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the non-employee members of our Board for approval.

The Committee is supported in its work by the head of the Human Resources Department, her staff, and the Committee’s executive Compensation Consultant, as described below.

The Committee’s charter, which sets out its duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.

Role of the Chief Executive Officer

Within the framework of the compensation programs approved by the Committee and based on management’s review of market competitive positions, each year our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for our officers at the senior vice president level and above, including the other NEOs. These recommendations are based upon his assessment of each executive officer’s performance, the performance of the individual’s respective business or function, and employee retention considerations. The Committee reviews our CEO’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion.

Our CEO does not play any role with respect to any matter affecting his own compensation.

Role of the Compensation Consultant

The Committee has retained Frederic W. Cook & Co., Inc. as its executive Compensation Consultant. The Compensation Consultant reports directly to the Committee and the Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested, and communicates with the Committee Chair between meetings.

The Compensation Consultant provides various executive compensation services to the Committee pursuant to a written consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to their performance.

During 2015, the Compensation Consultant performed the following specific services:

 

 

The Compensation Consultant provided no services to management during 2015.

The Committee retains sole authority to hire the Compensation Consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.

The total amount of fees paid to the Compensation Consultant for services to the Committee in 2015 was $100,103. The Compensation Consultant received no other fees or compensation from us, except for $3,400 to participate in a general industry survey of long-term compensation. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to the listing standards of The New York Stock Exchange and SEC rules and concluded that no conflict of interest exists that would prevent the Compensation Consultant from serving as an independent consultant to the Compensation Committee.

 

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		Compensation Discussion and Analysis

 

 

Compensation Peer Group

The Committee uses compensation data compiled from a group of peer companies in the insurance, asset management, and other diversified financial services industries generally selected from the Standard & Poor’s 500 Financials Index (the “Peer Group”). The Committee periodically reviews and updates the Peer Group, as necessary, upon recommendation of the Compensation Consultant. We believe the Peer Group represents the industries with which we currently compete for executive talent, and also includes our principal business competitors.

 

Although included within the broad financial services sector, we exclude from the Peer Group companies such as property and casualty insurers and investment banking firms that predominantly offer different products, have substantially different business models and with whom we have less direct competition for executive talent.   For 2015, the Peer Group consisted of the following 20 companies:
North American Life Insurance Companies		Consumer Finance Companies		Asset Management and Custody Banks		Diversified Banks
• AFLAC, Incorporated   • Lincoln National   • Manulife Financial Corporation   • MetLife, Inc.   • Principal Financial Group   • Sun Life Financial Inc.		• American Express Company   • Capital One Financial Corporation		• Ameriprise Financial, Inc.   • The Bank of New York Mellon Corporation   • BlackRock, Inc.   • Franklin Resources, Inc.   • Northern Trust Corporation   • State Street Corporation		• Bank of America Corporation   • Citigroup Inc.   • JPMorgan Chase & Co.   • PNC Financial Services Group, Inc.   • U.S. Bancorp   • Wells Fargo & Company

Use of Competitive Data

We compete in several different businesses, most of which are involved in helping individuals and institutions grow and protect their assets. These businesses draw their key employees from different segments of the marketplace. Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for executive talent, while being subject to centralized design, approval, and control.

The Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the NEOs.

To assess the competitiveness of our executive compensation program, we analyze Peer Group compensation data obtained from peer company proxy materials as well as compensation and benefits survey data provided by national compensation consulting firms, such as Willis Towers Watson, McLagan Partners, and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review the mix of our compensation components with respect to fixed versus variable, short term versus long term, and cash versus equity-based pay. This information is then presented to the Committee for its review and use.

The Committee generally compares the compensation of each NEO in relation to both the 50th and the 75th percentiles of the Peer Group for similar positions, as we are significantly above the median of the Peer Group in terms of size. In addition, the Committee takes into account various factors such as our performance within the Peer Group, the unique characteristics of the individual’s position, and any succession and retention considerations. In general, compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range.

Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by the scope of their responsibilities, market data for similar positions, and considerations of internal equity.

 

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Components of Our Executive Compensation Program

The principal components of our executive compensation program, purpose, key characteristic and type of performance measured (if applicable) are presented in the following table. We measure the program’s competitiveness both by comparing relevant market data with the target and actual amounts paid at each executive officer position as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities.

Total Direct Compensation

 

Compensation Component		Purpose		Key Characteristic		Performance Measured
Base Salary		• Compensate executive officers fairly for the responsibility of the position held		Fixed		Individual
Annual Incentive Awards		• Motivate and reward executive officers for achieving our short-term business objectives   • Provide balance by also rewarding performance relative to the North American Life Insurers in our peer group		Variable		Corporate and Individual
Long-Term Incentive Awards		• Motivate executive officers by tying incentives to the achievement of our multi-year financial goals, our relative performance, and the performance of our Common Stock and book value over the long term   • Reinforce the link between the interests of our executive officers and shareholders		Variable		Corporate

Other Forms of Compensation

 

Compensation Component		Purpose		Key Characteristic
Health & Welfare, and Retirement Plans		• Provide benefits that promote employee health and support employees in attaining financial security		Fixed
Perquisites and Other Personal Benefits		• Provide a business-related benefit to our Company, and to assist in attracting and retaining executives		Fixed
Post-Employment Compensation		• Provide temporary income following an executive’s involuntary termination of employment, and in the case of a change of control, to also provide continuity of management		Fixed

The following discussion contains information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. Investors should not apply these performance measures and goals to other contexts.

 

 

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Annual Incentive Award Decisions for 2015

The driver of the actual annual incentive awards made to the NEOs is the Final Performance Factor. The Committee also considers individual performance and contributions in determining final awards.

At the beginning of 2015, our CEO met with each of the other NEOs to outline and discuss with them the key financial factors for determining awards under our annual incentive program and their expected contributions to that performance.

In assessing the individual performance of Mr. Strangfeld, the Committee and the independent members of our Board considered the evaluation of his performance that was conducted by the Lead Independent Director and the Committee Chair. In assessing the individual performance of our other NEOs, the Committee considered Mr. Strangfeld’s recommendations and its own evaluation of performance. Based on the Final Performance Factor and these assessments, the Committee recommended, and the independent members of our Board approved, the annual incentive awards below for 2015. Of these amounts, 30% was mandatorily deferred into the Book Value Performance Program.

 

•

Mr. Strangfeld. $5,915,000 , or approximately 1.056 times his target award amount, a decrease of 24% from his 2014 annual incentive award of $7,800,000.

 

•

Mr. Falzon. $2,600,000, or approximately 1.061 times his target award amount, a decrease of 21% from his 2014 annual incentive award of $3,300,000.

 

•

Mr. Grier. $5,100,000, or approximately 1.063 times his target award amount, a decrease of 22% from his 2014 annual incentive award of $6,500,000.

 

•

Mr. Lowrey. $4,250,000, or approximately 1.063 times his target award amount, a decrease of 21% from his 2014 annual incentive award of $5,400,000.

 

•

Mr. Pelletier. $3,200,000, or approximately 1.067 times his target award amount, a decrease of 20% from his 2014 annual incentive award of $4,000,000.

Long-Term Incentive Program

We provide a long-term incentive opportunity to motivate and reward our executive officers for their contributions toward achieving our business objectives by tying these incentives to the performance of our Common Stock and book value over the long term, to further reinforce the link between the interests of our executive officers and our shareholders, and to motivate our executive officers to improve our multi-year financial performance. Our practice is to grant long-term incentive awards annually in the form of a balanced mix of performance shares and units, stock options, and book value units to our officers at the level of senior vice president and above, including the NEOs, in amounts that are consistent with competitive practice.

The mix of long-term incentives granted since 2014 is shown in the table below:

 

Performance Shares and Units			60	%
Stock Options			20	%
Book Value Units			20	%

In determining the amount of individual long-term incentive awards, the Committee considers a senior executive’s individual performance during the immediately preceding year, potential future contributions, his or her prior year’s award value, and retention considerations, as well as market data for the executive officer’s position at the companies in the Peer Group.

Long-term incentive awards may also be granted when an individual is promoted to a senior executive position to recognize the increase in the scope of his or her role and responsibilities. From time to time, we may make special awards in the form of restricted stock units, to recognize major milestones, or selective awards in situations involving a leadership transition.

In addition, for all long-term incentive awards granted in 2016 or earlier to any NEO who is subject to Section 162(m), the total payout amount for performance shares and units, restricted stock units, and book value units, as well as the annual incentive payment in any year, may not exceed 0.6% of our pre-tax AOI for the prior year. See Item 4–Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan—Compliance with Code Section 162(m) for limits on awards under the 2016 Omnibus Incentive Plan.

 

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PERFORMANCE SHARES AND UNITS

Performance shares and units align the majority of our long-term incentive values to the achievement of our key ROE goals over a three-year performance period. Starting with the February 2014 awards with respect to the 2014 to 2016 performance period, award payouts generally range from 0% to 125% of the target number of shares and units. In past years, maximum awards ranged up to 150% of the targets.

The maximum award level of 125% of target recognizes the Company’s sustainable ROE objective of 13%. The preliminary payout is based on the average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee.

Starting with the February 2015 awards with respect to the 2015 to 2017 performance period, we introduced a relative performance modifier. This modifier provides a balance between absolute performance and performance relative to the North American Life Insurance subset of the Peer Group. It is based on the Company’s three-year performance in ROE, book value per share growth and EPS growth. The modifier will increase or decrease the award payment by up to 10% within the 0% to 125% range. The table below shows the components and weightings of the modifier.

 

Metric		Methodology		Weighting
ROE		Average annual ranking over 3 years			50	%
Book Value Per Share Growth		3-year compounded annual growth rate			25	%
EPS Growth		3-year compounded annual growth rate			25	%

Performance unit awards are denominated in share equivalents and have the same value as the performance share awards on the award payment date. Dividend equivalents are paid retroactively on the final number of performance shares and units paid out, up to the target number of shares and units. The ROE figures are subject to standard adjustments as part of our pre-set established formulaic framework.

ROE will also be adjusted to exclude the non-economic effects of foreign exchange remeasurement of non-yen liabilities and assets.

While the program allows the Committee to make a discretionary adjustment by up to 15% of the earned shares and units based on quantitative and qualitative factors, the Committee has rarely exercised discretion and did not exercise discretion for the 2013 awards that paid in February 2016.

STOCK OPTIONS

Stock options provide value based solely on stock price appreciation. Stock options are granted with a maximum term of ten years. One-third of the option grants vest on each of the first three anniversaries of the date of grant. The exercise price is based on the closing market price of a share of our Common Stock on The New York Stock Exchange on the date of grant.

BOOK VALUE PERFORMANCE PROGRAM

Our Book Value Performance Program is intended to link payments to a measure of book value per share — a key metric in valuing insurance companies, banks, and investment firms that is closely followed by investors. Book value per share is calculated by dividing our book value by the number of shares of our Common Stock outstanding. Our calculations of book value and book value per share exclude certain balance sheet items that do not, and may never, flow through the income statement. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the book value per share metric takes into consideration realized gains and losses in our investment portfolio. The key features of the Book Value Performance Program are:

 

•

Awards are granted and denominated in book value units that are funded from two sources:

 

–

the allocation of 20% of a participant’s long-term incentive award value for the year as determined by the Committee; and

 

–

for the NEOs, a mandatory deferral of 30% of their annual incentive award.

 

•

Once granted, the value of these book value units then tracks changes in book value per share for each participant.

 

•

These units track the value of book value per share of Common Stock, excluding total accumulated other comprehensive income and the non-economic effects of foreign currency exchange rate remeasurement of non-yen liabilities and assets included in net income or loss.

