Table of Contents
Notice of 2017 Annual Meeting
and Proxy
Statement
Table of Contents
REPORT FROM
INDEPENDENT DIRECTORS TO STOCKHOLDERS |
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The Allstate Corporation 2775
Sanders Road Northbrook, IL
60062 |
April 12,
2017
As independent directors we proactively
oversee corporate governance, strategy, business performance, executive
compensation and succession and capital management. Our objectives are to
support Allstate in meeting its obligations to customers, stockholders,
employees, business partners and society. This report summarizes our major
accomplishments in 2016, which are also discussed in more detail in the proxy
statement.
CORPORATE GOVERNANCE
Our governance responsibilities are built
on a foundation of interactive dialogue with stockholders and external
governance firms, written principles and continuous improvement. Allstate has a
long history of proactively reaching out multiple times a year to its largest
stockholders to discuss governance trends and issues. In 2016, these discussions
included our independent lead director, chair of the nominating and governance
committee and our Chairman. Feedback was evaluated by the full Board and several
important changes were implemented in 2016.
● |
Strengthened the Lead Director
Role Last year a proposal to
prospectively split the role of Chair and CEO received support from less
than a majority of shares outstanding, but at a significant enough level
to warrant a closer review. Our stockholder discussions made it apparent
that we should formalize existing practices and institute additional
changes to strengthen the lead director role. As a result, we formalized
the lead directors role in approving Board meeting agendas, schedules and
meeting materials, and the lead directors ability to call meetings of the
independent directors. We also revised our governance guidelines to
require that only independent directors elect the lead director and
established the expectation that the lead director serve for more than one
year. Lead director duties are fully described on page 21 of the proxy
statement. |
● |
Expanded Committee Chair
Responsibilities We formally
extended to the committee chairs the power to approve committee
agendas and meeting materials. |
● |
Strengthened Cybersecurity
Oversight In 2013, we created a risk and
return committee to better oversee enterprise risk and return activities
and free up audit committee time for cybersecurity oversight. In 2016, the
audit committee engaged its own independent cybersecurity advisor to
provide additional independent oversight. While this advisor does not
attest to results, as Deloitte & Touche LLP does for our annual
audited financial statements, it is another step in adding cybersecurity
monitoring capabilities and ensuring independent evaluation and
oversight. |
● |
Enhanced Board
Capabilities Allstates 11 member Board
includes 10 independent directors who are highly qualified to oversee the
business and provide expertise to support management, and have an average
tenure of seven years. Half of the nominees bring gender or ethnic
diversity, and currently hold four of the five Board leadership roles. We
continuously look for opportunities to refresh our Board to augment its
skills and expertise and this year added Perry Traquina, the former chair and
chief executive officer of Wellington Management Company, one of the
nations largest investors. Our independent directors, as a whole, bring
expertise in financial services, technology, data and analytics, customer
service, leadership, talent management, investment management and
strategic expansions. Directors participated in external training and
director forums in 2016. |
STRATEGY AND BUSINESS PERFORMANCE
Since the pace of economic change
continues to accelerate, a diligent board must simultaneously focus on current
performance and long-term strategy. As part of strategic planning, the Board
reviews Allstates relative competitive positioning and alternatives to maximize
profitable growth. In 2016, we focused on overseeing managements operating
performance, execution of the customer segmented go-to-market strategy and
investment activities. In addition, we spent considerable time discussing the
strategic options to take advantage of a changing personal transportation
system, and a new entity, Arity LLC, was launched to fully leverage and expand
automotive telematics offerings. We also approved the acquisition of
SquareTrade, a protection plan provider for consumer electronics and connected
devices.
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www.allstate.com |
Table of Contents
EXECUTIVE COMPENSATION AND SUCCESSION
The Board and compensation and succession
committee spend a considerable amount of time on executive compensation and
succession planning. Executive compensation programs are designed, with
assistance from an independent consultant, to be aligned with our strategy, key
performance metrics and total shareholder returns. These programs are working
effectively, as reflected by the stockholder advisory vote with 95% support for
each of the last three years. Several enhancements to these programs were made
in 2016.
● |
Annual Incentive Plan Total return on the investment portfolio was added as a
funding measure for the annual incentive compensation pool. This change holds
management accountable for both short-term income and the market value of the
portfolio on an annual basis. |
● | Management Stock Ownership Requirements
The CEO is required to hold a minimum of 6
times salary but currently holds a multiple of 34 times, reflecting a culture of
strong equity ownership. This year, the holding requirement for the President
and all executive vice presidents was aligned to a consistent multiple of 3
times salary. Beginning with awards granted in 2014, there is also a one year
holding period for a portion of the net shares received from equity
grants. |
● | Succession Planning We expanded our succession planning discussions to four times
a year. The processes are designed to ensure sufficient in-house talent is
available for all senior management positions by incorporating individual
reviews, scenario planning, specific development plans and one-on-one meetings
with more than 20 senior leaders and Board members. |
SHAREHOLDER RETURNS
Total shareholder return was 21.5%, 43.2%
and 196.6% over the last one, three and five years, respectively, which compares
favorably to the Companys peers and the S&P 500 Index. The annual dividend
was raised by 10% and a $1.5 billion share repurchase plan was approved in May
2016.
SOCIETAL RESPONSIBILITIES
The Board also ensures that Allstate
fulfills its role as a key member of the communities in which it operates. This
includes operating with integrity, participating in an appropriate manner in
public policy development and being a force for good by supporting youth
empowerment and helping victims of domestic violence. Allstate and The Allstate
Foundation helped over 4,800 nonprofit social service organizations in 2016.
These activities are discussed in detail in Allstates corporate social
responsibility report (http://corporateresponsibility.allstate.com/).
Stockholder interaction and dialogue are a
key input to effectively executing our fiduciary Board duties, and consequently
we value the insights and suggestions of all stockholders. You can reach us at
directors@allstate.com.
We want to thank Herb Henkel who will be
retiring from the Board in May. We are thankful for his wise counsel and
strategic expertise over the last four years.
Thank you for your continued support of
Allstate.
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Kermit R. Crawford |
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Michael L. Eskew |
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Herbert L. Henkel |
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Siddharth N. (Bobby) Mehta |
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Jacques P. Perold |
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Andrea Redmond |
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John
W. Rowe |
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Judith A. Sprieser |
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Mary
Alice Taylor |
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Perry M. Traquina |
The Allstate
Corporation |
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3 |
Table of Contents
NOTICE OF 2017 ANNUAL MEETING OF
STOCKHOLDERS
When: |
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Thursday, May 25, 2017, at 11:00 a.m.
Central time. Registration begins at 10:00 a.m. |
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Where: |
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Allstate, North Plaza Auditorium
2775 Sanders Road Northbrook, Illinois 60062 |
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Items
of Business: |
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Proposal 1 Election of 10
directors.
Proposal 2 Say-on-pay: advisory vote on the compensation of
the named executives.
Proposal 3 Advisory vote on the
frequency of future advisory votes on the compensation of the named
executives.
Proposal 4 Approval of The
Allstate Corporation 2017 Equity Compensation Plan for Non-Employee
Directors.
Proposal 5 Ratification of
appointment of Deloitte & Touche LLP as Allstates independent
registered public accountant for 2017.
Proposals 6 through 8 Three
stockholder proposals, if properly presented at the meeting.
In addition, any other business
properly presented may be acted upon at the meeting. |
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Who
Can Vote: |
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Holders of Allstate common stock at
the close of business on March 27, 2017. Each share of common stock is
entitled to one vote for each director position and one vote for each of
the other proposals. |
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Who
Can Attend: |
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Stockholders who wish to attend the
meeting in person should review page 87. |
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Date
of Mailing: |
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On or about April 12, 2017, these
proxy materials and annual report are being mailed or made available to
stockholders and to participants in the Allstate 401(k) Savings
Plan. |
By Order of the Board,
Susan L. Lees
Secretary
April 12, 2017
How To
Vote In Advance
Your vote is important. Please vote as
soon as possible by one of the methods shown below. Make sure to have your proxy card, voting instruction form, or notice of
Internet availability in hand and follow the instructions.
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By Telephone: In the U.S. or Canada, you can vote your shares
toll-free by calling 1-800-690-6903. |
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By
Internet:
You can vote your shares online at www.proxyvote.com. |
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By Mail: You can vote by mail by marking, dating, and signing
your proxy card or voting instruction form and returning it in the
postage-paid envelope. |
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By Tablet or
Smartphone: You can vote your shares
online with your tablet or smartphone by scanning the QR
code. |
Important Notice Regarding the
Availability of Proxy Materials for the Stockholder Meeting to Be Held on
May 25, 2017
The Notice of 2017 Annual Meeting, Proxy Statement, and 2016
Annual Report and the means to vote by Internet are available at
www.proxyvote.com. |
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www.allstate.com |
Table of Contents
PROXY SUMMARY
This summary highlights selected
information about the items to be voted on at the annual meeting. This summary
does not contain all of the information that you should consider in deciding how
to vote. You should read the entire proxy statement carefully before
voting.
Meeting
Agenda and Voting Recommendations
1 |
Election of 10 Directors |
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The Board
recommends a vote FOR each of the director nominees.
●Diverse slate of directors with broad leadership experience; four
of five leadership roles bring gender or ethnic diversity.
●All candidates are highly successful executives with relevant
skills and expertise.
●Average director tenure of 7 years with 9 of 10 independent of
management.
●Proactive stockholder engagement.
●Exceptional corporate governance ratings. |
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See pages 11-16 for further information |
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Name |
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Principal Professional
Experience(1) |
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Years of Tenure |
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#
of Other Public Company Boards |
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Committee Memberships(2) |
AC |
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CSC |
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NGC |
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RRC |
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EC |
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Kermit R.
Crawford |
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President, Pharmacy, Health and Wellness for Walgreen
Co. |
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4 |
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1 |
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Michael L.
Eskew |
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Chairman and CEO of United Parcel Service, Inc. |
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3 |
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3 |
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Siddharth N. Mehta |
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President and CEO of TransUnion |
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3 |
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2 |
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Jacques P.
Perold |
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President of Fidelity Management & Research
Company |
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1 |
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1 |
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Andrea
Redmond |
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Managing Director of Russell Reynolds Associates
Inc. |
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7 |
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0 |
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● |
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John W. Rowe |
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Chairman and CEO of Exelon Corporation |
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5 |
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3 |
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Judith
A. Sprieser Lead Independent Director |
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CEO of Transora, Inc.
and senior executive at Sara Lee Corporation |
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18 |
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2 |
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Mary Alice
Taylor |
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Senior executive at Citicorp and FedEx Corporation |
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19 |
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0 |
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Perry M. Traquina(3) |
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Chairman, CEO and Managing Partner of Wellington Management
Company, LLP |
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<1 |
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2 |
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Thomas J. Wilson |
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Chair and CEO of The Allstate Corporation |
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11 |
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1 |
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AC
= Audit
Committee |
RRC = Risk and Return Committee |
CSC = Compensation and Succession Committee |
EC
= Executive
Committee |
NGC = Nominating and Governance Committee |
= Chair of
Committee |
(1) |
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Except for Mr. Wilson, the
professional experiences listed are the nominees former principal
occupations. |
(2) |
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Committee assignments for 2017
will be made after the annual election of directors. |
(3) |
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Consistent with Allstates
onboarding practices, committee assignments for Mr. Traquina will be
established during his first year of
service. |
The Allstate
Corporation |
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5 |
Table of Contents
2017 Proxy Statement |
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Proxy Summary |
BOARD
NOMINEE HIGHLIGHTS
Relevant Skills and Experience |
Tenure |
Diversity |
Broad governance experience by
serving on other public company boards |
Significant corporate leadership
experience in relevant industries |
Mix of seasoned directors who have
been with Allstate through different external operating environments and
fresh perspectives |
Diversity of skill set, experience,
thought, gender, ethnicity and
background |
9 |
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Nine of our nominees have other public board experience |
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8 |
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Eight of our nominees have served as a CEO or President |
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6 |
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Six highly qualified nominees have joined the Board in the last five
years |
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5 |
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Three of our nominees bring gender diversity, and two of our nominees
bring ethnic diversity to the Allstate boardroom |
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10 |
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10 |
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10 |
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10 |
Allstate has a history of strong corporate
governance guided by three primary principles - dialogue, transparency and
responsiveness. The Board has adjusted our governance approach over time to
align with evolving best practices, drive sustained stockholder value and best
serve the interests of stockholders.
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Stockholder Rights |
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Annual election of all
directors |
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Majority vote standard in
uncontested director elections |
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Proxy access
rights |
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No stockholder rights plan
(poison pill) |
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No supermajority voting
provisions |
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Confidential
voting |
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Right to call a special meeting
for stockholders with 10% or more of outstanding
shares |
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Right to request action by
written consent for stockholders with 10% or more of outstanding
shares |
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Stockholder engagement with
holders of approximately 1/3 of outstanding shares each
year |
Independent Oversight |
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Strong independent lead director
role with clearly articulated responsibilities |
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See pages
20-21 for changes made during 2016 |
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Independent Board
committees |
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All directors are independent
except the Chair |
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Executive sessions at every
in-person Board and committee meeting without management
present |
Good Governance |
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Extensive Board dialogue with
formal processes for stockholder engagement and frequent cross-committee
and Board communications |
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Annual report to stockholders
from the independent directors on Board
accomplishments |
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Ongoing Board and committee
self-evaluation process, including at the end of each in-person
meeting |
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See page
18 for information about our evaluation processes |
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Strong annual individual director
evaluation process |
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See page
18 for further information about the individual director
evaluations |
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Comprehensive annual report on
corporate involvement with public policy |
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Robust global code of business
conduct and ethics training for all directors |
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Effective director education
program |
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Strong equity ownership and
retention requirements for
executives |
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www.allstate.com |
Table of Contents
Proxy Summary |
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2017 Proxy
Statement |
Proposal
2 |
Say-on-Pay: Advisory Vote on the Compensation of
the Named Executives |
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The Board
recommends a vote FOR this proposal.
●Independent oversight by compensation and succession committee with
the assistance of an independent consultant.
●Executive compensation targeted at 50th percentile of peers and is
structured to be aligned with total return to shareholders and our
strategy.
●Compensation programs are working effectively. Annual incentive
compensation funding for our named executives in 2016 was 55.1% of target,
from 80.8% of target in the prior year, primarily due to the impact of
auto insurance profit improvement actions on the total premium
measure.
●Total shareholder return compares favorably to
compensation. |
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See pages 32-66 for further information |
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EXECUTIVE COMPENSATION
HIGHLIGHTS
We compensated our named executives using
the following elements for total target direct compensation in 2016:
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Element |
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Description |
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Further Information (pages) |
Targeted at 50th
percentile of
peers |
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Salary |
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Provides a base level of competitive
cash to attract and retain executive talent |
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37, 42 |
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Annual Cash Incentive |
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A funding pool for 2016 of 55.1% of
target was based on four performance measures
●Amounts awarded to each executive were based on pool
funding, established target amounts, and individual
performance |
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37, 42-43 |
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Long-term Equity
Incentive |
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The mix of equity incentives granted
in 2016 was 60% performance stock awards (PSAs) and 40% stock
options
●Actual PSAs awarded are determined by Average Adjusted
Operating Income Return on Equity (ROE) (70%) and Earned Book Value (30%)
(both measured over a three-year period) |
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37,
43-45 |
Our executive compensation programs have
delivered pay which is supported by performance as illustrated by the following
chart showing CEO total compensation in comparison to Operating Income per
Diluted Common Share and Total Shareholder Return over the last three
years.
(1) |
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As reported in the Total column of the Summary Compensation Table. |
(2) |
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The Operating Income per Diluted Common Share measure is
not based on accounting principles generally accepted in the United States
of America (non-GAAP) and is defined and reconciled to the most directly
comparable GAAP measure (net income applicable to common shareholders per
diluted common share) in Appendix A. |
The Allstate
Corporation |
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7 |
Table of Contents
2017 Proxy Statement |
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Proxy
Summary |
Proposal
3 |
Advisory Vote on the Frequency of Future Advisory
Votes on the Compensation of the Named Executives |
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The Board
recommends that you vote to conduct future advisory votes on executive
compensation EVERY YEAR.
●Our stockholders have expressed interest in annual say-on-pay
proposals.
●The Board values the opportunity to receive annual feedback to
respond to changing market conditions.
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See page 67 for further information |
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Proposal
4 |
Approval of The Allstate Corporation 2017 Equity
Compensation Plan for Non-Employee Directors |
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The Board
recommends a vote FOR the approval of the Plan.
●Director pay is reviewed and benchmarked against our peers
annually.
●The Plan includes a number of provisions that reflect best
practice, including an annual limit on equity awards to
directors.
●The director pay program is aligned with stockholder interests as a
meaningful portion of director compensation is in the form of
equity.
●Allstate cannot make equity awards to non-employee directors beyond
the remaining allotment under the 2006 plan. The new Plan authorizes
400,000 shares for equity grants to Allstates independent
directors. |
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See pages 68-72 for further information |
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Proposal
5 |
Ratification of Deloitte & Touche LLP as the
Independent Registered Public Accountant for 2017 |
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The Board
recommends a vote FOR ratification of Deloitte & Touche LLP for
2017.
●Independent firm with few ancillary services and reasonable
fees.
●Significant industry and financial reporting
expertise.
●The audit committee has solicited requests for information from
other auditing firms in the last four years and determined that the
retention of Deloitte & Touche LLP continues to be in the best
interests of Allstate and its stockholders. |
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See pages 73-75 for further information |
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www.allstate.com |
Table of Contents
Proxy Summary |
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2017 Proxy
Statement |
Proposal
6 |
Stockholder Proposal on Independent Board
Chairman |
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The Board
recommends a vote AGAINST this proposal.
●Allstates independent lead director provides meaningful
independent leadership of the Board.
●The Board should continue to have flexibility to determine whether
to split or combine the Chair and CEO roles and not be required to utilize
one approach.
●The Board has split the roles of Chair and CEO in the
past.
●The lead director is just one of many structural safeguards that
provide effective independent oversight of Allstate.
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See pages 76-78 for further information |
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Proposal
7 |
Stockholder Proposal on Lead Director
Qualifications |
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The Board
recommends a vote AGAINST this proposal.
●This proposal seeks to establish a new independence standard that
is inconsistent with public stock exchange listing standards.
●The nominating and governance committee specifically evaluated the
impact of Ms. Spriesers tenure and concluded it had no impact on her
independence.
●Allstates independent lead director is selected through a robust
process, and her performance is evaluated annually.
●The Board believes it is important to maintain a mix of director
tenures. |
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See pages 79-80 for further information |
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Proposal
8 |
Stockholder Proposal on Reporting Political
Contributions |
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The Board
recommends a vote AGAINST this proposal.
●Allstate already provides stockholders with comprehensive
disclosures on Allstates involvement in the public policy arena (found at
www.allstate.com/publicpolicyreport).
●Allstates Board has strong governance and oversight practices over
the companys public policy involvement.
●Allstate surpasses all disclosure requirements pertaining to
political contributions under federal, state, and local
laws. |
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See pages 81-82 for further information |
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The Allstate
Corporation |
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9 |
Table of Contents
About Allstate
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We Are The Good
Hands. |
The Allstate Corporation is the largest
publicly held personal lines property and casualty insurer in America, serving
more than 16 million households nationwide. Founded in 1931, Allstate has been
dedicated to protecting our customers from lifes uncertainties and preparing
them for the future for more than 85 years.
Allstate became a publicly-traded company
in 1993, and is listed on the New York Stock Exchange under the trading symbol
ALL. In 2016, Allstate had over $36 billion in
revenues.
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See information about
our stockholder
engagement regarding our Board
leadership structure in 2016 on page 25 |
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See information about
our compensation decisions for
our named executive officers in
2016 on pages 38-40 |
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See information about
our proposed director pay
limits on pages 68-69 |
10 |
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www.allstate.com |
Table of Contents
CORPORATE
GOVERNANCE
1 |
Election of 10 Directors |
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The Board
recommends a vote FOR each of the director nominees.
●Diverse slate of directors with broad leadership experience; four
of five leadership roles bring gender or ethnic diversity.
●All candidates are highly successful executives with relevant
skills and expertise.
●Average director tenure of 7 years with 9 of 10 independent of
management.
●Proactive stockholder engagement.
●Exceptional corporate governance ratings.
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The Board recommends 10 nominees for
election to the Allstate Board for one-year terms beginning in May 2017 and
until a successor is duly elected and qualified or his or her earlier
resignation or removal. These nominees are talented, both as individuals and as
a team. They bring a full array of business and leadership skills to their
oversight responsibilities. Most nominees serve on other public company boards,
enabling our Board to more quickly adopt best practices from other companies.
Their diversity of experience and expertise facilitates robust and thoughtful
decision-making on Allstates Board.
Each nominee, other than Mr. Traquina, was
previously elected at Allstates annual meeting of stockholders on May 24, 2016
for one-year terms. Mr. Traquina was elected by the Board on June 30, 2016. The
Board expects all nominees named in this proxy statement to be available for
election. If any nominee is not available, then the proxies may vote for a
substitute. On the following pages, we list the reasons for nominating each
individual. Mr. Henkel is not standing for re-election at the annual
meeting.
DIRECTOR NOMINEES SKILLS AND
EXPERIENCE |
Our Board selected the nominees based on
their diverse skills and experiences, which the Board believes will contribute
to the effective oversight of Allstate.
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Core
Competencies |
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Strategic Oversight |
100% of Directors |
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Stockholder Advocacy |
100% of Directors |
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Corporate Governance |
100% of Directors |
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Leadership |
100% of Directors |
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Additional
Capabilities |
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Financial Services |
80% of Directors |
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Complex, Highly-Regulated
Businesses |
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80% of
Directors |
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Risk Management |
80% of Directors |
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Operational Risk
Management |
70% of Directors |
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Accounting and Finance |
80% of Directors |
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Succession Planning |
70% of Directors |
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Technology |
80% of Directors |
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Innovation and Consumer
Focus |
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70% of Directors |
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Global Perspective |
70% of Directors |
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Government, Public Policy and
Regulatory Affairs |
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60% of Directors |
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|
|
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|
|
The Allstate
Corporation |
|
11 |
Table of Contents
2017 Proxy Statement |
|
Corporate Governance |
Director
Nominees
|
|
|
|
|
KERMIT R.
CRAWFORD
Age: 57
Allstate Board Service
●Tenure: 4 years (2013)
●Audit committee
●Nominating and governance
committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Former President and Executive Vice President, Pharmacy, Health and
Wellness for Walgreen Co., which operates one of the largest drugstore
chains in the United States. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Expertise assessing the strategies and performance of a
geographically distributed and consumer-focused service business in a
highly competitive industry. |
|
|
|
|
● |
Effectively led operational change, including through the use of
technology, and established strong platforms for long-term stockholder
value creation. |
|
|
|
|
● |
Extensive knowledge about analyzing consumer experience and
insights. |
|
|
|
|
● |
Effectively transformed the pharmacy
experience from a model focused primarily on drug delivery to a
pharmacist-patient centric model. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Audit
Committee Member |
|
|
|
|
● |
As a senior leader at Walgreen Co.,
he was responsible for all aspects of strategic, operational, and profit
and loss management of the largest division of the then-largest drugstore
chain in the United States. |
|
|
|
|
● |
Significant experience overseeing
the strategy and transformation of a highly competitive consumer-focused
business. |
|
|
|
|
● |
Current member of the audit and
compliance committee at LifePoint Health. |
|
|
|
|
Nominating and
Governance Committee Member |
|
|
|
|
● |
Member of the governing bodies of
Northwestern Lake Forest Hospital and the University of Southern
California School of Pharmacy. |
|
|
|
|
● |
Current member of the corporate
governance and nominating committee at LifePoint Health. |
|
|
|
|
Other Public Board
Service: |
|
|
|
|
● |
LifePoint
Health |
2016present |
|
|
|
|
|
|
|
|
MICHAEL L.
ESKEW
Age: 67
Allstate Board Service
●Tenure: 3 years (2014)
●Audit committee
●Compensation and succession
committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Former Chairman and CEO of United Parcel Service, Inc., a provider
of specialty transportation and logistics services. |
|
|
|
|
● |
Presiding director at International
Business Machines Corporation since May 2014 and lead director at 3M
Company since 2012. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Effectively re-designed UPSs operational platforms by using
digital technologies to more effectively and efficiently deliver a
customer-focused worldwide service. |
|
|
|
|
● |
Expertise in strategy and leadership development. |
|
|
|
|
● |
Oversight of a highly regulated company
as a director of Eli Lilly and Company. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Audit
Committee Member |
|
|
|
|
● |
Chair of the IBM and Eli Lilly audit committees and a
past member of the 3M audit committee. |
|
|
|
|
● |
Successful execution of financial oversight
responsibilities as CEO of UPS. |
|
|
|
|
Compensation and
Succession Committee Member |
|
|
|
|
● |
Significant management experience as
former Chairman and CEO of UPS from 2002 to 2007 and director of other
publicly-traded companies. |
|
|
|
|
● |
Current chair of the 3M compensation
committee. |
|
|
|
|
Other Public Board
Service: |
|
|
|
|
● |
Eli Lilly
and Company |
2008present |
|
|
|
|
● |
IBM |
2005present |
|
|
|
|
● |
3M
Company |
2003present |
|
|
|
12 |
|
www.allstate.com |
Table of Contents
Corporate Governance |
|
2017 Proxy Statement |
|
|
|
|
|
SIDDHARTH N. (BOBBY)
MEHTA
Age: 58
Allstate Board Service
●Tenure: 3 years (2014)
●Audit committee
●Risk and return committee chair
●Executive committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Former President, CEO, and current director of TransUnion, a global
provider of credit information and risk management solutions. |
|
|
|
|
● |
Former Chairman and CEO, HSBC North America Holdings,
Inc. |
|
|
|
|
● |
Former Chief Executive Officer, HSBC
Finance Corporation. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Successful CEO leadership that increased revenues and global reach
through the use of technology and advanced analytics. |
|
|
|
|
● |
Extensive operational and strategic
experience in the financial services industry, including in banking and
the credit markets, which provides valuable insights into the highly
regulated insurance industry and investment activities. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Audit
Committee Member |
|
|
|
|
● |
Multiple leadership positions with financial oversight
responsibility, including President and CEO of TransUnion, CEO of HSBC
Finance Corporation, and Chairman and CEO of HSBC North America Holdings,
Inc. |
|
|
|
|
● |
Chair of Allstate risk and return committee. |
|
|
|
|
Risk and
Return Committee Chair |
|
|
|
|
● |
Significant experience in financial
markets through multiple executive leadership positions at HSBC
Group. |
|
|
|
|
Other Public Board
Service: |
|
|
|
|
● |
TransUnion |
2012present |
|
|
|
|
● |
Piramal
Enterprises Ltd. |
2013present |
|
|
|
|
|
|
|
|
JACQUES P.
PEROLD
Age: 58
Allstate Board Service
●Tenure: 1 year (2015)
●Nominating and governance committee
●Risk and return
committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Former President of Fidelity
Management & Research Company, a privately-held investment and asset
management company serving clients worldwide with $1.8 trillion in assets
under management. |
|
|
|
|
● |
Former Chief Operating Officer for
Fidelity Asset Management. |
|
|
|
|
● |
Former Founder, President and Chief
Investment Officer of Geode Capital Management, LLC, a global asset manager and independent
institutional investment firm and sub-advisor to
Fidelity. |
|
|
|
|
● |
Current trustee of New York Life
Insurance Companys MainStay Mutual Funds. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
30 years of successful leadership of
strategy and operations and investment expertise in the financial services
industry. |
|
|
|
|
● |
Leader of one of the worlds largest
asset management firms. |
|
|
|
|
● |
Oversaw investments and operations
for Fidelitys family of mutual funds with over $1.8 trillion in assets
under management. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Nominating and
Governance Committee Member |
|
|
|
|
● |
Investor perspective on corporate
governance as a result of asset management expertise. |
|
|
|
|
● |
Significant governance experience as
President of Geode Capital which involved interlocking financial and
operating relationships. |
|
|
|
|
Risk and
Return Committee Member |
|
|
|
|
● |
Significant experience in management
and oversight of risk for three large asset management
firms. |
|
|
|
|
● |
Current trustee of several mutual
funds. |
|
|
|
|
Other Public Board
Service: |
|
|
|
|
● |
MSCI
Inc. |
2017present |
|
|
|
The Allstate
Corporation |
|
13 |
Table of Contents
2017 Proxy Statement |
|
Corporate Governance |
|
|
|
|
|
ANDREA
REDMOND
Age: 61
Allstate Board Service
●Tenure: 7 years (2010)
●Compensation and succession committee
●Nominating and governance committee chair
●Executive committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Former Managing Director, co-head of
the CEO/board services practice, founder and leader of global insurance
practice, and member of financial services practice at Russell Reynolds
Associates Inc., a global executive search firm, with 20 years of
experience at the firm. |
|
|
|
|
● |
Independent consultant providing
executive recruiting, succession planning, and talent management
services. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Expert in public company succession
planning, talent management, and compensation across a wide range of
industries. |
|
|
|
|
● |
Substantial experience in financial
services leadership selection and executive
development. |
|
|
|
|
● |
Effectively helped companies
identify and recruit leaders capable of building high-performance
organizations. |
|
|
|
|
● |
Extensive experience in assessing
required board capabilities and evaluating director
candidates. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Compensation and
Succession Committee Member |
|
|
|
|
● |
Experience in executive recruiting,
succession planning, and talent management. |
|
|
|
|
● |
Extensive experience working with
numerous publicly-traded companies to recruit and place senior
executives. |
|
|
|
|
Nominating
and Governance Committee Chair |
|
|
|
|
● |
Significant expertise recruiting and
evaluating directors for a variety of public
companies. |
|
|
|
|
● |
A senior partner at a highly
regarded global executive search firm, Russell Reynolds Associates, from
1986 to 2007, including significant tenure as co-head of the CEO/board
services practice. |
|
|
|
|
|
|
|
|
JOHN W.
ROWE
Age: 71
Allstate Board Service
●Tenure: 5 years (2012)
●Compensation and succession committee chair
●Nominating and governance committee
●Executive committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Chairman Emeritus and former
Chairman and CEO of Exelon Corporation, one of the countrys largest
electric utilities. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Extensive leadership and management
experience as a CEO. |
|
|
|
|
● |
Successfully led a company in a
highly regulated industry comparable to the complex insurance regulatory
system in which Allstate operates. |
|
|
|
|
● |
Created and implemented a
differentiated strategy in a highly regulated
industry. |
|
|
|
|
● |
Financial services and insurance
expertise as lead director on the board of Northern Trust Corporation and
a former director of Unum Provident. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Compensation and Succession Committee Chair |
|
|
|
|
● |
Leadership responsibilities as
former Chairman and CEO of Exelon Corporation. |
|
|
|
|
● |
Former member of SunCoke Energy
compensation committee. |
|
|
|
|
● |
Member of Northern Trust Corporation
compensation and benefits committee. |
|
|
|
|
● |
Former director of Sunoco and member
of its compensation committee. |
|
|
|
|
Nominating and Governance Committee Member |
|
|
|
|
● |
Chair of corporate governance
committee and lead director of Northern Trust
Corporation. |
|
|
|
|
● |
Lead director and chair of SunCoke
Energy governance committee. |
|
|
|
|
● |
Former director of Sunoco and member
of its executive committee. |
|
|
|
|
Other Public Board
Service: |
|
|
|
|
● |
Northern
Trust Corporation |
2002present |
|
|
|
|
● |
SunCoke
Energy, Inc. |
2012present |
|
|
|
|
● |
American DG
Energy, Inc. |
2013present |
|
|
|
14 |
|
www.allstate.com |
Table of Contents
Corporate Governance |
|
2017 Proxy Statement |
|
|
|
|
|
JUDITH A.
SPRIESER Lead Director
Age: 63
Allstate Board Service
●Tenure: 18 years (1999)
●Nominating and governance committee
●Risk and return committee
●Executive committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Former CEO of Transora, Inc., a
technology software and services company. |
|
|
|
|
● |
Former CFO and other senior
executive positions at Sara Lee Corporation, a global manufacturer and
marketer of brand-name consumer goods. |
|
|
|
|
● |
Former director at Jimmy Choo plc,
Royal Ahold NV and Experian. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Extensive service on boards of
publicly-traded and international companies, including highly regulated
companies. |
|
|
|
|
● |
More than 20 years operational
experience in executive positions at Sara Lee
Corporation. |
|
|
|
|
● |
Extensive evaluation of financial
statements and supervision of financial executives. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Lead
Director |
|
|
|
|
● |
Prior chair of audit committee (7
years). |
|
|
|
|
● |
Board service at Allstate during
many different external operating environments and two
CEOs. |
|
|
|
|
Nominating
and Governance Committee Member |
|
|
|
|
● |
Significant experience on boards of
publicly-traded and international companies, and current member of
nominating and governance committee at Intercontinental Exchange,
Inc. |
|
|
|
|
● |
Numerous key leadership positions,
including CEO of Transora, Inc., and CFO of Sara Lee
Corporation. |
|
|
|
|
Risk and
Return Committee Member |
|
|
|
|
● |
Insight from service as prior chair
of Allstates audit committee and current audit committee chair at
Intercontinental Exchange, Inc. |
|
|
|
|
● |
Significant risk oversight and
management experience. |
|
|
|
|
● |
Tenure as an Allstate director has
provided experience through multiple operating
environments. |
|
|
|
|
Other Public Board
Service: |
|
|
|
|
● |
Intercontinental Exchange, Inc. |
2004present |
|
|
|
|
● |
Reckitt
Benckiser Group plc |
2003present |
|
|
|
|
|
|
|
|
MARY ALICE
TAYLOR
Age: 67
Allstate Board Service
●Tenure: 19 years (1996-1998;
2000-present)
●Audit committee chair
●Risk and return committee
●Executive committee |
|
|
|
Professional
Experience |
|
|
|
|
● |
Former senior executive with several
Fortune 500 companies, including Citicorp and FedEx
Corporation. |
|
|
|
|
● |
Former director at Blue Nile,
Inc. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Held senior executive roles in
technology, finance, operations, and distribution logistics at large
corporations, including Citicorp and FedEx
Corporation. |
|
|
|
|
● |
Developed significant financial
experience by serving in financial oversight roles at Cook Industries,
Northern Telecom, Homegrocer.com, Citicorp, and FedEx
Corporation. |
|
|
|
|
● |
Prior experience as a lead director
at Blue Nile, Inc. |
|
|
|
|
● |
Certified public accountant
(inactive). |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Audit
Committee Chair |
|
|
|
|
● |
Significant financial oversight
expertise developed as Chairman and CEO of HomeGrocer.com and in senior
executive roles at Citicorp and FedEx Corporation. |
|
|
|
|
● |
Former member of the audit committee
of Blue Nile, Inc. |
|
|
|
|
Risk and
Return Committee Member |
|
|
|
|
● |
Significant senior management
experience. |
|
|
|
|
● |
Expertise in strategy formation,
including technology-based business strategies, at both large established
companies and start-ups. |
|
|
|
|
● |
Tenure as an Allstate director has
provided experience through multiple operating
environments. |
|
|
|
|
● |
Chair of Allstate audit
committee. |
|
|
|
The Allstate
Corporation |
|
15 |
Table of Contents
2017 Proxy Statement |
|
Corporate Governance |
|
|
|
|
|
|
|
PERRY M.
TRAQUINA
Age: 60
Allstate Board Service
●Tenure: <1 year
●Elected to the Board on June 30,
2016 |
|
|
|
|
|
Professional
Experience |
|
|
|
|
|
● |
Former Chairman, CEO and Managing
Partner of Wellington Management Company, LLP, one of the worlds largest
global investment management firms. |
|
|
|
|
|
Relevant Skills |
|
|
|
|
|
● |
Extensive leadership and management
experience as CEO of one of the largest institutional
investors. |
|
|
|
|
|
● |
Strong financial services and global
investment management expertise through 34 years at Wellington Management
Company, LLP. |
|
|
|
|
|
● |
Oversaw the globalization of
Wellingtons investment platform. |
|
|
|
|
|
● |
Successfully led company in a highly
regulated climate with volatile capital markets. |
|
|
|
|
|
● |
Brings valuable market-oriented
investor perspective. |
|
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
|
Consistent with past practice,
committee assignments will be established during first year of
service. |
|
|
|
|
|
● |
Current audit committee member at
Morgan Stanley and member of the audit and corporate governance and
nominating committees at eBay. |
|
|
|
|
|
● |
Current chair of the risk committee
at Morgan Stanley. |
|
|
|
|
|
Other Public Board
Service: |
|
|
|
|
|
● |
Morgan
Stanley |
2015present |
|
|
|
|
|
● |
eBay |
2015present |
|
|
|
|
|
|
|
|
|
THOMAS J.
WILSON Board Chair and Chief
Executive Officer
Age: 59
Allstate Board Service
●Tenure: 11 years (2006)
●Executive committee
chair |
|
|
|
Professional
Experience |
|
|
|
|
● |
CEO since January 2007 and Chair of
Board since May 2008. |
|
|
|
|
● |
President from January 2005 to
January 2015. |
|
|
|
|
● |
Held senior executive roles other
than CEO, leading all major operating units over a 22-year
period. |
|
|
|
|
Relevant Skills |
|
|
|
|
● |
Key leadership roles throughout
Allstate over a 22-year period. |
|
|
|
|
● |
Thorough and in-depth understanding
of Allstates business, including its employees, agencies, products,
investments, customers, and investors. |
|
|
|
|
● |
Developed Allstates strategy to
provide differentiated customer value propositions to four consumer
segments. |
|
|
|
|
● |
Created and implemented Allstates
risk and return optimization program, allowing Allstate to withstand the
2008 financial market crisis and adapt to increases in severe weather and
hurricanes. |
|
|
|
|
● |
In-depth understanding of the
insurance industry. |
|
|
|
|
● |
Industry and community leadership,
including former chair of the Property and Casualty CEO Roundtable and the
Financial Services Roundtable, co-chair of a public-private partnership to
reduce violence in Chicago, and national and Illinois co-chair for WE
Day. |
|
|
|
|
Committee Expertise
Highlights |
|
|
|
|
Executive
Committee Chair |
|
|
|
|
● |
Comprehensive knowledge of
Allstates business and industry with 22 years of leadership experience at
the company. |
|
|
|
|
Other Public Board
Service: |
|
|
|
|
● |
State Street
Corporation |
2012present |
|
|
|
16 |
|
www.allstate.com |
Table of Contents
Corporate Governance |
|
2017 Proxy Statement |
Board Composition and
Nominee Considerations
The Board and nominating and governance
committee believe that each director should be
well-versed in strategic oversight, corporate governance, stockholder advocacy,
and leadership in order to be an effective member of the Allstate
Board. In addition to this fundamental
expertise, the Board and committee seek directors with corporate operating
experience, financial services
expertise, and compensation and succession
experience. The Board and committee also consider experience in the areas listed
under the section Evaluation Process for Current Directors on page 18.
The Board and committee expect each
non-employee director to be free of interests or affiliations that could give
rise to a biased approach to directorship responsibilities or a conflict of
interest and be free of any significant relationship with Allstate that would
interfere with the directors exercise of independent judgment. The Board and
committee also expect each director to devote the time and effort necessary to
serve as an effective director and act in a manner consistent with a directors
fiduciary duties of loyalty and care. Allstate executive officers may not serve
on boards of other corporations whose executive officers serve on Allstates
Board.
Board nominees are identified through a
retained search firm, suggestions from current directors and stockholders, and
through other methods including self-nominations. Our newest director, Mr.
Traquina, was identified by our other directors.
The nominating and governance committee
will consider director candidates recommended by a stockholder in the same
manner as all other candidates recommended by other sources. A stockholder may
recommend a candidate at any time of the year by writing to the Office of the
Secretary, The Allstate Corporation, 2775 Sanders Road, Suite F7, Northbrook,
Illinois 60062-6127.
All candidates are evaluated and
considered for their diversity, including gender, ethnic and diversity of
background, expertise, and perspective, as well as the criteria described in our
Corporate Governance
Guidelines at www.allstateinvestors.com.
Beginning with the 2017 annual meeting, a
stockholder or group of up to 20 stockholders owning 3% or more of Allstates
outstanding common stock continuously for at least three years can nominate
director candidates constituting up to 20% of the Board in the companys annual
meeting proxy materials.
NOMINATION PROCESS FOR BOARD
ELECTION |
|
The Board continuously identifies
potential director candidates in anticipation of retirements,
resignations, or the need for additional capabilities. The graphic below
describes the ongoing nominating and governance committee process to
identify highly qualified candidates for Board service. |
|
|
|
|
|
|
|
Consider current Board skill sets
and needs |
|
Ensure Board is strong in core
competencies of strategic oversight, corporate governance, stockholder
advocacy and leadership and has diversity of expertise and perspective to
meet existing and future business needs |
|
|
Check conflicts of interest and
references |
|
All candidates are screened for
conflicts of interest, and all directors are independent, except the
CEO |
|
|
Nominating and governance committee
dialogue |
|
Considered 112 candidates since
2011 |
|
|
Meet with qualified
candidates |
|
To ensure appropriate personal
qualities, such as independence of mind, being a team player, tenacity,
and skill set to meet existing or future business needs |
|
|
Nominating and governance committee
dialogue |
|
To consider shortlisted candidates and
after deliberations, recommend candidates for election to the
Board |
|
|
Board dialogue and
decision |
|
Added seven highly qualified directors
in the past five years |
|
The Allstate
Corporation |
|
17 |
Table of Contents
2017 Proxy Statement |
|
Corporate Governance |
EVALUATION PROCESS FOR
CURRENT DIRECTORS
Before recommending the annual slate of
director nominees, the nominating and governance committee has a rigorous
process to evaluate current directors. In addition to considering the current
directors tenure, the committees process includes:
● |
On an annual basis, the contributions
and performance of each individual director are evaluated, including in
the following areas: |
● |
Core capabilities
of strategic oversight, corporate governance,
stockholder advocacy, and leadership. |
|
|
● |
Additional
capabilities that provide the
appropriate mix of skills and experience that fit Allstates business and
strategies and contribute to the effectiveness of the Board, including
capabilities in the following areas: financial services,
complex/highly-regulated businesses, risk management, operational risk
management, accounting and finance, succession
planning, |
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technology, innovation and consumer focus, global perspective, and
government, public policy and regulatory affairs. |
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Interests and
affiliations that could give rise to a
biased approach to directorship responsibilities. |
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Significant
relationships with Allstate that would
interfere with the directors exercise of independent
judgment. |
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Willingness and
ability to devote the time necessary to
serve as an effective director. |
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In addition, on a biennial basis, each
directors future plans for continued Board membership are discussed so
that individual circumstances can be appropriately
addressed. |
Individual directors receive feedback each
year from the Chair, the lead director, or chair of the nominating and
governance committee.
The outcomes of such evaluations are
shared with the nominating and governance committee in connection with the
annual nomination process and inform the Board and nominating and governance
committees ongoing process to identify highly qualified candidates for Board
service.
STEPS TO ACHIEVE BOARD EFFECTIVENESS EVALUATION PROCESSES |
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Evaluation at every in-person
meeting review Board, committee, and management performance after every
meeting to measure the effectiveness of Board and committee oversight
(performed by independent directors) |
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Annual evaluation
review contributions and performance of each
director in light of Allstates business and strategies and confirm the
continued independence of each non-employee director (evaluations
performed by lead director, chair of nominating and governance committee
and Chair with feedback provided to each director every year by the lead
director, the chair of nominating and governance committee or
Chair) |
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Biennial evaluation
discuss each directors future plans for
continued Board membership and whether overall Board skills align with
business strategy (performed by lead director, chair of nominating and
governance committee and Chair) |
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Evaluation after change in
circumstances review continued
service of a director if there is a change in principal employment or
other significant change in responsibilities (performed by
Board) |
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Results
●Board refreshment and average director
tenure of seven years
●Added seven highly qualified directors in
past five years
●Added Mr. Traquina in 2016 as former CEO
of one of the largest institutional investors, he complements the
strategic, operational and investment expertise of Allstates
Board |
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Table of
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Corporate Governance |
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2017 Proxy Statement |
NOMINEE INDEPENDENCE DETERMINATIONS
The Board has determined that all
non-employee directors who served during 2016 and all nominees, other than Mr.
Wilson, are independent according to
applicable law, the NYSE listing standards, and the Boards Director Independence Standards (which are included on www.allstateinvestors.com). In accordance with
the Director Independence
Standards, the Board has determined that the
nature of the relationships with the corporation that are set forth in Appendix
B do not create a conflict of interest that would impair a directors
independence. The Board also determined that the members of the audit,
compensation and succession, nominating and governance, and risk and return
committees are independent within the meaning of applicable laws, the NYSE
listing standards and the Director
Independence Standards.
When evaluating the independence of
director nominees, the Board weighs numerous factors, including tenure. In
particular, the Board weighed the potential
impact of tenure on the independence of our two longest serving directors, Ms.
Sprieser and Ms. Taylor. Both directors have
significant experience serving at Allstate under different operating
environments and management teams, and both served on the Board under two CEOs
and prior to Mr. Wilsons appointment. The Board concluded that both Ms.
Sprieser and Ms. Taylor continue to be effective directors who fulfill their
responsibilities with integrity and independence of thought. They appropriately
challenge management and the status quo, and are reasoned, balanced, and
thoughtful in Board deliberations and in communications with management.
Therefore, the Board determined that their independence from management has not
been diminished by their years of service.
Board Leadership Structure and Practices
BOARD CHAIR
Allstates Corporate Governance Guidelines
allow the independent directors the flexibility to split or combine the Chair
and CEO responsibilities. The independent directors periodically review
Allstates leadership structure and whether separating the roles of Chair and
CEO is in the best interests of Allstate and its stockholders. When making this
determination, the independent directors consider the recommendation of the
nominating and governance committee, the current circumstances at Allstate, the
skills and experiences of the individuals involved and the leadership
composition of the Board. The roles of Chair
and CEO were split during a transition of leadership in 2007 and
2008. The independent directors also appoint
an independent lead director with robust powers and responsibilities.
A strong lead director role provides an effective
independent counterbalance if the independent directors choose to combine the
Chair and CEO roles.
At present, the independent directors have
determined Allstate is well-served by having these roles performed by Mr.
Wilson, who provides excellent leadership and direction for both management and
the Board. This promotes a strong connection between the Board and management
and is still subject to strong independent oversight by Allstates independent
lead director and the other independent directors. The Board believes it
benefits from the considerable knowledge and perspective that Mr. Wilson has
acquired from more than 22 years of insurance industry experience. Given his
extensive company knowledge and his ability to effectively fulfill both roles
simultaneously, he is uniquely qualified to lead discussions of the Board and is
in the best position to facilitate the flow of business information and
communications between the Board and management.
The Allstate
Corporation |
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Table of
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2017 Proxy Statement |
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Corporate Governance |
INDEPENDENT LEAD DIRECTOR
Allstates Board places great importance
on strong independent Board leadership and has had a strong lead director role
in place for over six years. Allstates Corporate Governance Guidelines
describe
the responsibilities of the lead director
and the selection process, including the characteristics that the Board
considers important in a lead director.
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In November 2016,
in response to stockholder feedback and to formalize its practices, the
Board amended Allstates Corporate Governance Guidelines to expand the
responsibilities of the lead director to include:
●Approval of meeting agendas, schedules and other
materials sent to the Board
●Authority to call meetings of the independent
directors
●Formal oversight over the Board committee
self-evaluation process and committee reports to the Board
●Responsibility for facilitating the Chair and CEO
succession process |
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Other
changes to the guidelines included:
●Formalized change in lead director election process to
provide that only the independent directors elect the lead director
annually, with the expectation that the lead director serve more than one
year
●Clarified lead director selection process, including
selection considerations for nominees, which are reviewed annually in
connection with evaluation of the lead director
●Reduced the number of public company boards that a
non-executive director can serve on, in addition to Allstate, from five to
four |
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Table of
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2017 Proxy Statement |
Judy Sprieser is Allstates lead director,
and has held that role since 2015. The lead director is elected annually by the
independent directors, and it is generally expected that the lead director serve
more than one year. The lead directors duties include:
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Board Meetings
and Executive Sessions
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Has
the authority to call meetings of the independent directors |
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Approves meeting agendas and schedules and information
sent to the Board to ensure there is sufficient time for discussion of all
items and that directors have the information necessary to perform their
duties |
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Chairs executive sessions of independent directors at
every Board meeting |
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Presides at all Board meetings when the
Chair is not present |
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Duties to the
Board |
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Has
regular communications with the CEO about the strategy and performance of
Allstate |
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Performs additional duties that the
independent directors may designate from time to time |
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Communication Between
Chair and Independent Directors |
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Serves as liaison between the Chair and independent
directors |
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Is available to consult with the Chair about
the concerns of the Board and reports on decisions made/suggestions in
executive sessions |
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Communication
with Stockholders |
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Communicates with significant stockholders
and other stakeholders on matters involving broad corporate policies and
practices |
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Committee Involvement |
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Works with the Chair and committee chairs to ensure
coordinated coverage of Board responsibilities and ensures effective
functioning of all committees |
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Ensures the implementation of a committee
self-evaluation process and regular reports to the Board |
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Board and Individual
Director Evaluations |
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Facilitates the evaluation of individual
director, Board and committee performance in conjunction with the chair of
the nominating and governance committee and the Chair |
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CEO
Performance Evaluation |
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Facilitates and communicates the Boards
performance evaluation of the Chair and CEO in conjunction with the chair
of the compensation and succession committee |
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Succession Plans |
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Ensures that a succession plan is in place
for the Chair and CEO |
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JUDITH A. SPRIESER
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governance expertise, operational and
leadership experience, board service and tenure, integrity, prior Board
leadership roles, and ability to meet the required time commitment. It is
preferable that the lead director hold a previous position as chair of a
Board committee, either at Allstate or another company. Ms. Sprieser was
chosen by the independent directors as she exemplified these
characteristics. She has devoted significant time fulfilling her duties as
lead director since May of 2015. During her tenure on Allstates Board,
she has cultivated an expansive knowledge of Allstate and the trust of the
independent directors. She became a director prior to the election of the
current Chair and CEO and has been a director through a number of
different external operating environments. Her long-term perspective
complements the perspectives of newer Board members, seven of whom have
joined in the last five years. The independent directors believe that Ms.
Sprieser is exceptionally well-qualified to serve as Allstates
independent lead director. |
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●Lead director since 2015
●Member of the nominating and governance, risk and return
and executive committees
●Prior chair of audit committee for seven
years
●Allstate Board experience in
multiple operating environments and under two CEOs |
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Considerations in Selecting
Current Lead Director
When determining the appropriate
candidate for lead director, the independent directors consider several
factors, including the directors corporate |
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The Allstate
Corporation |
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Table of
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2017 Proxy Statement |
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Corporate Governance |
ACTIVE AND ENGAGED BOARD SELECT ACTIONS OVER LAST FIVE
YEARS
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Allstates Board is committed to
operating with transparency. The following summary lists select strategic,
governance and compensation developments overseen by the Board during the
last five years. |
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●Governance Enhanced the
independent lead directors powers, responsibilities and election
process
●Governance Strengthened role
of committee chairs in approval of meeting agendas and committee
materials
●Governance The audit committee
engaged an independent advisor to report on cybersecurity
risk
●Strategy Approved acquisition
of SquareTrade, a protection plan provider for consumer electronics and
connected devices, which expands Allstates customer protection
offerings |
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●Strategy Launched Arity LLC, a new entity,
to fully leverage Allstates telematics offerings and expand Allstates
current analytical capabilities
●Compensation Added a fourth
performance measure, total return, to the annual incentive compensation
program to capture all investment results on an annual
basis |
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●Governance Adopted proxy
access (3%, 3 years, 20% of Board, up to 20 stockholders can
aggregate)
●Strategy Oversight of auto
insurance profit improvement plan in response to the historic rise in auto
loss costs across the industry
●Compensation Made decision to
replace time-based restricted stock awards with performance stock awards
for all senior vice presidents, starting in 2016 |
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●Compensation Added a second performance
measure to the performance stock award program, earned book value, to
create greater alignment with the increase in performance-based assets in
Allstates investment portfolio, beginning with 2016 awards
●Compensation Changed
allocation of long-term equity award grants to 60% performance stock
awards and 40% stock options, effective for 2016 grants |
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●Governance Increased focus on
cybersecurity oversight with audit committee conducting quarterly
cybersecurity reviews
●Compensation Changed
performance goal for performance stock awards to three-year average
(instead of three separate one-year periods) |
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●Compensation Adopted a policy prohibiting
the pledging of Allstate securities for senior executives and
directors |
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●Governance Created a risk and
return committee to enhance the Boards oversight of Allstates risk and
return activities
●Governance Expanded and
formalized the Boards director evaluation practices, and included a
biennial review in addition to the annual reviews to discuss each
directors future plans for Board service
●Strategy Approved the sale of
Lincoln Benefit Life to strategically focus Allstate Financial and
redeploy capital to earn higher risk-adjusted returns |
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●Strategy Strengthened Allstates capital
position and improved its strategic flexibility by utilizing preferred
stock and subordinated debt to refinance higher-cost senior
debt
●Compensation Added an equity
retention requirement for certain senior executives to require that 75% of
the net proceeds be held for an additional year past the three-year
vesting period in the case of performance stock awards, or for an
additional year after exercise in the case of options |
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●Governance Implemented
stockholder right to call special meeting - 10% or more of outstanding
shares
●Governance Implemented
stockholder action by written consent - 10% or more of outstanding
shares |
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●Strategy Implementation of customer
segmented approach to property-liability insurance and aggressive
initiation of auto telematics programs
●Compensation Replaced
time-based restricted stock awards with performance stock awards for
senior leaders |
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Table of
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Corporate Governance |
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2017 Proxy Statement |
BOARD ROLE IN RISK OVERSIGHT
The Board is responsible for the oversight
of Allstates strategy, business results, and management, including risk
management. The Board formally reviews Allstates overall risk position and risk
management twice a year and uses external resources when appropriate to assess
enterprise risk and return management processes. Material risks, including those
affected by climate, are regularly identified, measured, managed, and reported
to senior management and the Board.
In 2013, the Board added a risk and return
committee as a standing committee of the Board to ensure sufficient expertise
and continuity between the Boards biannual reviews. This committee oversees the
effectiveness of Allstates enterprise risk and return management framework,
governance structure and decision-making. The key responsibilities of the risk
and return committee are further detailed on page 29.
The audit committee provides oversight and
guidance on Allstates controls related to key risks and reviews the major
financial risk exposures
and the steps taken to monitor and control
those risks. As such, cybersecurity risk oversight was expanded in 2014 to
supplement the oversight already provided by the Board and risk and return
committee. The audit committee conducts quarterly reviews to:
●Oversee the efficacy of cybersecurity risk initiatives and
related policies and procedures.
●Assess regular reports received from the chief risk officer
and chief information security officer, who are tasked with monitoring
cybersecurity risks, and from outside experts to supplement management
reports.
In 2016, the audit committee engaged an
independent advisor to assess Allstates cybersecurity risk. The advisor
delivered a detailed report to the audit committee and Board. The chairs
of the risk and return and audit committees are members of both committees
to enhance cross-committee communication at the Board
level. |
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RISK MANAGEMENT AND COMPENSATION
The compensation and succession committee
reviews executive compensation programs to ensure they appropriately reflect the
risk and return principles approved by the Board. Each year, Allstates chief
risk officer conducts a review and assessment of potential compensation-related
risks arising from Allstates executive compensation plans and presents the
analysis to the compensation and succession committee for further consideration
and dialogue. The chief risk officer reviews the design, performance measures,
and ranges in the incentive plans to ensure they are consistent with Allstates
risk and return principles. The committee plays an important role in overseeing
the executive compensation risk assessment and understanding any steps taken by
management to manage and control executive compensation risks. In addition, the
committee employs an independent compensation consultant each year to review and
assess Allstates executive pay levels, practices, and overall program
design.
Based on this annual review, we believe
our compensation policies and practices are appropriately structured and do not
provide incentives for employees to take unnecessary or excessive risks.
Compensation plans provide a balanced and appropriate mix of cash and
equity
through annual and long-term incentives to
align with short and long-term business goals. No one, regardless of
eligibility, is guaranteed an award under the annual cash incentive program. We
utilize multiple performance measures that correlate with long-term stockholder
value creation and that diversify the risk associated with any single
performance indicator. In addition, the annual incentive program contains a
funding adjustment for senior executives in the event of a net loss, which
reduces the corporate pool funding for those officers by 50% of actual
performance. Likewise, for the performance stock award program, the committee
requires positive net income for our executives to earn awards above target.
Equity awards to executive officers after 2009 and annual cash incentive awards
beginning in 2010 are subject to clawback in the event of certain financial
restatements. Executives are also subject to rigorous stock ownership and
retention requirements. Beginning with awards granted in 2014, for senior
executives, there is also a one year holding period for a portion of the net
after-tax shares received from equity grants.
Based on this analysis, we believe
Allstates compensation policies ensure appropriate levels of risk-taking, while
avoiding unnecessary risks that could have a material adverse effect on
Allstate.
BOARD ROLE IN MANAGEMENT SUCCESSION
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The Board oversees the recruitment,
development, and retention of executive talent. Management succession is
now discussed four times annually. Management succession is discussed in
the compensation and succession committee, nominating and governance
committee, and Board meetings with the CEO, as well as in executive
sessions. |
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Discussions cover the CEO and other senior
executive roles and include a broader discussion on organizational health. The
Board also has regular and direct exposure to senior leadership and
high-potential officers through one-on-one breakfasts and other informal
meetings held throughout the year.
The Allstate
Corporation |
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Table
of Contents
2017 Proxy Statement |
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Corporate Governance |
BOARD REVIEW OF SUCCESSION PLANNING AND TALENT
DEVELOPMENT PRACTICES |
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April |
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July |
Topic: CEO succession
planning
Primary Focus: Internal
succession alternatives in three different time periods immediate, 3-5
years, and long-term |
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Topic: Organizational health how the organization recruits,
develops and retains people, including its inclusive diversity
commitments
Primary
Focus: Systematic approach to talent
development |
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November |
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Topic: CEO and senior leadership succession what if
scenario planning
Primary
Focus: Board dialogue in advance of
unexpected succession issues |
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Topic: Senior leadership succession, including CEO
Primary
Focus: Key leader development and
retention |
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BOARD ROLE IN SETTING COMPENSATION
The compensation and succession committee
reviews the executive compensation program throughout the year with the
assistance of an independent compensation consultant, Compensation Advisory
Partners (CAP). CAP benchmarks Allstates plans and compensation payments to
the market and evaluates changes to our executive compensation program. The
compensation consultant also assesses Allstates executive compensation design,
peer group selection, relative pay for performance, and total direct
compensation for individual senior executive positions. Representatives of the
compensation consultant participated in all six compensation and succession
committee meetings in 2016.
The compensation and succession committee
annually evaluates the compensation consultants performance and
independence.
The compensation and succession committee
makes recommendations to the Board on compensation for the CEO and executive
officers and the structure of plans used for executive officers.
The compensation and succession committee
grants all equity awards to individuals designated as executive officers for
purposes of Section 16 of the Securities Exchange Act of 1934 or covered
employees as defined in Internal Revenue Code section 162(m). The compensation
and succession committee has authority to grant equity awards to eligible
employees in accordance with the terms of our 2013 Equity Incentive Plan. The
Board has delegated limited authority to the CEO to grant equity awards to
non-executive officers. All awards granted between compensation and succession
committee meetings are reported at the next meeting.
The compensation consultant also provides
to the nominating and governance committee competitive information on director
compensation, including updates on practices and emerging trends.
STOCKHOLDER ENGAGEMENT
Allstate has a proactive practice of
discussing corporate governance issues with significant stockholders throughout
the year. Dialogue, transparency, and responsiveness are the cornerstones of our
practice. Such discussions are held before the annual meeting, during
stockholder voting, and after the annual meeting and include our lead director,
chair of nominating and governance committee, Chair of the Board, and
other committee chairs or directors as
necessary. Direct engagement typically
involves our largest stockholders representing approximately one-third of our
total outstanding shares. We also engage with
proxy and other investor advisory firms that represent the interests of various
stockholders. In addition to input on current governance and executive
compensation topics specific to Allstate, we invite discussion on any other
topics or trends
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Table of
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Corporate Governance |
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2017 Proxy Statement |
stockholders may wish to share with us.
Their input is reported to the nominating and governance committee, which in
turn allocates specific issues to relevant Board committees for further
consideration. Each Board committee reviews
relevant feedback and determines if additional discussion or actions are
necessary by the respective committee or full Board. In addition, broader investor surveys provide perspective on investor
concerns.
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During 2016, Allstate reached out
to stockholders representing approximately 40% of outstanding shares and
spent a significant amount of time
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discussing Allstates Board leadership
structure, including the appropriate duties, responsibilities and important
characteristics for our lead director role. After many investor meetings and
focused discussions, the Board amended Allstates Corporate Governance
Guidelines to, among other things, expand and formalize existing practices and
responsibilities of the lead director. These amended guidelines can be found at
www.allstateinvestors.com.
STOCKHOLDER ENGAGEMENT CYCLE |
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Before Annual Meeting |
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During Stockholder
Voting |
-Preview with
investors plans for governance and compensation issues/
actions.
-Request feedback
from investors. |
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-Follow up on
previous conversations and discuss final Board decisions and
reasoning.
-Review vote
proposals and solicit support for Board
recommendations. |
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After Annual Meeting |
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Annual Meeting of
Stockholders |
-Discuss with
investors potential actions in response to results and new governance and
compensation topics of interest for the upcoming
year. |
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-Stockholders vote on
issues such as directors, say-on-pay, auditor ratification and stockholder
proposals. |
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BOARD
ATTENDANCE POLICY
Each incumbent director attended at least
75% of the combined Board meetings and meetings of committees of which he or she
was a member.
Attendance at Board and committee meetings
during 2016 averaged 99% for the incumbent directors as a group. Directors are
expected to
attend Board and committee meetings and
the annual meeting of stockholders. All directors who stood for election at the
2016 annual meeting of stockholders attended the annual
meeting.
RELATED
PERSON TRANSACTIONS
The nominating and governance committee
has adopted a written policy on the review, approval, or ratification of
transactions with related persons, which is posted on the Corporate Governance
section of allstateinvestors.com.
There were no related person transactions
identified for 2016.
The committee or committee chair reviews
transactions with Allstate in which the amount involved exceeds $120,000 and in
which any related person had, has, or will have a direct or indirect material
interest. In general, related persons are
directors, executive officers, their
immediate family members, and stockholders beneficially owning 5% or more of our
outstanding stock. The committee or committee chair approves or ratifies only
those transactions that are in, or not inconsistent with, the best interest of
Allstate and its stockholders. Transactions are reviewed and approved or
ratified by the committee chair when it is not practicable or desirable to delay
review of a transaction until a committee meeting. The committee chair reports
any approved transactions to the committee. Any ongoing, previously approved, or
ratified related person transactions are reviewed annually.
The Allstate
Corporation |
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Table of
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2017 Proxy Statement |
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Corporate Governance |
MANAGEMENT
PARTICIPATION IN COMMITTEE MEETINGS
Audit
Committee. The CFO, chief audit executive,
chief compliance executive, chief risk officer, CEO, general counsel and
controller all actively participate in audit committee meetings. Senior business
unit and technology executives, including the chief technology officer, are
present when appropriate. Executive sessions of the committee are scheduled and
held throughout the year, including sessions in which the committee meets
exclusively with the independent registered public accountant, chief audit
executive, and chief ethics, compliance and privacy officer.
Compensation and
Succession Committee. The executive vice
president, human resources, general counsel, CFO and CEO regularly participate
in compensation and succession committee meetings. The committee regularly meets
in executive sessions that include just the independent compensation consultant
or executive vice president, human resources, when necessary.
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Our senior human resources executive
provides the committee with internal and external analyses of the
structure of compensation programs. Throughout the year, the estimated and
actual results under our incentive compensation plans are
reviewed.
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Our CFO discusses financial results
relevant to incentive compensation, other financial measures, and
accounting rules. |
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Our CEO advises on the alignment of
our incentive plan performance measures with our overall strategy and the
design of our equity incentive awards. He also provides the committee with
performance evaluations of senior executives and recommends merit
increases and compensation awards.
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The general counsel is available at
meetings to provide input on the legal and regulatory environment and
corporate governance best practices and to ensure the proxy materials
accurately reflect the committees actions.
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The chief risk officer reports
annually on compensation plan alignment with Board-approved risk and
return principles. |
Nominating and Governance
Committee. The CEO and general counsel
participate in nominating and governance committee meetings. The committee
regularly meets in executive session without management present.
Risk and Return
Committee. The chief risk officer, CFO,
general counsel, CEO and operating unit risk officers participate in risk and
return committee meetings. The committee regularly meets in executive session,
including sessions with the chief risk officer.
COMMUNICATION
WITH THE BOARD
The Board has established a process to
facilitate communication by stockholders and other interested parties with
directors as a group. The general counsel reports regularly to the nominating
and governance committee on all correspondence received that, in her opinion,
involves functions of the Board or its committees or that she otherwise
determines merits Board attention.
In addition, the audit committee has
established procedures for the receipt, retention, and treatment of any
complaints about accounting, internal accounting controls, or auditing matters.
The communication process and the methods to communicate with directors are
posted on the Corporate Governance and Management & Directors sections
of www.allstateinvestors.com.
The Allstate Board welcomes your input on
compensation, governance, and other matters.
|
The Allstate
Corporation Nominating & Governance
Committee 2775 Sanders Road, Suite F7 Northbrook, IL
60062-6127 c/o General
Counsel |
26 |
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Table of
Contents
Corporate Governance |
|
2017 Proxy Statement |
CORPORATE
RESPONSIBILITY
The Board oversees Allstates
reputation and corporate responsibility initiatives and believes that
investing in our communities and operating sustainably benefit Allstates
investors. Allstate and The Allstate Foundation create positive social
change through the following priorities and initiatives. |
|
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|
Youth
Empowerment: Good Starts Young is The
Allstate Foundations program supporting Americas youth and their role in
society as problem solvers. Last year, the organizations we supported helped
over 1.7 million youth participate in service-based learning. |
|
|
|
Helping End Domestic
Violence: Over the past decade, The
Allstate Foundation Purple Purse program became the nations
longest-running program focused on providing financial empowerment
services for domestic violence survivors. To date, our programs have
helped over 1 million domestic violence survivors. |
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|
Volunteerism: Allstate employees contribute time and talent to a
variety of organizations through Allstate and The Allstate Foundation
Helping Hands in the Community programs. In 2016, employees and agents
reported they volunteered over 230,000 hours of service to local nonprofit
organizations. Additionally, many of Allstate officers provide leadership
by serving on nonprofit boards. |
|
|
|
Sustainability
Efforts: In 2010, Allstate pledged to
reduce its energy use by 20% over a ten-year period and surpassed that goal six
years early. Allstate continues to work toward further reductions.
Allstate has reduced its greenhouse gas emissions by nearly 30% since
establishing a baseline in 2007. |
|
|
|
To learn more about our corporate
responsibility efforts, please view Allstates Corporate Responsibility
Report at
http://corporateresponsibility.allstate.com/. |
MORE
INFORMATION
You can learn more about our corporate
governance by visiting www.allstateinvestors.com, where you will find our
Corporate Governance
Guidelines, each standing committee charter,
and Director Independence
Standards. Allstate has adopted a
comprehensive Global Code of Business Conduct that applies to the chief
executive officer, chief financial officer, controller, and other senior
financial
and executive officers, as well as the
Board of Directors and other employees. It is also available at
www.allstateinvestors.com. Each of the above documents is available in print
upon request to the Office of the Secretary, The Allstate Corporation, 2775
Sanders Road, Suite F7, Northbrook, Illinois 60062-6127.