 

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•

One-third of a participant’s annual award of book value units is distributed in cash in each of the three years following the year of grant.

 

 

•

The NEOs’ awards, distributions and accumulated holdings under the Book Value Performance Program are as follows:

 

Named Executive Officer		Number of Book Value Units Held at January 1, 2015 (#)				Value of Book Value Units Held at January 1, 2015 1 ($)				Value of Book Value Units Distributed in 2015 2 ($)				Value of Book Value Units Awarded in 2015 3 ($)				Number of Book Value Units Held at December 31, 2015 (#)				Value of Book Value Units Held at December 31, 2015 4 ($)
John R. Strangfeld			123,226				7,978,884				3,813,192				4,040,012				126,729				9,325,987
Robert M. Falzon			25,404				1,644,909				658,637				1,590,066				39,789				2,928,073
Mark B. Grier			102,240				6,620,040				3,151,901				3,350,036				105,300				7,749,027
Charles F. Lowrey			77,038				4,988,211				2,346,216				2,520,070				79,723				5,866,816
Stephen Pelletier			24,328				1,575,238				722,481				2,000,063				44,059				3,242,302

 

(1)	Represents the aggregate market value of the number of book value units held at January 1, 2015 obtained by multiplying the book value per share of $64.75 as of December 31, 2014 by the number of book value units outstanding.

 

(2)	Represents the aggregate market value distributed on February 20, 2015 for all NEOs, and also for Mr. Pelletier on April 13, 2015.

 

(3)	Represents the aggregate market value awarded on February 10, 2015 for all NEOs.

 

(4)	Represents the aggregate market value of the number of book value units held at December 31, 2015 obtained by multiplying the book value per share of $73.59 as of December 31, 2015 by the number of book value units outstanding.

LONG-TERM INCENTIVE AWARD DECISIONS FOR 2015

In February 2016, the Committee granted long-term incentive awards to the NEOs based on updated market data and its assessment of their individual performance during 2015. These awards were granted in the form of performance shares (30%), performance units (30%), stock options (20%), and book value units (20%) under the Book Value Performance Program (in addition to the mandatory deferral of 30% of each NEO’s annual incentive award). The Committee determined that this long-term incentive mix would appropriately reward the NEOs for their 2015 performance, motivate them to work towards achieving our long-term objectives, further reinforce the link between their interests and the interests of our shareholders, and provide a balanced portfolio composed of performance shares and units (which provide value based upon attainment of specific performance goals as well as performance relative to peers), stock options (which provide value based solely on stock price appreciation) and book value units (which provide value based on changes in book value per share).

 

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The following table presents the long-term incentive awards granted to each NEO in February 2016, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of their annual incentive award. Awards are expressed as dollar compensation values in the table. These awards generally will not be reported in the Summary Compensation Table until 2017. For discussion of the long-term incentive awards granted in February 2015 for 2014 performance and included in this year’s Summary Compensation Table, see our 2015 Proxy Statement.

 

Named Executive Officer			Compensation Value of Book Value Units	1			Compensation Value of Stock Options				Compensation Value of Performance Shares				Compensation Value of Performance Units				Total
John R. Strangfeld		$	3,774,500			$	2,000,000			$	3,000,000			$	3,000,000			$	11,774,500
Robert M. Falzon		$	1,580,000			$	800,000			$	1,200,000			$	1,200,000			$	4,780,000
Mark B. Grier		$	3,130,000			$	1,600,000			$	2,400,000			$	2,400,000			$	9,530,000
Charles F. Lowrey		$	2,225,000			$	950,000			$	1,425,000			$	1,425,000			$	6,025,000
Stephen Pelletier		$	1,860,000			$	900,000			$	1,350,000			$	1,350,000			$	5,460,000

 

(1)	Includes amounts that were mandatorily deferred from the Annual Incentive Program (30%) that total $1,774,500 for Mr. Strangfeld; $780,000 for Mr. Falzon; $1,530,000 for Mr. Grier; $1,275,000 for Mr. Lowrey, and $960,000 for Mr. Pelletier.

PERFORMANCE SHARE AND PERFORMANCE UNIT AWARDS

The NEOs currently have three performance share and unit awards outstanding. In February 2016, the Committee granted the performance share and unit awards for the 2016 to 2018 performance period. The key features of these awards are as follows:

 

Performance Period		Performance Measures		Performance Measure Target Levels		Target Number of Shares/ Units to be Awarded		Actual Number of Shares/Units
2014–2016		- Return on equity		Average ROE of 13.5% for the 2014 through 2016 performance period.		100% at target level and 125% if average ROE is 14% or more.		To be determined between 0% and 125% of the target number by the Committee in February 2017 based on average ROE over the 2014-2016 performance period compared to the Company’s ROE targets.
2015–2017		- Return on equity - Relative Performance:      ROE      Book value per share growth      EPS growth		Average ROE of 13.5% for the 2015 through 2017 performance period. Weighted average relative performance ranking of 4 on relative ROE, book value per share growth and EPS growth.		100% at target level and 125% if average ROE is 14% or more, in each case, assuming a relative performance modifier of zero.		To be determined between 0% and 125% of the target number by the Committee in February 2018 based on average ROE over the 2015-2017 performance period compared to the Company’s ROE targets, as modified by the relative performance modifier.
2016-2018		- Return on equity - Relative Performance:      ROE      Book value per share growth      EPS growth		Average ROE of 13% for the 2016 through 2018 performance period. Weighted average relative performance ranking of 4 on relative ROE, book value per share growth and EPS growth.		100% at target level and 125% if average ROE is 14% or more, in each case, assuming a relative performance modifier of zero.		To be determined between 0% and 125% of the target number by the Committee in February 2019 based on average ROE over the 2016-2018 performance period compared to the Company’s ROE targets, as modified by the relative performance modifier.

 

 

The final award payments to the NEOs in February 2016 for the 2013 to 2015 performance period were:

 

Named Executive Officers		Target Number of Shares/Units Awarded(1)				Actual Number of Shares/Units Awarded1
John R. Strangfeld			59,142				88,714
Robert M. Falzon			13,916				20,874
Mark B. Grier			48,706				73,060
Charles F. Lowrey			31,310				46,966
Stephen Pelletier			10,438				15,658

 

(1)	Target and actual number of awards are 50% shares and 50% units.

 

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What are some examples of items included in GAAP net income, but excluded from AOI, and why are they excluded?

 

 

Post-Employment Compensation

Retirement Plans

We view retirement benefits as a key component of our executive compensation program because they encourage long-term service. Accordingly, we offer our employees, including the NEOs, a comprehensive benefits program that provides the opportunity to accumulate adequate retirement income. This program includes both defined benefit and defined contribution plans, as well as two supplemental retirement plans which allow highly compensated employees (that is employees whose compensation exceeds the limits established by the Internal Revenue Code for covered compensation and benefit levels) to receive the same benefits they would have earned but for these limitations. Further, we sponsor three supplemental executive retirement plans (SERPs) for certain eligible executive officers, including the NEOs, to offset the potential loss or forfeiture of retirement benefits under certain limited circumstances or to provide additional benefits to certain key executives. For descriptions of these plans, including their titles, see “Pension Benefits.”

We also maintain the Prudential Insurance Company of America Deferred Compensation Plan (the “Deferred Compensation Plan”). We offer this plan to our executive officers, including the NEOs, as a competitive practice. For a description of this plan, see “Nonqualified Deferred Compensation.”

We periodically compare the competitiveness of our benefits programs for our employees, including retirement benefits, against other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median of the competitive market when compared to other employers.

Severance and Change in Control Arrangements

Our Board has adopted a policy prohibiting us from entering into any severance or change in control agreement with any of our executive officers, including the NEOs, that provides for payments and benefits that exceed 2.99 times the sum of the executive officer’s base salary and most recently earned cash bonus, without shareholder approval or ratification. We do not provide excise tax payments or reimbursements to any of our executive officers.

While our other executive officers are eligible for severance payments in the event of involuntary termination of employment without “cause,” our CEO is not a participant in the severance program providing this benefit.

 

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To enable us to offer competitive total compensation packages to our executive officers, as well as to ensure the ongoing retention of these individuals when considering potential takeovers that may create uncertainty as to their future employment with us, we offer certain post-employment payments and benefits to our executive officers, including the NEOs, upon the occurrence of several specified events. These payments and benefits are provided under two separate programs:

 

•

the Prudential Severance Plan for Senior Executives (the “Severance Plan”); and

 

•

the Prudential Financial Executive Change in Control Severance Program.

We have not entered into individual employment agreements with our executive officers. Instead, the rights of our executive officers with respect to post-employment compensation upon specific events, including death, disability, severance or retirement, or a change in control of the Company, are covered by these two programs.

We use plans, rather than individually negotiated agreements, to provide severance and change in control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of these arrangements from time to time. An employment agreement would require that the affected executive officer consent to any changes. Second, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate severance or other employment separation payments and benefits on a case-by-case basis. In addition, it assures each of our executive officers that his or her severance payments and benefits are comparable to those of other executive officers with similar levels of responsibility and tenure.

Our executive officers, including the NEOs, except for our CEO, are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause.” These executive officers and our CEO are also eligible for “double trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our equity awards are also designed to be “double trigger,” so long as such awards are allowed to continue in effect following any change in control transaction on substantially equivalent terms and conditions to those applicable prior to such transaction.

The payment of these awards at target achievement rewards the executive officer for his or her expected performance prior to the change in control transaction.

For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control.”

Perquisites and Other Personal Benefits

We do not provide our executive officers, including the NEOs, with perquisites or other personal benefits, except for the use of Company aircraft, Company-provided vehicles and drivers, and, in the case of our CEO and Vice Chairman, security services. These items are provided because we believe that they serve a necessary business purpose and represent an immaterial element of our executive compensation program. The cost allocated to the personal use of Company-provided vehicles and drivers, including commuting expenses, and the incremental cost associated with the security services, to the extent not reimbursed to us, are reported in the Summary Compensation Table. Our executive officers, including the NEOs, are required to reimburse us for the incremental cost of any personal use of Company aircraft.

We do not provide tax reimbursements or any other tax payments to any of our executive officers.

 

Other Compensation Related Policies

In addition to the other components of our executive compensation program, we maintain the policies described below. These policies are consistent with evolving best practices and help ensure that our executive compensation program does not encourage our executive officers to engage in behaviors that are beyond our ability to effectively identify and manage risk.

Clawback Policy

In 2015, we strengthened our clawback policy to cover all incentive compensation, material financial restatements, and improper conduct (including failure to report).

The revised clawback policy covers all executive officers (including the NEOs) and applies to all incentive-based compensation (including stock options and other equity awards) paid to or in respect of an executive officer. The policy provides that if (i) the Company is required to undertake a material restatement of any financial statements filed with the SEC or (ii) an executive officer

 

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engages in improper conduct that either has had, or could reasonably be expected to have, a significant adverse reputational or economic impact on the Company or any of its affiliates or divisions, then the Board may, in its sole discretion, after evaluating the associated costs and benefits, seek to recover all or any portion of the incentive-based compensation paid to any such executive officer during the three-year period preceding the restatement, or the occurrence of the improper conduct, as the case may be.

The policy also requires us to disclose to our shareholders not later than the filing of the next proxy statement the action taken by the Board, or the Board’s decision not to take action, with regard to compensation recovery following the occurrence of a material restatement or improper conduct, so long as such event has been previously disclosed in our SEC filings.

For purposes of the policy a “restatement” means any material restatement (occurring after the effective date of this Policy) of any of the Company’s financial statements that have been filed with the SEC under the Exchange Act or the Securities Act of 1933, as amended. “Improper conduct” means willful misconduct (including, but not limited to, fraud, bribery or other illegal acts) or gross negligence, which, in either case, includes any failure to report properly, or to take appropriate remedial action with respect to, such misconduct or gross negligence by another person.