The Allstate
Corporation |
|
27 |
Table of
Contents
2017 Proxy Statement |
|
Corporate Governance |
Board Meetings and Committees
THE ALLSTATE CORPORATION BOARD OF
DIRECTORS |
Meetings in
2016: 7
Independent Lead
Director: Judith A. Sprieser
Chair: Thomas J. Wilson
Key
Responsibilities:
The primary role and responsibility of the Board of
Directors is to oversee the affairs of the Corporation for the benefit of the
stockholders. . . . [including] oversight of the Corporations strategy,
business performance, capital structure, management selection, compensation
programs, shareholder advocacy, corporate reputation,
social responsibility initiatives, ethical
business practices, and Board and Committee structure and
operations.
-Allstates Corporate Governance
Guidelines
10 of 11 Allstate directors are
independent
|
Executive sessions without
management present at every in-person meeting |
|
Strategy discussion at every meeting, including a meeting
devoted solely to that topic |
|
Succession planning discussed at
four meetings annually |
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AUDIT COMMITTEE(1) |
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Meetings in
2016: 10
Chair: Mary Alice Taylor
Other
Members:
●Kermit R. Crawford
●Michael L. Eskew
●Siddharth N. Mehta
Key
Responsibilities:
●Oversees integrity of financial statements and other
financial information and disclosures
●Oversees the system of internal control over accounting
and financial reporting and disclosure controls and
procedures
●Reviews the enterprise risk control assessment and
guidelines, including cybersecurity risk and the major financial risk
exposures and management steps to monitor and control those
risks
●Oversees the ethics and compliance program and
compliance with legal and regulatory requirements
●Appoints, retains, and oversees the independent
registered public accountant, and evaluates its qualifications,
performance and independence |
We discussed risk at
five of our meetings, and engaged an independent advisor to review
Allstates cybersecurity risks and controls. We anticipate that this will
continue to be an area of focus throughout 2017.
Mary Alice
Taylor, Chair
|
|
|
|
●Retains independent cybersecurity advisor
●Oversees Allstates internal audit function
●Has authority to engage independent counsel and other
advisors to carry out its duties |
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COMPENSATION
AND SUCCESSION COMMITTEE |
|
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|
Meetings in
2016: 6
Chair: John W. Rowe
Other
Members:
●Michael L. Eskew
●Herbert L. Henkel
●Andrea Redmond
Key
Responsibilities:
●Oversees Allstates executive compensation
plans
●Has authority to retain the committees independent
compensation consultant
●Assists the Board in determining all compensation
elements of the executive officers, including the CEO
●Reviews the Compensation Discussion and Analysis and
prepares the Compensation Committee Report in this proxy
statement
●Reviews management succession plans, evaluation
processes and organizational strength |
In 2016, we spent a
considerable amount of time on the performance metrics in our short- and
long-term incentive programs to ensure the programs, as a whole, continued
to align with the long-term interests of our stockholders. We also added a
fourth discussion on management succession.
John W.
Rowe, Chair
|
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|
●Reviews CEOs performance in light of approved goals and
objectives
|
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|
(1) |
|
The Board determined that all
members of the audit committee are independent under the New York Stock
Exchange and SEC requirements, and that Mrs. Taylor and Messrs. Eskew and
Mehta are each an audit committee financial expert as defined under SEC
rules. Ms. Sprieser and Messrs. Rowe and Traquina also have the background
and experience to qualify as audit committee financial
experts. |
|
28 |
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Table of
Contents
Corporate Governance |
|
2017 Proxy Statement |
|
Judith A.
Sprieser, Independent
Lead Director
Oversight of
Allstates strategy was an important area of focus for our Board and this
was a key part of our meetings in 2016. We also formalized and expanded
the responsibilities of the lead director and committee chairs in response
to stockholder feedback. We continue to evaluate our directors to ensure
the optimal mix of skills, experience and diversity to effectively execute
the Boards responsibilities. This Board is well informed, actively
engaged and highly collaborative.
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NOMINATING
AND GOVERNANCE COMMITTEE |
|
|
|
RISK AND
RETURN COMMITTEE |
|
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|
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|
|
Meetings in 2016: 6
Chair: Andrea Redmond
Other Members:
●Kermit R. Crawford
●Jacques P. Perold
●John W. Rowe
●Judith A. Sprieser
Key
Responsibilities:
●Recommends candidates for Board election and nominees
for Board committees
●Recommends candidates for lead director and
Chair
●Recommends criteria for selecting directors and the lead
director, and determines director independence
●Reviews the Corporate Governance Guidelines and advises
the Board on corporate governance issues
●Determines performance criteria and oversees the
performance assessment of the Board, Board committees, and lead
director
●Reviews Allstates non-employee director compensation
program
●Has authority to retain a director search firm and
director compensation consultant |
We spent a
considerable amount of time discussing the role of the independent lead
director, reflecting on last years stockholder vote and subsequent
dialogue with stockholders and governance firms. As a result, we made
additional changes to the responsibilities of this role. Board composition
and refreshment were also important areas of focus. We were also thrilled
to add Perry Traquina to our Board.
Andrea Redmond,
Chair
|
|
|
|
Meetings in 2016: 5
Chair: Siddharth N. Mehta
Other Members:
●Herbert L. Henkel
●Jacques P. Perold
●Judith A. Sprieser
●Mary Alice Taylor
Key
Responsibilities:
●Assists the Board in risk and return governance and
oversight
●Reviews risk and return processes, policies, and
guidelines used by management to evaluate, monitor, and manage enterprise
risk and return (particularly related to Allstates business strategy,
capital structure and operating plans)
●Reviews Allstates enterprise risk and return management
function, including its performance, organization, practices, budgeting,
and staffing
●Supports the audit committee in its oversight of risk
assessment and management policies
●Has authority to retain outside advisors to assist in
its duties |
The committee is
focused on building Allstates exceptional risk management practices and
capital and risk allocation processes. Expanding governance of model risk,
operational risk management and talent development were key priorities in
2016.
Siddharth N.
Mehta, Chair |
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EXECUTIVE COMMITTEE |
Meetings in
2016: No meetings were necessary
Chair: Thomas J. Wilson
Other Members: |
●Siddharth N. Mehta
●Andrea Redmond
●John W. Rowe |
●Judith A. Sprieser
●Mary Alice Taylor |
Key
Responsibilities:
●Has the powers of the Board in the management of
Allstates business affairs to the extent permitted under the bylaws,
excluding any powers granted by the Board to any other committee of the
Board
●Provides Board oversight if outside the scope of
established committees or if an accelerated process is
necessary
●Comprised of lead director, committee chairs and
Chair |
Each committee operates
under a written charter and has the ability to hire third-party advisors.
Outside experts such as independent auditors, compensation consultants,
governance specialists, cybersecurity experts, board search firm
representatives, and financial advisors attend meetings to provide directors
with additional information on issues. All committees, other than the executive
committee, used independent external consultants in
2016.
The Allstate
Corporation |
|
29 |
Table of
Contents
2017 Proxy Statement |
|
Corporate Governance |
Director Compensation
DIRECTOR
COMPENSATION PROGRAM
Allstates non-employee director
compensation is reviewed annually. The nominating and governance committee
proposes changes to director compensation based on this annual review and
benchmark information from peer companies and
relevant compensation surveys. The
following table describes each component of our non-employee director
compensation program for 2016. No meeting fees or other professional fees were
paid to the directors.
Role |
|
Quarterly Cash Retainer(1) |
|
Equity
|
Non-Employee Director |
|
$26,250 |
|
To create a linkage with corporate
performance and stockholder interests, the Board believes that a
meaningful portion of a directors compensation should be in the form of
equity securities. For that reason, directors are granted restricted stock
units on June 1 equal in value to $150,000 divided by the closing price of
a share of Allstate common stock on such grant date, rounded to the
nearest whole share. For the 2017 award, the amount was increased to
$155,000. |
Lead Director |
|
$12,500 |
|
Audit Committee Chair |
|
$6,250 |
|
Other Committee Chair (except Executive
Committee) |
|
$5,000 |
|
|
|
|
|
(1) |
Paid in advance on the first day
of January, April, July, and October. The retainer is prorated for a
director who joins the Board during a
quarter. |
|
|
Based on peer benchmarking and an
evaluation of the increased demands associated with Board service,
effective January 1, 2017, the standard retainer was increased to $31,250,
the quarterly chair |
fee for the compensation and succession
and risk and return committees was increased to $6,250 and the audit committee
chair fee was increased to $8,750. Director compensation was last increased in
2015.
DIRECTOR
STOCK OWNERSHIP GUIDELINES
Each director is expected, within five
years of joining the Board or within five years of an increase in annual
retainer, if applicable, to accumulate an ownership position in Allstate common
stock equal to five times the annual value of the standard
retainer.
Each director has met the ownership
guideline, except for Messrs. Mehta, Perold, and Traquina, who joined the Board
in the last five years.
2016 DIRECTOR
COMPENSATION
The following table summarizes the
compensation for each of our non-employee directors who served as a member of
the Board and its committees in 2016.
Name |
|
Leadership Roles Held During 2016 |
|
Fees Earned or Paid in
Cash ($)(1)(2) |
|
Stock Awards ($)(3)(4) |
|
All Other Compensation ($)(5) |
|
Total ($) |
Mr. Beyer |
|
Retired May 2016
Risk and Return Committee Chair (January
- May) |
|
62,500 |
|
0 |
|
10,000 |
|
72,500 |
Mr. Crawford |
|
|
|
105,000 |
|
150,054 |
|
0 |
|
255,054 |
Mr. Eskew |
|
|
|
105,000 |
|
150,054 |
|
0 |
|
255,054 |
Mr. Henkel |
|
|
|
105,000 |
|
150,054 |
|
0 |
|
255,054 |
Mr. Mehta |
|
Risk and Return Committee Chair (May
December) |
|
117,088 |
|
150,054 |
|
0 |
|
267,142 |
Mr. Perold |
|
|
|
105,000 |
|
150,054 |
|
0 |
|
255,054 |
Ms. Redmond |
|
Nominating and Governance Committee Chair |
|
125,000 |
|
150,054 |
|
0 |
|
275,054 |
Mr. Rowe |
|
Compensation and Succession Committee Chair |
|
125,000 |
|
150,054 |
|
0 |
|
275,054 |
Ms. Sprieser |
|
Lead Director |
|
155,000 |
|
150,054 |
|
0 |
|
305,054 |
Mrs. Taylor |
|
Audit Committee Chair |
|
130,000 |
|
150,054 |
|
0 |
|
280,054 |
Mr. Traquina |
|
|
|
52,788 |
|
137,522 |
|
0 |
|
190,310 |
(1) |
Mr.
Traquina received a prorated retainer as he joined the Board in June
2016. |
30 |
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www.allstate.com |
Table of Contents
Corporate Governance |
|
2017 Proxy
Statement |
(2) |
|
Under the 2006 Equity Compensation Plan for Non-Employee
Directors, directors may elect to receive Allstate common stock in lieu of
cash compensation. Mr. Traquina elected to receive stock in lieu of cash.
Also, under Allstates Deferred Compensation Plan for Non-Employee
Directors, directors may elect to defer their retainers to an account that
is credited or debited, as applicable, based on (a) the fair market value
of, and dividends paid on, Allstate common shares (common share units);
(b) an average interest rate calculated on 90-day dealer commercial paper;
(c) Standard & Poors 500 Index, with dividends reinvested; or (d) a
money market fund. No director has voting or investment powers in common
share units, which are payable solely in cash. Subject to certain
restrictions, amounts deferred under the plan, together with earnings
thereon, may be transferred between accounts and are distributed after the
director leaves the Board in a lump sum or over a period not in excess of
ten years in accordance with the directors instructions. For 2016,
Messrs. Eskew and Henkel each elected to defer his cash retainer into
common share units. |
(3) |
|
Grant date fair value for restricted stock units granted
in 2016 is based on the final closing price of Allstate common stock on
the grant dates, which in part also reflects the payment of expected
future dividend equivalent rights. (See note 18 to our audited financial
statements for 2016.) Mr. Traquina received a prorated award when he
joined the Board in 2016. The final grant date closing price was $67.44,
except with respect to the prorated award granted to Mr. Traquina, which
was $69.95. The values were computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718.
Each restricted stock unit entitles the director to receive one share of
Allstate common stock on the conversion date (see footnote
4). |
(4) |
|
The following table provides outstanding restricted
stock units and stock options as of December 31, 2016 for each
director. |
|
OUTSTANDING AWARDS AT FISCAL YEAR-END
2016 |
|
|
|
|
|
Restricted Stock Units |
|
Stock Options |
|
Name |
|
(#) |
|
(#) |
|
Mr.
Beyer |
|
4,000 |
|
0 |
|
Mr.
Crawford |
|
11,283 |
|
0 |
|
Mr.
Eskew |
|
6,622 |
|
0 |
|
Mr.
Henkel |
|
10,962 |
|
0 |
|
Mr.
Mehta |
|
7,761 |
|
0 |
|
Mr.
Perold |
|
3,407 |
|
0 |
|
Ms.
Redmond |
|
26,755 |
|
0 |
|
Mr.
Rowe |
|
15,904 |
|
0 |
|
Ms.
Sprieser |
|
40,413 |
|
0 |
|
Mrs.
Taylor |
|
40,413 |
|
8,000 |
|
Mr.
Traquina |
|
1,966 |
|
0 |
|
|
Restricted stock unit awards granted before September 15, 2008,
convert into common stock one year after termination of Board service.
Restricted stock unit awards granted on or after September 15, 2008 and
before June 1, 2016, convert into common stock upon termination of Board
service. Restricted stock units granted on or after June 1, 2016, convert
into common stock on the earlier of the third anniversary of the date of
grant or upon termination of Board service. Directors had the option to
defer the conversion of the restricted stock units granted on June 1,
2016, for ten years from the date of grant or the later of termination of
Board service or June 1, 2024. The conversion of restricted stock units
granted after June 1, 2016, may be deferred for ten years or until
termination of Board service. In addition to the conversion periods
described above, restricted stock units will convert upon death or
disability. Each restricted stock unit includes a dividend equivalent
right that entitles the director to receive a payment equal to regular
cash dividends paid on Allstate common stock. Under the terms of the
restricted stock unit awards, directors have only the rights of general
unsecured creditors of Allstate and no rights as stockholders until
delivery of the underlying shares. |
|
|
Non-employee directors do not receive stock options as part of
their compensation as a result of a policy change effective on June 1,
2009. All outstanding stock options were exercisable as of December 31,
2016. |
|
|
All outstanding options were awarded under the terms of the 2006
Equity Compensation Plan for Non-Employee Directors, which specifies that
the exercise price for the option awards is equal to the fair market value
of Allstate common stock on the grant date. For options granted in 2007
and 2008, the fair market value is equal to the closing sale price on the
date of the grant. If there was no such sale on the grant date, then on
the last previous day on which there was a sale. The options became
exercisable in three substantially equal annual installments and expire
ten years after grant. Stock option repricing is not permitted. An
outstanding stock option will not be amended to reduce the option exercise
price. However, the plan permits repricing in the event of an equity
restructuring (such as a split) or a change in corporate capitalization
(such as a merger). |
(5) |
|
This amount represents a
charitable contribution made by Allstate to an entity selected by Mr.
Beyer upon his retirement from the Board. |
The Allstate
Corporation |
|
31 |
Table of Contents
EXECUTIVE
COMPENSATION
2 |
Say-on-Pay: Advisory Vote on the Compensation of
the Named Executives |
|
|
The Board
recommends a vote FOR this proposal.
●Independent oversight by compensation and succession committee with
the assistance of an independent consultant.
●Executive compensation targeted at 50th percentile of peers and is
structured to be aligned with total return to shareholders and our
strategy.
●Compensation programs are working effectively. Annual incentive
compensation funding for our named executives in 2016 was 55.1% of target,
from 80.8% of target in the prior year, primarily due to the impact of
auto insurance profit improvement actions on the total premium
measure.
●Total shareholder return compares favorably to
compensation. |
|
|
|
|
|
We conduct a say-on-pay vote every year at
the annual meeting. While the vote is non-binding, the Board and the
compensation and succession committee (the committee as referenced throughout
the Compensation Discussion and Analysis and Executive Compensation sections)
consider the results as part of their annual evaluation of our executive
compensation program.
You may vote to approve or not approve the
following advisory resolution on the executive compensation of the named
executives:
RESOLVED, on an advisory basis, the
stockholders of The Allstate Corporation approve the compensation of the named
executives, as disclosed pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including the Compensation Discussion and
Analysis and accompanying tables and narrative on pages 33-66 of the Notice of
2017 Annual Meeting and Proxy Statement.
|
Allstate continued to execute operational improvements
in a challenging external environment. These operational improvements,
however, led to a modest decline in insurance policies in force and, in
part, led to results below threshold on the total premiums performance
measure in the annual incentive program. Operating income was below target
due to catastrophe losses in excess of plan. Net investment income was
close to target levels and total return on our investment portfolio was
well above target. |
|
Total shareholder return was 21.5% for 2016 in
comparison to 16.5% for the compensation peer group. |
|
Total 2016 compensation for the CEO decreased from 2015
by $1.1 million to $12.2 million excluding the change in pension value, as
shown in the Summary Compensation Table. |
|
The annual incentive compensation plan was funded for
the named executives at 55.1% of target in 2016. Based on company and
individual performance, the named executives received the following annual
incentive payments, which were significantly lower than the prior two
years awards: |
|
Named Executive |
|
2014 Annual Incentive ($) |
|
2015 Annual Incentive ($) |
|
2016 Annual Incentive ($) |
|
Mr.
Wilson |
|
4,073,075 |
|
2,888,136 |
|
1,982,880 |
|
Mr.
Shebik |
|
883,619 |
|
850,000 |
|
600,000 |
|
Mr.
Civgin |
|
1,000,000 |
|
768,629 |
|
535,066 |
|
Ms.
Fortin(1) |
|
|
|
|
|
291,774 |
|
Mr.
Winter |
|
1,500,000 |
|
1,600,000 |
|
1,017,513 |
|
(1) |
|
For Ms. Fortin, only the last fiscal year is
shown since this is the first year she is a named executive
officer. |
32 |
|
www.allstate.com |
Table of Contents
Executive Compensation |
|
2017 Proxy
Statement |
Compensation Discussion and
Analysis
EXECUTIVE
OVERVIEW
Our Compensation Discussion and Analysis
describes Allstates executive compensation program, including total 2016
compensation for our named executives listed below:
Thomas J. Wilson
Chair
and Chief Executive Officer (CEO) |
Steven E. Shebik Executive Vice President and Chief
Financial Officer (CFO) |
Don Civgin President, Emerging
Businesses |
Mary Jane Fortin President, Allstate Financial |
Matthew E. Winter President |
See Appendix C for a list of Allstates
other executive officers.
Business Highlights
In 2016, Allstate successfully executed
its strategy to serve the four customer segments with unique value propositions,
met near-term financial commitments and invested in long-term growth platforms.
Stockholders received $1.8 billion in cash in 2016 through a combination of
stock repurchases and common stock dividends. Our management team continued to advance all
five of our 2016 operating priorities:
Operating Priorities |
|
|
Results |
|
|
Better serve our customers
through innovation, effectiveness, and efficiency |
|
|
●Advanced the Allstate
brand trusted advisor transformation by introducing new customer
relationship initiation practices, including providing personalized
insurance proposals to prospective customers.
●Effectively utilized
a net promoter score to focus efforts to better serve
customers. |
|
|
|
|
|
|
|
|
|
|
|
Achieve target economic returns
on capital |
|
|
●Operating income* of $1.8
billion despite a 49.6% increase in catastrophe losses in 2016, generating
an operating income return on capital* of 10.4%.
●Delivered a
property-liability underlying combined ratio* of 87.9 for 2016, at the
favorable end of the annual outlook range provided to
investors. |
|
|
|
|
|
|
|
|
|
|
|
Grow insurance policies in
force |
|
|
●Overall insurance policies
in force declined modestly as increases in auto insurance pricing reduced
both new business and customer retention.
●Strong growth at
Allstate Benefits. |
|
|
|
|
|
|
|
|
|
|
|
Proactively manage
investments |
|
|
●Net investment income of $3
billion was essentially on plan.
●Achieved 4.4% total return
on the $82 billion investment portfolio in 2016.
●Performance-based
investments, including private equity and real estate, grew 17.2% in 2016
to $6 billion. |
|
|
|
|
|
|
|
|
|
|
|
Build and acquire long-term
growth platforms |
|
|
●Launched Arity, our
telematics company, to provide software, data and analytics
services.
●Agreed to acquire
SquareTrade to expand Allstates protection offerings (closed in January
2017).
●Allstate Benefits achieved $1 billion in premiums and contract
charges in 2016. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The operating income and
underlying combined ratio measures are not based on accounting principles
generally accepted in the United States of America (non-GAAP) and are
defined and reconciled to the most directly comparable GAAP measures in
Appendix A. |
|
The Allstate
Corporation |
|
33 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation
|
Allstates one-year total shareholder
return was 21.5%. The following chart shows Allstates total shareholder return
over one, three and five years relative to the market cap weighted average of
the peer group used for 2016 compensation benchmarking (identified on page 46).
COMPARISON OF TOTAL SHAREHOLDER
RETURN |
Alignment of Pay with
Performance
The committee designs the executive
compensation program to deliver pay in accordance with corporate, business unit
and individual performance. A large percentage of total target compensation is
at risk through long-term equity awards and annual cash incentive awards. These
awards are linked to
performance measures that correlate with
long-term stockholder value creation. The mix of target total direct
compensation for 2016 for our CEO and the average of our other named executives
is shown in the chart below.
CHIEF EXECUTIVE
OFFICER |
|
AVERAGE OF OTHER
NAMED |
|
|
EXECUTIVE
OFFICERS |
|
|
|
34 |
|
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Executive
Compensation |
|
2017 Proxy
Statement |
In addition to the compensation structure
at target, the 2016 compensation paid to our named executives reflects strong
pay for performance alignment.
● |
Annual cash
incentive. For our annual cash incentive award, we set
performance ranges to align with our operating plan and strategy. The
annual incentive plan was funded for the named executives at 55.1% of
target. Allstate continued to execute operational improvements
|
|
in a challenging external
environment. These operational improvements, however, led to a modest
decline in insurance policies in force and, in part, led to results below
threshold on the total premiums performance measure in the annual
incentive program. Operating income was below target due to catastrophe
losses in excess of plan. Net investment income was close to target
levels, and total return on our investment portfolio was well above
target.
|
The following table shows the annual cash
incentive award paid to each named executive as a percentage of target in the
last three years.
|
AIP % OF TARGET |
|
|
|
Name |
|
2014 |
|
2015 |
|
2016 |
|
Mr. Wilson |
|
118.9% |
|
80.8% |
|
55.1% |
|
Mr. Shebik |
|
118.9% |
|
90.7% |
|
62.3% |
|
Mr. Civgin |
|
114.3% |
|
80.8% |
|
55.1% |
|
Ms. Fortin |
|
|
|
|
|
51.2% |
|
Mr. Winter |
|
130.4% |
|
89.3% |
|
55.1% |
● |
Long-term incentive
awards. Senior executives received equity
grants in 2016 composed of 60% performance stock awards (PSAs) and 40%
stock options. The committee selected Average Adjusted Operating Income
ROE and Earned |
|
Book Value as the performance
measures for PSAs since those measures were deemed to be best correlated
to long-term stockholder value. See pages 43-45. The 2014-2016 PSAs paid
out at 87.1% of target. |
CONSIDERATION OF 2016
STOCKHOLDER VOTE
Stockholders approved the 2016
say-on-pay resolution with approximately 95% of the votes cast in favor.
The committee, with input from the independent compensation consultant,
considered the vote results, investor input, and current market practices
as it evaluated whether changes to the compensation program were
warranted.
|
As we strive to
continuously improve our practices, we made the following modifications to
our program in 2016: |
● |
Annual Incentive
Plan. Our annual incentive plan for 2016
included total return as a fourth performance measure, further aligning
our short-term incentive program with our long-term investments
strategy. |
● |
Stock Ownership
Guidelines. The President and all
executive vice presidents are now required to own Allstate common stock
worth a multiple of three times their base
salary. |
The Allstate
Corporation |
|
35 |
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2017 Proxy Statement |
|
Executive
Compensation |
ALLSTATES EXECUTIVE
COMPENSATION PRINCIPLES
Allstates executive compensation program
includes industry best practices.
|
|
|
|
What We Do |
|
|
|
Pay
for Performance. A significant
percentage of total target direct compensation is pay at-risk and is based
on measurable performance goals. |
|
|
|
Strong Link between Performance Measures and
Strategic Objectives. Performance
measures for incentive compensation are linked to operating priorities
designed to create long-term stockholder value. |
|
|
|
Independent Compensation
Consultant. The committee retains
an independent compensation consultant to review the executive
compensation programs and practices. |
|
|
|
Targeted Pay at 50th Percentile of
Peers. The committee targets total
direct compensation at the 50th percentile of peers. |
|
|
|
Benchmark Peers of Similar Revenues and Business
Complexity. The committee
benchmarks our executive compensation program and reviews the composition
of the peer group annually with the assistance of the independent
compensation consultant. |
|
|
|
Moderate Change-in-Control
Benefits. Change-in-control
severance benefits are three times target cash compensation for the CEO
and two times target cash compensation for other executive
officers. |
|
|
|
Double Trigger in the Event of a Change in
Control. Beginning with grants
made in 2012, equity incentive awards have a double trigger; that is, they
will not vest in the event of a change in control unless also accompanied
by a qualifying termination of employment. |
|
|
|
Maximum Payout Caps for Annual Cash Incentive
Compensation and Performance Stock Awards (PSAs). The committee establishes a maximum limit on the number
of PSAs and the amount of annual cash incentive that can be earned. The
respective compensation plans also limit awards for certain
executives. |
|
|
|
Robust Equity Ownership and Retention
Requirements. In addition to
executive stock ownership guidelines, we extended holding requirements
beginning with awards granted in 2014. Senior executives must hold a
portion of their equity for one additional year after vesting of the PSAs
or restricted stock units or exercise of options. |
|
|
|
Clawback of Certain Compensation if Restatement or
Covenant Breach. Certain awards
made to executive officers are subject to clawback in specified
circumstances. |
|
|
|
|
|
|
|
|
|
What We Dont
Do |
|
|
|
No Employment Agreements for
Executive Officers. Our executive
officers are at-will employees with no employment contracts. |
|
|
|
No Guaranteed Annual Salary
Increases or Bonuses. For the
named executives, annual salary increases are based on evaluations of
individual performance, while their annual cash incentives are tied to
corporate and individual performance. |
|
|
|
No Special Tax Gross
Ups. No tax gross ups are provided
beyond limited items which are generally available to all full-time
employees. |
|
|
|
No Repricing or Exchange of
Underwater Stock Options. Our
equity incentive plan does not permit repricing or exchange of underwater
stock options or stock appreciation rights without stockholder approval,
except in connection with certain transactions involving Allstate or a
change in control. |
|
|
|
No Plans that Encourage Excessive
Risk-Taking. Based on the annual
review, it was determined that the companys compensation practices are
appropriately structured and avoid incenting employees to engage in
unnecessary and excessive risk-taking. |
|
|
|
No Hedging or Pledging of Allstate
Securities. Officers, directors,
and employees are prohibited from hedging Allstate securities. Directors,
executive officers and other senior executives are prohibited from
pledging Allstate securities as collateral or holding securities in a
margin account, unless an exception is granted by the Chair or lead
director. |
|
|
|
No Inclusion of Equity Awards in
Pension Calculations. Compensation
realized from the exercise of stock options or the settlement of PSAs is
not used in the calculation of an employees pension benefit. |
|
|
|
No Dividends Paid on Unvested
PSAs. Dividend equivalents are
accrued but not paid on PSAs until the performance conditions are
satisfied and the PSAs vest after the performance measurement
period. |
|
|
|
No Excessive Perks. We offer only limited benefits as required to remain
competitive and to attract and retain highly talented
executives. |
|
|
|
|
|
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Executive
Compensation |
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2017 Proxy Statement |
ELEMENTS
OF 2016 EXECUTIVE COMPENSATION PROGRAM DESIGN
The following table lists the elements of
target direct compensation for our 2016 executive compensation program. The
committee uses the 50th
percentile of our peer companies as a guideline when
setting total target direct compensation. The program uses a mix of fixed and
variable compensation elements and provides alignment with both short- and
long-term business goals through annual and long-term incentives. Our incentives
are designed to drive overall corporate performance, specific business unit
strategies, and individual performance using measures that correlate to
stockholder value and align with our long-term strategic vision and operating
priorities.
|
|
Fixed |
|
|
|
Variable |
|
|
|
|
Base Salary |
|
Annual Cash Incentive Awards |
|
Performance Stock Awards (PSAs) |
|
Stock Options |
Key
Characteristics |
|
●Fixed compensation component payable in
cash.
●Reviewed annually and adjusted when
appropriate. |
|
●Variable compensation component payable annually in
cash.
●Actual performance against annually established goals
determines overall corporate pool, which is allocated based on individual
performance. |
|
●Equity award based on achieving performance
goals.
●PSAs vest on the day before the third anniversary of the
grant date based on actual performance against goals established at the
beginning of the performance period.
●See page 45 for the retention requirements for
PSAs. |
|
●Non-qualified stock options to purchase shares at the
market price when awarded. Vest ratably over three years.(1)
●Expire in ten years or in the event of retirement, the
earlier of five years or normal expiration.
●See page 45 for the retention requirements for stock
options. |
Why We
Pay This Element |
|
●Provide a base level of competitive cash compensation
for executive talent. |
|
●Motivate and reward executives for performance on key
strategic, operational, and financial measures during the
year. |
|
●Motivate and reward executives for performance on key
long-term measures.
●Align the interests of executives with long-term
stockholder value and retain executive talent. |
|
●Align the interests of executives with long-term
stockholder value and retain executive talent. |
How
We Determine Amount |
|
●Experience, job scope, market data, and individual
performance.
●Senior executive payments are approved by the
compensation and succession committee. |
|
●A corporate-wide funding pool is based on performance on
four measures:
●Adjusted Operating Income(2)
●Total Premiums(2)
●Net Investment Income(2)
●Total Return(2)
●Individual awards are based on job scope, market data,
and individual performance. |
|
●Target awards based on job scope, market data, and
individual performance.
●Vested awards based on performance on Adjusted Operating
Income Return on Equity(2) and
Earned Book Value(2) with
a requirement of positive Net Income for any payout above
target. |
|
●Target awards based on job scope, market data, and
individual performance. |
(1) |
|
Stock options granted prior to
February 18, 2014 vested over four years with 50% exercisable on the
second anniversary of the grant date, and 25% exercisable on each of the
third and fourth anniversary dates. The change to a three-year vesting
schedule with one-third exercisable on each anniversary was made in 2014
to reflect current market practice. |
(2) |
|
For a description of how these
measures are determined, see pages 64-66. |
The Allstate
Corporation |
|
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|
Executive Compensation |
COMPENSATION DECISIONS FOR 2016
Chief Executive
Officer
Mr. Wilson, Chair and Chief Executive
Officer
●Mr. Wilsons total compensation and the amount of each
compensation element are driven by the design of our compensation program,
his experience, his responsibility for Allstates overall strategic
direction, performance and operations, and the committees analysis of
peer company CEO compensation. In conjunction with the committees
independent compensation consultant, the committee conducts an annual
review of Mr. Wilsons total target direct compensation and determines if
any changes are warranted.
●Mr. Wilsons performance as Chair and CEO is evaluated
under the following categories which are determined by the committee:
operating results, total shareholder return, developing and implementing
long-term strategy, maintaining and motivating a high performance team,
corporate stewardship and Board effectiveness. Performance is assessed
over one- and three-year time periods.
●Operating Results.
Allstate made substantial progress in executing the profit improvement
plan for auto insurance. However, the auto insurance profit improvement
plan negatively impacted the total premiums measure in the annual
incentive plan. Operating profit was below plan due to a substantial
increase in catastrophe losses in 2016.
●Total Shareholder
Returns. Total shareholder returns of 21.5% and 43.2% over one
and three years are substantially higher than the compensation peer group
(see page 34).
●Long-term Strategy.
Successful execution of the customer segmentation strategy and building
long-term growth platforms such as Arity and Allstate Benefits, and the acquisition of
SquareTrade.
●High Performance Team.
Allstate has a strong performance based culture, exceptional employee
engagement and an excellent leadership team.
●Board Effectiveness.
The Board is highly collaborative, transparent and fully engaged. Mr.
Traquina joined the Board in 2016.
●During the 2016 annual review, the committee determined
that Mr. Wilsons target direct compensation was appropriately aligned
with the median of the compensation peer group. Furthermore, Mr. Wilsons
annual cash incentive target of 300% of salary and long-term equity
incentive target of 750% of salary remained unchanged.
●Salary. In 2016, the
Board did not adjust Mr. Wilsons salary of $1,200,000. Mr. Wilsons last
salary increase was in March 2015.
●Annual Cash Incentive
Award. Mr. Wilsons target annual incentive payment of 300% of
base salary with a maximum funding opportunity for the award pool of 200%
of target was unchanged in 2016. The committee approved an annual cash
incentive award of $1,982,880, which was 55.1% of target and equal to the
funding level as determined by the actual results for the four performance
measures. This was 19.8% of the maximum payment established by the
Board.
●Equity Incentive
Awards. In February 2016, based on its assessment of Mr.
Wilsons performance in delivering strong business results in 2015, the
committee granted him equity awards of stock options with a grant date
fair value of $3,600,000 and performance stock awards with a grant date
fair value of $5,400,028, which was Mr. Wilsons target equity incentive
award opportunity of 750% of salary.
●Other. The change in
pension value for Mr. Wilson in 2016 of $1,574,760 was $3,907,387 lower
than the change would have been had management not recommended a change in
pension benefits beginning in 2014, as discussed on page 47. The total
value of Mr. Wilsons pension benefit as of December 31, 2016 is $13.4
million less than it would have been without the 2014 pension
change. |
38 |
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2017 Proxy Statement |
Other
Named Executives
Mr. Wilson and the Board evaluate the
performance and contributions of each member of the senior leadership team,
including each other named executive. Based on his review, Mr. Wilson
recommended specific adjustments to salary as well as actual incentive awards.
The recommendations were considered and approved by the committee.
Mr. Shebik, Executive
Vice President and Chief Financial Officer
●Salary. The committee
approved an increase from $750,000 to $775,000 during 2016, based on an
evaluation of his performance, level of responsibility, and target
compensation as compared to the peer group.
●Incentive Targets. No
changes were made to Mr. Shebiks incentive targets during 2016. Mr.
Shebiks annual incentive target was 125% of salary and his target equity
incentive opportunity was 300% of salary.
●Annual Cash Incentive Award. The committee
approved an annual cash incentive award of $600,000 for Mr. Shebik. This
award was slightly above pool funding based on excellent performance in
2016. This was 11.1% of the maximum payment established by the
Board.
●Equity Incentive
Awards. In February 2016, based on a review of Mr. Shebiks
performance during 2015, the committee granted him equity awards with a
grant date fair value of $2,749,985, which is approximately $500,000 above
his target equity incentive award opportunity.
●2016 Performance. Mr.
Shebik had exceptional performance in 2016. As Chief Financial Officer he
was integral to all of the operational and strategic accomplishments
across Allstate. He also served as Interim Chief Investment Officer
beginning in April 2016 and delivered strong investment
results. |
Mr. Civgin,
President, Emerging Businesses
●Salary. The committee
approved an increase from $762,000 to $780,000 during 2016, based on an
evaluation of his performance, level of responsibility, and target
compensation as compared to the peer group.
●Incentive Targets. No
changes were made to Mr. Civgins incentive targets during 2016. Mr.
Civgins annual incentive target was 125% of salary and his target equity
incentive opportunity was 300% of salary.
●Annual Cash Incentive
Award. The committee approved an annual cash incentive award of
$535,066 for Mr. Civgin, which was at the calculated pool funding and 9.9%
of the maximum payment established by the Board.
●Equity Incentive
Awards. In February 2016, based on a review of Mr. Civgins
performance during 2015, the committee granted him equity awards with a
grant date fair value of $2,400,027, which is approximately $114,000 above
his target equity incentive award opportunity.
●2016 Performance. Mr.
Civgins business results were slightly below plan as profit improvement
initiatives were more complicated than expected. Excellent progress was
made in building two long-term growth opportunities, Arity and Allstate
Benefits. |
Ms. Fortin,
President, Allstate Financial
●Salary. The committee
approved an increase from $625,000 to $634,375 during 2016, based on an
evaluation of her performance, level of responsibility, and target
compensation as compared to the peer group.
●Incentive Targets. No
changes were made to Ms. Fortins incentive targets during 2016. Ms.
Fortins annual incentive target was 90% of salary and her target equity
incentive opportunity was 250% of salary.
●Annual Cash Incentive
Award. The committee approved an annual cash incentive award of
$291,774 for Ms. Fortin, which was slightly below calculated pool funding
and 5.4% of the maximum payment established by the Board.
●Equity Incentive
Awards. In February 2016, based on a review of Ms. Fortins
performance during 2015, the committee granted her equity awards with a
grant date fair value of $1,562,486, which was Ms. Fortins target equity
incentive award opportunity of 250% of salary.
●2016 Performance.
Allstate Life and Retirement operating income was above plan, but sales
were below the prior year. Substantial long-term economic value should be
created by the repositioning of the investment portfolio for the payout
annuity liabilities. |
The Allstate
Corporation |
|
39 |
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2017 Proxy Statement |
|
Executive Compensation |
Mr. Winter, President
●Salary. The committee approved an increase from $800,000 to
$825,000 during 2016, based on an evaluation of his performance, level of
responsibility, and target compensation as compared to the peer
group.
●Incentive
Targets. No changes were made to Mr.
Winters incentive targets during 2016. Mr. Winters annual incentive
target was 225% of salary and his target equity incentive opportunity was
375% of salary.
●Annual Cash Incentive
Award. The committee approved an annual
cash incentive award of $1,017,513 for Mr. Winter, which was at calculated
pool funding and 14.1% of the maximum payment established by the
Board.
●Equity Incentive
Awards. In February 2016, based on a
review of Mr. Winters performance during 2015, the committee granted him
equity awards with a grant date fair value of $3,200,016, which is
approximately $200,000 above his target equity incentive award
opportunity.
●2016
Performance.
●Operating income was below plan
despite a 49.6% increase in catastrophe losses from the prior year.
Excellent execution of the auto insurance profit improvement plan while
maintaining attractive margins from homeowners insurance. Successfully
utilized continuous improvement processes and operational oversight to
reduce expenses.
●Enhanced long-term competitive
position of Allstate agencies by implementing the trusted advisor
strategy.
●Developed and recruited a strong
senior leadership team. |
40 |
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Executive Compensation |
|
2017 Proxy Statement |
INCENTIVE DESIGN AND GOAL SETTING
For the annual and long-term incentive
programs, the committee oversees a rigorous and comprehensive goal-setting
process. The committee works to identify performance measures and ranges of
performance in the annual and long-term programs that (1) align with the
companys strategy,
operating principles and priorities, and
stockholder interests, (2) support the achievement of corporate goals, and (3)
reflect the companys overall performance. The following timeline of key events
reflects the committees process:
INCENTIVE DESIGN, PAYOUT, AND GOAL-SETTING
PROCESS |
March-April
●Evaluate peer group to determine
if any changes are required for the next performance
cycle
●Compare actual compensation
paid, operating results and stockholder returns from previous year to peer
group as provided by the independent compensation
consultant
●Review feedback from
stockholders and governance firms |
|
July-October
●Independent compensation
consultant provides advice on incentive design and overall executive
compensation program
●The consultant provides
compensation data from the peer group and information on current market
practices and industry trends |
|
November-January
●Establish plan design,
performance measures and ranges (target, threshold, and maximum) for
upcoming year for annual incentive plan and long-term incentive
awards
●Review plans and measures for
alignment with enterprise risk and return
principles |
|
January-February
●Calculate the corporate pool for
the annual incentive award based on actual performance
●Allocate the calculated
corporate pool amongst Market Facing Businesses and Areas of
Responsibility based on their operating performance in relationship to
target amounts. Allocate these pools based on individual
performance
●Determine the number of
performance stock awards that vested for the applicable measurement period
based on actual performance
●Approve specific measurable
goals for current year for annual incentive plan and 3-year performance
stock awards
●Review and approve salary
adjustments and annual incentive and equity targets for executive
officers |
|
Ongoing
●Review compensation philosophy
and objectives in light of company performance, company goals and
strategy, stockholder feedback, and external benchmarking
●Monitor compensation estimates
in comparison to actual and relative
performance |
The Allstate
Corporation |
|
41 |
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|
Executive Compensation |
● |
Executive salaries are set by the
Board based on the committees recommendations. In recommending executive salary levels, the committee uses the
50th percentile of total target direct compensation of our peer companies
as a guideline, which supports
Allstates ability to compete effectively for and to retain executive
talent. Annual merit increases for named executives are based on
evaluations of their performance, using the enterprise-wide merit increase
budget as a guideline. |
Annual
Cash Incentive Awards
● |
At the beginning of the year, after
extensive review, the committee sets performance measure goals based on
the operating plan. Target performance is equal to the operating plan.
Threshold and maximum measures are informed by probability testing,
historical results, and operational performance scenarios. To further test
the appropriateness of the ranges, the committees independent consultant
provides advice based on peer performance, market expectations and
industry trends. The chief risk officer reviews the performance measures
and ranges to ensure they are consistent with Allstates risk and return
principles. |
● |
Actual performance on the
performance measures determines the overall funding level of the corporate
pool and the aggregate total award budget for eligible employees. In 2016,
the pool was funded based on the collective results of four measures:
Adjusted Operating Income, Total Premiums, Net Investment Income, and
Total Return. Funding for each measure is equal to 0% below threshold, 50%
at threshold, 100% at target and 200% at maximum, and results between
threshold, target and maximum are subject to
interpolation. |
● |
In the event of a net loss, the
corporate pool funding is reduced by 50% of actual performance for senior
executives. For example, if performance measures ordinarily would fund the
corporate pool at 60% and there was a net loss, then the corporate pool
would be funded at 30% for senior executives. This mechanism ensures
alignment of pay and performance in the event of a natural catastrophe or
extreme financial market conditions. |
● |
Target annual incentive
compensation percentages for each named executive are based on market data
pay levels of peer companies and our benchmark target for total direct
compensation at the 50th percentile. |
● |
Individual awards are based on
individual performance in comparison to position-specific compensation
targets and overall company performance. |
● |
In order to qualify annual cash
incentive awards as deductible performance-based compensation under
Internal Revenue Code section 162(m), Allstate has established the maximum
awards that could be paid to any of the named executives as the lesser of
the stockholder approved maximum of $10 million under the Annual Executive
Incentive Plan or a percentage of an award pool. For 2016, the award pool
is equal to 1.0% of Adjusted Operating Income (defined on pages 64-65),
and the percentage of the award pool for Mr. Wilson is 35%, Mr. Winter,
20%, and for each other named executive, 15%. Although section 162(m) does
not apply to the compensation of the CFO, the CFO was included in the
award pool consistent with the award opportunity available to the other
named executives. The committee retains complete discretion to pay less
than the maximums established by the Annual Executive Incentive Plan and
the award pool. |
42 |
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Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
● |
We paid the 2016 cash incentive
awards in March 2017. The following table shows how the corporate pool was
funded and distributed to individual
participants: |
Formulaic Calculation of Corporate Funding Pool |
|
|
Annual
Corporate Pool Distribution |
Actual performance is determined
after the end of the performance period. The pool available for
distribution is calculated in accordance with a formula based on four
performance measures.
Adjusted
Operating Income (aligns with stockholders expectations of current
performance)(1)
Total
Premiums (captures growth and competitive position of the
businesses)(1)
Net Investment
Income (a significant component of profitability)(1)
Total
Return (captures all investment results for the business)(1) |
|
|
|
1. |
Committee approves corporate pool based on review of actual
performance in comparison to goals |
|
|
|
2. |
CEO
allocates portion of corporate pool for
participants other than senior executives between business units and Areas of Responsibility based on
relative performance against annual operating goals |
|
|
|
|
●CEO did not exercise discretion in allocating
pool funding between the
Market Facing Businesses or Areas of Responsibility for
2015
●In 2016, the CEO applied positive discretion
equal to 25% additional
funding for the participants within the Investments group due to their strong results for
the 2016 performance year. The positive discretion in Investments
resulted in negative discretion
of 5% for all other Market Facing Businesses and Areas of Responsibility |
|
|
|
3. |
Committees compensation recommendations for the CEO are
reviewed and approved by the independent directors of our Board in
executive session |
|
|
|
4. |
Committee reviews and approves CEO recommendations for executive
officers based on individual performance and position-specific
compensation targets |
|
|
|
5. |
Individual awards for other employees are
determined by senior leaders of Market Facing Businesses and Areas of
Responsibility and are subject to approval by CEO senior leaders are
required to ensure the appropriate pay for performance by ensuring that
high performing participants earn awards (as a percent of funding) that
are at least 1.5 times the awards earned by lower performing participants
for the annual incentive plan. The ratio must be at least 2.0 times for
the equity components of
compensation |
(1) |
|
The committee has discretion to
determine the amount of the awards paid from the corporate pool to the
named executives. For treatment of catastrophe losses and
performance-based long-term income in the funding calculation, see
discussion of performance measures on pages 64-66. |
Performance Stock Awards and Stock Options
● |
We grant equity awards to executives
based on scope of responsibility, consistent with our philosophy that a
significant amount of compensation should be in the form of equity.
Additionally, from time to time, equity awards are granted to attract new
executives and to retain existing executives. |
● |
In 2016 and 2017, the mix of equity
incentives for senior executives was 60% PSAs and 40% stock options. We
believe both PSAs and stock options are forms of performance-based
incentive compensation because PSAs are earned based on achieving
established performance goals and stock options require stock price
appreciation to deliver value to an executive. The PSAs are awarded based
on results over a three-year period with the actual number of PSAs vesting
between 0% to 200% of that periods target PSAs based on Adjusted
Operating Income ROE (70%) and Earned Book Value (30%) for the measurement
period. |
● |
The committee selected Adjusted
Operating Income ROE as a performance measure because
it: |
|
● |
Measures performance in a way that
is tracked and understood by investors. |
|
● |
Captures both income and balance
sheet impacts, including capital management
actions. |
|
● |
Provides a useful gauge of overall
performance while limiting the effects of factors management cannot
influence, such as extreme weather conditions. |
|
● |
Correlates to changes in long-term
stockholder value. |
● |
Earned Book Value was selected to
create greater alignment with the increase in performance-based assets in
the investment portfolio. |
● |
Both measures are further described
on pages 64-66. For both measures, the committee considered historical and
expected performance, market expectations and industry trends when
approving the range of performance. |
● |
For awards in 2014 and 2015, the
number of PSAs that vest depends on the three-year Average Adjusted
Operating Income ROE. Adjusted Operating Income ROE for those years is
defined on pages 64-66. |
The Allstate
Corporation |
|
43 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
● |
For all PSA awards, Adjusted
Operating Income and Earned Book Value include a minimum or maximum amount of
after-tax catastrophe losses if actual catastrophe losses are less than or
exceed those amounts, respectively, which serves to decrease volatility
and stabilize the measure. |
● |
The committee requires
positive net income in order for our executives to earn PSAs based on
Adjusted Operating Income ROE above target. If Allstate has a net loss in
a measurement period, the number of PSAs vested would not exceed target,
regardless of the Adjusted Operating Income ROE. This hurdle is included
to prevent misalignment between Allstate reported net income and the PSAs
vested based on the Adjusted Operating Income ROE result. This situation
could occur if, for example, catastrophe losses or capital losses that are
not included in Adjusted Operating Income ROE caused Allstate to report a
net loss for the period. |
● |
At the end of each measurement
period, the committee certifies the level of our Adjusted Operating Income
ROE and Earned Book Value achievement. The committee does not have the
discretion to adjust the performance achievement for any measurement
period. PSAs will vest following the end of the three-year performance
cycle if the performance conditions are met, subject to continued
employment (other than in the event of death, disability, retirement, or a
qualifying termination following a change in
control). |
For the 2017-2019 award, the Average
Adjusted Operating Income ROE and Earned Book Value measures are calculated,
respectively, as follows:
Adjusted Operating
Income(1) |
± |
Catastrophe Losses
Adjustment |
÷ |
Adjusted Common Shareholders
Equity(2) |
= |
Average Adjusted Operating Income
ROE |
Average for three years in the
performance cycle |
|
Adjusted to reflect a minimum or
maximum amount of catastrophe losses |
|
Average of common shareholders
equity excluding unrealized gains and losses, after tax, at
December 2016, and at the end of each year in the performance
cycle |
|
70% of PSA
Performance Measure |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned Book
Value: Compound annual growth rate between reported common shareholders
equity at December 2016 and adjusted common shareholders equity at
December 2019(3) |
Common Shareholders Equity |
+ |
Capital Transactions |
± |
Catastrophe Losses Adjustment |
➔ |
|
|
|
|
|
|
Reported common shareholders equity
at December 2019 |
|
Adjusted to add back common share
repurchases and common share dividends during the performance
period |
|
Adjusted to reflect a minimum or
maximum amount of catastrophe losses |
|
30% of PSA
Performance Measure |
|
|
|
|
|
|
|
|
(1) |
|
Adjusted Operating Income for the
2017-2019 PSA award is defined on pages 64-66. |
(2) |
|
Adjusted Common Shareholders
Equity for the 2017-2019 PSA award is defined on page 66. |
(3) |
|
Earned Book Value is defined on
page 66. |
44 |
|
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Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
2017-2019 PERFORMANCE STOCK AWARD RANGE OF
PERFORMANCE |
|
|
Performance Measures |
|
|
Threshold |
|
Target |
|
Maximum |
Average Adjusted Operating Income ROE
(70%)(1) |
|
6.0 |
% |
|
11.0 |
% |
|
13.0 |
% |
Earned Book Value (Compound Annual Growth)
(30%) |
|
6.0 |
% |
|
9.0 |
% |
|
11.0 |
% |
Payout |
|
0 |
% |
|
100 |
% |
|
200 |
% |
(1) |
|
Subject to positive Net Income
hurdle |
EQUITY
OWNERSHIP AND RETENTION REQUIREMENTS
Instituted in 1996, stock ownership
guidelines require each of the named executives to own Allstate common stock
worth a multiple of base salary to link management and stockholders interests.
The following chart shows the salary multiple guidelines and the equity holdings
that count towards the requirement.
The current stock ownership guidelines
apply to 93 of our 192 senior executives and other officers as of December 31,
2016 and
require these executives to hold 75% of net shares received as a result of
equity compensation awards until their salary multiple guidelines are
met.
STOCK OWNERSHIP AS MULTIPLE OF BASE SALARY AS
OF DECEMBER 31, 2016 |
Named Executive |
|
Guideline |
|
Actual |
|
Vested In The
Money Option Value (after-tax) |
Mr.
Wilson |
|
6 |
|
34 |
|
35 |
Mr.
Shebik |
|
3 |
|
9 |
|
6 |
Mr.
Civgin |
|
3 |
|
10 |
|
1 |
Ms.
Fortin |
|
3 |
|
6 |
|
0 |
Mr.
Winter |
|
3 |
|
11 |
|
9 |
What Counts Toward the Guideline |
●
Allstate shares owned personally and
beneficially |
●
Shares held in the Allstate 401(k) Savings
Plan |
●
Restricted stock units |
What Does Not Count Toward the Guideline |
●
Unexercised stock options |
●
Unvested performance stock
awards |
Retention
Requirements
Beginning with awards granted in 2014,
Allstate added a requirement that, regardless
of a senior executives stock ownership level, senior executives must retain at
least 75% of net shares received as a result of equity compensation awards for
one year. In the case of PSAs and restricted stock
units, senior executives must retain 75% of net after-tax shares after the three
or four-year vesting period for one year. In the case of stock options, senior
executives must retain 75% of all shares remaining after covering the exercise
price of the shares and taxes. This retention requirement applies to
approximately 9% of officers in 2016.
Policies
on Hedging and Pledging Securities
We have a policy that prohibits all
officers, directors, and employees from engaging in transactions in securities
issued by Allstate or any of its subsidiaries that might be considered
speculative or hedging, such as selling short or buying or selling options. We
instituted a policy in 2014 that prohibits senior
executives and directors from pledging
Allstate securities as collateral for a loan or holding such securities in a
margin account, unless an exception is granted by the Chair or lead
director.
Timing of
Equity Awards and Grant Practices
Typically, the committee approves grants
of equity awards during a meeting in the first fiscal quarter. The timing allows
the committee to align awards with our annual performance and business goals.
Throughout the year, the committee may
grant equity incentive awards to newly hired or promoted executives or to retain
or recognize executives. The grant date for these awards was fixed as the third
business day of a month following the later of committee action or the date of
hire or promotion, or for recognition grants, such other date specified by the
committee.
For additional information on the
committees practices, see portions of the Board Leadership Structure and
Practices section of this proxy statement on pages 23-24, and
26.
The Allstate
Corporation |
|
45 |
Table of Contents
2017 Proxy Statement |
|
Executive
Compensation |
PEER
BENCHMARKING
The committee monitors performance toward
goals throughout the year and reviews executive compensation program design and
executive pay levels annually. As part of that evaluation, Compensation Advisory
Partners, the committees independent compensation consultant, provided
executive compensation data, information on current market practices, and
alternatives to consider when determining compensation for our named executives.
The committee benchmarks executive compensation program design, executive pay,
and performance against a group of peer companies that are publicly-traded.
Product mix, market segment, annual revenues, premiums,
assets, and market value were considered
when identifying peer companies. The committee believes Allstate competes
against these companies for executive talent, business and stockholder
investment. The committee reviews the composition of the peer group annually
with the assistance of its compensation consultant. In 2016, the committee made
one change to the peer group. The Chubb Corporation and Ace Ltd. merged and the
resulting entity (Chubb Limited) is now included in the peer group. CNA
Financial Corporation will be included as a peer company for 2017 compensation
benchmarking. The following table reflects the peer group used for 2016
compensation benchmarking.
PEER
COMPANIES(1)
|
|
|
|
|
|
|
|
|
|
Total Shareholder Return
(%) |
Company Name |
|
Revenue ($ in billions) |
|
Market Cap ($ in billions) |
|
Assets ($ in billions) |
|
Premiums ($ in billions) |
|
One Year |
|
Three Years |
|
Five Years |
AFLAC Inc. |
|
22.6 |
|
28.2 |
|
129.8 |
|
19.2 |
|
19.0 |
|
12.2 |
|
81.4 |
American International Group, Inc. |
|
52.4 |
|
65.0 |
|
498.3 |
|
37.1 |
|
7.5 |
|
33.3 |
|
194.5 |
Chubb Limited |
|
31.7 |
|
61.6 |
|
159.8 |
|
28.7 |
|
15.4 |
|
36.9 |
|
111.3 |
The
Hartford Financial Services Group, Inc. |
|
18.3 |
|
17.8 |
|
223.4 |
|
14.8 |
|
11.6 |
|
38.5 |
|
218.5 |
Manulife Financial Corporation |
|
29.1 |
|
26.3 |
|
400.5 |
|
15.6 |
|
22.7 |
|
-1.0 |
|
95.9 |
MetLife, Inc. |
|
63.5 |
|
59.0 |
|
898.8 |
|
48.4 |
|
15.0 |
|
8.6 |
|
95.6 |
The
Progressive Corporation |
|
23.4 |
|
20.6 |
|
33.4 |
|
22.5 |
|
14.4 |
|
43.9 |
|
116.7 |
Prudential Financial, Inc. |
|
58.8 |
|
44.7 |
|
784.0 |
|
36.9 |
|
31.3 |
|
22.2 |
|
136.0 |
The
Travelers Companies, Inc. |
|
27.6 |
|
34.2 |
|
100.2 |
|
24.5 |
|
10.8 |
|
43.9 |
|
130.5 |
Allstate |
|
36.5 |
|
27.1 |
|
108.6 |
|
33.6 |
|
21.5 |
|
43.2 |
|
196.6 |
Allstate Ranking Relative to
Peers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
Products |
|
3
of 7 |
|
5
of 7 |
|
5
of 7 |
|
3
of 7 |
|
1
of 7 |
|
3
of 7 |
|
2
of 7 |
Life
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Financial Products |
|
4
of 7 |
|
5
of 7 |
|
7
of 7 |
|
4
of 7 |
|
3
of 7 |
|
1
of 7 |
|
2
of 7 |
All Peer
Companies |
|
4
of 10 |
|
7
of 10 |
|
8
of 10 |
|
4
of 10 |
|
3
of 10 |
|
3
of 10 |
|
2
of 10 |
(1) |
|
Information as of year-end
2016. |
In its executive pay discussions, the
committee also considered compensation information for 19 general industry
companies in the S&P 100 with fiscal year 2015 revenues between $24 billion
and $53 billion. The committee uses compensation surveys for certain executives
that provide information on companies of similar size and business mix as
Allstate, as well as companies with a broader market context.
The committee uses the 50th percentile
of our peer group as a guideline in setting the target total direct compensation
of our named executives. Within the
guideline, the committee balances the various elements of compensation based on
individual experience, job scope and responsibilities, performance, and market
practices.
46 |
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Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
OTHER ELEMENTS OF
COMPENSATION
To remain competitive with other employers
and to attract, retain, and motivate highly talented executives and other
employees, we offer the benefits listed in the following table.
Benefit or Perquisite |
|
Named Executives |
|
Other Officers and Certain Managers |
|
All Full-time and Regular
Part-time Employees |
401(k)(1) and defined benefit pension |
|
● |
|
● |
|
● |
Supplemental retirement benefit |
|
● |
|
● |
|
|
Health and welfare benefits(2) |
|
● |
|
● |
|
● |
Supplemental long-term disability |
|
● |
|
● |
|
|
Deferred compensation |
|
● |
|
● |
|
|
Tax
preparation and financial planning services(3) |
|
● |
|
● |
|
|
Personal use of aircraft, ground
transportation, |
|
|
|
|
|
|
and
mobile devices(4) |
|
● |
|
● |
|
|
Tickets to Allstate events(5) |
|
● |
|
● |
|
● |
(1) |
|
Allstate contributed $0.80 for
every dollar of matchable pre-tax or Roth 401(k) deposits made in 2016 (up
to 5% of eligible pay). |
(2) |
|
Including medical, dental,
vision, life, accidental death and dismemberment, long-term disability,
and group legal insurance. For named executives and other senior officers,
Allstate offers an executive physical program. |
(3) |
|
All officers are eligible for tax
preparation services. Financial planning services were provided only to
senior executives. |
(4) |
|
The Board encourages the CEO to
use our corporate aircraft when it improves his efficiency in managing the
company, even if it is for personal purposes. Personal usage is counted as
taxable compensation. The committee also approved the Presidents usage of
corporate aircraft for personal use up to 40 hours annually. In limited
circumstances approved by the CEO, other senior executives are permitted
to use our corporate aircraft for personal purposes. Ground transportation
is available to senior executives. Mobile devices are available to senior
executives, other officers, and certain managers and employees depending
on their job responsibilities. |
(5) |
|
Tickets to Allstate sponsored
events or the Allstate Arena are offered as recognition for
service. |
Retirement
Benefits
Each named executive participates in two
different defined benefit pension plans. The Allstate Retirement Plan (ARP) is a
tax qualified defined benefit pension plan available to all of our regular
full-time and regular part-time employees who meet certain age and service
requirements. The ARP provides an assured retirement income based on an
employees level of compensation and length of service at no cost to the
employee. As the ARP is a tax qualified plan, federal tax law limits (1) the
amount of an individuals compensation that can be used to calculate plan
benefits and (2) the total amount of benefits payable to a plan participant on
an annual basis. For certain employees, these limits may result in a lower
benefit under the ARP than would have been payable otherwise. Therefore, the
Supplemental Retirement Income Plan (SRIP) is used to provide ARP-eligible
employees whose compensation or benefit amount exceeds the federal limits with
an additional defined benefit in an amount equal to what would have been payable
under the ARP if the federal limits did not exist. Effective January 1, 2014,
Allstate modified its defined benefit pension plans so that all eligible
employees earn future pension benefits under a new cash balance
formula.
Change-in-Control and Post-Termination Benefits
Consistent with our compensation
objectives, we offer these benefits to attract, motivate, and retain executives.
A change in control of Allstate could have a disruptive impact on both Allstate
and our executives. Change-in-control benefits and post-termination benefits are
designed to mitigate that impact and to maintain alignment between the interests
of our executives and our stockholders.
The following summarizes Allstates
change-in-control benefits for the executive officers:
● |
The change-in-control severance plan
(CIC Plan) does not include excise tax gross ups or a lump sum cash
pension enhancement. |
● |
For the CEO, the amount of cash
severance payable is three times the sum of base salary and target annual
incentive. For the other executive officers, the amount of cash severance
payable is two times the sum of base salary and target annual
incentive. |
● |
In order to receive the cash
severance benefits under the CIC Plan, a participant must have been
terminated (other than for cause, death, or disability) or the participant
must have terminated employment for good reason
(such |
The Allstate
Corporation |
|
47 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
|
as adverse changes in the terms or
conditions of employment, including a material reduction in base
compensation, a material change in authority, duties, or responsibilities,
or a material change in job location) within two years following a change
in control. |
● |
Long-term equity incentive awards
vest on an accelerated basis due to a change in control only if the
participant has been terminated (other than for cause, death, or
disability) or the participant terminated employment for good reason (as
defined above) within two years following a change in
control. |
The change-in-control and post-termination
arrangements which are described in the Potential Payments as a Result of Termination or Change in
Control section on pages 60-62 are not
provided exclusively to the named executives. A larger group of management
employees is eligible to receive many of the post-termination benefits described
in that section.
Clawback
of Compensation
Awards made to executive officers after
May 19, 2009, under short- and long-term
incentive compensation plans, are subject to clawback in the event of certain
financial restatements. Annual cash incentive and equity awards granted after
May 19, 2009 are also subject to cancellation or recovery
in certain circumstances if the recipient
violates non-solicitation covenants. Equity awards granted after February 21,
2012, are subject to cancellation in certain circumstances if the recipient
violates non-competition covenants.
Impact of
Tax Considerations on Compensation
We may take a tax deduction of no more
than $1 million per executive for compensation paid in any year to our CEO and
the three other most highly compensated executives, excluding any individual
that served as CFO during the year, as of the last day of the fiscal year in
which the compensation is paid, unless the compensation meets specific
standards. We may deduct more than $1 million in compensation if the
compensation is performance-based and paid under a plan that meets certain
requirements. The committee considers the impact of this Internal Revenue Code
rule in developing, implementing, and administering our compensation programs.
However, the committee balances this consideration with our primary goal of
structuring compensation programs to attract, motivate, and retain highly
talented executives. In light of this balance and the need to maintain
flexibility in administering compensation programs, the committee may authorize
compensation in any year that exceeds $1 million and does not meet the required
standards for deductibility.
EARNED
ANNUAL CASH INCENTIVE AWARDS
In 2016, the total corporate pool was
based on four measures: Adjusted Operating Income, Total Premiums, Net
Investment Income, and Total Return. The 2016 annual incentive plan targets for
Adjusted Operating Income and Net Investment Income were lower than actual 2015
performance to reflect the fact that 2015 catastrophe losses were below expected
levels and continued low interest rates negatively impact net investment income.
The 2016 targets did factor in improved auto insurance profitability,
maintenance of attractive returns from homeowners insurance and continued strong
expense controls. Modest adjustments were made
to the range between threshold and maximum
for Total Premiums in alignment with the operating plan and the probability of
achieving the results.
The 2017 annual incentive plan targets are
not included since those targets do not relate to 2016 pay, and because target
performance is set at the 2017 operating plan, which is proprietary
information.
For a description of how the 2016 measures
are determined, see pages 64-65. The ranges of performance and 2016 actual
results are shown in the following table.
2016 ANNUAL CASH INCENTIVE AWARD RANGES OF
PERFORMANCE |
Measure |
|
Threshold |
|
Target |
|
Maximum |
|
Actual Results |
|
%Target |
|
Adjusted Operating Income (in millions) |
|
$1,500 |
|
$2,000 |
|
$2,500 |
|
$1,928 |
|
92.8% |
|
Total Premiums (in millions) |
|
$34,200 |
|
$34,700 |
|
$35,200 |
|
$33,872 |
|
0.0% |
|
Net
Investment Income (in millions) |
|
$2,850 |
|
$3,050 |
|
$3,250 |
|
$3,042 |
|
98.0% |
|
Total Return |
|
0% |
|
3.5% |
|
6.5% |
|
4.4% |
|
130.0% |
|
Payout Percentages |
|
|
|
|
|
|
|
|
|
|
|
Named Executives(1) |
|
50%(2) |
|
100% |
|
200% |
|
|
|
55.1% |
|
(1) |
|
Payout percentages reflect
contribution to incentive compensation pool. Actual awards are fully
discretionary and vary depending on individual performance. |
(2) |
|
Actual performance below
threshold results in a 0% payout. |
48 |
|
www.allstate.com |
Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
PERFORMANCE STOCK AWARDS (PSAs)
For the last four PSA grants, the
performance measures and levels of performance needed to earn the threshold,
target and maximum number of PSAs, as well as actual results and payout
percentages, are set forth in the table below. The total shareholder returns for
Allstate and its peers are also shown.
PERFORMANCE STOCK AWARDS RANGES OF
PERFORMANCE |
Performance Cycle(1) |
|
Threshold |
|
Target |
|
Maximum |
|
Actual
Results |
|
Payout Percentage |
|
Total Shareholder Returns |
Allstate |
|
Peers |
Vested Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013-2015(2) |
|
6.0% |
|
12.0% |
|
13.5% |
|
12.8% |
|
154.8% |
|
63.0% |
|
63.1% |
2014-2016 |
|
6.0% |
|
13.0% |
|
14.5% |
|
12.1% |
|
87.1% |
|
43.2% |
|
26.8% |
Outstanding Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015-2017 |
|
6.0% |
|
13.5% |
|
14.5% |
|
Two year
results are currently below target(3) |
|
9.5% |
|
16.5% |
2016-2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Adjusted |
|
|
|
|
|
|
|
One year results are currently below target for both
measures(3) |
|
|
|
|
Operating Income |
|
|
|
|
|
|
|
|
|
|
|
ROE (70%) |
|
6.0% |
|
13.0% |
|
14.0% |
|
|
|
|
|
-Earned Book |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
(30%) |
|
6.0% |
|
12.0% |
|
15.0% |
|
|
|
|
|
21.5% |
|
16.5% |
Payout |
|
0% |
|
100% |
|
200% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subject to positive Net Income
hurdle For Adjusted Operating Income ROE |
|
|
|
|
|
|
|
|
(1) |
|
For the performance cycles prior
to 2016, Average Adjusted Operating Income ROE was the performance
measure. In 2016, Earned Book Value was added as a second performance
measure. |
(2) |
|
Represents the average of the
separate 1-year performance goals and payouts. Actual results are 13.4%,
13.2%, 11.9% with payout percentage of 200.0%, 180.0% and 84.3% for 2013,
2014 and 2015, respectively. |
(3) |
|
Payouts under the PSAs are based
on performance over the three-year period, and actual results will not be
known until the end of the performance period. |
The following table shows the target
number of PSAs granted to each of our named executives for the 2014-2016,
2015-2017 and 2016-2018 performance cycles.