Other Long-Term Compensation Recovery Policies

In 2015, we also adopted a “resignation notice period” requirement as part of the terms and conditions of all long-term incentive awards granted to certain designated grades of executives, including the NEOs. The requirement is applicable to awards granted in 2015 and subsequent years. The requirement is intended to reduce the adverse and disruptive effect of a sudden voluntary departure of a participant, and requires participants to provide notice for a specified period prior to the effective date of a voluntary resignation, or otherwise risk forfeiting their outstanding long-term incentive awards.

The terms and conditions of long-term incentive awards also provide for forfeiture in the event participants violate applicable non-solicitation or non-competition agreements.

Process for Approving Long-Term Incentive Awards

The Committee approves long-term incentive awards (including stock options, book value units, performance shares, performance units, and restricted stock units) on an annual basis at its regularly scheduled February meeting.

The Committee has delegated authority to management to approve long-term incentive awards for new hires, promotions, and retention purposes within specified limits below the level of senior vice president. The Committee approves any long-term incentive awards to newly hired or promoted senior executives.

Under the terms of our Omnibus Plan, which was approved by shareholders in 2003, and the 2016 Omnibus Plan, stock options are required to be priced at the closing market price of our Common Stock on the date of grant. The number of shares of Common Stock subject to a stock option grant to an individual is determined by dividing the compensation value by the fair value of each stock option based on the average closing market price of our Common Stock on the NYSE for the final 20-day trading period in the month prior to the grant date.

The number of performance shares and units or restricted stock units awarded to an individual is determined by a formula that divides the compensation value of the award by the average closing market price of our Common Stock on the NYSE for the final 20-day trading period in the month prior to the grant date.

Stock Ownership Guidelines

We have adopted stock ownership guidelines for our executive officers to encourage them to build their ownership position in our Common Stock over time by direct market purchases, making investments available through the PESP and the Deferred Compensation Plan, and retaining shares they earn under long-term incentive awards. In 2015, we revised the guidelines to increase the CEO stock ownership level from 500% to 700% of base salary. The guidelines are framed in terms of stock value as a percentage of base salary as follows:

 

Position		Stock Value as a Percentage of Base Salary
Chief Executive Officer			700%
Vice Chairman and Executive Vice Presidents			300%
Senior Vice Presidents			200%

Each of the NEOs meets his individual stock ownership level. Under the current stock ownership guidelines, once an executive officer attains his or her individual ownership level, he or she will remain in compliance with the guidelines despite future changes in stock price and base salary, as long as his or her holdings do not decline below the number of shares at the time the stock ownership guidelines were met.

 

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Stock Retention Requirements

We have adopted stock retention requirements for our executive officers. Each executive officer is required to retain 50% of the net shares (after payment of the applicable exercise price (if any), fees, and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold such shares until the later of one year following the date of acquisition of such shares (even if this one-year holding period extends beyond termination of employment) or the date that he or she satisfies our stock ownership guidelines.

Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities

Our Board has adopted a policy prohibiting all employees, including the NEOs, and members of the Board from engaging in any hedging transactions with respect to any of our equity securities held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) designed to hedge or offset any decrease in the market value of such equity securities.

Our Board has also adopted a policy prohibiting our Section 16 officers and members of the Board from pledging, or using as collateral, our securities to secure personal loans or other obligations, which includes holding shares of our Common Stock in a margin account.

 

Impact of Tax Policies

DEDUCTIBILITY OF EXECUTIVE COMPENSATION

It is our policy to structure and administer our annual and long-term incentive compensation plans and stock option grants for our CEO and the other NEOs to maximize the tax deductibility of the payments as “performance-based compensation” under Section 162(m) to the extent practicable. In 2015, all such performance-based compensation was deductible. The Committee may provide compensation that is not tax deductible if it determines that such action is appropriate. Further, the rules and regulations promulgated under Section 162(m) are complicated, and may change from time to time, sometimes with retroactive effect. As such, there can be no guarantee that any compensation intended to qualify as “performance-based compensation” will so qualify.

The Omnibus Plan contains an overall limit on compensation paid to each executive officer to comply with the conditions for determining “performance-based compensation” under Section 162(m). Under the terms of the Omnibus Plan, the total amount of annual incentives, book value units, performance shares and units, and restricted stock units awarded to a NEO who is subject to Section 162(m) in a taxable year cannot exceed 0.6% of our pre-tax AOI for the prior year. See Item 4—Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan—Compliance with Code Section 162(m) for limits on awards under the 2016 Incentive Plan.

 

 

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Executive Compensation

2015 Summary Compensation Table

The following table presents, for the years ended December 31, 2015, 2014, and 2013, the compensation of Mr. Strangfeld, our principal executive officer, Mr. Falzon, our principal financial officer, and Messrs. Grier, Lowrey and Pelletier, our three most highly compensated executive officers (other than the principal executive officer and principal financial officer) who were serving as executive officers as of December 31, 2015.

For information on the role of each compensation component within the total compensation packages of the NEOs, please see the relevant description in the “Compensation Discussion and Analysis (“CD&A”).” The compensation data in this table is presented in accordance with the SEC disclosure rules. For the Compensation Committee’s view of 2015 performance year compensation, see the “Supplemental Compensation Analysis — Total Direct Compensation” in the CD&A.

 

 

 

(1)	The amounts reported in the Salary column for 2015 include elective contributions of a portion of their base salary to the SESP by Messrs. Strangfeld, Falzon, Grier, Lowrey, and Pelletier in the amounts of $45,400, $17,092, $37,000, $20,200, and $19,769, respectively.

 

(2)	The amounts reported in the Bonus column represent bonuses paid in February 2014 for performance in 2013.

 

For 2013, this column does not include 30% of the total bonus carved out to the Book Value Performance Program, which will appear in the Non-Equity Plan Compensation column of the Summary Compensation Table, for the applicable fiscal year in which it is paid.

 

The amounts excluded in the table above for 2013 are $2,340,000 for Mr. Strangfeld; $597,000 for Mr. Falzon; $1,950,000 for Mr. Grier; and $1,680,000 for Mr. Lowrey.

 

(3)

The amounts reported in the Stock Awards column represent the aggregate grant date fair value for performance shares and performance units at target in each respective year. The maximum number of performance shares and performance units payable for 2015 and 2014 are 1.25 times the target amounts, and for 2013 are 1.5 times the target amounts.

 

For 2015, the maximum performance shares and units payable and valued at the grant date price of $78.08 to Messrs. Strangfeld, Falzon, Grier, Lowrey, and Pelletier are 77,556 or $6,055,572; 27,374 or $2,137,362; 63,870 or $4,986,970; 41,060 or $3,205,965; and 36,498 or $2,849,764, respectively.

 

For 2014, the maximum performance shares and units payable and valued at the grant date price of $84.53 to Messrs. Strangfeld, Falzon, Grier, Lowrey and Pelletier are 72,158 or $6,099,516; 22,073 or $1,865,831; 59,425 or $5,023,195; 38,203 or $3,229,300; and 12,735 or $1,076,490, respectively. Mr. Pelletier received an additional grant upon his promotion to Executive Vice President in April 2014 that has a maximum number of performance shares and performance units payable and valued at the grant date price of $81.17 of 13,108 or $1,063,976.

 

For 2013, the maximum performance shares and units payable and valued at the grant date price of $57.00 to Messrs. Strangfeld, Falzon, Grier, and Lowrey are 88,713 or $5,056,641; 20,874 or $1,189,818; 73,059 or $4,164,363; and 46,965 or $2,677,005, respectively.

 

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(4)

The amounts reported in the Options Awards column represent the aggregate grant date fair value for stock options granted in each respective year for the prior year’s performance as calculated under ASC Topic 718. The assumptions made in calculating the grant date fair value amounts for these stock options are incorporated herein by reference to the discussion of those assumptions and found below in the Grants of Plan-Based Awards Table. Note that the amounts reported in this column do not necessarily correspond to the actual economic value that will be received by the Named Executive Officers from the options.

 

(5)

The aggregate amounts reported in the Non-Equity Incentive Plan Compensation column for 2015 represent annual incentives paid in February 2016 for performance in 2015, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2016, and additionally in April 2015 for Mr. Pelletier; for 2014 represent annual incentives paid in February 2015 for performance in 2014, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2015:

 

		2015								2014
Name		Annual Incentive Award				Book Value Units Value Paid				Annual Incentive Award				Book Value Units Value Paid
Strangfeld		$	4,140,500			$	4,612,768			$	5,460,000			$	3,813,192
Falzon		$	1,820,000			$	1,266,410			$	2,310,000			$	658,637
Grier		$	3,570,000			$	3,840,736			$	4,550,000			$	3,151,901
Lowrey		$	2,975,000			$	2,902,390			$	3,780,000			$	2,346,216
Pelletier		$	2,240,000			$	1,341,969			$	2,800,000			$	614,542

 

The amounts in this column for 2013 represent the value of the book value units paid in February 2014. For Mr. Falzon, 2015, 2014 and 2013 also include the value of carried interest payments of $4,747, $15,600 and $140,660, respectively.

 

For Mr. Lowrey, 2015, 2014, and 2013 also include the value of carried interest payments of $197,029, $237,147, and $232,360, respectively.

 

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The carried interest payments relate to carried interest programs in which Mr. Falzon and Mr. Lowrey participate as a result of previous positions held within the Company’s Asset Management Business. While Mr. Falzon and Mr. Lowrey are no longer entitled to invest in or be granted new carried interests in these programs, they will continue to receive distributions if and when they are earned.

 

(6)

The amounts reported in the Change in Pension Value column represent the change in the actuarial present value of each NEO’s accumulated benefit under the Merged Retirement Plan, the Supplemental Retirement Plan, and the SERPs, as applicable, determined using interest rate and mortality rate assumptions consistent with those used for our consolidated financial statements on December 31, 2012, December 31, 2013, December 31, 2014 and December 31, 2015, as applicable; namely, the RP 2000 generational mortality table with white collar adjustments for 2012 and 2013, and the RP 2014 generational mortality table with white collar adjustments, and an adjustment to reflect recent Prudential-specific experience for 2014 and 2015, an interest discount rate of 4.05% for 2012, 4.95% for 2013, 4.10% for 2014 and 4.50% for 2015, a Cash Balance Formula interest crediting rate of 4.25% for 2012, 4.25% for 2013, 4.25% for 2014 and 4.25% for 2015, and a PSI Cash Balance Formula interest crediting rate of 5.00% for 2012, 5.00% for 2013, 5.00% for 2014 and 5.00% for 2015. The amounts represented above may fluctuate significantly in a given year depending on a number of factors that affect the formula to determine pension benefits, including age, years of service, and the measurement of average annual earnings.

 

Messrs. Strangfeld and Pelletier accrue pension benefits under the Traditional Pension Formula and Messrs. Falzon, Grier, and Lowrey accrue pension benefits under the Cash Balance Formula (both formulas are described in the “Pension Benefits” section of this proxy statement). In accordance with the provisions of the Traditional Pension Formula, the years of earnings used for determining Average Eligible Earnings change every two years (most recently on January 1, 2014).

 

The amounts reported in this column include payments from the Supplemental Retirement Plan of $485 for Mr. Falzon, $2,431 for Mr. Grier and $1,395 for Mr. Lowrey in 2013; $2,524 for Mr. Falzon, $21,367 for Mr. Grier and $13,899 for Mr. Lowrey in 2014; and $5,549 for Mr. Falzon, $29,589 for Mr. Grier and $20,597 for Mr. Lowrey in 2015; and above-market interest on the SESP of $2,451 for Mr. Strangfeld, $79 for Mr. Falzon, $1,616 for Mr. Grier and $635 for Mr. Lowrey in 2013; $82 for Mr. Strangfeld, $6 for Mr. Falzon, $56 for Mr. Grier, $24 for Mr. Lowrey and $17 for Mr. Pelletier in 2014; and $4,229 for Mr. Strangfeld, $359 for Mr. Falzon, $2,905 for Mr. Grier, $1,235 for Mr. Lowrey and $917 for Mr. Pelletier in 2015.

 

The actual change in pension value for Mr. Strangfeld in 2013 was $(856,310) and in 2015 was $(382,375). In accordance with SEC instructions, the amount included in this column for the change in pension value for 2013 and 2015 is $0.

 

(7)	The amounts reported in the All Other Compensation column are itemized in the supplemental “All Other Compensation” table below.

 

(8)	Mr. Pelletier was appointed an executive officer in April 2014.

All Other Compensation

 

		Year				Perquisites(1)				PESP  Contributions(2)				SESP  Contributions(2)				Total
John R. Strangfeld			2015			$	32,371			$	8,615			$	45,400			$	86,386
			2014			$	32,437			$	8,615			$	45,800			$	86,852
			2013			$	33,508			$	8,615			$	45,800			$	87,923
Robert M. Falzon			2015			$	14,800			$	8,308			$	17,092			$	40,200
			2014			$	15,047			$	8,000			$	15,600			$	38,647
			2013			$	12,838			$	7,785			$	13,585			$	34,208
Mark B. Grier			2015			$	30,175			$	10,600			$	37,000			$	77,775
			2014			$	39,243			$	10,400			$	37,200			$	86,843
			2013			$	36,292			$	10,200			$	37,400			$	83,892
Charles F. Lowrey			2015			$	14,395			$	10,600			$	20,200			$	45,195
			2014			$	15,470			$	10,392			$	20,400			$	46,262
			2013			$	17,577			$	10,200			$	20,600			$	48,377
Stephen Pelletier			2015			$	29,849			$	8,173			$	19,769			$	57,791
			2014			$	20,661			$	8,077			$	14,908			$	43,646

 

(1)

For Messrs. Strangfeld and Grier, the amounts reported in the Perquisites column for 2015 represent the incremental cost for security services of $12,772 and $7,672, respectively, and the costs associated with Company-provided vehicles for personal and commuting purposes of $19,599 and $22,503, respectively. For Messrs, Falzon, Lowrey and Pelletier, the amounts reported represent the costs of commuting and limited personal use of Company-provided vehicles. The amounts reported in the table for commuting and personal use of vehicles reflect our determination of the costs allocable to the actual commuting and personal use of each individual and are based on a formula that takes into account various expenses, including costs associated with the driver and fuel.

 

(2)

The amounts reported in the PESP and SESP Contributions columns represent our contributions to the account of each NEO under (a) The Prudential Employee Savings Plan (the “PESP”), a defined contribution plan which provides employees with the opportunity to contribute up to 50% of eligible earnings in any combination of before-tax, Roth 401(k) and/or after-tax contributions (subject to Internal Revenue Code limits) and (b) the Prudential Supplemental Employee Savings Plan, a non-qualified plan which provides employees who exceed the Internal Revenue Code earnings limit ($265,000 in 2015) with the opportunity to defer up to 4% of eligible earnings in excess of the earnings limit. We match 100% of the first 4% of an employee’s before-tax or Roth 401(k) deferrals under the PESP (after one year of service) and 100% of an employee’s deferrals under the SESP.

 

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Table of Contents

		Executive Compensation

 

 

Supplemental Compensation Analysis

 

 

CEO TOTAL COMPENSATION

Grant Date Fair Value vs. Realized and Realizable Gains (in thousands)

 

•    Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.   •    Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2012 and paid in February 2015 based on an earnout factor of 1.5 times target valued at the December 31, 2014 share price of $90.46; performance shares and units awarded in 2013 and 2014 valued at target based on the $90.46 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2014 at $64.75 per unit; and the intrinsic value of stock options awarded in each year based on the $90.46 share price as of December 31, 2014.   •    For 2012 and 2013, a key reason why grant date and realized/realizable pay differ is that the intrinsic value of the stock options and the value of the performance shares and units awarded in each year are significantly higher when valued as of December 31, 2014. Another contributing factor to the higher realized/realizable pay for 2012 is that the 2012 performance shares program payment is 1.5 times target reflecting the achievement of our sustainable ROE objective of 13% to 14%. There is little difference between the 2014 grant date and realized/realizable pay amounts consistent with the relatively small change in our share price in 2014.				•    Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.   •    Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2013 and paid in February 2016 based on an earnout factor of 1.5 times target valued at the December 31, 2015 share price of $81.41; performance shares and units awarded in 2014 and 2015 valued at target based on the $81.41 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2015 at $73.59 per unit; and the intrinsic value of stock options awarded in each year based on the $81.41 share price as of December 31, 2015.   •    For 2013, a key reason why grant date and realized/realizable pay differ is that the intrinsic value of the stock options and the value of the performance shares and units awarded are significantly higher when valued as of December 31, 2015. Another contributing factor to the higher realized/realizable pay for 2013 is that the 2013 performance shares program payment is 1.5 times target reflecting the achievement of our sustainable ROE objective of 13% to 14%. For 2014 and 2015, the difference is primarily due to the lower realizable gain for stock options versus the grant date fair value.

 

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Table of Contents

		Executive Compensation

 

 

Grants of Plan-Based Awards

The following table presents, for each of the NEOs, information concerning awards under our Long-Term Incentive Program (including our Book Value Performance Program) and grants of equity awards made during 2015 for 2014 performance.

2015 Grants of Plan-Based Awards Table

 

Name		Grant Date				Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)1												Estimated Future Payouts Under Equity Incentive Plan Awards2								All Other Option Awards; Number of Securities Underlying Options (#)3				Exercise or Base Price of Option Awards ($/Sh)				Grant Date Fair Value of Stock and Option Awards($)4
						Number of Book Value Units (#)				Target ($)				Maximum ($)				Target (#)				Maximum (#)
John R. Strangfeld			n/a							$	5,600,000			$	11,200,000
			02/10/15																31,022				38,778											$	2,422,198
			02/10/15																31,022				38,778											$	2,422,198
			02/10/15																								85,902			$	78.08			$	1,584,892
			02/10/15				62,394			$	4,040,012
Robert M. Falzon			n/a							$	2,450,000			$	4,900,000
			02/10/15																10,949				13,687											$	854,898
			02/10/15																10,949				13,687											$	854,898
			02/10/15																								30,319			$	78.08			$	559,386
			02/10/15				24,557			$	1,590,066
Mark B. Grier			n/a							$	4,800,000			$	9,600,000
			02/10/15																25,548				31,935											$	1,994,788
			02/10/15																25,548				31,935											$	1,994,788
			02/10/15																								70,743			$	78.08			$	1,305,208
			02/10/15				51,738			$	3,350,036
Charles F. Lowrey			n/a							$	4,000,000			$	8,000,000
			02/10/15																16,424				20,530											$	1,282,386
			02/10/15																16,424				20,530											$	1,282,386
			02/10/15																								45,478			$	78.08			$	839,069
			02/10/15				38,920			$	2,520,070
Stephen Pelletier			n/a							$	3,000,000			$	6,000,000
			02/10/15																14,599				18,249											$	1,139,890
			02/10/15																14,599				18,249											$	1,139,890
			02/10/15																								40,425			$	78.08			$	745,841
			02/10/15				30,889			$	2,000,063

 

(1)

The amounts reported in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column represent the potential amounts for annual incentives for the 2015 performance year. Actual amounts earned by the NEOs are reflected in the Summary Compensation Table. In addition, individual amounts are reported by grant date to represent the value of the book value units awarded to the NEOs under the Omnibus Plan on February 10, 2015, and reflected in the Number of Book Value Units column, based on the book value per share of the company of $64.75 as originally reported as of December 31, 2014.

 

(2)

The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards columns represent performance shares and performance units awarded to the NEOs under the Omnibus Plan in 2015. Performance share and performance unit awards are granted for a three-year performance period with payout determined at the end of the period based on our performance against our ROE goals. The ROE goals for the 2015 grant are within a range of 10% to 14%.

 

(3)

The amounts reported in the All Other Option Awards column represent the number of stock options granted to each Named Executive Officer under the Omnibus Plan in 2015. These stock options vest one-third each year on the anniversary of the grant date. These stock options expire 10 years from their respective grant date. The exercise price for the February 10, 2015 grant of stock options is the closing price of our Common Stock on the grant date of February 10, 2015 ($78.08 per share).

 

(4)

The amounts in the Grant Date Fair Value column have been calculated in the case of performance shares and performance units as the target number of performance shares and performance units multiplied by the closing price of our Common Stock on the grant date of February 10, 2015 ($78.08 per share).

For stock options, the grant date fair values are hypothetical values developed under a binomial option pricing model, which is a complex, mathematical formula to determine fair value of stock options on the date of grant. The binomial option pricing model is a flexible, lattice-based valuation model that takes into consideration transferability, fixed estimate of volatility, and expected life of the options. As such, the amounts reported in the table are hypothetical values and may not reflect the actual economic value a Named Executive Officer would realize upon exercise.

We made the following assumptions when calculating the grant date fair value of the stock option grants: exercise price is equal to our share price on the grant date, and for the grants of February 10, 2015, 5.57 year life expected for each option, expected dividend yield is 3.0%, risk-free rate of return of 1.61%, and expected price volatility of 34.67%.

 

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Outstanding Equity Awards

The following table provides information on the NEOs’ outstanding equity awards as of December 31, 2015. The equity awards reported in the Stock Awards columns consist of performance share and performance unit awards. The equity awards reported in the Option Awards columns consist of non-qualified stock options.

2015 Outstanding Equity Awards at Fiscal Year-End Table

 

 