Named Executive |
|
Target Number of PSAs for 2014-2016 Performance
Cycle |
|
Target Number of PSAs for 2015-2017 Performance
Cycle |
|
Target Number of PSAs for 2016-2018 Performance
Cycle |
Mr.
Wilson |
|
73,783 |
|
65,054 |
|
86,650 |
Mr.
Shebik |
|
17,248 |
|
15,910 |
|
26,476 |
Mr.
Civgin |
|
20,123 |
|
16,872 |
|
23,107 |
Ms.
Fortin |
|
n/a |
|
3,287 |
|
15,043 |
Mr.
Winter |
|
25,153 |
|
21,921 |
|
30,809 |
(1) |
|
The actual number of PSAs that
will vest will vary from 0% to 200% of the target PSAs based on Average
Adjusted Operating Income ROE or Average Adjusted Operating Income ROE and
Earned Book Value for the measurement period. The number of PSAs that vest
will be determined in 2017, 2018 and 2019,
respectively. |
Compensation Committee Report
The compensation and succession committee
has reviewed and discussed with management the Compensation Discussion and
Analysis contained on pages 33-49 of this proxy statement. Based on such review
and discussions, the committee recommended to the Board that the Compensation
Discussion and Analysis be included in this proxy statement.
THE COMPENSATION
AND SUCCESSION COMMITTEE
|
|
|
|
|
|
|
John
W. Rowe (Chair) |
|
Michael L. Eskew |
|
Herbert L. Henkel |
|
Andrea Redmond |
The Allstate
Corporation |
|
49 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
Executive Compensation Tables
SUMMARY
COMPENSATION TABLE
The following table summarizes the
compensation of the named executives for the last three fiscal years. However,
only the last fiscal year is shown for Ms. Fortin since this is the first year
she is a named executive.
Name and Principal Position |
|
Year |
|
Salary ($) |
|
Bonus ($) |
|
Stock Awards ($)(1) |
|
Option Awards ($)(2) |
|
Non-Equity Incentive Plan Compensation ($) |
|
Change in Pension
Value and Non-qualified Deferred Compensation Earnings ($)(3) |
|
All Other Compensation ($)(4) |
|
Total ($) |
|
|
Total Without Change
in Pension Value ($)(5) |
Thomas J.
Wilson |
|
2016 |
|
1,200,000 |
|
|
|
5,400,028 |
|
3,600,000 |
|
1,982,880 |
|
1,574,760 |
|
55,847 |
|
13,813,515 |
|
|
12,238,755 |
Chair and
Chief |
|
2015 |
|
1,191,346 |
|
|
|
4,599,968 |
|
4,599,996 |
|
2,888,136 |
|
532,116 |
|
62,131 |
|
13,873,693 |
|
|
13,341,577 |
Executive Officer |
|
2014 |
|
1,141,346 |
|
|
|
3,849,997 |
|
3,850,001 |
|
4,073,075 |
|
2,632,215 |
|
94,751 |
|
15,641,385 |
|
|
13,009,170 |
Steven E.
Shebik |
|
2016 |
|
770,673 |
|
|
|
1,649,984 |
|
1,100,001 |
|
600,000 |
|
479,800 |
|
28,690 |
|
4,629,148 |
|
|
4,149,348 |
Executive
Vice |
|
2015 |
|
750,000 |
|
|
|
1,124,996 |
|
1,124,999 |
|
850,000 |
|
185,312 |
|
28,180 |
|
4,063,487 |
|
|
3,878,175 |
President and
Chief |
|
2014 |
|
652,500 |
|
|
|
900,001 |
|
899,998 |
|
883,619 |
|
827,696 |
|
26,960 |
|
4,190,774 |
|
|
3,363,078 |
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don Civgin |
|
2016 |
|
776,885 |
|
|
|
1,440,028 |
|
959,999 |
|
535,066 |
|
88,721 |
|
38,727 |
|
3,839,426 |
|
|
3,750,705 |
President,
Emerging |
|
2015 |
|
760,808 |
|
|
|
1,193,019 |
|
1,192,993 |
|
768,629 |
|
46,822 |
|
37,195 |
|
3,999,466 |
|
|
3,952,644 |
Businesses |
|
2014 |
|
700,000 |
|
|
|
1,050,018 |
|
1,049,996 |
|
1,000,000 |
|
135,885 |
|
26,560 |
|
3,962,459 |
|
|
3,826,574 |
Mary Jane
Fortin |
|
2016 |
|
632,752 |
|
|
|
937,480 |
|
625,006 |
|
291,774 |
|
27,366 |
|
30,682 |
|
2,545,060 |
|
|
2,517,694 |
President,
Allstate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew E.
Winter |
|
2016 |
|
820,673 |
|
|
|
1,920,017 |
|
1,279,999 |
|
1,017,513 |
|
121,710 |
|
153,663 |
|
5,313,575 |
|
|
5,191,865 |
President |
|
2015 |
|
799,423 |
|
|
|
1,550,034 |
|
1,550,004 |
|
1,600,000 |
|
80,745 |
|
79,399 |
|
5,659,605 |
|
|
5,578,860 |
|
|
2014 |
|
766,539 |
|
|
|
1,312,484 |
|
1,312,504 |
|
1,500,000 |
|
139,076 |
|
39,016 |
|
5,069,619 |
|
|
4,930,543 |
(1) |
|
The aggregate grant date fair
value of PSAs granted in 2016, 2015, and 2014 are computed in accordance
with Financial Accounting Standards Board (FASB) Accounting Standards
Codification Topic 718 (ASC 718). The fair value of PSAs is based on the
final closing price of Allstates common stock on the grant date, which in
part reflects the payment of expected future dividends. (See note 18 to
our audited financial statements for 2016.) This amount reflects an
accounting expense and does not correspond to actual value that will be
realized by the named executives. The value of PSAs is based on the
probable satisfaction of the performance conditions. The number of PSAs
granted in 2016 to each named executive is provided in the Grants of Plan-Based
Awards table on page 52.
The value of the PSAs granted in 2016 at grant date share price if maximum
corporate performance were to be achieved is as follows: Mr. Wilson
$10,800,056, Mr. Shebik $3,299,969, Mr. Civgin $2,880,056, Ms. Fortin
$1,874,960, and Mr. Winter $3,840,034. |
(2) |
|
The aggregate grant date fair
value of option awards is computed in accordance with FASB ASC 718. The
fair value of each option award is estimated on the grant date using a
binomial lattice model and the assumptions (see note 18 to our audited
financial statements for 2016) as set forth in the following
table: |
|
|
|
2016 |
|
2015 |
|
2014 |
|
Weighted average expected term |
|
5.0 years |
|
6.5 years |
|
6.5 years |
|
Expected volatility |
|
16.0-34.3% |
|
16.0-37.8% |
|
16.8-42.2% |
|
Weighted average volatility |
|
24.3% |
|
24.7% |
|
28.3% |
|
Expected dividends |
|
1.9-2.1% |
|
1.6-2.1% |
|
1.7-2.2% |
|
Weighted average expected dividends |
|
2.1% |
|
1.7% |
|
2.1% |
|
Risk-free rate |
|
0.2-2.4% |
|
0.0-2.4% |
|
0.0-3.0% |
|
|
This amount reflects an accounting expense and does not
correspond to actual value that will be realized by the named executives.
The number of options granted in 2016 to each named executive is provided
in the Grants of Plan-Based Awards table on page 52. |
(3) |
|
Amounts reflect the aggregate increase in actuarial
value of the pension benefits as set forth in the Pension Benefits table, accrued during 2016, 2015, and 2014. These are benefits under the
Allstate Retirement Plan (ARP) and the Supplemental Retirement Income Plan
(SRIP). Non-qualified deferred compensation earnings are not reflected
since our Deferred Compensation Plan does not provide above-market
earnings. The pension plan measurement date is December 31. (See note 17
to our audited financial statements for
2016.) |
50 |
|
www.allstate.com |
Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
|
The following table reflects the respective change in the
actuarial value of the benefits provided to the named executives in
2016: |
|
Name |
|
ARP ($) |
|
SRIP ($) |
|
Mr.
Wilson |
|
113,353 |
|
1,461,407 |
|
Mr.
Shebik |
|
124,367 |
|
355,433 |
|
Mr.
Civgin |
|
14,350 |
|
74,371 |
|
Ms.
Fortin |
|
7,861 |
|
19,505 |
|
Mr.
Winter |
|
12,991 |
|
108,719 |
|
Interest rates and other assumptions
can have a significant impact on the change in pension value from one year
to another. |
|
Effective January 1, 2014, Allstate modified its pension plans so
that all eligible employees earn future pension benefits under a new cash
balance formula. The change in actuarial value of benefits provided for
each named executive in 2016 would have been as indicated in the following
table under the prior formula: |
|
Name |
|
ARP ($) |
|
SRIP ($) |
|
Mr.
Wilson |
|
184,530 |
|
5,297,617 |
|
Mr.
Shebik |
|
203,850 |
|
2,426,861 |
|
Mr.
Civgin |
|
12,341 |
|
88,922 |
|
Ms.
Fortin |
|
6,979 |
|
1,368 |
|
Mr.
Winter |
|
10,271 |
|
86,457 |
(4) |
|
The following table describes the incremental cost of
other benefits provided in 2016 that are included in the All Other
Compensation column. |
|
Name |
|
Personal Use
of Aircraft(1) ($) |
|
401(k) Match(2) ($) |
|
Other(3) ($) |
|
Total All
Other Compensation ($) |
|
Mr.
Wilson |
|
16,837 |
|
10,600 |
|
28,410 |
|
55,847 |
|
Mr.
Shebik |
|
|
|
10,600 |
|
18,090 |
|
28,690 |
|
Mr.
Civgin |
|
|
|
10,600 |
|
28,127 |
|
38,727 |
|
Ms.
Fortin |
|
|
|
10,412 |
|
20,270 |
|
30,682 |
|
Mr.
Winter |
|
121,998 |
|
10,600 |
|
21,065 |
|
153,663 |
|
|
(1) |
|
The amount reported for personal use of aircraft is
based on the incremental cost method, which is calculated based on
Allstates average variable costs per flight hour. Variable costs include
fuel, maintenance, on-board catering, landing/ramp fees, and other
miscellaneous variable costs. The total annual variable costs are divided
by the annual number of flight hours flown by the aircraft to derive an
average variable cost per flight hour. This average variable cost per
flight hour is then multiplied by the flight hours flown for personal use
to derive the incremental cost. This method of calculating the incremental
cost excludes fixed costs that do not change based on usage, such as
pilots and other employees salaries, costs incurred in purchasing the
aircraft, and non-trip related hangar expenses. |
|
|
(2) |
|
Each of the named executives participated in our 401(k)
plan during 2016. The amount shown is the amount allocated to their
accounts as employer matching contributions. Ms. Fortin will not be vested
in the employer matching contribution until she has completed three years
of vesting service. |
|
|
(3) |
|
Other consists of personal benefits and perquisites
related to mobile devices, tax preparation services, financial planning,
ground transportation, executive physical related items and supplemental
long-term disability coverage. There was no incremental cost for the use
of mobile devices. We provide supplemental long-term disability coverage
to all regular full- and part-time employees who participate in the
long-term disability plan and whose annual earnings exceed the level which
produces the maximum monthly benefit provided by the long-term disability
plan. This coverage is self-insured (funded and paid for by Allstate when
obligations are incurred). No obligations for the named executives were
incurred in 2016, and therefore, no incremental cost is reflected in the
table. Mr. Civgin was also provided limited home security protection
during the year. |
(5) |
|
We have included an additional
column to show total compensation minus the change in pension value. The
amounts reported in this column may differ substantially from, and are not
a substitute for, the amounts reported in the Total column required
under SEC rules. The change in pension value is subject to several
external variables, including interest rates, that are not related to
company or individual performance and may differ significantly based on
the formula under which the benefits were
earned. |
The Allstate
Corporation |
|
51 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
Grants
of Plan-Based Awards at Fiscal Year-end 2016
The following table provides information
about awards granted to our named executives during fiscal year 2016.
Name |
|
Grant Date |
|
Plan Awards(1) |
|
Estimated Possible Payouts Under Non-Equity
Incentive Plan Awards(2) |
|
Estimated Future
Payouts Under Equity Incentive Plan
Awards(3) |
|
All Other Option Awards: Number
of Securities Underlying Options (#) |
|
Exercise or Base Price
of Option Awards ($/Sh)(4) |
|
Grant Date Fair Value
($)(5) |
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
Threshold (#) |
|
Target (#)
|
|
Maximum (#) |
Stock Awards |
|
Option Awards |
Mr. Wilson |
|
|
|
Annual cash incentive |
|
1,800,000 |
|
3,600,000 |
|
10,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/11/2016 |
|
PSAs |
|
|
|
|
|
|
|
0 |
|
86,650 |
|
173,300 |
|
|
|
|
|
5,400,028 |
|
|
|
|
02/11/2016 |
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
295,324 |
|
62.32 |
|
|
|
3,600,000 |
Mr. Shebik |
|
|
|
Annual cash incentive |
|
481,899 |
|
963,798 |
|
5,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/11/2016 |
|
PSAs |
|
|
|
|
|
|
|
0 |
|
26,476 |
|
52,952 |
|
|
|
|
|
1,649,984 |
|
|
|
|
02/11/2016 |
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
90,238 |
|
62.32 |
|
|
|
1,100,001 |
Mr. Civgin |
|
|
|
Annual cash incentive |
|
485,717 |
|
971,434 |
|
5,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/11/2016 |
|
PSAs |
|
|
|
|
|
|
|
0 |
|
23,107 |
|
46,214 |
|
|
|
|
|
1,440,028 |
|
|
|
|
02/11/2016 |
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
78,753 |
|
62.32 |
|
|
|
959,999 |
Ms. Fortin |
|
|
|
Annual cash incentive |
|
284,800 |
|
569,600 |
|
5,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/11/2016 |
|
PSAs |
|
|
|
|
|
|
|
0 |
|
15,043 |
|
30,086 |
|
|
|
|
|
937,480 |
|
|
|
|
02/11/2016 |
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
51,272 |
|
62.32 |
|
|
|
625,006 |
Mr. Winter |
|
|
|
Annual cash incentive |
|
923,668 |
|
1,847,336 |
|
7,200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/11/2016 |
|
PSAs |
|
|
|
|
|
|
|
0 |
|
30,809 |
|
61,618 |
|
|
|
|
|
1,920,017 |
|
|
|
|
02/11/2016 |
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
105,004 |
|
62.32 |
|
|
|
1,279,999 |
(1) |
|
Awards under the Annual Executive
Incentive Plan and the 2013 Equity Incentive Plan. |
(2) |
|
The amounts in these columns
consist of the threshold, target, and maximum annual cash incentive awards
for the named executives. The threshold amount for each named executive is
50% of target, as the minimum amount payable (subject to individual
performance) if threshold performance is achieved. If the threshold is not
achieved, the payment to the named executives would be zero. The target
amount is based upon achievement of the performance measures listed under
the Earned Annual Cash Incentive
Awards caption on page 48. The maximum
amount is based on the maximum amount that could be paid to a named
executive to qualify the annual cash incentive award as deductible under
section 162(m). The maximum amount payable to any named executive who
served as CFO during the year is an amount equal to 15% of the 162(m)
award pool described on pages 64-65. The maximum amount payable to the CEO
and the three most highly compensated executives, excluding any named
executive who served as CFO during the year, is the lesser of a
stockholder-approved maximum of $10 million under the Annual Executive
Incentive Plan or a percentage, which varies by executive, of the award
pool. The award pool is equal to 1.0% of Adjusted Operating Income with
award opportunities capped at 35% of the pool for Mr. Wilson, 20% for Mr.
Winter, and 15% of the pool for each other named executive. Adjusted
Operating Income is defined on pages 64-65. For a description of the
ranges of performance established by the committee for the 2016 annual
incentive, which are lower than the section 162(m) limits, see page 48. |
(3) |
|
The amounts shown in these
columns reflect the threshold, target, and maximum PSAs for the named
executives. The threshold amount for each named executive is 0% payout.
The target and maximum amounts are based upon achievement of the
performance measures listed under the Performance Stock Awards caption
on page 49. |
(4) |
|
The exercise price of each option
is equal to the closing sale price on the New York Stock Exchange on the
grant date or, if there was no such sale on the grant date, then on the
last previous day on which there was a sale. |
(5) |
|
The aggregate grant date fair
value of the PSAs was $62.32 and stock option award was $12.19, computed
in accordance with FASB ASC 718 based on the probable satisfaction of the
performance conditions. The assumptions used in the valuation are
discussed in footnotes 1 and 2 to the Summary Compensation Table on
page 50. |
52 |
|
www.allstate.com |
Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
PERFORMANCE STOCK AWARDS (PSAs)
PSAs represent our promise to transfer
shares of common stock in the future if certain performance measures are met.
For the awards granted in 2016, performance is measured in a single three-year
measurement period, and the actual number of PSAs that vest will vary from 0% to
200% of that periods target PSAs based on Average Adjusted Operating Income ROE
(70%) and Earned Book Value (30%) for the measurement period. For a definition
of how those measures are calculated, see pages 64-66. Each PSA represents
Allstates promise to transfer
one fully vested share in the future for
each PSA that vests. Vested PSAs will be converted into shares of Allstate
common stock and dividend equivalents accrued on these shares will be paid in
cash. No dividend equivalents will be paid prior to vesting. PSAs will vest
following the end of the three-year performance cycle if the performance
conditions are met, subject to continued employment (other than in the event of
death, disability, retirement, or a qualifying termination following a change in
control).
STOCK
OPTIONS
Stock options represent an opportunity to
buy shares of our stock at a fixed exercise price at a future date. We use them
to align the interests of our executives with long-term stockholder value, as
the stock price must appreciate from the grant date for the executives to
profit.
Under our stockholder-approved equity
incentive plan, the exercise price cannot be less than the closing price of a
share on the grant date. Stock option repricing is not permitted. In other
words, without an event such as a stock split, if the committee cancels an award
and substitutes a new award, the exercise price of the new award cannot be less
than the exercise price of the cancelled award.
All stock option awards have been made in
the form of non-qualified stock options. The options granted to the named
executives beginning in 2014 become exercisable over three years. One-third of
the stock options will become exercisable on the anniversary of the grant date
for each of the three years. The change to the vesting schedule beginning in
2014 was made to reflect current market practice. For the vesting schedule for
other option grants, see footnote 1 to the Outstanding Equity Awards at Fiscal Year-end 2016 table. All of the options expire ten years from the grant
date, unless an earlier date has been approved by the committee in connection
with certain change-in-control situations or other special circumstances such as
termination, death, or disability.
The Allstate
Corporation |
|
53 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
Outstanding Equity Awards at Fiscal Year-end
2016
The following table summarizes the
outstanding equity awards of the named executives as of December 31,
2016.
Name |
|
Option Awards(1) |
|
Stock
Awards(2) |
Option Grant Date |
|
Number
of Securities Underlying Unexercised Options
(#) Exercisable(3) |
|
Number
of Securities Underlying Unexercised Options
(#) Unexercisable(3) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
Stock Award Grant
Date |
|
Number of Shares or
Units of Stock That Have Not Vested (#)(4) |
|
Market Value of Shares
or Units of Stock That Have Not Vested ($)(5) |
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units, or Other Rights that
Have Not Vested (#)(6) |
|
Equity Incentive Plan Awards: Market
or Payout Value of Unearned Shares, Units, or
Other Rights that Have Not Vested ($)(5) |
Mr. Wilson |
|
02/26/2008 |
|
338,316 |
|
0 |
|
48.82 |
|
02/26/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2010 |
|
417,576 |
|
0 |
|
31.41 |
|
02/22/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2011 |
|
447,808 |
|
0 |
|
31.74 |
|
02/22/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2012 |
|
444,060 |
|
0 |
|
31.56 |
|
02/21/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
02/12/2013 |
|
272,556 |
|
90,853 |
|
45.61 |
|
02/12/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
02/18/2014 |
|
206,158 |
|
103,079 |
|
52.18 |
|
02/18/2024 |
|
02/18/2014 |
|
64,265 |
|
4,763,322 |
|
|
|
|
|
|
02/18/2015 |
|
98,164 |
|
196,330 |
|
70.71 |
|
02/18/2025 |
|
02/18/2015 |
|
|
|
|
|
65,054 |
|
4,821,802 |
|
|
02/11/2016 |
|
0 |
|
295,324 |
|
62.32 |
|
02/11/2026 |
|
02/11/2016 |
|
|
|
|
|
86,650 |
|
6,422,498 |
Mr. Shebik |
|
02/22/2010 |
|
33,616 |
|
0 |
|
31.41 |
|
02/22/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2011 |
|
35,197 |
|
0 |
|
31.74 |
|
02/22/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2012 |
|
26,446 |
|
0 |
|
31.56 |
|
02/21/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
03/06/2012 |
|
35,014 |
|
0 |
|
31.00 |
|
03/06/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
02/12/2013 |
|
56,391 |
|
18,797 |
|
45.61 |
|
02/12/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
02/18/2014 |
|
48,192 |
|
24,097 |
|
52.18 |
|
02/18/2024 |
|
02/18/2014 |
|
15,023 |
|
1,113,505 |
|
|
|
|
|
|
02/18/2015 |
|
24,007 |
|
48,016 |
|
70.71 |
|
02/18/2025 |
|
02/18/2015 |
|
|
|
|
|
15,910 |
|
1,179,249 |
|
|
02/11/2016 |
|
0 |
|
90,238 |
|
62.32 |
|
02/11/2026 |
|
02/11/2016 |
|
|
|
|
|
26,476 |
|
1,962,401 |
Mr. Civgin |
|
02/12/2013 |
|
0 |
|
21,930 |
|
45.61 |
|
02/12/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
02/18/2014 |
|
56,224 |
|
28,113 |
|
52.18 |
|
02/18/2024 |
|
02/18/2014 |
|
17,527 |
|
1,299,101 |
|
|
|
|
|
|
02/18/2015 |
|
25,458 |
|
50,918 |
|
70.71 |
|
02/18/2025 |
|
02/18/2015 |
|
|
|
|
|
16,872 |
|
1,250,553 |
|
|
02/11/2016 |
|
0 |
|
78,753 |
|
62.32 |
|
02/11/2026 |
|
02/11/2016 |
|
|
|
|
|
23,107 |
|
1,712,691 |
Ms. Fortin |
|
10/05/2015 |
|
5,393 |
|
10,788 |
|
59.90 |
|
10/05/2025 |
|
10/05/2015 |
|
43,824 |
|
3,248,235 |
|
3,287 |
|
243,632 |
|
|
02/11/2016 |
|
0 |
|
51,272 |
|
62.32 |
|
02/11/2026 |
|
02/11/2016 |
|
|
|
|
|
15,043 |
|
1,114,987 |
Mr. Winter |
|
02/22/2011 |
|
101,869 |
|
0 |
|
31.74 |
|
02/22/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
02/21/2012 |
|
144,175 |
|
0 |
|
31.56 |
|
02/21/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
02/12/2013 |
|
79,495 |
|
26,499 |
|
45.61 |
|
02/12/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
02/18/2014 |
|
70,281 |
|
35,141 |
|
52.18 |
|
02/18/2024 |
|
02/18/2014 |
|
21,908 |
|
1,623,821 |
|
|
|
|
|
|
02/18/2015 |
|
33,077 |
|
66,155 |
|
70.71 |
|
02/18/2025 |
|
02/18/2015 |
|
|
|
|
|
21,921 |
|
1,624,785 |
|
|
02/11/2016 |
|
0 |
|
105,004 |
|
62.32 |
|
02/11/2026 |
|
02/11/2016 |
|
|
|
|
|
30,809 |
|
2,283,563 |
(1) |
|
The options granted in 2014 and
after vest over three years: one-third will become exercisable on the
anniversary of the grant date for each of the three years. The options
granted in 2012 and 2013 vest over four years: 50% on the second
anniversary date and 25% on each of the third and fourth anniversary
dates. The other options vest in four installments of 25% on each of the
first four anniversaries of the grant date. The exercise price of each
option is equal to the closing price of Allstates common stock on the
grant date. If there was no sale on the grant date, the closing price is
calculated as of the last previous day on which there was a
sale. |
(2) |
|
The awards listed in this table
are PSAs, except for Ms. Fortins new hire award of restricted stock units
in 2015. The 43,824 shares listed above represent three-fourths of her
original award granted on October 5, 2015. The shares convert in four
increments with one-fourth of the total shares converting on the
anniversary of the grant date for the succeeding four
years. |
54 |
|
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Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
(3) |
|
The aggregate value and aggregate number of exercisable
and unexercisable in-the-money options as of December 31, 2016, for each
of the named executives are as follows: |
|
|
|
Exercisable |
|
Unexercisable |
|
Name |
|
Aggregate Number (#) |
|
Aggregate Value ($) |
|
Aggregate Number (#) |
|
Aggregate Value ($) |
|
Mr.
Wilson |
|
2,224,638 |
|
76,899,780 |
|
685,586 |
|
9,006,081 |
|
Mr.
Shebik |
|
258,863 |
|
8,309,637 |
|
181,148 |
|
2,293,134 |
|
Mr.
Civgin |
|
81,682 |
|
1,320,366 |
|
179,714 |
|
2,344,939 |
|
Ms.
Fortin |
|
5,393 |
|
76,688 |
|
62,060 |
|
758,415 |
|
Mr.
Winter |
|
428,897 |
|
14,374,456 |
|
232,799 |
|
2,991,116 |
(4) |
|
The PSAs vest in one installment on the day before the
third anniversary of the grant date. |
(5) |
|
Amount is based on the closing price of our common stock
of $74.12 on December 30, 2016. |
(6) |
|
The PSAs vest in one installment on the day before the
third anniversary of the grant date. The number of shares that ultimately
vest may range from 0 to 200% of the target depending on actual
performance during the three-year performance period. For a description of
the PSA program and the performance measures used, see pages 43-45 and 49.
The number of PSAs reflected in this column for the 2015 and 2016 awards
are the number of shares that would vest if the target level of
performance is achieved. Final payouts under the PSAs will not be known
until the respective performance period is
completed. |
Option
Exercises and Stock Vested During 2016
The following table summarizes the options
exercised by the named executives during 2016 and the PSAs or restricted stock
units that vested during 2016.
|
|
Option Awards(1) |
|
Stock Awards |
Name |
|
Number
of Shares Acquired on Exercise (#) |
|
Value Realized on Exercise ($) |
|
Number
of Shares Acquired on Vesting (#) |
|
Value Realized on Vesting ($) |
Mr. Wilson |
|
262,335 |
|
3,079,813 |
|
130,638 |
|
8,141,360 |
Mr. Shebik |
|
61,334 |
|
1,631,726 |
|
32,356 |
|
2,019,478 |
Mr. Civgin |
|
214,412 |
|
5,682,556 |
|
35,627 |
|
2,220,275 |
Ms. Fortin |
|
0 |
|
0 |
|
14,607 |
|
990,939 |
Mr. Winter |
|
55,785 |
|
2,003,768 |
|
43,050 |
|
2,682,876 |
(1) |
|
Of the options exercised in 2016 by Mr. Wilson and Mr.
Shebik, 262,335 and 15,571, respectively, were due to expire in the first
quarter of 2017. |
The Allstate
Corporation |
|
55 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
Retirement Benefits
The following table provides information
about the pension plans in which the named executives participate. Each of the
named executives participates in the Allstate Retirement Plan (ARP) and the
Supplemental Retirement Income Plan (SRIP).
Name |
|
Plan Name |
|
Number of
Years Credited Service (#) |
|
Present Value of Accumulated Benefit(1)(2) ($) |
|
Payments During Last Fiscal
Year ($) |
Mr. Wilson |
|
ARP |
|
23.8 |
|
1,047,349 |
|
0 |
|
|
SRIP |
|
23.8 |
|
14,448,421 |
|
0 |
Mr. Shebik |
|
ARP |
|
28.2 |
|
1,275,795 |
|
0 |
|
|
SRIP |
|
28.2 |
|
3,667,002 |
|
0 |
Mr. Civgin |
|
ARP |
|
8.3 |
|
63,328 |
|
0 |
|
|
SRIP |
|
8.3 |
|
382,650 |
|
0 |
Ms. Fortin(3) |
|
ARP |
|
1.3 |
|
7,861 |
|
0 |
|
|
SRIP |
|
1.3 |
|
19,505 |
|
0 |
Mr. Winter |
|
ARP |
|
7.2 |
|
53,032 |
|
0 |
|
|
SRIP |
|
7.2 |
|
495,031 |
|
0 |
(1) |
|
These amounts are estimates and do not necessarily reflect the
actual amounts that will be paid to the named executives, which will be
known only at the time they become eligible for payment. The present value
of the accumulated benefit was determined using the same measurement date
(December 31, 2016) and material assumptions that we use for year-end
financial reporting purposes, except that we made no assumptions for early
termination, disability, or pre-retirement mortality. Other assumptions
include the following: |
|
|
●Retirement at the normal
retirement age as defined in the plans (age 65).
●Discount rate of
4.15%. |
|
|
Other assumptions for
the final average pay formula include the following: |
|
|
●80% paid as a lump sum and
20% paid as an annuity; for the cash balance formula, 100% paid as a lump
sum.
●Lump-sum/annuity conversion
segmented interest rates of 2.75% for the first five years, 5.00% for the
next 15 years, and 5.75% for all years after 20.
●Lump sum calculations were
done using the RP-2014 mortality table projected with the MP-2016
projection table, with a blend of 50% males and 50% females. The RP-2014
mortality table and MP-2016 projection table were created by the Society
of Actuaries. Allstate adopted these tables for accounting on December 31,
2016 to measure retirement program obligations in the United States;
however, benefits are not determined using these factors in 2016 or
2017.
●Annuity calculations were
done using the RP-2014 white collar mortality table for annuitants
projected with the MP-2016 projection table. |
|
|
See note 17 to our
audited financial statements for 2016 for additional
information. |
(2) |
|
The following table
shows the lump sum present value of the non-qualified pension benefits for
each named executive earned through December 31, 2016, if the named
executives employment terminated on that
date. |
|
Name |
|
Plan Name |
|
Lump
Sum Amount ($) |
|
Mr. Wilson |
|
SRIP |
|
16,229,913 |
|
Mr. Shebik |
|
SRIP |
|
4,129,068 |
|
Mr. Civgin |
|
SRIP |
|
387,879 |
|
Ms. Fortin |
|
SRIP |
|
19,867 |
|
Mr. Winter |
|
SRIP |
|
498,672 |
|
|
The amount
shown is based on the lump sum methodology used by the Allstate pension
plans in 2017. Specifically, the interest rate for 2017 is based on 100%
of the average corporate bond segmented yield curve from August of the
prior year. As required under the Internal Revenue Code, the mortality
table used for 2017 is the 2017 combined static Pension Protection Act
funding mortality table with a blend of 50% males and 50%
females. |
(3) |
|
Ms. Fortin is not currently vested
in the Allstate Retirement Plan or the Supplemental Retirement Income
Plan. |
56 |
|
www.allstate.com |
Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
ALLSTATE RETIREMENT PLAN (ARP)
Contributions to the ARP are made entirely
by Allstate and are paid into a trust fund from which benefits are paid. Before
January 1, 2014, ARP participants earned benefits under one of two formulas
(final average pay or cash balance) based on their date of hire or their choice
at the time Allstate introduced the cash balance formula. In order to better
align our pension benefits with market practices, provide future pension
benefits more equitably to Allstate employees, and reduce costs, final average
pay benefits were frozen as of December 31, 2013. As of January 1, 2014, all
eligible participants earn benefits under a cash balance formula
only.
Final
Average Pay Formula Frozen as of 12/31/13
Benefits under the final average pay
formula were earned and are stated in the form of a straight life annuity
payable at the normal retirement age of 65. Messrs. Shebik and Wilson have
earned final average pay benefits equal to the sum of a Base Benefit and an
Additional Benefit. The Base Benefit equals 1.55% of the participants average
annual compensation, multiplied by credited service after 1988 through 2013. The
Additional Benefit equals 0.65% of the amount of the participants average
annual compensation that exceeds the participants covered compensation,
multiplied by credited service after 1988 through 2013. Covered compensation is
the average of the maximum annual salary taxable for Social Security over the
35-year period ending the year the participant would
reach Social Security retirement age.
Messrs. Shebik and Wilson are eligible for a reduced early retirement benefit
which would reduce their Base Benefit by 4.8% for each year of early payment
before age 65 and their Additional Benefit by 8% for each year of early payment
from age 62 to age 65 and 4% for each year of early payment from age 55 to age
62, prorated on a monthly basis based on age at the date payments
begin.
Cash
Balance Formula For all Participants Beginning 1/1/14
All named executives earned benefits under
the cash balance formula in 2016. Under this formula, participants receive pay
credits while employed at Allstate, based on a percentage of eligible annual
compensation and years of service, plus interest credits. Pay credits are
allocated to a hypothetical account in an amount equal to 3% to 5% of eligible
annual compensation, depending on years of vesting service. Interest credits are
allocated to the hypothetical account based on the interest crediting rate in
effect for that plan year as published by the Internal Revenue Service. The
interest crediting rate is set annually and is currently based on the average
yield for 30-year U.S. Treasury securities for August of the prior year. Prior
to 2014, Messrs. Civgin and Winter earned cash balance credits equal to 2.5% of
eligible annual compensation after they completed one year of vesting service
based on the prior cash balance formula.
SUPPLEMENTAL RETIREMENT INCOME PLAN (SRIP)
SRIP benefits are generally determined
using a two-step process: (1) determine the amount that would be payable under
the ARP formula(s) specified above if Internal Revenue Code limits did not
apply, then (2) reduce the amount described in (1) by the amount actually
payable under the applicable ARP
formula(s). The normal retirement date
under the SRIP is age 65. If eligible for early retirement under the ARP, the
employee also is eligible for early retirement under the SRIP. SRIP benefits are
not funded and are paid out of Allstates general assets.
The Allstate
Corporation |
|
57 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
CREDITED SERVICE
No additional service credit beyond
service with Allstate or its predecessors is granted under the ARP or the SRIP
to any of the named executives. Messrs. Shebik and Wilson have combined service
with Allstate and its former parent company, Sears, Roebuck and Co., of 28.2 and
23.8 years, respectively. As a result, a portion of their retirement benefits
will be paid from the Sears pension plan. Consistent with the pension benefits
of other
employees with Sears service who were
employed by Allstate at the time of the spin-off from Sears in 1995, Messrs.
Shebiks and Wilsons final average pay pension benefits under the ARP and the
SRIP are calculated as if each had worked his combined Sears-Allstate career
with Allstate through December 31, 2013, and then are reduced by amounts earned
under the Sears pension plan.
ELIGIBLE COMPENSATION
Under both the ARP and SRIP, eligible
compensation consists of salary, annual cash incentive awards, and certain other
forms of compensation, but does not include long-term cash incentive awards or
income related to equity awards. Compensation used to determine benefits under
the ARP is limited in
accordance with the Internal Revenue Code.
For final average pay benefits, average annual compensation is the average
compensation of the five highest consecutive calendar years within the last ten
consecutive calendar years through 2013.
PAYMENT
OPTIONS
Payment options under the ARP include a
lump sum, straight life annuity, and various survivor annuity options. The lump
sum under the final average pay benefit is calculated in accordance with the
applicable interest rate and mortality assumptions as required under the
Internal Revenue Code.
The lump sum payment under the cash
balance benefit is generally equal to a participants account balance. Payments
from the SRIP are paid in the form of a lump sum using the same interest rate
and mortality assumptions used under the ARP.
TIMING
OF PAYMENTS
Eligible employees are vested in the
normal ARP and SRIP retirement benefits on the earlier of the completion of
three years of service or upon reaching age 65.
Final average pay benefits are payable at
age 65. A participant with final average pay benefits may be entitled to a
reduced early retirement benefit on or after age 55 if he or she terminates
employment after completing 20 or more years of vesting service.
A participant earning cash balance
benefits who terminates employment with at least three years of vesting service
is entitled to a lump sum benefit equal to his or her cash balance account
balance.
The following SRIP payment dates assume a
retirement or termination date of December 31, 2016:
● |
Messrs. Shebiks and Wilsons
SRIP benefits earned prior to 2005 would become payable as early as
January 1, 2017. Benefits earned after 2004 would be paid on July 1, 2017,
or following death. |
● |
Mr. Civgins SRIP benefit
would be paid on July 1, 2017, or following death. |
● |
Mr. Winters SRIP benefit
would be paid on July 1, 2017, or following death. |
● |
Ms. Fortins SRIP benefit is
not currently vested but would become payable following
death. |
58 |
|
www.allstate.com |
Table of Contents
Executive Compensation |
|
2017 Proxy Statement |
Non-Qualified Deferred Compensation at Fiscal Year-end
2016
The following table summarizes the
non-qualified deferred compensation contributions, earnings, and account
balances of our named executives in 2016. All amounts relate to The Allstate
Corporation Deferred Compensation Plan.
Name |
|
Executive Contributions in Last
FY ($) |
|
Registrant Contributions in Last
FY ($) |
|
Aggregate Earnings in Last FY ($)(1) |
|
Aggregate Withdrawals/ Distributions in Last
FY ($) |
|
Aggregate Balance at Last FYE ($)(2) |
Mr. Wilson |
|
0 |
|
0 |
|
131,704 |
|
0 |
|
891,608 |
Mr. Shebik |
|
0 |
|
0 |
|
20,464 |
|
0 |
|
155,797 |
Mr. Civgin |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
Ms. Fortin |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
Mr. Winter |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
(1) |
|
Aggregate earnings were not
included in the named executives compensation in the last completed
fiscal year in the Summary Compensation
Table. |
(2) |
|
There are no amounts reported in
the Aggregate Balance at Last FYE column that previously were reported as
compensation in the Summary Compensation
Table. |
In order to remain competitive with other
employers, we allow the named executives and other employees whose annual
compensation exceeds the amount specified in the Internal Revenue Code ($265,000
in 2016), to defer under the Deferred Compensation Plan up to 80% of their
salary and/or up to 100% of their annual cash incentive award that exceeds the
Internal Revenue Code limit. Allstate does not match participant deferrals and
does not guarantee a stated rate of return.
Deferrals under the Deferred Compensation
Plan are credited with earnings or debited for losses based on the results of
the notional investment option or options selected by the participants. The
notional investment options available in 2016 under the Deferred Compensation
Plan are: stable value, S&P 500, international equity, Russell 2000,
mid-cap, and bond funds. Under the Deferred Compensation Plan, deferrals are not
actually invested in these funds, but instead are credited with earnings or
debited for losses based on the funds investment returns. Because the rate of
return is based on actual investment measures in our 401(k) plan, no
above-market earnings are credited, recorded, or paid. Our Deferred Compensation
Plan and 401(k) plan allow participants to change their investment elections
daily, subject to certain trading restrictions.
The Deferred Compensation Plan is
unfunded. This means that Allstate does not set aside funds for the plan in a
trust or otherwise. Participants have only the rights of general unsecured
creditors and may lose their balances in the event of the companys bankruptcy.
Account balances are 100% vested at all times.
An irrevocable distribution election is
required before making any deferrals into the plan. Generally, a named executive
may elect to begin receiving a distribution of his or her account balance
immediately upon separation from service or in one of the first through fifth
years after separation from service. The earliest distribution date for
deferrals on or after January 1, 2005, and earnings and losses on these amounts,
is six months following separation from service. The named executive may elect
to receive payment in a lump sum or in annual cash installment payments over a
period of two to ten years. In addition, a named executive may elect an
in-service withdrawal of his or her entire balance earned and vested prior to
January 1, 2005, and earnings and losses on these amounts, subject to forfeiture
of 10% of such balance. Upon proof of an unforeseen emergency, a plan
participant may be allowed to access certain funds in a deferred compensation
account earlier than the dates specified above.
The Allstate
Corporation |
|
59 |
Table of Contents
2017 Proxy Statement |
|
Executive Compensation |
Potential Payments as a Result of Termination or Change in Control
(CIC)
The following table lists the compensation
and benefits that Allstate would generally provide to the named executives in
various scenarios involving a termination of employment, other than compensation
and benefits generally available to
salaried employees. The table describes
equity granting practices for the 2016 equity incentive awards. Relevant prior
practices are described in the footnotes.
|
|
Termination
Scenarios |
Compensation Elements |
|
Termination(1) |
|
Retirement |
|
Termination due to Change-in-Control(2) |
|
Death |
|
Disability |
Base Salary |
|
Ceases immediately |
|
Ceases immediately |
|
Ceases immediately |
|
Ceases immediately |
|
Ceases immediately |
Severance Pay |
|
None |
|
None |
|
Lump sum equal to two times salary and annual incentive at
target, except for CEO who receives three times salary and annual
incentive at target(3) |
|
None |
|
None |
Annual Incentive(4) |
|
Forfeited |
|
Prorated for the year and subject to discretionary
adjustments(5) |
|
Prorated at target (reduced by any amounts actually
paid) |
|
Prorated for the year and subject to discretionary
adjustments |
|
Prorated for the year and subject to discretionary
adjustments |
Stock Options(4)(6) |
|
Unvested are forfeited, vested expire at the earlier of three
months or normal expiration |
|
Awards granted more than 12 months before, and pro rata portion
of award granted within 12 months of retirement, continue to vest. All
expire at earlier of five years or normal expiration(7) |
|
Awards vest upon qualifying termination after a CIC |
|
Awards vest immediately and expire at earlier of two years or
normal expiration |
|
Awards vest immediately and expire at earlier of two years or
normal expiration |
Restricted Stock Units(4)(6) |
|
Forfeited |
|
Awards granted more than 12 months before, and pro rata portion
of award granted within 12 months of retirement, continue to vest(7) |
|
Awards vest upon qualifying termination after a CIC |
|
Awards vest and are payable immediately |
|
Awards vest and are payable immediately |
Performance Stock Awards(4)(6) |
|
Forfeited |
|
Awards granted more than 12 months before, and pro rata portion
of awards granted within 12 months of retirement, continue to vest and are
paid out based on actual performance(7) |
|
Awards vest based on performance upon a qualifying termination
after a CIC(8) |
|
Awards vest and are payable immediately(9) |
|
Awards vest and are payable immediately(9) |
Non-Qualified Pension Benefits(10) |
|
Distributions commence per plan |
|
Distributions commence per plan |
|
Immediately payable upon a CIC |
|
Distributions commence per plan |
|
Participant may request payment if age 50 or
older |
60 |
|
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Table of Contents
Executive
Compensation |
|
2017 Proxy
Statement |
|
|
Termination
Scenarios |
Compensation
Elements |
|
Termination(1) |
|
Retirement |
|
Termination due
to Change-in-Control(2) |
|
Death |
|
Disability |
Deferred Compensation(11) |
|
Distributions commence per participant
election |
|
Distributions commence per participant election |
|
Immediately payable upon a CIC |
|
Payable within 90 days |
|
Distributions commence per participant election |
Health, Welfare and Other
Benefits |
|
None |
|
None |
|
Outplacement services provided; lump sum
payment equal to additional cost of welfare benefits continuation coverage
for 18 months(12) |
|
None |
|
Supplemental Long Term Disability benefits
if enrolled in basic long term disability plan |
(1) |
|
Includes both voluntary and involuntary termination. Examples of
involuntary termination independent of a change in control include
performance-related terminations; terminations for employee dishonesty and
violation of Allstate rules, regulations, or policies; and terminations
resulting from lack of work, rearrangement of work, or reduction in
force. |
(2) |
|
In general, a change in control
is one or more of the following events: (1) any person acquires 30% or
more of the combined voting power of Allstate common stock within a
12-month period; (2) any person acquires more than 50% of the combined
voting power of Allstate common stock; (3) certain changes are made to the
composition of the Board; or (4) the consummation of a merger,
reorganization, or similar transaction. These triggers were selected
because any of these could cause a substantial change in management in a
widely held company the size of Allstate. Effective upon a change in
control, the named executives become subject to covenants prohibiting
solicitation of employees, customers, and suppliers until one year after
termination of employment. If a named executive incurs legal fees or other
expenses in an effort to enforce the change-in-control plan, Allstate
will reimburse the named executive for these expenses unless it is
established by a court that the named executive had no reasonable basis
for the claim or acted in bad faith. |
(3) |
|
Under the change-in-control plan,
severance benefits would be payable if a named executives employment is
terminated either by Allstate without cause or by the executive for good
reason as defined in the plan during the two years following the change in
control. Cause means the named executive has been convicted of a felony or
other crime involving fraud or dishonesty, has willfully or intentionally
breached the restrictive covenants in the change-in-control plan, has
habitually neglected his or her duties, or has engaged in willful or
reckless material misconduct in the performance of his or her duties. Good
reason includes a material diminution in a named executives base
compensation, authority, duties, or responsibilities, or a material change
in the geographic location where the named executive performs
services. |
(4) |
|
Named executives who receive an
equity award or an annual cash incentive award after May 19, 2009, are
subject to a non-solicitation covenant while they are employed and for the
one-year period following termination of employment. If a named executive
violates the non-solicitation covenant, the Board or the committee, to the
extent permitted by applicable law, may recover compensation provided to
the named executive (including cancellation of outstanding awards or
recovery of all or a portion of any gain realized upon vesting,
settlement, or exercise of an award or recovery of all or a portion of any
proceeds resulting from any disposition of shares received pursuant to an
award) if the vesting, settlement, or exercise of the award or the receipt
of the sale proceeds occurred during the 12-month period prior to the
violation. |
(5) |
|
Retirement for purposes of the
Annual Executive Incentive Plan is defined as voluntary termination on or
after the date the named executive attains age 55 with at least 10 years
of service or age 60 with five years of service. |
(6) |
|
Named executives who receive an
equity award on or after May 21, 2013, that remains subject to a period of
restriction or other performance or vesting condition, are subject to a
non-compete provision while they are employed and for the one-year period
following termination of employment. Named executives who received equity
awards granted between February 21, 2012, and May 20, 2013, are subject to
a non-compete provision while they are employed and for the two-year
period following termination of employment. If a named executive violates
the non-competition covenant, the Board or the committee may, to the
extent permitted by applicable law, cancel any or all of the named
executives outstanding awards that remain subject to a period of
restriction or other performance or vesting condition as of the date on
which the named executive first violated the non-competition
provision. |
The Allstate
Corporation |
|
61 |
Table of Contents
2017 Proxy Statement |
|
Executive
Compensation |
(7) |
|
Retirement definitions and
treatment for purposes of stock options, restricted stock units, and
performance stock awards are as follows: |
|
|
|
|
Date of award on or after February
21, 2012 |
|
Definition |
|
Early Retirement-age 55 with 10 years
of service; Normal Retirement-age 60 with at least five years of
service |
|
Treatment |
|
●Unvested awards not granted within 12 months of
retirement continue to vest.
●Prorated portion of unvested awards granted within 12
months of the retirement date continue to vest.
●Vested stock options expire at
the earlier of five years from the date of retirement or the expiration
date of the option. |
|
|
Stock option awards granted in
2012 and before have vested and will expire at the earlier of five years
from the date of retirement or the expiration date of the
option. |
(8) |
|
For completed measurement periods
with results certified by the committee, the earned amount continues to
vest. For open cycles, the committee will determine the number of PSAs
that continue to vest based on actual performance up to the change in
control. |
(9) |
|
For open cycles, the payout is
based on the target number of PSAs. |
(10) |
|
See the Retirement Benefits section for further detail on non-qualified pension benefits and
timing of payments. |
(11) |
|
See the Non-Qualified Deferred Compensation at Fiscal Year-end
2016 section for additional information
on the Deferred Compensation Plan and distribution options
available. |
(12) |
|
If a named executives employment
is terminated due to death during the two years after the date of a change
in control, the named executives estate or beneficiary will be entitled
to survivor and other benefits, including retiree medical coverage, if
eligible, that are not less favorable than the most favorable benefits
available to the estates or surviving families of peer executives of
Allstate. In the event of termination due to disability during the two
years after the date of a change in control, Allstate will pay disability
and other benefits, including supplemental long-term disability benefits
and retiree medical coverage, if eligible, that are not less favorable
than the most favorable benefits available to disabled peer
executives. |
62 |
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Table of Contents
Executive
Compensation |
|
2017 Proxy
Statement |
ESTIMATE OF POTENTIAL
PAYMENTS UPON TERMINATION(1)
The table below describes the value of
compensation and benefits payable to each named executive upon termination that
would exceed the compensation or benefits generally available to salaried
employees in each termination scenario. The total column in the following table
does not
reflect compensation or benefits
previously accrued or earned by the named executives, such as deferred
compensation and non-qualified pension benefits. Benefits and payments are
calculated assuming a December 31, 2016, employment termination date.
Name |
|
Severance ($) |
|
Annual Incentive Plan(2) ($) |
|
Stock Options Unvested
and Accelerated ($) |
|
Restricted Stock Units and Performance Stock
Awards Unvested and Accelerated ($) |
|
Welfare Benefits
and Outplacement Services ($) |
|
|
Total ($) |
Mr. Wilson |
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination/Retirement(3) |
|
0 |
|
1,982,880 |
|
8,615,701 |
|
15,288,139 |
|
0 |
|
|
25,886,720 |
Termination due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control(4) |
|
14,400,000 |
|
3,600,000 |
|
9,006,081 |
|
16,007,622 |
|
73,195 |
(5) |
|
43,086,898 |
Death |
|
0 |
|
1,982,880 |
|
9,006,081 |
|
16,007,622 |
|
0 |
|
|
26,996,583 |
Disability |
|
0 |
|
1,982,880 |
|
9,006,081 |
|
16,007,622 |
|
12,026,900 |
(6) |
|
39,023,483 |
Mr. Shebik |
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination/Retirement(3) |
|
0 |
|
600,000 |
|
2,173,847 |
|
4,035,315 |
|
0 |
|
|
6,809,162 |
Termination due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control(4) |
|
3,487,500 |
|
968,750 |
|
2,293,134 |
|
4,255,155 |
|
73,195 |
(5) |
|
11,077,734 |
Death |
|
0 |
|
600,000 |
|
2,293,134 |
|
4,255,155 |
|
0 |
|
|
7,148,289 |
Disability |
|
0 |
|
600,000 |
|
2,293,134 |
|
4,255,155 |
|
3,541,488 |
(6) |
|
10,689,777 |
Mr. Civgin |
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination/Retirement(3) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
0 |
Termination due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control(4) |
|
3,510,000 |
|
975,000 |
|
2,344,939 |
|
4,262,345 |
|
73,195 |
(5) |
|
11,165,479 |
Death |
|
0 |
|
535,066 |
|
2,344,939 |
|
4,262,345 |
|
0 |
|
|
7,142,350 |
Disability |
|
0 |
|
535,066 |
|
2,344,939 |
|
4,262,345 |
|
6,391,461 |
(6) |
|
13,533,811 |
Ms. Fortin |
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination/Retirement(3) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
0 |
Termination due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control(4) |
|
2,410,625 |
|
570,938 |
|
758,415 |
|
4,606,854 |
|
73,195 |
(5) |
|
8,420,027 |
Death |
|
0 |
|
291,774 |
|
758,415 |
|
4,606,854 |
|
0 |
|
|
5,657,043 |
Disability |
|
0 |
|
291,774 |
|
758,415 |
|
4,606,854 |
|
0 |
(6) |
|
5,657,043 |
Mr. Winter |
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination/Retirement(3) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
0 |
Termination due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control(4) |
|
5,362,500 |
|
1,856,250 |
|
2,991,116 |
|
5,532,169 |
|
73,195 |
(5) |
|
15,815,230 |
Death |
|
0 |
|
1,017,513 |
|
2,991,116 |
|
5,532,169 |
|
0 |
|
|
9,540,798 |
Disability |
|
0 |
|
1,017,513 |
|
2,991,116 |
|
5,532,169 |
|
6,132,345 |
(6) |
|
15,673,143 |
(1) |
|
A 0 indicates either that there
is no amount payable to the named executive, or the amount payable is the
same for both the named executives and all salaried
employees. |
(2) |
|
The 2016 annual incentive plan
payment is payable to all named executives as a result of death and
disability. In addition, it is payable to Messrs. Wilson and Shebik in the
event of retirement. The amount listed for the annual incentive plan
payment upon termination due to a change in control is shown at target as
defined in the change-in-control severance plan. |
(3) |
|
As of December 31, 2016, Messrs.
Shebik and Wilson are the only named executives eligible to retire in
accordance with Allstates policy and the terms of its equity incentive
compensation and benefit plans. |
(4) |
|
The values in this
change-in-control row represent amounts paid if both the change in control
and qualifying termination occur on December 31, 2016. PSAs are paid out
based on actual performance; for purposes of this table, the 2014-2016
cycle is shown at 87.1% of target and the 2015-2017 and 2016-2018 cycles
are reflected at target. Beginning with awards granted in 2012, equity
awards do not accelerate in the event of a change in control unless also
accompanied by a qualifying termination of employment. A change in control
also would accelerate the distribution of each named executives
non-qualified deferred compensation and SRIP
benefits. |
The Allstate
Corporation |
|
63 |
Table of Contents
2017 Proxy Statement |
|
Executive
Compensation |
|
|
Please see the Non-Qualified Deferred Compensation at Fiscal Year-end
2016 table and footnote 2 to the
Pension Benefits table in
the Retirement Benefits section for details regarding the applicable amounts for
each named executive. |
(5) |
|
The Welfare Benefits and
Outplacement Services amount includes the cost to provide certain welfare
benefits to the named executive and family during the period the named
executive is eligible for continuation coverage under applicable law. The
amount shown reflects Allstates costs for these benefits or programs
assuming an 18-month continuation period. The value of outplacement
services is $50,000 for each named executive. |
(6) |
|
The named executives who
participate in the long-term disability plan are eligible to participate
in Allstates supplemental long-term disability plan for employees whose
annual earnings exceed the level which produces the maximum monthly
benefit provided by the long-term disability plan (basic plan). The
monthly benefit is equal to 60% of the named executives qualified annual
earnings divided by twelve and rounded to the nearest $100, reduced by
$7,500, which is the maximum monthly benefit payment that can be received
under the basic plan. The amount reflected assumes the named executive
remains totally disabled until age 65 and represents the present value of
the monthly benefit payable until age 65. |
Performance Measures for
2016
The following pages contain descriptions
of the performance measures used for executive incentive compensation. They were
developed uniquely for incentive compensation purposes, are non-GAAP measures
and are not reported in our financial statements. The committee has approved the
use of non-GAAP measures when appropriate to drive executive focus on particular
strategic, operational, or financial factors, or to exclude factors over which
our executives have little influence or control. The committee monitors
compensation estimates
during the year based on actual
performance on these measures, and the internal audit department reviews the
final results.
Adjusted Operating
Income: This measure is calculated uniquely
for annual cash incentive awards, the 162(m) pool, and each PSA performance
cycle. For each plan, Adjusted Operating Income is equal to net income
applicable to common shareholders as reported in The Allstate Corporation annual
report on Form 10-K adjusted for the after-tax effect of the items indicated
below:
64 |
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Table of Contents
Executive
Compensation |
|
2017 Proxy
Statement |
|
Indicates adjustments to Net
Income |
|
Annual Cash Incentive Awards/162(m) Pool |
|
Performance Stock Awards(1) |
Adjusted Operating
Income before adjustment for volatile
items(3) |
|
|
|
|
|
|
|
|
|
Adjustment for after-tax volatile items |
|
Adjusted to include
minimum or maximum amount of after-tax catastrophe losses and income from
performance-based long-term investments(4) |
|
Three-year average
adjusted to include a minimum or maximum amount of after-tax catastrophe
losses |
Adjusted Operating Income |
|
|
|
|
(1) |
|
Adjusted Operating Income is a performance measure for the
2014-2016, 2015-2017 and 2016-2018 performance cycles. The 2015-2017 and
2016-2018 performance cycles do not qualify for final measurement as of
December 31, 2016; the items checked above and after-tax volatile items
indicate items that by definition may impact the final measurement when
the three-year cycle and final measurement is completed. |
(2) |
|
Adjustment impacts only the calculations for the 2014-2016
performance cycle. |
(3) |
|
Volatile items include catastrophe losses and income from
performance-based long-term investments (PBLT income) depending on the
measure. |
(4) |
|
162(m) pool volatile items
adjustment only excludes actual amount of after-tax catastrophe losses.
2016 annual cash incentive award adjustment for volatile items was not
required. |
ANNUAL CASH INCENTIVE AWARD
PERFORMANCE MEASURES FOR 2016
● |
Adjusted Operating Income:
This measure is used to assess financial performance. In 2016, Adjusted
Operating Income was $1,928 million compared to reported operating income
of $1,838 million, an increase of $90 million. It was adjusted to remove
the impacts of the underwriting loss of the Discontinued Lines and
Coverages segment and restructuring and related charges. |
● |
Net Investment
Income: This measure is used to assess
the financial operating performance provided from investments. Net
investment income as reported in the consolidated statement of operations
is adjusted to include a minimum or maximum amount of income from
performance-based long-term investments if the actual amounts are less
than or exceed those amounts, respectively. Net Investment Income is also
subject to adjustments to be consistent with the financial reporting used
in establishing the measure and to exclude the effects of acquiring and
selling businesses. In 2016, no adjustments were necessary and Net
Investment Income of $3,042 million was equal to reported net investment
income. |
● |
Total Premiums: This measure
is used to assess growth within the Allstate Protection and Allstate
Financial businesses. It is equal to the sum of Allstate Protection
premiums written and Allstate Financial premiums and contract charges as
described below. |
|
Allstate Protection premiums written is equal
to the Allstate Protection net premiums written as reported in
managements discussion and analysis in The Allstate Corporation annual
report on Form 10-K. |
|
Allstate Financial premiums and contract charges are equal to
life and annuity premiums and contract charges reported in the
consolidated statement of operations. |
|
Total Premiums is subject to
adjustments to be consistent with the financial reporting used in
establishing the measure and to exclude the effects of acquiring and
selling businesses. No such adjustments were necessary in
2016. |
|
Total
Premiums of $33,872 million were equal to reported Total Premiums. |
● |
Total Return: This measure is used to
assess financial performance of the investment portfolio. Total return is
calculated as the ratio of the sum of net investment income, realized
capital gains and losses, the change in unrealized net capital gains and
losses, and the change in the difference between fair value and carrying
value of mortgage loans, cost method limited partnerships, bank loans and
agent loans, divided by the average fair value balances at the beginning
and at the end of 2016. |
|
Total Return is subject to
adjustment to be consistent with the financial reporting used in
establishing the measure and to exclude the effects of acquiring and
selling businesses. In 2016, no adjustments were necessary and Total
return was 4.4%. |
The Allstate
Corporation |
|
65 |
Table of Contents
2017 Proxy Statement |
|
Executive
Compensation |
PERFORMANCE STOCK AWARD
PERFORMANCE MEASURES FOR THE 2014-2016 AND 2015-2017 PERFORMANCE
CYCLES
● |
Three-Year Average Adjusted Operating Income
Return on Equity: It is calculated as the ratio of
the average Adjusted Operating Income for the three years in the period
divided by the average of Adjusted Common Shareholders Equity at December
31 of the year-end immediately preceding the period and at the end of each
year in the three-year period.
|
● |
Adjusted Common Shareholders Equity is equal
to common shareholders equity excluding the net effects of unrealized net
capital gains and losses. It is subject to adjustments to be consistent
with the financial reporting used in establishing the measure and to
exclude the net effects of acquiring and selling businesses. Adjusted
|
|
Common Shareholders Equity at December 31
of the year-end immediately preceding the period is not subject to
adjustment.
|
● |
Three-year Average Adjusted Operating Income Return on Equity for the 2014-2016 performance cycle was 12.1%, compared to our reported operating income return of equity of 10.4%, 11.6% and 12.6% for the three years ended 2016, 2015 and 2014, respectively, and the three year average of 11.5%. The primary adjustments relate to removing the impacts of the underwriting loss of the Discontinued Lines and Coverages segment, restructuring and related charges, net effects of selling businesses and adjusting for the change in accounting for investments in qualified affordable housing projects.
|
PERFORMANCE STOCK AWARD
PERFORMANCE MEASURES FOR THE 2016-2018 AND 2017-2019 PERFORMANCE
CYCLES
● |
Three-Year Average Adjusted Operating Income Return on Equity (measure weighted at 70%): These cycles are calculated in a similar manner to the 2014-2016 and 2015-2017 cycles as disclosed above, but are adjusted to reflect the foreign exchange rate used in establishing the measure (in place of actual foreign currency translation) for any period if the Total Premiums measure for the Annual Incentive Plan is adjusted for foreign exchange rates.
|
● |
Earned Book Value (measure weighted at 30%):
Earned book value is the increase between common shareholders equity at
December 31 of the year-end immediately preceding the three-year period
and adjusted common shareholders equity at December 31 of the last year
of the three-year period expressed as a compound annual growth rate.
Adjusted common shareholders equity is equal to common shareholders
equity at December 31 of the last year of the three-year period adjusted
to: |
|
|
|
|
Add back reductions for common share repurchases
and declared common shareholder dividends during the three-year
period. |
|
|
Remove the impact of other significant
non-recurring, infrequent or unusual items in excess of a threshold. |
|
|
|
|
|
Reflect a minimum or maximum amount of
after-tax catastrophe losses if the actual after-tax catastrophe losses
are more or less than +/- 20% respectively of the three years of
catastrophe losses used to establish the measure. |
|
|
|
|
|
Be consistent with the financial reporting used
in establishing the measure. |
|
|
|
|
|
Exclude the effects of acquiring and selling
businesses. |
|
|
|
|
|
Reflect the foreign exchange rate used in
establishing the measure (in place of actual foreign currency translation)
for any period if the Total Premiums measure for the Annual Incentive Plan
is adjusted for foreign exchange rates. |
66 |
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Table of
Contents
OTHER COMPENSATION PROPOSALS
3 |
Advisory Vote on the Frequency of Future Advisory
Votes on the Compensation of the Named Executives |
|
|
The Board
recommends that you vote to conduct future advisory votes on executive
compensation EVERY YEAR.
●Our stockholders have expressed interest in
annual say-on-pay proposals.
●The Board values the opportunity to receive
annual feedback to respond to changing market
conditions.
|
|
|
|
|
|
In accordance with the Dodd-Frank Wall
Street Reform and Consumer Protection Act, every six years, stockholders must
vote on whether executive compensation votes (say-on-pay) should occur every
year, every two years, or every three years.
The Board of Directors recommends that
future advisory votes on executive compensation occur every year, as is the
current practice. This provides the basis for proactive dialogue between the
Board and stockholders annually on the companys pay practices. When Allstate
last presented this issue for vote in 2011, approximately 64% of the votes cast
supported an annual frequency.
Stockholders will be able to specify one
of four choices for this proposal: one year, two years, three years, or abstain.
Stockholders are not voting to approve or disapprove the Boards recommendation.
While this advisory vote is non-binding on the Board of Directors, the Board
intends to adopt the frequency supported by the largest number of votes
cast.
The Board of Directors recommends that
you vote to conduct future advisory votes on executive compensation EVERY
YEAR.
The Allstate
Corporation |
|
67 |
Table of
Contents
2017 Proxy Statement |
|
Other Compensation Proposals |
4 |
Approval of The Allstate Corporation 2017 Equity
Compensation Plan for Non-Employee Directors |
|
|
The Board
recommends a vote FOR the approval of the Plan.
●Director pay is reviewed and benchmarked against our peers annually.
●The Plan includes a number of provisions that reflect best practice, including an
annual limit on equity awards to directors.
●The director pay program is aligned with stockholder interests as a meaningful
portion of director compensation is in the form of equity.
●Allstate cannot make equity awards to non-employee directors beyond the
remaining allotment under the 2006 plan. The new Plan authorizes 400,000 shares
for equity grants to Allstates independent directors.
|
|
|
|
|
|
We are asking stockholders to approve The
Allstate Corporation 2017 Equity Compensation Plan for Non-Employee Directors
(the 2017 Plan), which was approved by the Board subject to approval by the
stockholders at the 2017 Annual Meeting of Stockholders. The 2017 Plan will
become effective upon stockholder approval and is intended to replace The
Allstate Corporation 2006 Equity Compensation Plan for Non-Employee Directors,
which was approved by stockholders on May 16, 2006 (the 2006 Plan). The
maximum number of shares available under the 2006 Plan was 600,000 shares. As of
March 1, 2017, there were approximately 117,000 shares remaining for issuance.
Upon effectiveness of the 2017 Plan, any shares remaining for issuance under the
2006 Plan will no longer be available for future awards and the Board will no
longer have authority to grant new awards under the 2006 Plan.
The Board believes that it is both
desirable and appropriate for a meaningful portion of a non-employee directors
compensation to continue to be paid in the form of equity. Equity-based
compensation aligns the interests of non-employee directors with those of
stockholders. If the stockholders fail to approve the 2017 Plan, Allstate will
not be able to make equity-based awards to our non-employee directors beyond the
remaining allotment under the 2006 Plan of 117,000 shares.
The 2017 Plan contains a number of
provisions that reflect best practices, including:
● |
An annual limit on awards to
non-employee directors;
|
● |
No awards with an exercise price
less than fair market value on the grant date;
|
● |
No repricing or the exchange of
underwater awards without stockholder approval, except in the case of
certain corporate transactions;
|
● |
No annual evergreen provision
(i.e., no automatic annual increase in the number of shares available for
future awards); and
|
● |
Material amendments (defined as an
increase in the number of shares authorized for issuance, materially
modifying participation requirements, or materially increasing the
benefits accruing to non-employee directors) require stockholder
approval. |
Our directors are currently granted
equity awards with a three-year settlement provision (except for death,
disability and termination of Board service), subject to further deferral based
on the directors election.
The following is a summary of the 2017
Plans material features and is qualified in its entirety by reference to
Appendix D, which contains the complete 2017 Plan.
SUMMARY OF THE PLAN
Purpose
The purpose of the 2017 Plan is to align
the long-term interests of the directors with the interests of Allstates
stockholders and customers. In addition, the 2017 Plan is intended to help
motivate, attract and retain highly qualified persons to serve as
directors.
Shares
Available Under the Plan
The maximum number of shares that may be
issued under the 2017 Plan will be 400,000 shares. Awards may be granted under
the 2017 Plan from authorized
but unissued shares or treasury stock. If
any stock subject to an award is forfeited, or an award is cancelled, expired or
settled in cash, or in the case of an award that is not a stock option, that is
settled without delivery of shares of stock, the stock that is subject to such
award will again be available for distribution in connection with future awards
under the 2017 Plan. Shares of stock that are withheld to satisfy the option
exercise price related to a stock option or other award shall be deemed to be
issued under the 2017 Plan. As of March 1, 2017, the closing price of the
Companys common stock as reported on the New York Stock Exchange was
$82.69.
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In setting the number of shares issuable
under the 2017 Plan, the committee and the Board considered a number of factors.
These factors included:
● |
How long the shares available are
expected to last;
|
● |
Historical equity award granting
practices, including our three-year average share usage rate (commonly
referred to as burn rate) under all of Allstates equity plans for
employees and non-employee directors Allstates three-year average burn
rate of 1.32% is lower than the industry thresholds referenced by some
Allstate stockholders; and
|
● |
Total estimated cost of all of the
companys equity plans relative to
peers. |
Eligibility
Each director of Allstate who is not also
an officer or employee of Allstate or its subsidiaries (a non-employee
director) is eligible to participate in the 2017 Plan. The Board, upon
recommendation of the committee, determines the non-employee directors to whom
awards will be granted. The nominees for election as directors at the 2017
Annual Meeting, other than Mr. Wilson, are non-employee directors and will be
eligible for awards under the 2017 Plan.