							Option Awards1																Stock Awards
Name			Grant Date				Number of Securities Underlying Unexercised Options (# Exercisable)				Number of Securities Underlying Unexercised Options (# Unexercisable)				Option Exercise Price ($	)			Option Expiration Date				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Rights That Have Not Vested (#) 2				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Rights That Have Not Vested ($) 2
John R. Strangfeld			2/10/2015				—				85,902			$	78.08				2/10/2025				77,556			$	6,313,834
			2/11/2014				24,531				49,063			$	84.53				2/11/2024				72,158			$	5,874,383
			2/12/2013				164,729				82,365			$	57.00				2/12/2023				88,714			$	7,222,207
			2/14/2012				223,685				—			$	59.41				2/14/2022
			2/8/2011				170,667				—			$	64.01				2/8/2021
			2/9/2010				135,136				—			$	48.36				2/9/2020
			2/12/2008				146,315				—			$	69.03				2/12/2018
			1/18/2008				143,177				—			$	80.00				1/18/2018
			2/13/2007				66,310				—			$	91.73				2/13/2017
Robert M. Falzon			2/10/2015				—				30,319			$	78.08				2/10/2025				27,374			$	2,228,517
			2/11/2014				7,503				15,008			$	84.53				2/11/2024				22,074			$	1,797,044
			2/12/2013				19,380				19,380			$	57.00				2/12/2023				20,874			$	1,699,352
Mark B. Grier			2/10/2015				—				70,743			$	78.08				2/10/2025				63,870			$	5,199,657
			2/11/2014				20,202				40,405			$	84.53				2/11/2024				59,426			$	4,837,871
			2/12/2013				67,830				67,830			$	57.00				2/12/2023				73,060			$	5,947,815
			2/14/2012				57,895				—			$	59.41				2/14/2022
			2/13/2007				66,310				—			$	91.73				2/13/2017
Charles F. Lowrey			2/10/2015				—				45,478			$	78.08				2/10/2025				41,060			$	3,342,695
			2/11/2014				12,987				25,975			$	84.53				2/11/2024				38,204			$	3,110,188
			2/12/2013				87,209				43,605			$	57.00				2/12/2023				46,966			$	3,823,502
			2/14/2012				105,264				—			$	59.41				2/14/2022
			2/8/2011				74,667				—			$	64.01				2/8/2021
			2/9/2010				41,581				—			$	48.36				2/9/2020
			2/12/2008				41,644				—			$	69.03				2/12/2018
			1/18/2008				35,795				—			$	80.00				1/18/2018
			2/13/2007				7,369				—			$	91.73				2/13/2017
Stephen Pelletier			2/10/2015				—				40,425			$	78.08				2/10/2025				36,498			$	2,971,302
			4/7/2014				4,454				8,910			$	81.17				4/7/2024				13,108			$	1,067,122
			2/11/2014				4,329				8,659			$	84.53				2/11/2024				12,736			$	1,036,838
			2/12/2013				19,380				14,535			$	57.00				2/12/2023				15,658			$	1,274,718
			2/14/2012				22,807				—			$	59.41				2/14/2022
			2/8/2011				11,733				—			$	64.01				2/8/2021
			2/9/2010				2,599				—			$	48.36				2/9/2020
			10/14/2008				4,370				—			$	54.10				10/14/2018
			5/13/2008				1,865				—			$	73.86				5/13/2018
			2/12/2008				3,940				—			$	69.03				2/12/2018
			1/18/2008				17,898				—			$	80.00				1/18/2018
			2/13/2007				6,080				—			$	91.73				2/13/2017

(1)	The options reported in the Option Awards column vest at the rate of one-third per year on the anniversary of the date of grant.

 

(2)

The Equity Incentive Plan Awards columns reflect the number of outstanding performance shares and performance units that would be received by each Named Executive Officer at the maximum payout level for the 2013, 2014, and 2015 grants. The dollar values reported represent the estimated value of the outstanding performance shares and performance units at the maximum payout level for the 2013, 2014 and 2015 grants, based on the closing market price for our Common Stock on December 31, 2015 ($81.41 per share). Performance shares and performance units are subject to a three-year performance period with payout determined at the end of the period based on our performance against our ROE goals.

Grants were made for three-year performance cycles with the 2013 grant as the 2013-2015 performance cycle, the 2014 grant as the 2014-2016 performance cycle, and the 2015 grant as the 2015-2017 performance cycle.

 

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		Executive Compensation

 

 

Option Exercises and Stock Vested

The following table provides information on the value realized by each of the NEOs as a result of the exercise of options and stock awards that vested from January 1, 2015 through December 31, 2015.

2015 Option Exercises and Stock Vested Table

 

Name		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized On Exercise ($)				Number of Shares Acquired on Vesting (#)1				Value Realized On Vesting ($)2
John R. Strangfeld			71,628				633,940				92,310				7,207,565
Robert M. Falzon			4,386				118,308				5,430				423,974
Mark B. Grier			63,669				687,481				71,676				5,596,462
Charles F. Lowrey			53,937				2,585,434				43,440				3,391,795
Stephen Pelletier			9,690				309,122				14,118				1,102,333

 

(1)	The amounts in the Stock Awards—Number of Shares Acquired on Vesting column represent the payout of shares of our Common Stock for the vesting of the 2012 performance shares grants and payout of the 2012 performance units as cash.

 

(2)	The amounts in the Stock Awards—Value Realized on Vesting column represent the product of the number of performance shares and performance units released and the closing sale price of our Common Stock on February 10, 2015, $78.08.

Pension Benefits

The change in Mr. Strangfeld’s pension accrual for 2015 was $(382,375) which was included in the Summary Compensation Table as $0. Pension values may fluctuate significantly from year to year and it is expected that in 2016, should interest rates remain unchanged, the change in Mr. Strangfeld’s pension accrual will be higher due to the two-year reset of our pension plan formula. Alternatively, if the discount rate were to rise, it is possible that Mr. Strangfeld’s change in pension value in future years could also be a negative amount, as it was in 2015 and 2013.

The following table provides information on the defined benefit retirement plans in which the NEOs participate, including the present value of accumulated benefits as of December 31, 2015, except as noted, payable for each of the NEOs under each of these plans determined using interest rate and mortality rate assumptions consistent with those used in our consolidated financial statements; namely, the RP 2014 generational mortality table with white collar adjustments and an adjustment to reflect recent Prudential-specific experience and an interest discount rate of 4.50%. Cash Balance Formula and PSI Cash Balance Formula accounts are assumed to grow with interest at 4.25% and 5.00%, respectively, until commencement of pension benefits. No additional earnings or service after December 31, 2015 are included in the calculation of the accumulated benefits.

2015 Pension Benefits Table

 

Name		Plan Name		Number of Years of Credited Service (#)				Present Value of Accumulated Benefit ($)				Payments During Last Fiscal Year ($)
John R. Strangfeld		Merged Retirement Plan—Traditional Benefit Formula			38				3,323,304				—
		Supplemental Retirement Plan—Traditional Pension Formula			38				72,126,516				—
		Supplemental Retirement Plan—Cash Balance Formula			n/a	(1)			34,310				—
Robert M. Falzon		Merged Retirement Plan—Cash Balance Formula			32	(2)			1,291,775				—
		Merged Retirement Plan—PSI Cash Balance Formula			n/a	(2)			74,475				—
		Supplemental Retirement Plan—Cash Balance Formula			32	(2)			779,870				5,549	(3)
Mark B. Grier		Merged Retirement Plan—Cash Balance Formula			20				2,330,307				—
		Supplemental Retirement Plan—Cash Balance Formula			20				9,054,287				29,589	(3)
Charles F. Lowrey		Merged Retirement Plan—Cash Balance Formula			14				1,754,419				—
		Supplemental Retirement Plan—Cash Balance Formula			14				1,957,431				20,597	(3)
Stephen Pelletier		Merged Retirement Plan—Traditional Benefit Formula			17				1,086,637				—
		Merged Retirement Plan—Cash Balance Formula			n/a	(1)			5,386				—
		Merged Retirement Plan—PSI Cash Balance Formula			n/a	(4)			103,655				—
		Supplemental Retirement Plan—Traditional Pension Formula			17				12,899,854				—
		PSI Supplemental Retirement Plan for Executives			n/a	(4)			304,966				—

 

(1)	This benefit is a result of an allocation of demutualization compensation distributed to all participants in the Merged Retirement Plan in 2002 (“Demutualization Credit”). Ongoing service is not a consideration in determining this benefit for the NEOs.

 

(2)

Mr. Falzon transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula and subsequently, the Cash Balance Formula upon his election of this formula in 2001; in accordance with the Merged Retirement Plan Cash Balance Formula, credited service includes service with the Company’s subsidiaries, in particular Prudential Securities Incorporated. As a result of his transfer, ongoing service is not a consideration in determining his benefit under the PSI Cash Balance Formula.

 

(3)	This payment was a distribution from the Supplemental Retirement Plan Cash Balance Formula to pay for FICA taxes due and accrued in 2014 on this benefit, and federal, state and local taxes on the distributed amount. The entire payment was withheld to pay these taxes.

 

(4)	Mr. Pelletier transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula. As a result, ongoing service is not a consideration in determining this benefit.

 

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		Executive Compensation

 

 

The Merged Retirement Plan

Our wholly owned subsidiary, The Prudential Insurance Company of America, sponsors our tax-qualified defined benefit retirement plan, The Prudential Merged Retirement Plan (the “Merged Retirement Plan”), which is available to our executive officers, including the NEOs, and other salaried U.S. employees. The Merged Retirement Plan has two formulas under which participants may have their retirement benefits for ongoing service determined: the “Traditional Pension Formula” or the “Cash Balance Formula.” In addition, employees who previously worked for Prudential Securities Incorporated also have retirement benefits for their service with Prudential Securities Incorporated under a third component of the Merged Retirement Plan: the “PSI Cash Balance Formula.”

TRADITIONAL PENSION FORMULA

Under the Traditional Pension Formula, employees are fully vested in their accrued benefits. These benefits (which are subject to Internal Revenue Code limits) are determined using the following formula, which is based on Average Eligible Earnings (as defined) and years of Credited Service (as defined):

 

For a separation from service in 2015, Average Eligible Earnings are determined by taking the average of earnings (base salary plus annual incentive payment) over the period beginning January 1, 2007, and ending on the date of separation after dropping the lowest two years of earnings in that period. Under the Traditional Pension Formula, the starting point for the averaging period is moved forward two years on January 1 of every even calendar year. “Covered Compensation” for a year is the average of the Social Security wage bases for the 35 years ending in the year the participant will reach Social Security normal retirement age. Benefits are payable as early as age 55 (with a reduction in benefits) as a single life annuity if not married or an actuarially equivalent 50% joint and survivor annuity if married.

Generally, a participant’s benefit will be determined as the greater of:

 

•

the benefit as determined above calculated at the time of separation from service;

 

•

the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and

 

•

If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. (Messrs. Strangfeld and Pelletier each elected to receive their Supplemental Retirement Plan benefit in the form of a lump sum; consequently, this provision does not apply to them.)

Additional benefits are provided to participants who are eligible to retire upon separation from service. A participant is eligible to retire if he or she separates from service either: (a) after attainment of age 55 (with 10 years of vesting service) or age 65 or (b) due to an involuntary termination (other than for cause or exhausting short-term disability benefits) after attainment of age 50 (with 20 years of continuous service).

If a participant is eligible to retire, he or she is eligible for survivor benefits (with no actuarial reduction), a lesser (or no) reduction in benefit for benefit commencement before age 65, and an additional benefit paid to age 65.

The benefits reported in the Pension Benefits Table above are assumed to commence in the form of a 50% joint and survivor annuity on the later of January 1, 2016 and the date the participant is eligible for an unreduced benefit, i.e., the earlier of (i) the first of the month on or following the later of attainment of age 60 and 30 years of service and (ii) the first of the month on or following attainment of age 65 (“Normal Retirement Date”).

 

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CASH BALANCE FORMULA

The Cash Balance Formula was added to the Merged Retirement Plan in 2001 for employees hired on or after January 1, 2001, except employees of Prudential Securities Incorporated. At that time, we offered a one-time conversion election for the current Merged Retirement Plan participants with benefits under the Traditional Pension Formula to opt to have their individual retirement benefits determined under the Cash Balance Formula. Participants who made this election to use the Cash Balance Formula are fully vested in their Cash Balance Formula benefit. Otherwise, participants are generally vested in their Cash Balance Formula benefit after three years of service.

Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account that is allocated basic credits equal to 2% to 14% (depending on age and service) of base salary and annual incentive payments. Interest credits are made to the hypothetical account each month using an interest rate set each year based on the average yield on 30-year U.S. Treasury securities (constant maturities) for October of the prior year, with a minimum rate of 4.25%. The rate in effect for 2015 was 4.25%.

Active participants on June 30, 2003 received an additional credit equal to his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of January 1, 2002, if any. Active participants on June 30, 2012 received an additional credit of no more than his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of April 1, 2012, if any.

Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity; 50%, 75%, or 100% joint and survivor annuity; or 50% contingent annuity. Employees who made the one-time conversion election to use the Cash Balance Formula (specifically, Messrs. Falzon and Grier) have a frozen “Grandfathered Benefit” determined as the accrued benefit under the Traditional Pension Formula as of January 1, 2002. The value of the Grandfathered Benefit, and early retirement subsidies on this benefit, if applicable, are included in determining the payable benefit.

As reported in the Pension Benefits Table, cash balance accounts are assumed to grow with interest until, and benefits will commence on:

 

•

for Messrs. Strangfeld and Pelletier (whose Cash Balance Formula benefits are due only to the Demutualization Credit), the same date benefits are assumed to commence under the Traditional Pension Formula; and

 

•

for Messrs. Falzon, Grier, and Lowrey, the participant’s Normal Retirement Date.

Benefits are assumed to commence in a form that is based on a value comparison between a lump sum and a 50% joint and survivor annuity.

PSI CASH BALANCE FORMULA

The PSI Cash Balance Formula applies only to employees who previously worked for Prudential Securities Incorporated. At this time, all participants are fully vested in their PSI Cash Balance Formula benefit. Messrs. Falzon and Pelletier are the only NEOs with a benefit under this formula.

PSI Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account. Prior to January 1, 2004, the hypothetical accounts were allocated basic credits equal to 1.7% to 7% (depending on age and service) of eligible earnings. Since then, interest credits only have been made to the hypothetical account each month using an interest rate set each year, with a minimum rate of 5.00%. The rate in effect for 2015 was 5.00%.

Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity; 50%, 75%, or 100% joint and survivor annuity; 50% or 100% contingent annuity; or single life annuity with 5 or 10 years guaranteed.

As reported in the Pension Benefits Table, PSI Cash Balance accounts are assumed to grow with interest until, and benefits will commence on:

 

•

for Mr. Falzon, the participant’s Normal Retirement Date; and

 

•

for Mr. Pelletier, the same date benefits are assumed to commence under the Traditional Pension Formula.

Benefits are assumed to commence with 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity.

 

 

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The Supplemental Retirement Plan and SERPs

The Supplemental Retirement Plan is a non-qualified retirement plan designed to complement the Merged Retirement Plan by providing benefits to all participants of the Merged Retirement Plan, including the NEOs, who are prohibited from receiving additional benefits under the Merged Retirement Plan because of Internal Revenue Code limits. Benefits under the Supplemental Retirement Plan are generally payable at the earlier of six months after separation from service and age 65.

The Prudential Insurance Supplemental Executive Retirement Plan and the PFI Supplemental Executive Retirement Plan (collectively, the “Prudential SERPs”) provide “Early Retirement Benefits” to certain eligible executives, including the NEOs, subject to the approval of our Board and the Committee. Early Retirement Benefits are designed to recognize the service and contributions of eligible executives who are involuntarily terminated by exempting them from the reduction factor for early retirement between the ages of 55 and 65, a reduction of up to 50%, which would otherwise be applicable under the Traditional Pension Formula and the Grandfathered Benefit under the Cash Balance Formula of the Merged Retirement Plan and the Supplemental Retirement Plan. Benefits under the Prudential SERPs are generally payable at the earlier of six months after separation from service and age 65.

No NEO is currently eligible for benefits under the Early Retirement Benefits provision. Upon an involuntary termination of employment, Messrs. Strangfeld, Grier, and Lowrey will not be eligible for benefits under the Early Retirement Benefits provision due to a variety of factors; Messrs. Falzon and Pelletier are potentially eligible for benefits under the Early Retirement Benefits provision. However, were Mr. Falzon to qualify for Early Retirement Benefits, only the Grandfathered Benefit portion of his benefits would not be subject to reduction.

In 2008, the NEOs (with the exception of Mr. Lowrey) were permitted to make an irrevocable election regarding the form of payment for their pension benefits and each NEO (with the exception of Mr. Falzon) elected to receive his Supplemental Retirement Plan and Prudential SERPs benefits, if any, in a lump sum.

The Prudential Securities Incorporated Supplemental Retirement Plan for Executives (“PSI SERP”) was designed to make it more attractive to certain key executives to remain employees of Prudential Securities Incorporated and its subsidiaries. Mr. Pelletier is the only NEO that is accruing benefits under the PSI SERP. Mr. Pelletier’s PSI SERP benefit will be paid as an annuity upon separation from service, irrespective of age. The PSI SERP benefit is determined as a target benefit, less the benefit payable from the PSI Cash Balance Formula and an estimated Social Security retirement benefit. The target benefit is 60% of an employee’s average salary times a ratio of service to 30 years. Mr. Pelletier stopped accruing service credit under this plan upon his transfer to Prudential from Prudential Securities Incorporated.

Notwithstanding the foregoing, benefits reported in the Pension Benefits Table are assumed to commence in the same form and at the same time as under the Merged Retirement Plan benefit to be consistent with assumptions used in the Company’s financial statements.

Nonqualified Deferred Compensation

The following table provides information on the NEOs’ participation in the Prudential Supplemental Employee Savings Plan (The “SESP”) and the Deferred Compensation Plan:

2015 Nonqualified Deferred Compensation Table

Name		Plan				Executive Contributions in Last Fiscal Year ($)1				Registrant Contributions in Last Fiscal Year ($)2				Aggregate Earnings in Last Fiscal Year ($)3				Aggregate Withdrawals/ Distributions($)				Aggregate Balance at Last Fiscal Year End ($)4
John R. Strangfeld			SESP			$	45,400			$	45,400			$	41,147							$	1,271,402
			Deferred Compensation			$	0			$	0			$	140,559			$	0			$	8,287,465
Robert M. Falzon			SESP			$	17,092			$	17,092			$	3,504							$	127,596
			Deferred Compensation			$	0			$	0			$	136,535			$	0			$	2,351,818
Mark B. Grier			SESP			$	37,000			$	37,000			$	28,272							$	881,778
			Deferred Compensation			$	0			$	0			$	0			$	0			$	0
Charles F. Lowrey			SESP			$	20,200			$	20,200			$	12,033							$	383,245
			Deferred Compensation			$	0			$	0			$	832,436			$	0			$	11,859,992
Stephen Pelletier			SESP			$	19,769			$	19,769			$	8,934							$	291,301
			Deferred Compensation			$	0			$	0			$	104,787			$	0			$	10,738,800

 

(1)

The amounts reported in the Executive Contributions in Last Fiscal Year column represent elective contributions of a portion of their base salary to the SESP (which amounts are also included in the Salary Column of the Summary Compensation Table) and elective contributions to the Deferred Compensation Plan from the annual Bonus.

 

(2)	The amounts reported in the Registrant Contributions in Last Fiscal Year column represent the Company’s contributions to each NEO’s SESP account (which amounts are also included in the All Other Compensation column of the Summary Compensation Table).

 

(3)

The amounts reported in the Aggregate Earnings in Last Fiscal Year column include amounts reported for above-market interest on the SESP in the Change in Pension Value column of the Summary Compensation Table. Specifically, $4,229 for Mr. Strangfeld, $359 for Mr. Falzon, $2,905 for Mr. Grier, $1,235 for Mr. Lowrey and $917 for Mr. Pelletier.

 

(4)	The amounts reported in the Aggregate Balance at Last Fiscal Year-End column represent balances from the SESP and the Deferred Compensation Plan and include various amounts previously reported in the Summary Compensation Table as Salary, Bonus or All Other Compensation.

 

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SESP

The SESP is a non-qualified profit-sharing plan designed to provide benefits in excess of amounts permitted to be contributed under the PESP. It allows employees, including the NEOs, to elect to defer from 1% to 4% of their eligible earnings paid after the Code limit is exceeded in the year ($265,000 in 2015) to a hypothetical recordkeeping account on a pre-tax basis through payroll deduction. We match 100% of an employee’s deferrals. Eligible earnings for the NEOs under the SESP are limited to base salary only. Interest is earned on a participant’s account at the same rate as the Fixed Rate Fund under the PESP. This rate is generally set quarterly within a calendar year, and the rate in effect for each quarter of 2015 was 3.50%. A participant’s account is distributed to the employee six months after the participant’s separation from service.

Deferred Compensation Plan

The Deferred Compensation Plan is a non-qualified, unfunded plan that provides certain designated executives in the United States, including the NEOs, with the ability to defer taxation on up to 85% of their annual cash incentive awards. Deferrals may be invested in notional funds that generally mirror the PESP fund offerings, including shares of our Common Stock.

Post-Employment Compensation Arrangements

While we have not entered into employment agreements with our executive officers, including the NEOs, they are eligible to receive certain payments and benefits in the event of a termination of employment, including following a change in control of the Company, under the Severance Plan and Change in Control Program. Mr. Strangfeld does not participate in the Severance Plan.

In the case of the NEOs, and in many cases subject to the approval of our Board, the various payments and benefits provided under the Severance Plan, the Change in Control Program, the Omnibus Plan and other Company programs, as applicable, are as follows:

 

Severance

Annual Incentives

Stock Options

Performance Shares/ Performance Units

Book Value Units

SERP

Additional Retirement Accruals

Health/Life

Voluntary Termination; Early or Normal Retirement

—

Annual Incentive Program

Omnibus Plan*

Omnibus Plan*

Omnibus Plan*

—

Merged Retirement Plan and Supplemental Retirement Plan

—

Involuntary Termination Without Cause

Severance Plan

Annual Incentive Program

Omnibus Plan**

Omnibus Plan**

Omnibus Plan**

Prudential SERP

Merged Retirement Plan and Supplemental Retirement Plan

—

Separation in Connection With Change in Control1

Change in Control Program

Change in Control Program and Annual Incentive Program

Change in Control Program and Omnibus Plan

Change in Control Program and Omnibus Plan

Change in Control Program and Omnibus Plan

Prudential SERP

Merged Retirement Plan and Supplemental Retirement Plan

Change in Control Program

Separation Due to Disability

—

Annual Incentive Program

Omnibus Plan

Omnibus Plan

Omnibus Plan

—

Merged Retirement Plan and Supplemental Retirement Plan

Prudential Welfare Benefits Plan

Separation Due to Death

—

Annual Incentive Program

Omnibus Plan

Omnibus Plan

Omnibus Plan

—

Merged Retirement Plan and Supplemental Retirement Plan

—

See footnotes below.