Administration
The 2017 Plan will be administered by
Allstates nominating and governance committee or such other committee as the
Board selects (the committee as referenced throughout this Proposal 4). Each
member of the committee is a non-employee director not eligible to participate
in any other company equity compensation plan (other than the 2006 Plan). The
2017 Plan provides that the committee shall recommend to the full Board the
size, type and terms and conditions of awards. The committee has the authority
to interpret the 2017 Plan and to establish or amend any rules for its
administration.
Types of
Awards
The 2017 Plan provides for awards of stock
options, stock, restricted stock, restricted stock units (RSUs), election
shares, and other awards as determined by the Board upon recommendation of the
committee.
Limitations on Awards
The aggregate grant date fair value of any
awards that are valued by reference to, or based in, stock (other than election
shares) to a non-employee director during a calendar year may not exceed
$800,000.
Restricted
Stock and Restricted Stock Units
The 2017 Plan provides that restricted
stock and/ or RSUs may be granted to a non-employee director at such time, in
such number and subject to such terms as determined by the Board upon
recommendation of the committee.
Each award of restricted stock or RSUs
shall specify the number, the period of restriction, whether and the extent to
which restricted stock or RSUs shall be forfeitable and whether cash dividends
or dividend equivalents (other than large non-recurring cash dividends) are
provided for in the award. Restricted stock and RSUs shall become freely
transferable after the last day of the applicable restriction period provided in
the award. Payment of vested RSUs shall be made following the end of the
restriction period in either shares of common stock or cash of equal value (or a
combination thereof). Unless the Board determines otherwise, non-employee
directors holding restricted stock may exercise full voting rights on those
shares during the restriction period.
In the event of a change of control of the
company, as defined by the 2017 Plan, the successor corporation may either
assume outstanding RSUs or substitute substantially equivalent RSUs. If RSUs are
neither assumed nor substituted, then all outstanding RSUs shall be immediately
payable in shares of common stock upon consummation of the change of
control.
Stock
Options
The 2017 Plan provides that stock options
may be granted to a non-employee director at such time, in such number and
subject to such terms as determined by the Board upon the committees
recommendation. The Boards current practice is not to award stock options to
non-employee directors.
Each stock option award shall specify the
option exercise price (which may not be less than 100% of the fair market value
of Allstate common stock on the date of grant), its term (which may not exceed
ten years), the number of shares of stock to which the option pertains, the
period during which the option is exercisable, and the vesting schedule. The
2017 Plan defines fair market value as the price at which a share of Allstate
stock was last sold in the principal U.S. market for the stock as of the date
that fair market value is being determined. Outstanding stock option grants may
not be amended for the sole purpose of reducing the option exercise price. No
dividend equivalents shall be provided with respect to options. No stock option
may be granted on account of the use of stock to exercise a prior stock
option.
Stock options may be exercised by delivery
of a notice of intent to purchase a specific number of shares subject to the
option terms. The exercise price for the shares must be paid in full at the time
of exercise. Payment may be made in cash
The Allstate
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or its equivalent, by tendering previously
acquired shares of common stock, by broker-assisted cashless exercises, by share
withholding, or any combination of the foregoing. In the event of a change of
control of Allstate, as defined by the 2017 Plan, the successor corporation may
either assume outstanding stock options or substitute substantially equivalent
stock options. If stock options are neither assumed nor substituted, then all
outstanding and unvested stock options shall become immediately exercisable and
shall terminate if not exercised as of the date of the change of control or
other prescribed time period.
Election
to Receive Stock-In-Lieu of Retainer
In lieu of receiving the cash compensation
payable for services as a non-employee director, including annual lead director
and committee chair retainer fees, a non-employee director may elect in writing
to reduce, in ten percent increments, these cash fees and instead receive shares
with a fair market value equal to the amount by which the cash fees were reduced
(referred to as election shares). The election must be made no later than one
business day prior to the year to which the election relates and will remain in
effect until revoked or changed for a prospective period. Shares shall be issued
on the date cash compensation is payable to the director. Only whole shares may
be issued; fractional shares are payable in cash.
Other
Awards
The Board, upon recommendation of the
committee, may issue stock free of any forfeiture or transferability
restrictions, and may also grant other awards and determine the manner and
timing of payment under or settlement of these awards. The committee will
recommend to the Board whether and to what extent the awards will be entitled to
cash dividends, dividend equivalents or other distributions, except that no
dividend equivalents shall be provided for options.
Adjustments for Certain Events
The committee will make equitable
adjustments to the maximum number of shares of common stock that may be
delivered under the 2017 Plan and to outstanding awards to reflect an equity
restructuring that causes the per share value of stock to change, such as stock
dividends, stock splits, spin-offs, rights offerings, or recapitalizations. The
Board, upon recommendation by the committee, will make equitable adjustments to
the maximum number of shares of common stock that may be delivered under the
2017 Plan and to outstanding awards in the event of any other change in
corporate capitalization such as mergers, consolidations, reorganizations, or
liquidation events to prevent dilution or enlargement of rights.
Transferability
In general, each award shall not be
assignable or transferable other than by will or the laws of descent and
distribution. Vested portions of stock options may be transferred to certain
family members or to a trust, foundation or any other entity meeting certain
ownership requirements. However, in no event may a transfer be made for
consideration.
Amendment
of the Plan
The Board may amend, modify or terminate
the 2017 Plan at any time and in any respect, provided that no amendment shall
either (1) increase the total number of shares of common stock that can be
issued under the 2017 Plan, (2) materially modify the requirements for
participation in the 2017 Plan, or (3) materially increase the benefits accruing
to non-employee directors under the 2017 Plan, unless in each instance the
amendment is approved by Allstates stockholders.
Duration
of the Plan
The 2017 Plan will expire ten years after
the 2017 Annual Meeting of Stockholders, if approved by our stockholders. The
expiration will not affect any outstanding awards under the 2017 Plan, and the
terms and conditions of this 2017 Plan will continue to apply to those
awards.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE 2017 EQUITY COMPENSATION
PLAN FOR NON-EMPLOYEE DIRECTORS
The following is a general summary of the
current federal income tax consequences related to awards that may be granted
under the 2017 Plan. Federal tax laws may change and the federal, state and
local tax consequences for any non-employee director will depend upon his or her
individual circumstances. This summary does not address all potential tax
consequences related to awards, such as estate and gift taxes, foreign taxes and
state and local taxes.
Stock
Options
Generally a non-employee director will not
have any taxable income and Allstate is not entitled to any deduction on the
grant of a stock option.
Upon the exercise of the stock option, the
non-employee director recognizes ordinary income equal to the excess of the fair
market value of the shares acquired over the option exercise price on
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the date of exercise. Allstate is
generally entitled to a deduction equal to and at the same time the non-employee
director recognizes ordinary income. If vested portions of stock options are
transferred under the limited circumstances allowed by the 2017 Plan, any taxes
payable upon a transferees subsequent exercise of the option remain the
obligation of the non-employee director, the original option holder.
Use of
Common Stock to Pay Option Exercise Price of a Stock Option
If a non-employee director delivers
previously acquired common stock in payment of all or part of the option
exercise price of a stock option, the director will not, as a result of such
delivery, recognize taxable income or loss of any appreciation or depreciation
in value of the tendered common stock. The non-employee directors tax basis in
the tendered stock carries over to any equal number of the option shares
received on a share-for-share fair market value basis. The fair market value of
the shares received in excess of the tendered shares constitutes compensation
taxable to that director as ordinary income. Allstate may be entitled to
a
tax deduction equal to the compensation
income recognized by the non-employee director, and at the same time such income
is recognized.
Restricted
Stock, Restricted Stock Units and Stock Awards
Generally a non-employee director will not
have any taxable income on the grant of restricted stock and RSUs. When
restrictions lapse on restricted stock, that director will recognize ordinary
income in an amount equal to the fair market value of the shares. A non-employee
director may elect to be taxed at the time of grant, in which case he or she
will recognize ordinary income on the date of grant equal to the fair market
value of the shares on the grant date. For RSUs, a non-employee director
recognizes ordinary income equal to the fair market value of the shares received
upon settlement of the units with cash or shares of common stock. A non-employee
director will recognize ordinary income on the grant date of stock, in an amount
equal to the fair market value of the stock on the grant date. Allstate generally will be entitled to a tax deduction at the
time and in the amount that a non-employee director recognizes ordinary
income.
SECTION 409A
Section 409A of the Internal Revenue Code
imposes certain restrictions on amounts deferred under non-qualified deferred
compensation plans and a 20% additional tax on amounts that are subject to, but
do not comply with, Section 409A. Section 409A includes a broad definition of a
non-qualified
deferred compensation plan, which includes
certain types of equity incentive compensation. Allstate intends for the awards
granted under the 2017 Plan to comply with or be exempt from the requirements of
Section 409A and the Treasury regulations thereunder.
NEW PLAN BENEFITS
It is not possible at this time to
determine the benefits or amounts of awards that will be made in the future
under the 2017 Plan. However, subject to stockholder approval and consistent
with past practices, the Board intends to provide each non-employee director
with equity compensation for 2017 consisting of an RSU award on June 1,
2017
equal in value to $155,000 divided by the
closing price of a share of Allstate common stock on such grant date, rounded to
the nearest whole share.
The table below sets forth the awards that would be
received by the non-employee directors as a group during 2017 under the 2017
Plan if approved and the Board proceeds with its planned
awards.
NEW PLAN
BENEFITS 2017 EQUITY COMPENSATION PLAN FOR NON-EMPLOYEE
DIRECTORS |
Name and Position |
|
Number of Shares Underlying Options anticipated
to be Granted(2) |
|
Number of RSUs anticipated to be Granted(2) |
All
current non-employee directors as a group(1) |
|
0 |
|
Not available |
(1) |
No other groups, such as
executive officers or employees, are eligible to receive awards under the
2017 Plan. |
(2) |
Annual awards under the 2017 Plan
are expected to be made on June 1. The number of RSUs that will be granted
to the non-employee directors is not available at this time. It will be
equal in value to $155,000 divided by the closing price of a share of
Allstate common stock on the grant date, rounded to the nearest whole
share. |
The Allstate
Corporation |
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EQUITY COMPENSATION PLAN
INFORMATION |
The following table includes information
as of December 31, 2016, with respect to The Allstate Corporations equity
compensation plans for all of its employees and non-employee
directors:
Plan Category |
|
Number of Securities to be Issued upon Exercise of
Outstanding Options, Warrants and Rights (a) |
|
|
Weighted-Average Exercise Price of Outstanding
Options, Warrants and Rights (b) |
|
Number of Securities Remaining Available for Future
Issuance under Equity Compensation Plans (Excluding Securities
Reflected in Column (a)) (c) |
|
Equity Compensation Plans |
|
|
|
|
|
|
|
|
Approved by Security Holders(1) |
|
17,076,608 |
(2) |
|
$50.01 |
|
19,750,494 |
(3) |
Total |
|
17,076,608 |
(2) |
|
$50.01 |
|
19,750,494 |
(3) |
(1) |
Consists of the 2013 Equity
Incentive Plan, which amended and restated the 2009 Equity Incentive Plan;
the 2006 Equity Compensation Plan for Non-Employee Directors, and the
Equity Incentive Plan for Non-Employee Directors (the equity plan for
non-employee directors prior to 2006). The Allstate Corporation does not
maintain any equity compensation plans not approved by
stockholders. |
(2) |
As of December 31, 2016,
1,678,566 restricted stock units (RSUs) and 1,838,092 performance stock
awards (PSAs) were outstanding. The weighted-average exercise price of
outstanding options, warrants, and rights does not take into account RSUs
and PSAs, which have no exercise price. PSAs are reported at the maximum
potential amount awarded for incomplete performance periods and the amount
earned for the 2014 PSA grant, reduced for forfeitures. For incomplete
performance periods, the actual number of shares earned may be less and
are based upon measures achieved at the end of the three-year performance
period for those granted in 2015 and 2016. |
(3) |
Includes 19,633,233 shares that
may be issued in the form of stock options, unrestricted stock, restricted
stock, restricted stock units, stock appreciation rights, performance
units, performance stock, and stock in lieu of cash under the 2013 Equity
Incentive Plan; and 117,261 shares that may be issued in the form of stock
options, unrestricted stock, restricted stock, restricted stock units, and
stock in lieu of cash compensation under the 2006 Equity Compensation Plan
for Non-Employee Directors. |
The Board unanimously recommends that
stockholders vote for the approval of The Allstate Corporation 2017 Equity
Compensation Plan for Non-Employee Directors. The text of the entire plan is set
forth in Appendix D.
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AUDIT COMMITTEE MATTERS
5 |
Ratification of Deloitte & Touche LLP as the
Independent Registered Public Accountant for 2017 |
|
|
The Board
recommends a vote FOR ratification of Deloitte & Touche LLP for
2017.
●Independent firm with few ancillary
services and reasonable fees.
●Significant industry and financial
reporting expertise.
●The audit committee has solicited requests
for information from other auditing firms in the last four years and
determined that the retention of Deloitte & Touche LLP continues to be
in the best interests of Allstate and its
stockholders.
|
|
|
|
|
|
The audit committee has established strong
practices to evaluate the qualifications, compensation, performance, and
independence of the independent registered public accountant both on an ongoing
basis throughout the year and through the completion of an annual evaluation.
Deloitte & Touche LLP has been Allstates independent registered public
accountant since Allstate became a publicly-traded entity in 1993.
As a starting point for the annual
evaluation, a survey is administered by a Deloitte & Touche LLP partner who
is not affiliated with the Allstate account and by a risk or internal audit
executive. The survey assesses Allstates general satisfaction with the quality
and efficiency of the services provided. Results are reported to the audit
committee for its discussion and analysis.
In addition, the audit committee reviews
and discusses the results of the firms reports on its quality controls and
external assessments, including results of inspections conducted by the Public
Company Accounting Oversight Board (PCAOB).
Rotation of the independent registered
public accounting firm is explicitly considered each year by the committee in
addition to the regular mandated rotation of audit partners.
The audit committee has adopted a policy
regarding its pre-approval of all audit and permissible non-audit services
provided by the independent registered public accountant. The policy
identifies
the basic principles that must be
considered by the audit committee in approving services to ensure that the
registered public accountants independence is not impaired, describes the type
of audit, audit-related, tax and other services that may be provided, and lists
the non-audit services that may not be performed. The independent registered
public accountant or management will submit to the audit committee detailed
schedules with all of the proposed services within each category, together with
the estimated fees. Each specific service will require approval before service
can begin.
Prior to requesting approval from the
audit committee, the registered public accountant and management consider and
conclude that the services are permissible in that they: (1) do not place the
registered public accountant in the position of auditing their own work, (2) do
not result in the registered public accountants personnel acting as management
or an employee of Allstate, (3) do not place the registered public accountant in
a position of being an advocate for Allstate, (4) do not create a mutual or
conflicting interest between the registered public accountant and Allstate and
(5) are not based on a contingent fee arrangement. The audit committees policy
delegates to the chair the authority to grant approvals, but the decisions of
the chair must be reported to the audit committee at its next regularly
scheduled meeting. All services provided by Deloitte & Touche LLP in 2015
and 2016 were approved in accordance with this pre-approval policy.
The Allstate
Corporation |
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Audit Committee Matters |
Based on the results of the annual
evaluation, the audit committee has appointed Deloitte & Touche LLP as Allstates independent registered
public accountant for 2017. The factors considered by the audit committee
include:
●Focus on independence and their quality control
policies;
●Insurance and technical expertise and capability in
handling the breadth and complexity of Allstates operations and
industry;
●Quality and efficiency of the work
performed;
●Quality of discussions and feedback
sessions;
●External data on audit quality and performance,
including the results from the PCAOB; and
●Reasonableness of fees.
The audit committee and the Board
believe it is in the best interests of Allstate and its stockholders to
continue to retain Deloitte & Touche LLP as Allstates independent
registered public accountant. The committee and its chair approve the
selection of Deloitte & Touche LLPs lead engagement
partner. |
The following fees have been, or are
anticipated to be, billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their
respective affiliates, for professional
services rendered to Allstate for the fiscal years ending December 31, 2015 and
December 31, 2016.
|
|
2015(5) |
|
2016 |
Audit fees(1) |
|
$9,814,000 |
|
$10,139,000 |
Audit-related fees(2) |
|
$519,000 |
|
$739,000 |
Tax
fees(3) |
|
$611,000 |
|
$6,000 |
All
other fees(4) |
|
$0 |
|
$95,000 |
Total fees |
|
$10,944,000 |
|
$10,979,000 |
(1) |
|
Fees for audits of annual
financial statements, reviews of quarterly financial statements, statutory
audits, attest services, comfort letters, consents, and review of
documents filed with the Securities and Exchange Commission. The amount
disclosed does not reflect reimbursements expected to be received for
certain separate account audit fees from the managing entity in the
amounts of $165,000 and $179,000 for 2015 and 2016,
respectively. |
(2) |
|
Audit-related fees are for
professional services, such as accounting consultations on new accounting
standards, internal control reviews, and audits and other attest services
for non-consolidated entities (e.g., employee benefit plans, various
trusts) and are set forth below. |
|
|
|
2015 |
|
2016 |
|
Audits and other attest services for non-consolidated
entities |
|
$359,000 |
|
$345,000 |
|
Other audit-related fees |
|
$160,000 |
|
$394,000 |
|
Total audit-related fees |
|
$519,000 |
|
$739,000 |
(3) |
|
Tax fees include income tax
return preparation, compliance assistance, tax studies and research for
audit support and international tax planning. |
(4) |
|
All other fees includes all
fees paid that are not audit, audit-related, or tax services. In 2016,
these fees relate to advisory services. |
(5) |
|
Total fees for 2015 have been
reallocated between audit and audit-related fees to account for an
additional required audit. |
Representatives of Deloitte & Touche
LLP will be present at the 2017 annual meeting to respond to questions and may
make a statement if they choose. If stockholders fail to ratify the appointment,
the
audit committee will reconsider the
appointment, but no assurance can be given that the audit committee will change
the appointment.
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Audit
Committee Report
Deloitte & Touche LLP (Deloitte) was
Allstates independent registered public accountant for the year ended December
31, 2016.
The audit committee reviewed and discussed
with management the audited financial statements for the fiscal year ended
December 31, 2016.
The committee discussed with Deloitte the
matters required to be discussed by Auditing Standard No. 1301, as adopted by
the Public Company Accounting Oversight Board. The committee received the
written disclosures and letter from Deloitte that is required by applicable
requirements
of the Public Company Accounting Oversight
Board regarding Deloittes communications with the committee concerning
independence and has discussed with Deloitte its independence.
Based on these reviews and discussions and
other information considered by the committee in its judgment, the committee
recommended to the Board of Directors that the audited financial statements be
included in Allstates annual report on Form 10-K for the fiscal year ended
December 31, 2016, for filing with the Securities and Exchange Commission, and
furnished to stockholders with this Notice of Annual Meeting and Proxy
Statement.
|
|
|
|
|
|
|
Mary
Alice Taylor (Chair) |
|
Kermit R. Crawford |
|
Michael L. Eskew |
|
Siddharth N.
Mehta |
The Allstate
Corporation |
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STOCKHOLDER PROPOSALS
6 |
Stockholder Proposal on Independent Board
Chairman |
|
|
The Board
recommends a vote AGAINST this proposal.
●Allstates independent lead director provides meaningful
independent leadership of the Board.
●The Board should continue to have flexibility to determine whether
to split or combine the Chair and CEO roles and not be required to utilize
one approach.
●The Board has split the roles of Chair and CEO in the
past.
●The lead director is just one of many structural safeguards that
provide effective independent oversight of Allstate.
|
|
|
|
|
|
Mr. Kenneth Steiner, 14 Stoner Ave.,
2M, Great Neck, NY 11021, beneficial owner of no less than 500 shares of
Allstate common stock as of November 28, 2016, intends to propose the
following resolution at the annual meeting.
Proposal 6
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.
Caterpillar reversed itself by
naming an independent board chairman in October 2016. Caterpillar had
opposed a shareholder proposal for an independent board chairman as recent
as its June 2016 annual meeting. Wells Fargo also reversed itself and
named an independent board chairman in October 2016.
This proposal is of
greater importance to our company because our Lead Director, Judith
Sprieser was cited as a flagged director by GMI Analysis because she was
involved with a company that went bankrupt. Ms. Sprieser had 17 years
long-tenure (one of 2 directors with over 17-years tenure) which can make
a director act like an insider.
This proposal topic won 47% voting
support at our 2016 annual meeting. This means that the overwhelming
number of shareholders who are well informed on both sides of the issues
involving an independent board chairman supported this proposal
topic.
According to Institutional
Shareholder Services 53% of the Standard & Poors 1,500 firms separate
these 2 positions 2015 Board Practices, April 12, 2015. This proposal
topic won 50%-plus support at 5 major U.S. companies in 2013 including
73%-support at Netflix.
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.
Having a board chairman who is
independent of management is a practice that will promote greater
management accountability to shareholders and lead to a more objective
evaluation of management.
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 Systems
Global Principles of Accountable Corporate Governance recommends that a
companys 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
6 |
76 |
|
www.allstate.com |
Table of Contents
Stockholder Proposals |
|
2017 Proxy Statement |
Board
of Directors Statement in Opposition to the Stockholder Proposal on Independent
Board Chairman
The Board recommends that
stockholders vote AGAINST this proposal for the following
reasons:
ALLSTATES INDEPENDENT LEAD DIRECTOR PROVIDES MEANINGFUL
INDEPENDENT LEADERSHIP OF THE BOARD.
● |
The powers of the lead director
and committee chairs were formalized and expanded in 2016 as a result of
stockholder dialogue. For a more detailed description of our lead director
role, see page 21. |
● |
Our lead director is selected after
a comprehensive annual process and has well-defined and substantive
responsibilities: |
● |
Is elected solely by independent
members of the Board; |
● |
Has authority to call meetings of
the independent members of the Board; |
● |
Approves Board meeting agendas,
schedules and information provided to the Board; |
● |
Facilitates and communicates the
Boards performance evaluation of the CEO and Chair; |
● |
Facilitates the evaluation of Board
and director performance; |
● |
Ensures implementation of the Board
committee self-evaluation process and reports to the Board, and provides
guidance to Committee chairs, as needed; |
● |
Facilitates the Chair and CEO
succession process; |
● |
Presides at all Board meetings at
which the Chair is not present and at all executive sessions;
and |
● |
Communicates with significant
stockholders and other stakeholders on matters involving broad corporate
policies and practices, when appropriate. |
● |
The lead directors performance is
assessed annually; as part of that review, the nominating and governance
committee evaluates the criteria for nominees for the lead director role
and assesses any needed changes. |
● |
The committee chairs
responsibilities were proactively enhanced to include the power to approve
committee agendas and meeting
materials. |
THE
BOARD SHOULD CONTINUE TO HAVE FLEXIBILITY TO DETERMINE WHETHER TO SPLIT OR
COMBINE THE CHAIR AND CEO ROLES AND NOT BE REQUIRED TO UTILIZE ONE
APPROACH.
● |
The Board believes it is important
to maintain the flexibility to choose whether to separate the Board Chair
and CEO roles at Allstate. Requiring a split of the roles would reduce the
Boards ability to act in the best interests of the company as the needs
of the Board and the company change over time. |
● |
According to a survey by a major
executive search firm in 2015, only 4% of S&P 500 companies
REQUIRE the
separation of the roles. Most boards believe it is beneficial to have
flexibility in determining whether to separate or combine the
roles. |
● |
In response to a similar proposal
last year, the Board engaged in an extensive outreach campaign to our
largest stockholders representing approximately 40% of Allstates
outstanding shares in 2016. Topics
discussed |
|
included the lead director role and
the decision to maintain a combined Chair and CEO. Based on feedback from
our stockholders and the Boards analysis of its needs, the lead director
role and committee chair responsibilities were enhanced, codifying
existing practices and incorporating additional
responsibilities. |
● |
At present, the independent
directors have determined Allstate is well-served by having both Chair and
CEO roles performed by Mr. Wilson, who provides excellent leadership and
direction for both management and the Board. Given his extensive company
knowledge and his ability to effectively fulfill both roles
simultaneously, he is uniquely qualified to lead discussions of the Board
and is in the best position to facilitate the flow of business information
and communications. |
The Allstate
Corporation |
|
77 |
Table of Contents
2017 Proxy Statement |
|
Stockholder Proposals |
THE
BOARD HAS SPLIT THE ROLES OF CHAIR AND CEO IN THE PAST.
● |
Allstates Board previously and
effectively used this flexibility to benefit stockholders. The Board split
the roles of Chair and CEO in 2007 during a leadership transition. In
January 2007, Thomas Wilson replaced Edward Liddy as CEO, and the Board
determined that Mr. Liddy should remain Chair. During this period, both
Mr. Liddy and Mr. Wilson attended Board and committee meetings to provide
historical context and a |
|
seamless transition. Mr. Liddy
retired in 2008 and the Board decided to have Mr. Wilson be Chair while
retaining his role as CEO. |
● |
The practice of splitting the roles
during leadership transitions is common among companies. According to a
survey from a leading global advisory firm, 37% of current stand-alone
board chairs previously served as CEO of the same
company. |
THE
LEAD DIRECTOR IS JUST ONE OF MANY STRUCTURAL SAFEGUARDS THAT PROVIDE EFFECTIVE
INDEPENDENT OVERSIGHT OF ALLSTATE.
● |
In addition to the strong
independent lead director, the Board has policies and practices that
support a balanced and strong governance system,
including: |
● |
All of Allstates Board members are
independent within the meaning of applicable laws, with the exception of
the CEO; |
● |
All members of each of the key Board
committees (the audit, compensation and succession, nominating and
governance, and risk and return committees) are
independent; |
● |
Each committee operates under a
written charter that has been approved by the Board and that details the
oversight of key matters, such as the integrity of Allstates financial
statements, executive compensation, CEO performance, nomination of
directors, evaluation of the Board, and risk and return
management; |
● |
The Board performs a formal annual
evaluation of the Chair and CEO in an executive session;
and |
● |
All key Board committees have access
to and utilize independent external
advisors. |
78 |
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Table of Contents
Stockholder Proposals |
|
2017 Proxy Statement |
7 |
Stockholder Proposal on Lead Director
Qualifications |
|
|
The Board
recommends a vote AGAINST this proposal.
●This proposal seeks to establish a new independence standard that
is inconsistent with public stock exchange listing standards.
●The nominating and governance committee specifically evaluated the
impact of Ms. Spriesers tenure and concluded it had no impact on her
independence.
●Allstates independent lead director is selected through a robust
process, and her performance is evaluated annually.
●The Board believes it is important to maintain a mix of director
tenures.
|
|
|
|
|
|
Mr. William Steiner, 112 Abbottsford
Gate, Piermont, NY 10968, beneficial owner of no less than 100 shares of
Allstate common stock as of December 6, 2016, intends to propose the
following resolution at the annual meeting.
Proposal 7
Lead Director Qualifications
Shareholders request that our Board
adopt a rule that whenever possible our Lead Director have less than
12-years tenure. A director with more than 12-years tenure is arguably not
independent.
GMI Analyst said Judith Sprieser,
our Lead Director, had long tenure of 17 years, which may compromise her
ability to act as an effective and independent counterbalance to the
CEO/chair. Ms. Sprieser had also been flagged for her service on a board
that previously filed for bankruptcy. GMI said long-tenured directors can
often form relationships that may compromise their independence and
therefore hinder their ability to provide effective oversight.
Independence in a Lead Director is especially important since Mr. Wilson
serves the dual roles of CEO and Chairman.
Please vote to enhance shareholder
value:
Lead
Director Qualifications Proposal 7 |
The Allstate
Corporation |
|
79 |
Table of Contents
2017 Proxy Statement |
|
Stockholder Proposals |
Board
of Directors Statement in Opposition to the Stockholder Proposal on Lead
Director Qualifications
The Board recommends that
stockholders vote AGAINST this proposal for the following
reasons:
THIS
PROPOSAL SEEKS TO ESTABLISH A NEW INDEPENDENCE STANDARD THAT IS INCONSISTENT
WITH PUBLIC STOCK EXCHANGE LISTING STANDARDS.
● |
New York Stock Exchange listing
standards for director independence do not cite tenure as a
factor. |
● |
In our discussions with our top
investors, none cite tenure as the sole reason to deem a director
non-independent. |
● |
Our independence assessment
considers the number of years of service as part of the annual evaluation
of director nominees. |
THE
NOMINATING AND GOVERNANCE COMMITTEE SPECIFICALLY EVALUATED THE IMPACT OF MS.
SPRIESERS TENURE AND CONCLUDED IT HAD NO IMPACT ON HER
INDEPENDENCE.
● |
The Board weighed the potential
impact of tenure on the independence of Ms. Sprieser. She has significant
experience serving at Allstate under different operating environments and
management teams, and has served on the Board under two CEOs. The
independent directors concluded that she is a highly effective director
capable of leading reasoned, balanced and thoughtful Board deliberations
amongst the |
|
independent directors. Her
experience with two CEOs in a variety of operating environments was
determined to be a significant source of insight for effective
governance. |
● |
The proposal cites Ms. Spriesers
experience serving on the board of another company that successfully
emerged from bankruptcy proceedings. The Board concluded this served to
deepen and enhance her skill set. |
ALLSTATES INDEPENDENT LEAD DIRECTOR IS SELECTED THROUGH A ROBUST
PROCESS, AND HER PERFORMANCE IS EVALUATED ANNUALLY.
● |
Each year, the nominating and
governance committee recommends a director to the independent members of
the Board to serve as the independent lead director. The lead director is
elected annually by the independent directors but is generally expected to
serve for more than one year. |
● |
In selecting the lead director, the
independent directors consider evolving market, operational, and
governance issues facing Allstate.
They |
|
consider relevant leadership,
operational and corporate governance experience, relationships with the
other Board members and external commitments. In addition, the lead
director is expected to have a thorough understanding of the companys
business operations and history. |
● |
The responsibilities of the lead
director are reviewed annually in connection with the annual evaluation of
the lead directors performance. |
THE
BOARD BELIEVES IT IS IMPORTANT TO MAINTAIN A MIX OF DIRECTOR
TENURES.
● |
Our Board evaluates tenure for each
individual and in aggregate because a mix of experience and tenure is
critical to the effectiveness of our Board. |
● |
Our Board is committed to routine
refreshment, and our current diversity of director tenures provides us
with a mix of fresh perspectives and experienced insights derived from
overseeing a business that has developed and changed
through many different external operating
environments. |
● |
Our Boards current average tenure
of 7 years is below the S&P 500 average of 8 years (according to a survey by
a major executive search firm in 2016). |
● |
In addition to the variety of
director tenures, the Board values and actively cultivates a mix of
diversity and experience among our directors to enhance the range of
perspectives on all issues. |
● |
Sufficient tenure gives the lead
director the experience, institutional knowledge and understanding of
Board and company dynamics needed to lead and oversee management
effectively; this is balanced by other directors with a shorter
tenure. |
80 |
|
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Table of
Contents
Stockholder Proposals |
|
2017 Proxy Statement |
8 |
Stockholder Proposal on Reporting Political
Contributions |
|
|
The Board
recommends a vote AGAINST this proposal.
●Allstate already provides stockholders with
comprehensive disclosures on Allstates involvement in the public policy
arena (found at www.allstate.com/publicpolicyreport).
●Allstates Board has strong governance and oversight practices over
the companys public policy involvement.
●Allstate surpasses all disclosure requirements pertaining to
political contributions under federal, state, and local
laws.
|
|
|
|
|
|
The Comptroller of the State of New York,
59 Maiden Lane 30th Floor, New York, NY 10038, beneficial owner of no less
than 1,354,824 shares of Allstate common stock as of December 5, 2016, and The
International Brotherhood of Teamsters, 25 Louisiana Avenue, NW, Washington,
D.C. 20001, beneficial owners of no less than 64 shares of Allstate common stock
as of December 7, 2016, intend to propose the following resolution at the annual
meeting.
Resolved, that the shareholders of Allstate
Corp. (Allstate or Company) hereby
request that the Company provide a report, updated semiannually, disclosing the
Companys:
1. |
Policies and procedures for making, with corporate funds
or assets, contributions and expenditures (direct or indirect) to (a)
participate or intervene in any political campaign on behalf of (or in
opposition to) any candidate for public office, or (b) influence the
general public, or any segment thereof, with respect to an election or
referendum. |
|
|
2. |
Monetary and non-monetary contributions and expenditures
(direct and indirect) used in the manner described in section 1 above,
including: |
|
|
a. |
The identity of the recipient as
well as the amount paid to each; and |
|
|
|
b. |
The title(s) of the person(s) in
the Company responsible for decision-making. |
The report shall be presented to the board
of directors or relevant board committee and posted on the Companys website
within 12 months from the date of the annual meeting.
Supporting
Statement:
As long-term shareholders of Allstate, we
support transparency and accountability in corporate spending on political
activities. These include any activities considered intervention in any
political campaign under the Internal Revenue Code, such as direct and indirect
contributions to political candidates, parties, organizations, or ballot
measures; direct independent expenditures; or electioneering communications on
behalf of federal, state, or local candidates.
Disclosure is in the best interest of the
company and its shareholders. The Supreme Court affirmed this its
Citizens United decision: [D]isclosure permits citizens and shareholders to react to
the speech of corporate entities in a proper way. This transparency enables the
electorate to make informed decisions and give proper weight to different
speakers and messages. Gaps in transparency and accountability may expose the
company to reputational and business risks that could threaten long-term
shareholder value.
Publicly available records show that
Allstate directly or indirectly contributed over $10.4 million in corporate
funds since the 2004 election cycle. (CQ: http://moneyline.cq.com and National
Institute on Money in State Politics: http://www.followthemoney.org)
We acknowledge that Allstate publicly
discloses some information on its political spending. However, such data is
presented in the aggregate and does not identify specific recipients, making it
difficult for shareholders to get a complete picture of the Companys political
spending. This proposal asks the Company to provide itemized disclosure of all
of its political expenditures, including payments to trade associations and
other tax-exempt organizations.