 

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		Executive Compensation

 

 

 

Estimated Post-Employment Payments and Benefits

Name		Type of Payment or Benefit				Voluntary Termination/Early or Normal Retirement ($)				Involuntary Termination Without Cause ($)				Separation Due to Change In Control ($)				Separation Due to Disability ($)				Separation Due to Death ($)
John R. Strangfeld		Severance Payment													21,106,653	1
		Annual Incentive					5,915,000	2			5,915,000	2			5,600,000				7,076,700				7,076,700
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											7,282,613	4			7,282,613	4			7,282,613	4
				Performance Units											7,282,613	5			7,282,613	5			7,282,613	5
		Book Value Performance		Book Value Units											9,325,987	6			9,325,987	6			9,325,987	6
		Benefits:		SERP
				Health/Life											28,802	7			2,146,590
				Addtl. Retire Accruals			738,060				738,060				284,856				2,409,420				1,205,388
		Total					6,653,060				6,653,060				50,911,524				35,523,923				32,173,301
Robert M. Falzon		Severance Payment									4,150,100				6,362,869	1
		Annual Incentive					2,600,000	2			2,600,000	2			2,450,000				2,066,700				2,066,700
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											2,176,578	4			2,176,578	4			2,176,578	4
				Performance Units											2,176,578	5			2,176,578	5			2,176,578	5
		Book Value Performance		Book Value Units											2,928,073	6			2,928,073	6			2,928,073	6
		Benefits:		SERP							166,140				166,140
				Health/Life											28,802	7			10,531,859
				Addtl. Retire Accruals			264,301				686,177				249,053				3,488,449				212,870
		Total					2,864,301				7,602,417				16,538,093				23,368,237				9,560,799
Mark B. Grier		Severance Payment									10,697,600				17,814,037	1
		Annual Incentive					5,100,000	2			5,100,000	2			4,800,000				5,941,700				5,941,700
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											5,997,556	4			5,997,556	4			5,997,556	4
				Performance Units											5,997,556	5			5,997,556	5			5,997,556	5
		Book Value Performance		Book Value Units											7,749,027	6			7,749,027	6			7,749,027	6
		Benefits:		SERP
				Health/Life											27,402	7			11,071,004
				Addtl. Retire Accruals			666,969				2,065,980				627,735				2,449,072				784,304
		Total					5,766,969				17,863,580				43,013,313				39,205,915				26,470,143
Charles F. Lowrey		Severance Payment									8,680,100				13,231,577	1
		Annual Incentive					4,250,000	2			4,250,000	2			4,000,000				5,016,700				5,016,700
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											3,855,578	4			3,855,578	4			3,855,578	4
				Performance Units											3,855,578	5			3,855,578	5			3,855,578	5
		Book Value Performance		Book Value Units											5,866,816	6			5,866,816	6			5,866,816	6
		Benefits:		SERP
				Health/Life											33,975	7			14,265,139
				Addtl. Retire Accruals			423,944				1,289,796				399,006				4,833,920				506,687
		Total					4,673,944				14,219,896				31,242,530				37,693,731				19,101,359
Stephen Pelletier		Severance Payment									5,892,600				11,212,299	1
		Annual Incentive					3,200,000	2			3,200,000	2			3,000,000				3,158,400				3,158,400
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											2,454,919	4			2,454,919	4			2,454,919	4
				Performance Units											2,454,919	5			2,454,919	5			2,454,919	5
		Book Value Performance		Book Value Units											3,242,302	6			3,242,302	6			3,242,302	6
		Benefits:		SERP							1,597,560				1,855,980
				Health/Life											32,457	7			4,215,163
				Addtl. Retire Accruals			1,498,092				4,073,100				1,352,424				1,467,792				800,784
		Total					4,698,092				14,763,260				25,605,300				16,993,495				12,111,324

(1)	Includes severance payments equal to two times annual cash compensation (subject to execution of a non-competition agreement), and a cash payment for the pension impact of additional two years of credited service.

(2)	Includes annual incentive award amount for 2015 performance.

(3)	For disability and death, accelerated vesting of all stock options with up to three years to exercise.

(4)	Includes the value of 2013, 2014, and 2015 target performance shares paid based on the closing market price of our Common Stock on December 31, 2015 ($81.41 per share).

(5)	Includes the value of 2013, 2014, and 2015 target performance units paid based on the closing market price of our Common Stock on December 31, 2015 ($81.41 per share).

(6)	Includes the value of 2013, 2014, and 2015 book value units paid based on the Company’s book value per share as of December 31, 2015 ($73.59 per share).

(7)	Reflects the expected contribution subsidy for 18 months and the associated tax gross-up. For this purpose, we have assumed the 2016 premium and contribution rates continue for the full 18 months.

 

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General Information About The Meeting

Voting Instructions and Information

Who Can Vote

You are entitled to vote your Common Stock if our records show that you held your shares as of the record date, March 11, 2016. At the close of business on that date, a total of 444,281,231 shares of Common Stock were outstanding and entitled to vote. Each share of Common Stock is entitled to one vote at this Annual Meeting. Your voting instructions are confidential and will not be disclosed to persons other than those recording the vote, except if a shareholder makes a written comment on the proxy card, otherwise communicates his or her vote to management, as may be required in accordance with the appropriate legal process, or as authorized by you.

Voting Your Proxy

If your Common Stock is held through a broker, bank or other nominee (held in street name), you will receive instructions from such entity that you must follow in order to have your shares voted. If you want to vote in person, you must obtain a legal proxy from your broker, bank or other nominee and bring it to the meeting, and submit it with your vote.

If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may instruct the proxies how to vote by following the instructions listed on the Notice of Internet Availability or the proxy card to vote online, or by signing, dating and mailing the proxy card in the postage-paid envelope. Of course, you can always come to the meeting and vote your shares in person.

Whichever method you select to transmit your instructions, the proxies will vote your shares in accordance with those instructions. Except as discussed below with respect to shares held in certain company plans, if you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board of Directors: for each director nominee, for ratification of the appointment of the independent registered public accounting firm, for the advisory vote to approve named executive officer compensation, for approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan, and against the shareholder proposal regarding an independent Board Chairman.

Special Voting Instructions for Plan Shares

If you are a participant in The Prudential Employee Savings Plan (“PESP”) and your account is invested in the Common Stock Fund, you may instruct the PESP Trustee how to vote the shares of Common Stock credited to your PESP account and held in the Fund on March 8, 2016. The PESP Trustee, the shareholder of record, will vote these shares in accordance with your instructions or, if you do not provide voting instructions, in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions subject to the terms of the PESP plan document, its trust agreement and applicable law. If you hold shares of Common Stock through your participation in the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan (collectively, “the Plan”), on March 11, 2016 those shares will be voted by the Plan administrator in accordance with your instructions or, if you do not provide voting instructions, in accordance with the Board of Directors’ recommendation subject to the terms of the Plan and applicable law.

Matters to Be Presented

We are not aware of any matters to be presented at the Annual Meeting other than those described in this proxy statement. If any matters not described in this Proxy Statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is adjourned or postponed, the proxies can vote your shares at the adjournment or postponement as well.

Revoking Your Proxy

If you hold your shares in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. If you are a holder of record and wish to revoke your proxy instructions, you must deliver later-dated proxy instructions, advise the Chief Governance Officer and Corporate Secretary in writing before the proxies vote your shares at the meeting, or attend the meeting and vote your shares in person.

 

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		General Information About The Meeting

 

 

Quorum

A quorum is required to transact business at our Annual Meeting. Shareholders of record holding shares of stock constituting 50% of the shares entitled to be cast shall constitute a quorum. If you have returned valid proxy instructions or attend the meeting in person, your shares will be counted for the purpose of determining whether there is a quorum, even if you abstain from voting on some or all matters introduced at the meeting. In addition, broker non-votes will be treated as present for purposes of determining whether a quorum is present.

Voting Requirements

You may either vote for, against or abstain on each of the proposals. The affirmative vote of a majority of the votes cast is required to approve each proposal. Broker non-votes and abstentions will have no impact, as they are not counted as votes cast. However, for purposes of approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan under New York Stock Exchange rules, abstentions are counted as votes cast and, therefore, will have the same effect as a vote “against” the proposal; broker non-votes are not counted as votes cast and, therefore, will have no impact.

Although the advisory vote in Item 3 is non-binding, as provided by law, our Board will review the results of the vote and, consistent with our commitment to shareholder engagement, will take it into account in making a determination concerning executive compensation. If you hold your shares in street name, and you do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares in their discretion on the election of directors, the advisory vote to approve executive compensation, the approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan, or the shareholder proposal regarding an independent Board Chairman, but may still be permitted to vote your shares in their discretion on the ratification of the independent registered public accounting firm.

Election of Directors

At the meeting, each nominee must receive the affirmative vote of a majority of the votes cast with respect to his or her election in order to be elected. If an incumbent nominee is not elected by the requisite vote, he or she must tender his or her resignation, and the Board, through a process managed by the Corporate Governance and Business Ethics Committee, will decide whether to accept the resignation.

BOARD RECOMMENDATIONS

 

Cost of Proxy Solicitation

We are providing these proxy materials in connection with the solicitation by the Company’s Board of Directors of proxies to be voted at our Annual Meeting. We will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, we expect that a number of our employees will solicit shareholders personally, electronically and by telephone. None of these employees will receive any additional compensation for doing this. We have retained Georgeson, Inc. to assist in the solicitation of proxies for a fee of $25,000 plus reimbursement of expenses. We will, on request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.

Attending the Annual Meeting

If you attend the Annual Meeting, you will be asked to present valid, government-issued photo identification, such as a driver’s license. If you are a holder of record, the top half of your proxy card or your Notice of Internet Availability is your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares, and submit it with your vote.

Attendance at the Annual Meeting is limited to shareholders of Prudential as of the record date. Each shareholder may appoint only one proxy holder or representative to attend the Annual Meeting on his or her behalf.

 

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Submission of Shareholder Proposals and Director Nominations

Proposals and Director Nominations for Inclusion in the Proxy Statement for the 2017 Annual Meeting

In order to submit shareholder proposals for the 2017 Annual Meeting of Shareholders for inclusion in our Proxy Statement pursuant to SEC Rule 14a-8, materials must be received by the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark, New Jersey, no later than the close of business on November 22, 2016.

In March 2015, we amended our By-laws to proactively adopt proxy access, which permits a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding capital stock for at least three years, to submit director nominees for up to 20% of the Board for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in our By-laws. Notice of director nominations submitted under these proxy access By-law provisions must be received no earlier than December 11, 2016 and no later than January 10, 2017. However, if the 2017 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 2017 Annual Meeting was mailed or public disclosure of the meeting date was made.

Proposals submitted for inclusion in our Proxy Statement must comply with all of the requirements of SEC Rule 14a-8, and director nominations submitted pursuant to the proxy access provisions of our By-laws must comply with all of the requirements of our By-laws. As the rules of the SEC and our By-laws make clear, simply submitting a proposal or nomination does not guarantee its inclusion.

Other Proposals or Director Nominations for Presentation at the 2017 Annual Meeting

Our By-laws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the Proxy Statement, but that a shareholder instead wishes to present directly at an Annual Meeting. To be properly brought before the 2017 Annual Meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark (see below) not less than 120 or more than 150 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Company’s By-laws (and not pursuant to SEC Rule 14a-8) must be received no earlier than December 11, 2016, and no later than January 10, 2017. However, if the 2017 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 2017 Annual Meeting was mailed or public disclosure of the meeting date was made. All director nominations and shareholder proposals must comply with the requirements of the Company’s By-laws, a copy of which may be obtained at no cost from the Chief Governance Officer and Corporate Secretary. The Chairman may refuse to acknowledge or introduce any such matter at the Annual Meeting if notice of the matter is not received within the applicable deadlines or does not comply with the Company’s By-laws. If a shareholder does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual Meeting.

All proposals and director nominations should be addressed to: Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, Prudential Financial, Inc., 751 Broad Street, Newark, NJ 07102.

Eliminating Duplicative Proxy Materials

A single Proxy Statement and Annual Report, along with individual proxy cards, or individual Notices of Internet Availability, will be delivered in one envelope to multiple shareholders having the same last name and address and to individuals with more than one account registered at Computershare with the same address unless contrary instructions have been received from an affected shareholder.

If you would like to enroll in this service or receive individual copies of all documents, now or in the future, please contact Computershare by calling 1-800-305-9404 or writing Computershare, P.O. Box 43033, Providence, RI 02940-3033. We will deliver a separate copy of all documents to a shareholder at a shared address to which a single copy of the documents was delivered promptly upon request to the address or telephone number provided above.

 

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		General Information About The Meeting

 

 

Delivery of Proxy Materials

We want to communicate with you in the way that is most convenient for you. You may choose to receive either a full set of printed materials—which will include an Annual Report, Proxy Statement, and proxy card—or an email with instructions for how to view the materials and vote online. To select a method of delivery during the voting season, registered shareholders may follow the instructions when voting online at www.investorvote.com/prudential. Following the 2016 Annual Meeting, you may continue to choose your method of delivery of future documents by visiting www.computershare.com/investor. If you own shares indirectly through a broker, bank, or other nominee, please contact your financial institution for additional information regarding delivery options.

If you do not choose a method of delivery as outlined above, you may receive a one-page Notice of Internet Availability instructing you how to access the materials and vote in lieu of printed or electronic materials. As a publicly traded company, Prudential is legally required to make these materials available to all shareholders and it is not possible to opt out of the mailing.

Important Notice Regarding the Availability of Proxy Materials for the 2016 Annual Meeting of Shareholders to Be Held on May 10, 2016: Our 2016 Proxy Statement and Annual Report for the year ended December 31, 2015, are available free of charge on our website at www.prudential.com/governance.

Annual Report on Form 10-K

The Company will provide by mail, without charge, a copy of its Annual Report on Form 10-K, at your request. Please direct all inquiries to the Company’s Corporate Information Service at 1-877-998-ROCK (7625) or 751 Broad Street, Newark, NJ 07102.

Incorporation By Reference

To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of Prudential Financial under the Securities Act of 1933 or the Exchange Act, the sections of this Proxy Statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and “Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.

Shareholder List

A list of shareholders entitled to vote at the Annual Meeting will be available for examination by shareholders at the Annual Meeting.

 

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CONSISTENT ACTIONABLE RESPONSIVE EFFECTIVE Year round Committed to open, Shareholder Proactive shareholder communications cycle interactive dialogue feedback is reflected engagement with large and small in Prudential’s philosophy benefits all shareholders governance practices registered, retail, and and executive institutional investors compensation plan PAPERS PRODUCED UNDER A SUSTAIN- ABLE FOREST MANAGEMENT PROGRAM. PRINTED USING VEGETABLE-BASED INKS AND RENEWABLE ENERGY. PRINTED ON RECYCLED PAPER WITH 10% POST-CONSUMER WASTE.

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Proxy/Voting Instruction Form

q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

A		Proposals — The Board of Directors recommends a vote FOR the election of each director nominee listed in Proposal 1.

 

1. Election of Directors:

For

Against

Abstain

For

Against

Abstain

For

Against

Abstain

+

01 - Thomas J. Baltimore, Jr.

¨

¨

¨

05 - Martina Hund-Mejean

¨

¨

¨

09 - Sandra Pianalto

¨

¨

¨

02 - Gilbert F. Casellas

¨

¨

¨

06 - Karl J. Krapek

¨

¨

¨

10 - Christine A. Poon

¨

¨

¨

03 - James G. Cullen

¨

¨

¨

07 - Peter R. Lighte

¨

¨

¨

11 - Douglas A. Scovanner

¨

¨

¨

04 - Mark B. Grier

¨

¨

¨

08 - George Paz

¨

¨

¨

12 - John R. Strangfeld

¨

¨

¨

13 - Michael A. Todman

¨

¨

¨

 

The Board of Directors recommends a vote FOR Proposal 2, 3 and 4.

For

Against

Abstain

2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2016.

¨

¨

¨

The Board of Directors recommends a vote AGAINST Proposal 5.

For

Against

Abstain

3. Advisory vote to approve named executive officer compensation.

¨

¨

¨

5. Shareholder proposal regarding an independent Board Chairman.

¨

¨

¨

4. Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan.

¨

¨

¨

 

B		Non-Voting Proposal – Please select one option or leave blank if you do not want to participate.

I would like a free tote bag from Prudential.  ¨    I prefer Prudential plant a tree in my honor.      ¨

 

C		Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

 

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) — Please print date below.		Signature 1 — Please keep signature within the box.		Signature 2 — Please keep signature within the box.

/    /

 

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		ANNUAL MEETING OF SHAREHOLDERS
		May 10, 2016, 2:00 p.m.
		751 Broad Street, Newark, New Jersey 07102

If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

This card covers the total number of shares of Prudential Financial, Inc. Common Stock (“Common Stock”) registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 11, 2016, and may also cover the total number of shares of Prudential Financial, Inc. Common Stock held in The Prudential Employee Savings Plan (“PESP”) on March 8, 2016. Or, this card may cover the total number of shares of Prudential Financial, Inc. Common Stock for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) registered in your name with Computershare as of the close of business on the record date of March 11, 2016.

You only need to vote once. This card enables you to submit your vote on your Registered Shares; to provide voting instructions to the PESP Trustee for your PESP shares; or to submit voting instructions for your International portion of the Prudential Stock Purchase Plan shares.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 10, 2016. The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential

q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

Proxy/Voting Instruction Form		Prudential Financial, Inc.		+

This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 10, 2016.

The undersigned, having received the Notice of Meeting and Proxy Statement dated March 22, 2016, appoints Margaret M. Foran, Timothy P. Harris and John R. Strangfeld, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 10, 2016, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.

If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.

Special Voting Instructions for Plan Shares: If you are a participant in The Prudential Employee Savings Plan (“PESP”), or the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan, your shares will be voted by the applicable trustee or administrator in accordance with the instructions indicated on the reverse side or received by internet or telephone. If no instructions are specified, your PESP shares will be voted in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions, and all other shares will be voted by the plan administrator in accordance with the Board of Directors’ recommendations, in each case, subject to the terms of the applicable plan documents and applicable law.

Comments — We value your feedback. Please provide any comments you have in the space below.

 

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IMPORTANT SHAREHOLDER INFORMATION

YOUR VOTE COUNTS!

 

				ANNUAL MEETING OF SHAREHOLDERS
				May 10, 2016, 2:00 p.m.
				751 Broad Street, Newark, New Jersey 07102
				You can vote and obtain proxy materials online.
				VOTING INSTRUCTIONS ARE LOCATED BELOW

 

Shareholder Meeting Notice & Admission Ticket

Important Notice Regarding the Availability of Proxy Materials for the

Prudential Financial, Inc. Shareholder Meeting to be Held on May 10, 2016

The proxy materials for the annual meeting are available online. The items to be voted on are listed below. Follow the instructions to view the materials and vote online. Your vote is important! To obtain a paper or e-mail copy of the proxy materials follow the instructions on the reverse side.

Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.

The Board of Directors recommends that you vote FOR Proposals 1 – 4:

 

1.

Election of Directors: Thomas J. Baltimore, Jr., Gilbert F. Casellas, James G. Cullen, Mark B. Grier, Martina Hund-Mejean, Karl J. Krapek, Peter R. Lighte, George Paz, Sandra Pianalto, Christine A. Poon, Douglas A. Scovanner, John R. Strangfeld and Michael A. Todman.

 

2.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2016.

 

3.

Advisory vote to approve named executive officer compensation.

 

4.

Approval of the Prudential Financial, Inc. 2016 Omnibus Incentive Plan.

The Board of Directors recommends that you vote AGAINST Proposal 5:

 

5.

Shareholder proposal regarding an independent Board Chairman.

This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.

We encourage you to access and review all of the important information contained in the proxy materials before voting.

The proxy statement and annual report to shareholders are available at www.investorvote.com/prudential.

 

		Easy Online Access — A Convenient Way to Vote!
		If you have access to the Internet, you can complete the process in a few easy steps:
		Step 1: Go to www.investorvote.com/prudential
		Step 2: Click the View buttons to see the proxy statement, which contains details of the proposals to be voted on, and the annual report.
		Step 3: Follow the instructions on the screen to log in.
		Step 4: Make your selection as instructed on each screen to select delivery preferences.
		Step 5: Make your voting selections as instructed on the screen and click the vote button to submit your vote.

PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card.

 

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Shareholder Meeting Notice & Admission Ticket

 

Here’s how to order a copy of the proxy materials and select future delivery preference:

Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below.

E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet or e-mail following the instructions below. If you request an e-mail copy of the materials, you will receive an e-mail with a link to view the materials on the Internet.

PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials.

 

g

Internet – Go to www.investorvote.com/prudential. Follow the instructions to log in and order a paper or e-mail copy of the current meeting materials and submit your preference for e-mail or paper delivery of future meeting materials.

 

g

Telephone – Call us free of charge at 1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings.

 

g

E-mail – Send an e-mail to investorvote@computershare.com with “Proxy Materials Prudential” in the subject line. In the e-mail, include your full name and address, plus the number located in the shaded bar on the reverse side of this document. State in the e-mail whether you want a paper or e-mail copy of the current meeting materials. You can also state your preference for an e-mail or paper copy for future meetings.

If you wish to attend and vote at the meeting, please bring this notice and identification with you.

 

 

Prudential Financial, Inc.’s Annual Meeting of Shareholders will be held on May 10, 2016, at 751 Broad Street, Newark, New Jersey 07102, at 2:00 p.m.

If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

 

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		Margaret M. Foran
		Chief Governance Officer
		Senior Vice President and Corporate Secretary
		Prudential Financial, Inc.
		751 Broad Street, Newark NJ 07102-3777
		March 28, 2016

Dear Shareholder:

As a shareholder, you have the right to vote on important matters that affect Prudential Financial. We take the opinions of Prudential’s shareholders very seriously and we hope you will provide your input by casting your vote on the items in the 2016 Proxy Statement.

Enclosed you will find a Notice of Internet Availability (Notice), which provides information on how to view the materials and cast your vote online. If you would prefer to vote by mail, you may request a paper copy of the proxy materials by visiting www.investorvote.com/prudential, calling 1-866-641-4276, or by sending an email to investorvote@computershare.com.

Additional information regarding the Notice is located on the reverse side of this letter. The SEC has also created an educational website where you can learn more about proxy voting — www.sec.gov/spotlight/proxymatters.shtml.

To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or having a tree planted in your honor. Since this program’s inception, we have planted more than 645,000 trees through our partnership with American Forests and have provided nearly 470,000 bags to our shareholders.

This year’s tree planting initiative will continue to support our work with American Forests in our National Parks.

As always, we thank you for your investment in Prudential.

Sincerely,

 

Margaret M. Foran

Chief Governance Officer,

Senior Vice President and Corporate Secretary

Prudential Financial, Inc.

© 2016 Prudential Financial, Inc., and its related entities. All rights reserved.

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FAQ – Internet Availability of Proxy Materials

The Securities and Exchange Commission (SEC) has issued rules requiring public companies to:

 

•	Make proxy materials (such as the Annual Report and Proxy Statement) available on the Internet

•	Notify shareholders how and where to access those materials online

These rules allow companies to give shareholders more options for reviewing important proxy materials. Information can be made available to shareholders more quickly and conveniently—online documents are easily searchable, enabling shareholders to quickly find the information they need to make informed voting decisions.

The SEC also allows companies to send a one-page Notice to holders with instructions on how to access the materials online, rather than sending a full set of materials. Our reasons for choosing the notice-only option are to:

 

•	Adopt more sustainable practices and be more environmentally responsible—by shrinking our carbon footprint through reductions in ink and paper used in printing and fuel used in shipping

•	Increase shareholder value—by reducing print and mail costs

Please refer to the information below to learn more and to find out what your options are as a shareholder to view materials and vote.

 

 

One of your key privileges as an investor is the right to vote on important matters that affect the company you own shares in.   Please vote. Your vote is important to us and our business.

 

002CSN35BA		© Copyright 2016 Computershare Limited. All rights reserved.

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						Dear Shareholder:
						This package includes your proxy and voting materials. We care about what you think and voting is an important way for you to let us know how we’re doing.
						To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or having a tree planted in your honor. Since its inception, this program has resulted in over 645,000 trees being planted and provided nearly 470,000 tote bags to our shareholders. This year’s tree planting will continue our work with American Forests in our National Parks.
						Whether you vote via the Internet, phone, or mail, you can indicate your choice of either the bag or a tree planted in your honor. If you elect to receive a bag, you can expect to receive your free gift around the end of June.
						Thank you,
						Margaret M. Foran
						Chief Governance Officer,
						Senior Vice President and Corporate Secretary,
						Prudential Financial, Inc.

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