This would bring our Company in line with
a growing number of leading companies, including AFLAC Inc., Bank of America Corp., and
Travelers Companies Inc., that support political disclosure and accountability and
present this information on their websites.
The Companys Board and its shareholders
need comprehensive disclosure to be able to fully evaluate the political use of
corporate assets. We urge your support for this critical governance
reform.
The Allstate
Corporation |
|
81 |
Table of
Contents
2017 Proxy Statement |
|
Stockholder Proposals |
Board of Directors
Statement in Opposition to the Stockholder Proposal on Reporting Political
Contributions
The Board recommends that stockholders vote
AGAINST this proposal for the following reasons:
ALLSTATE ALREADY PROVIDES
STOCKHOLDERS WITH COMPREHENSIVE DISCLOSURES ON ALLSTATES INVOLVEMENT IN THE
PUBLIC POLICY ARENA (FOUND AT
WWW.ALLSTATE.COM/PUBLICPOLICYREPORT).
● |
Allstate issues an annual Corporate
Involvement in Public Policy report, which provides a comprehensive
discussion of Allstates activities. The report describes the Boards
process for overseeing expenditures, the strategic and business rationale
for expenditures, total amounts contributed by category (including
non-deductible amounts for certain lobbying activities and to political
candidates and organizations), those involved in the decision-making
process, and the major organizations supported. |
|
|
● |
The proponents seek additional
disclosure of line-item expenditures to each recipient, but they do not
address the possible harm to Allstate |
|
in providing this information. This additional disclosure
could be used by special interest groups to pressure Allstate to change
the way it manages its public policy engagement or to pressure Allstate to
stop providing support to organizations that support initiatives that are in the
best interests of Allstate and its stockholders, employees, agencies, and
customers. |
|
|
● |
In our ongoing engagement with
investors, several have indicated strong support for Allstates current
political contribution disclosures, finding them to contain appropriate
and meaningful detail. Some investors have told us our report is a model
for balanced disclosure. |
ALLSTATES BOARD HAS STRONG
GOVERNANCE AND OVERSIGHT PRACTICES OVER THE COMPANYS PUBLIC POLICY
INVOLVEMENT.
● |
The specific deployment of corporate
resources in the public policy arena is presented formally to the Board
each year. Our Corporate Governance Guidelines address the Boards annual
review and our involvement in the public policy arena and can be found at
www.allstateinvestors.com. |
|
|
● |
We expanded the discussion of
Allstates oversight over political spending in the 2016 report and
accelerated its availability to |
|
stockholders prior to the 2017 annual meeting. Subject
matter experts within Allstate make recommendations for which
organizations and candidates to support financially, and members of
Allstates government and industry relations group consult with members of
senior management to make the ultimate
determinations. |
ALLSTATE SURPASSES ALL
DISCLOSURE REQUIREMENTS PERTAINING TO POLITICAL CONTRIBUTIONS UNDER FEDERAL,
STATE, AND LOCAL LAWS.
● |
Allstate complies with all public
disclosure laws at the federal, state, and local levels. |
|
|
● |
Allstate also maintains internal
guidelines and procedures to ensure that the companys public policy
efforts remain consistent with the companys operating priorities and
annual operating plan while advancing positions that promote Allstates
strategy and the long-term interests of our stockholders,
employees, |
|
agencies, and customers. For example, we use our industry
expertise in formulating public policy solutions that help mitigate
weather-related risks and reduce the likelihood and severity of property
loss. |
|
|
● |
The proposal would impose
requirements on Allstate that are not dictated by law or our own internal
requirements and that are not standard among other companies.
|
82 |
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Table of
Contents
Stockholder Proposals |
|
2017 Proxy Statement |
Stockholder Proposals or
Director Nominations for the 2018 Annual Meeting
Proposals that stockholders would like to
include in Allstates proxy materials for presentation at the 2018 annual
meeting of stockholders must be received by the Office of the Secretary by
December 13, 2017, and must otherwise comply with Securities and Exchange
Commission rules in order to be eligible for inclusion in the proxy material for
the 2018 annual meeting.
If a stockholder would like to bring a
matter before the meeting which is not the subject of a proposal that meets the
Securities and Exchange Commission proxy rule requirements for inclusion in the
proxy statement, the stockholder must follow procedures in Allstates bylaws in
order to personally present the proposal at the meeting.
One of the procedural requirements in the
bylaws is timely notice in writing of the business the stockholder proposes to
bring before the meeting. Notice of business proposed to be brought before the
2018 annual meeting must be received by the Office of the Secretary no earlier
than the close of business on January 25, 2018, and no later than the close of
business on February 26, 2018. Among other things, the notice must describe the
business proposed to be brought before the meeting, the reasons for conducting
the business at the meeting, and any material interest of the stockholder in the
business.
A stockholder also may directly nominate
someone for election as a director at a stockholders meeting. Under our bylaws,
a stockholder may nominate a candidate at the 2018 annual meeting by providing
advance notice to Allstate to the Office of the Secretary that is received no
earlier than the close of business on January 25, 2018, and no later than the
close of business on February 26, 2018. For proxy access nominees to be
considered at the 2018 annual meeting, the nomination notice must be received by
the Office of the Secretary no earlier than the close of business on November
13, 2017 and no later than the close of business on December 13, 2017. Among
other things, the notice must include the information and documents described in
Section 20 of the companys bylaws.
A copy of the procedures and requirements
related to the above matters is available upon request from the Office of the
Secretary or can be found on Allstates website, allstateinvestors.com. The
notices required above must be sent to the Office of the Secretary, The Allstate
Corporation, 2775 Sanders Road, Suite F7, Northbrook, Illinois
60062-6127.
The Allstate
Corporation |
|
83 |
Table of
Contents
STOCK OWNERSHIP
INFORMATION
Security Ownership of
Directors and Executive Officers
The following table shows the Allstate
common shares beneficially owned as of March 1, 2017 by each director and named
executive individually, and by all executive officers and directors of Allstate
as a group. Shares reported as beneficially owned include
shares held indirectly through the
Allstate 401(k) Savings Plan and other shares held indirectly. It also includes
shares subject to stock options exercisable on or before April 30, 2017. As of
March 1, 2017, none of these shares were pledged as security.
Name of Beneficial Owner |
|
Amount and Nature of Beneficial Ownership
of Allstate Common Stock(1) |
|
Common Stock Subject to Options Exercisable on
or prior to April 29, 2017 Included in
Previous Column(1) |
Kermit R. Crawford |
|
1,000 |
|
0 |
Michael L. Eskew |
|
190 |
|
0 |
Herbert L. Henkel |
|
0 |
|
0 |
Siddharth N. Mehta |
|
0 |
|
0 |
Jacques P. Perold(2) |
|
35 |
|
0 |
Andrea Redmond |
|
4,000 |
|
0 |
John W. Rowe |
|
6,025 |
|
0 |
Judith A. Sprieser |
|
0 |
|
0 |
Mary Alice Taylor |
|
21,048 |
|
8,000 |
Perry M. Traquina |
|
765 |
|
0 |
Thomas J. Wilson(2) |
|
3,199,281 |
|
2,615,176 |
Steven E. Shebik |
|
460,930 |
|
355,844 |
Don Civgin |
|
298,634 |
|
183,435 |
Mary Jane Fortin |
|
32,410 |
|
22,483 |
Matthew E. Winter |
|
694,532 |
|
558,615 |
All directors and executive officers as a
group |
|
5,520,918 |
|
4,344,897 |
(1) |
As of March 1, 2017, no director
or executive officer beneficially owned 1% or more of the outstanding
common stock of Allstate. The directors and executive officers of Allstate
as a group beneficially owned (including common stock subject to stock
options exercisable on or prior to April 29, 2017) approximately 1.5% of
the common stock outstanding as of March 1, 2017. |
(2) |
Mr. Perolds common shares are
held indirectly by a trust. The shares held by Mr. Wilson include shares
owned indirectly through a grantor retained annuity trust and a remainder
grantor retained annuity trust. |
84 |
|
www.allstate.com |
Table of
Contents
Stock Ownership Information |
|
2017 Proxy Statement |
Security Ownership of
Certain Beneficial Owners
Title of Class |
|
Name and Address of Beneficial Owner |
|
Amount and Nature of Beneficial
Ownership |
|
|
Percent of Class |
Common |
|
BlackRock, Inc. 55 East 52nd Street New York, NY
10055 |
|
28,277,120 |
(1) |
|
7.70% |
Common |
|
The Vanguard Group 100 Vanguard Boulevard Malvern,
PA 19355 |
|
22,904,281 |
(2) |
|
6.21% |
(1) |
Reflects shares beneficially
owned as of December 31, 2016, as set forth in a schedule 13G/A filed on
January 19, 2017. Of these shares, BlackRock reported it held 24,597,674
shares with sole voting power; 25,997 shares with shared voting power;
28,251,123 shares with sole dispositive power; and 25,997 shares with
shared dispositive power. BlackRock also manages approximately $3.2
billion of Allstates investment portfolio as of December 31, 2016 under
various investment management agreements and has licensed to Allstate an
investment technology software system widely used by investors. The terms
of these arrangements are customary and the aggregate related fees are not
material. |
(2) |
Reflects shares beneficially
owned as of December 31, 2016, as set forth in a schedule 13G/A filed on
February 9, 2017. Of these shares, The Vanguard Group reported it held
580,449 shares with sole voting power; 87,521 shares with shared voting
power; 22,239,770 with sole dispositive power; and 664,511 shares with
shared dispositive power. |
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934 requires Allstates executive officers, directors, and persons who
beneficially own more than 10% of Allstates common stock to file reports of
securities ownership and changes in such ownership with the Securities and
Exchange Commission.
Based solely upon a review of copies of
such reports, or written representations that all such reports were timely
filed, Allstate believes that each of its executive officers and directors
complied with all Section 16(a) filing requirements applicable to them during
2016.
The Allstate
Corporation |
|
85 |
Table of
Contents
OTHER
INFORMATION
Proxy and Voting
Information
Who is asking for my vote
and why?
The Allstate Board of Directors is
soliciting proxies for use at the annual meeting of stockholders to be held on
May 25, 2017, and any adjournments or postponements of the meeting. The annual
meeting will be held only if there is a quorum, which means that a majority of
the outstanding common stock entitled to vote is represented at the meeting by
proxy or in person. To ensure there will be a quorum, the Allstate Board asks
you to vote before the meeting, which allows your Allstate stock to be
represented at the annual meeting.
Who can vote at the annual
meeting?
The Allstate Board has set the close of
business on March 27, 2017 as the record date for the meeting. This means that
you are entitled to vote if you were a stockholder of record at the close of
business on March 27, 2017. On that date, there were 365,203,582 shares of
Allstate common stock outstanding and entitled to vote at the annual
meeting.
Why did I receive a notice
of Internet availability of proxy materials instead of the proxy
materials?
We distribute our proxy materials to
certain stockholders over the Internet using Notice and Access delivery, as
permitted by the rules of the Securities and Exchange Commission. We elected to
use this method for certain stockholders as it reduces our print and mail costs
and the environmental impact of our annual stockholders meeting.
How do I
vote?
Instructions on how to vote your shares
are included on the Notice on page 4. If you hold shares in your own name as a
registered stockholder, you may vote in person by attending the annual meeting,
or you may instruct the proxies how to vote your shares by following the
instructions on the proxy card/voting instruction form. If you plan to attend the meeting in person, please see the
details on page 87.
If you hold shares in street name (that
is, through a broker, bank, or other record holder), you should follow the
instructions provided by your broker, bank, or other record holder to vote your
shares.
If you hold shares through the Allstate
401(k) Savings Plan, please see the instructions on page 88.
Can I change my
vote?
Before your shares have been voted at the
annual meeting by the proxies, you may change or revoke your voting instructions
by providing instructions again by telephone, by Internet, in writing, or, if
you are a registered stockholder, by voting in person at the annual
meeting.
Are the votes kept
confidential?
All proxies, ballots, and tabulations that
identify the vote of a particular stockholder are confidential, except as
necessary to allow the inspector of election to certify the voting results or to
meet certain legal requirements. A representative of American Election Services,
LLC will act as the inspector of election and will count the votes. The
representative is independent of Allstate and its directors, officers, and
employees.
If you write a comment on your proxy card,
voting instruction form, or ballot, it may be provided to our Secretary along
with your name and address.
Your comments will be provided without
reference to how you voted, unless the vote is mentioned in your comment or
unless disclosure of the vote is necessary to understand your comment. At our
request, the distribution agent or the solicitation agent will provide us with
periodic status reports on the aggregate vote. These status reports may include
a list of stockholders who have not voted and breakdowns of vote totals by
different types of stockholders, as long as we are not able to determine how a
particular stockholder voted.
What happens if I submit a
signed proxy card but do not indicate how I want to vote?
You may instruct the proxies to vote FOR
or AGAINST on each proposal, other than Proposal 3 on which you are allowed to
choose one year, two years or three years, or you may instruct the proxies to
ABSTAIN from voting. If you submit a signed proxy card/voting instruction form
to allow your shares to be represented at the annual meeting but do not indicate
how your shares should be voted on one or more proposals, then the proxies will
vote your shares as the Board of Directors recommends on those proposals. Other
than the proposals listed on pages 5-9, we do not know of any other matters to
be presented at the meeting. If any other matters are properly presented at the
meeting, the proxies may vote your shares in accordance with their best
judgment.
86 |
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Other Information |
|
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What vote is needed to
approve each item?
Shares of common stock represented by a
properly completed proxy card/voting instruction form will be counted as present
at the meeting for purposes of determining a quorum, even if the stockholder is
abstaining from voting.
Proposal 1. To be elected under
Allstates majority vote standard, each director must receive an affirmative
vote of the majority of the votes cast. In other words, the number of shares
voted For a director must exceed 50% of the votes cast on that director.
Abstentions will not be counted as votes cast and will have no impact on the
votes outcome.
Proposals 2 8. Except for Proposal 3, to
be approved, a majority of the shares present in person or represented by proxy
at the meeting and entitled to vote must be voted For the proposal.
Abstentions will have the effect of a vote
against the proposal. With respect to
Proposal 3, if none of the three frequency choices receive a majority vote, the
Board will consider the frequency that receives a plurality of the votes cast as
the recommendation of the stockholders.
Are broker non-votes
counted at the meeting?
Brokers and banks have discretionary
authority to vote shares in the absence of instructions on matters the New York
Stock Exchange considers routine, such as the ratification of the appointment
of the auditors. They do not have discretionary authority to vote shares in the
absence of instructions on non-routine matters, such as the election of
directors, say-on-pay, frequency of say-on-pay, approval of the director equity
plan or the stockholder proposals. Broker non-votes will not be counted as
shares entitled to vote on any of the foregoing matters and will have no impact
on the votes outcome.
What is householding and
how does it affect me?
Allstate has adopted the householding
procedure approved by the SEC, which allows us to deliver one set of documents
to a household of stockholders instead of delivering a set to each stockholder
in a household, unless we have been instructed otherwise. This procedure is more
environmentally friendly and cost-effective because it reduces the number of
copies to be printed and mailed. Stockholders who receive proxy materials in
paper form will continue to receive separate proxy cards/voting instruction
forms to vote their shares. Stockholders who receive the Notice of Internet
Availability of Proxy Materials will receive instructions on submitting their
proxy cards/voting instruction form via the Internet.
If you would like to change your
householding election, request that a single copy of the proxy materials be sent
to your address, or request a separate copy of the proxy materials, please
contact our distribution agent, Broadridge Financial Solutions, by calling (866)
540-7095 or by writing to Broadridge Householding Department, 51 Mercedes Way,
Edgewood, NY 11717. We will promptly deliver the proxy materials to you upon
receipt of your request. If you hold your shares in street name, please contact
your bank, broker, or other record holder to request information about
householding.
If you receive more than one proxy
card/voting instruction form, your shares probably are registered in more than
one account or you may hold shares both as a registered stockholder and through
the Allstate 401(k) Savings Plan. You should vote each proxy card/voting
instruction form you receive.
How do I attend the annual
meeting?
If you plan to attend the meeting, you
must be a holder of Allstate shares as of the record date of March 27, 2017. We
encourage you to request an admission ticket in advance. You may request
admission tickets by visiting www.proxyvote.com and following the instructions
provided or calling 1-888-247-6053. You will need your proxy card, voting
instruction form, or notice of Internet availability with you when you request
the ticket.
At the entrance to the meeting, we will
request to see your admission ticket and valid photo identification, such as a
drivers license or passport.
If you do not request an admission ticket
in advance, we will request to see your photo identification at the entrance to
the meeting. We will then confirm your common stock ownership on the record date
by:
● |
For registered
stockholders: verifying your name and
stock ownership against our list of registered
stockholders. |
|
|
● |
For beneficial or street name
stockholders (those holding shares
through a broker, bank or other record holder): asking to review evidence
of your stock ownership as of March 27, 2017, such as your brokerage
statement. You must bring such evidence
with you in order to be admitted to the
meeting. |
If you are acting as a proxy, we will need
to review a valid written legal proxy signed by the owner of the common stock
granting you the required authority to vote the owners shares.
Where can I find the
results of the annual meeting?
Preliminary results will be announced at
the meeting and final results will be reported in a current report on Form 8-K,
which is expected to be filed with the SEC within four business days after the
meeting.
The Allstate
Corporation |
|
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|
Other Information |
Who
will pay the cost of this proxy solicitation?
Allstate pays the cost of this proxy
solicitation. Officers and other employees of Allstate and its subsidiaries may
solicit proxies by mail, personal interview, telephone, facsimile, electronic
means, or via the Internet. None of these individuals will receive special
compensation for soliciting votes, which will be performed in addition to their
regular duties, and some of them may not necessarily solicit proxies. Allstate
also has made arrangements with brokerage firms, banks, record holders, and
other fiduciaries to forward proxy solicitation materials to the beneficial
owners of shares they hold on your behalf. Allstate will reimburse these
intermediaries for reasonable out-of-pocket expenses. Georgeson LLC, 1290 Avenue
of the Americas, 9th Floor, New York, NY 10104 has been retained to assist in
the solicitation of proxies for a fee of $16,500 plus expenses.
How do
I vote if I hold shares through the 401(k) Savings Plan?
If you hold Allstate common shares through
the Allstate 401(k) Savings Plan, your proxy card/ voting instruction form for
those shares will instruct the plan trustee how to vote those shares. If you
received your annual meeting materials electronically, and you hold Allstate
common shares both through the plan and also directly as a registered
stockholder, the voting instructions you provide electronically will be applied
to both your plan shares and your registered shares. If you return a signed
proxy card/voting instruction form or vote by telephone or the Internet on a
timely basis, the trustee will follow your voting instructions for all Allstate
common shares allocated to your plan account unless that would be inconsistent
with the trustees duties.
If your voting instructions are not
received on a timely basis, the shares allocated to your plan account will be
considered unvoted. If you return a signed proxy card/voting instruction form
but do not indicate how your shares should be voted on a given matter, the
shares represented by your proxy card/ voting instruction form will be voted as
the Board of Directors recommends. The trustee
will vote all unvoted shares and all unallocated shares held by the plan as
follows:
● |
If the trustee receives instructions
(through voting instruction forms or through telephonic or Internet
instruction) on a timely basis for at least 50% of the votable allocated
shares in the plan, then it will vote all unvoted shares and unallocated
shares in the same proportion and in the same manner as the shares for
which timely instructions have been received, unless to do so would be
inconsistent with the trustees duties. |
● |
If the trustee receives instructions
for less than 50% of the votable allocated shares, the trustee will vote
all unvoted and unallocated shares in its sole discretion. However, the
trustee will not use its discretionary authority to vote on adjournment of
the meeting in order to solicit further
proxies. |
Plan votes receive the same high level
of confidentiality as all other votes. You
may not vote the shares allocated to your plan account by voting in person at
the meeting. You must instruct The Northern Trust Company, as trustee for the
plan, how to vote your shares.
By order of the Board,
Susan L.
Lees
Secretary
April 12, 2017
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|
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Appendix A Definitions of Non-GAAP
Measures
Measures that are not based on accounting
principles generally accepted in the United States of America (non-GAAP) are
defined and reconciled to the most directly comparable GAAP measure. We believe
that investors understanding of Allstates performance is enhanced by our
disclosure of the following non-GAAP measures. Our methods for calculating these
measures may differ from those used by other companies and therefore
comparability may be limited.
Operating income (operating profit or operating earnings) is net income
applicable to common shareholders, excluding:
● |
realized capital gains and losses,
after-tax, except for periodic settlements and accruals on non-hedge
derivative instruments, which are reported with realized capital gains and
losses but included in operating income, |
● |
valuation changes on embedded
derivatives that are not hedged,
after-tax, |
● |
amortization of deferred policy
acquisition costs (DAC) and deferred sales inducements (DSI), to the
extent they resulted from the recognition of certain realized capital
gains and losses or valuation changes on embedded derivatives that are not
hedged, after-tax, |
● |
amortization of purchased intangible
assets, after-tax, |
● |
gain (loss) on disposition of
operations, after-tax, and |
● |
adjustments for other significant
non-recurring, infrequent or unusual items, when (a) the nature of the
charge or gain is such that it is reasonably unlikely to recur within two
years, or (b) there has been no similar charge or gain within the prior
two years. |
Net income applicable to common
shareholders is the GAAP measure that is most directly comparable to operating
income.
We use operating income as an important
measure to evaluate our results of operations. We believe that the measure
provides investors with a valuable measure of the companys ongoing performance
because it reveals trends in our insurance and financial services business that
may be obscured by the net effect of realized capital gains and losses,
valuation changes on embedded derivatives that are not hedged, amortization of
purchased intangible assets, gain (loss) on disposition of operations and
adjustments for other significant non-recurring, infrequent or unusual
items.
Realized capital gains and losses,
valuation changes on embedded derivatives that are not hedged and gain (loss) on
disposition of operations may vary significantly between periods and are
generally driven by business decisions and external economic
developments
such as capital market conditions, the
timing of which is unrelated to the insurance underwriting process. Consistent
with our intent to protect results or earn additional income, operating income
includes periodic settlements and accruals on certain derivative instruments
that are reported in realized capital gains and losses because they do not
qualify for hedge accounting or are not designated as hedges for accounting
purposes. These instruments are used for economic hedges and to replicate fixed
income securities, and by including them in operating income, we are
appropriately reflecting their trends in our performance and in a manner
consistent with the economically hedged investments, product attributes (e.g.
net investment income and interest credited to contractholder funds) or
replicated investments.
Amortization of purchased intangible
assets is excluded because it relates to the acquisition purchase price and is
not indicative of our underlying insurance business results or
trends.
Non-recurring items are excluded because,
by their nature, they are not indicative of our business or economic
trends.
Accordingly, operating income excludes the
effect of items that tend to be highly variable from period to period and
highlights the results from ongoing operations and the underlying profitability
of our business. A byproduct of excluding these items to determine operating
income is the transparency and understanding of their significance to net income
variability and profitability while recognizing these or similar items may recur
in subsequent periods.
Operating income is used by management
along with the other components of net income applicable to common shareholders
to assess our performance. We use adjusted measures of operating income in
incentive compensation. Therefore, we believe it is useful for investors to
evaluate net income applicable to common shareholders, operating income and
their components separately and in the aggregate when reviewing and evaluating
our performance. We note that investors, financial analysts, financial and
business media organizations and rating agencies utilize operating income
results in their evaluation of our and our industrys financial performance and
in their investment decisions, recommendations and communications as it
represents a reliable, representative and consistent measurement of the industry
and the company and managements performance.
We note that the price to earnings
multiple commonly used by insurance investors as a forward-looking valuation
technique uses operating income as the denominator. Operating income should not
be considered a substitute for net income applicable to common shareholders and
does not reflect the overall profitability of our business.
The Allstate
Corporation |
|
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2017 Proxy Statement |
|
Other Information |
The following table reconciles
consolidated net income applicable to common shareholders and operating income
for the years ended December 31. Taxes on adjustments to reconcile net income
applicable to common shareholders and operating income generally use a 35%
effective tax rate and are reported net with the reconciling adjustment. If the
effective tax rate is other than 35%, this is specified in the
disclosure.
|
|
|
|
|
|
|
|
|
|
|
|
Per diluted common share |
($ in millions, except per share data) |
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
2012 |
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
2012 |
Net income applicable
to common shareholders |
|
$1,761 |
|
$2,055 |
|
$2,746 |
|
$2,263 |
|
$2,306 |
|
$4.67 |
|
$5.05 |
|
$6.27 |
|
$4.81 |
|
$4.68 |
Realized capital gains and losses, after-tax |
|
56 |
|
(19) |
|
(451) |
|
(385) |
|
(216) |
|
0.15 |
|
(0.05) |
|
(1.03) |
|
(0.82) |
|
(0.44) |
Valuation changes on embedded derivatives that are not
hedged, after-tax |
|
2 |
|
1 |
|
15 |
|
16 |
|
(82) |
|
|
|
|
|
0.03 |
|
0.03 |
|
(0.17) |
DAC
and DSI amortization relating to realized capital gains and
losses and valuation changes on embedded derivatives that are
not hedged, after-tax |
|
4 |
|
3 |
|
3 |
|
5 |
|
42 |
|
0.01 |
|
|
|
0.01 |
|
0.01 |
|
0.09 |
DAC
and DSI unlocking relating to realized capital gains and
losses, after-tax |
|
|
|
|
|
|
|
(7) |
|
(4) |
|
|
|
|
|
|
|
(0.01) |
|
(0.01) |
Reclassification of periodic settlements and accruals
on non-hedge derivative instruments, after-tax |
|
(3) |
|
(2) |
|
(7) |
|
7 |
|
33 |
|
(0.01) |
|
|
|
(0.02) |
|
0.01 |
|
0.07 |
Amortization of purchased intangible assets,
after-tax |
|
21 |
|
32 |
|
45 |
|
55 |
|
81 |
|
0.06 |
|
0.08 |
|
0.10 |
|
0.12 |
|
0.16 |
(Gain) loss on disposition of operations,
after-tax |
|
(3) |
|
(2) |
|
16 |
|
515 |
|
(12) |
|
(0.01) |
|
|
|
0.04 |
|
1.10 |
|
(0.02) |
Loss on extinguishment of debt, after-tax |
|
|
|
|
|
|
|
319 |
|
|
|
|
|
|
|
|
|
0.68 |
|
|
Postretirement
benefits curtailment gain, after-tax |
|
|
|
|
|
|
|
(118) |
|
|
|
|
|
|
|
|
|
(0.25) |
|
|
Change in accounting for investments in qualified
affordable housing projects, after-tax (all tax) |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
0.11 |
|
|
|
|
|
|
Operating income |
|
$1,838 |
|
$2,113 |
|
$2,367 |
|
$2,670 |
|
$2,148 |
|
$4.87 |
|
$5.19 |
|
$5.40 |
|
$5.68 |
|
$4.36 |
Combined ratio excluding the effect
of catastrophes, prior year reserve reestimates and amortization of purchased
intangible assets (underlying combined ratio) is a non-GAAP ratio, which is computed as the difference between four
GAAP operating ratios: the combined ratio, the effect of catastrophes on the
combined ratio, the effect of prior year non-catastrophe reserve reestimates on
the combined ratio, and the effect of amortization of purchased intangible
assets on the combined ratio. We believe that this ratio is useful to investors
and it is used by management to reveal the trends in our Property-Liability
business that may be obscured by catastrophe losses, prior year reserve
reestimates and amortization of purchased intangible assets. Catastrophe losses
cause our loss trends to vary significantly between periods as a result of their
incidence of occurrence and
magnitude, and can have a significant
impact on the combined ratio. Prior year reserve reestimates are caused by
unexpected loss development on historical reserves. Amortization of purchased
intangible assets relates to the acquisition purchase price and is not
indicative of our underlying insurance business results or trends. We believe it
is useful for investors to evaluate these components separately and in the
aggregate when reviewing our underwriting performance. We also provide it to
facilitate a comparison to our outlook on the underlying combined ratio. The
most directly comparable GAAP measure is the combined ratio. The underlying
combined ratio should not be considered a substitute for the combined ratio and
does not reflect the overall underwriting profitability of our business.
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|
2017 Proxy Statement |
The following table reconciles the
Property-Liability combined ratio to the Property-Liability underlying combined
ratio for the years ended December 31.
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Combined ratio |
|
96.1 |
|
|
94.9 |
|
|
93.9 |
|
|
92.0 |
|
|
95.5 |
|
Effect of catastrophe losses |
|
(8.2 |
) |
|
(5.7 |
) |
|
(6.9 |
) |
|
(4.5 |
) |
|
(8.8 |
) |
Effect of prior year non-catastrophe
reserve reestimates |
|
0.1 |
|
|
(0.3 |
) |
|
0.4 |
|
|
0.1 |
|
|
1.0 |
|
Effect of amortization of purchased intangible
assets |
|
(0.1 |
) |
|
(0.2 |
) |
|
(0.2 |
) |
|
(0.3 |
) |
|
(0.5 |
) |
Underlying combined ratio |
|
87.9 |
|
|
88.7 |
|
|
87.2 |
|
|
87.3 |
|
|
87.2 |
|
|
Effect of prior year catastrophe reserve
reestimates |
|
|
|
|
|
|
|
0.1 |
|
|
(0.3 |
) |
|
(1.5 |
) |
Underwriting margin is calculated as 100%
minus the combined ratio.
Operating income return on common
shareholders equity is a ratio that uses a
non-GAAP measure. It is calculated by dividing the rolling 12-month operating
income by the average of common shareholders equity at the beginning and at the
end of the 12-months, after excluding the effect of unrealized net capital gains
and losses. Return on common shareholders equity is the most directly
comparable GAAP measure. We use operating income as the numerator for the same
reasons we use operating income, as discussed above. We use average common
shareholders equity excluding the effect of unrealized net capital gains and
losses for the denominator as a representation of common shareholders equity
primarily attributable to the companys earned and realized business operations
because it eliminates the effect of items that are unrealized and vary
significantly between periods due to external economic developments such as
capital market conditions like changes in equity prices and interest rates, the
amount and timing of which are unrelated to the insurance underwriting process.
We use it to supplement our evaluation of net income applicable to common
shareholders and return on common shareholders equity because it excludes the
effect of items that tend to be highly variable from period to period. We
believe that this measure is useful to investors and that it provides a valuable
tool for investors when considered along with return on common shareholders
equity because it eliminates the after-tax effects of realized and unrealized
net capital gains and losses that can fluctuate significantly from period to
period
and that are driven by economic
developments, the magnitude and timing of which are generally not influenced by
management. In addition, it eliminates non-recurring items that are not
indicative of our ongoing business or economic trends. A byproduct of excluding
the items noted above to determine operating income return on common
shareholders equity from return on common shareholders equity is the
transparency and understanding of their significance to return on common
shareholders equity variability and profitability while recognizing these or
similar items may recur in subsequent periods. We use adjusted measures of
operating income return on common shareholders equity in incentive
compensation. Therefore, we believe it is useful for investors to have operating
income return on common shareholders equity and return on common shareholders
equity when evaluating our performance. We note that investors, financial
analysts, financial and business media organizations and rating agencies utilize
operating income return on common shareholders equity results in their
evaluation of our and our industrys financial performance and in their
investment decisions, recommendations and communications as it represents a
reliable, representative and consistent measurement of the industry and the
company and managements utilization of capital. Operating income return on
common shareholders equity should not be considered a substitute for return on
common shareholders equity and does not reflect the overall profitability of
our business.
The Allstate
Corporation |
|
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|
Other Information |
The following tables reconcile return on
common shareholders equity and operating income return on common shareholders
equity for the years ended December 31.
($ in millions) |
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
2012 |
Return on common shareholders equity |
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
Net income applicable to common
shareholders |
|
$1,761 |
|
$2,055 |
|
$2,746 |
|
$2,263 |
|
$2,306 |
Denominator: |
|
|
|
|
|
|
|
|
|
|
Beginning common shareholders
equity(1) |
|
$18,279 |
|
$20,558 |
|
$20,700 |
|
$20,580 |
|
$18,298 |
Ending common shareholders
equity(1) |
|
18,827 |
|
18,279 |
|
20,558 |
|
20,700 |
|
20,580 |
Average common shareholders equity |
|
$18,553 |
|
$19,419 |
|
$20,629 |
|
$20,640 |
|
$19,439 |
Return on common shareholders
equity |
|
9.5% |
|
10.6% |
|
13.3% |
|
11.0% |
|
11.9% |
|
Operating income return on common shareholders
equity |
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$1,838 |
|
$2,113 |
|
$2,367 |
|
$2,670 |
|
$2,148 |
Denominator: |
|
|
|
|
|
|
|
|
|
|
Beginning common shareholders
equity |
|
$18,279 |
|
$20,558 |
|
$20,700 |
|
$20,580 |
|
$18,298 |
Unrealized net capital gains
and losses |
|
620 |
|
1,926 |
|
1,646 |
|
2,834 |
|
1,400 |
Adjusted beginning common
shareholders equity |
|
17,659 |
|
18,632 |
|
19,054 |
|
17,746 |
|
16,898 |
Ending common shareholders
equity |
|
18,827 |
|
18,279 |
|
20,558 |
|
20,700 |
|
20,580 |
Unrealized net capital gains
and losses |
|
1,053 |
|
620 |
|
1,926 |
|
1,646 |
|
2,834 |
Adjusted ending common
shareholders equity |
|
17,774 |
|
17,659 |
|
18,632 |
|
19,054 |
|
17,746 |
Average adjusted common shareholders equity |
|
$17,717 |
|
$18,146 |
|
$18,843 |
|
$18,400 |
|
$17,322 |
Operating income return on
common shareholders equity |
|
10.4% |
|
11.6% |
|
12.6% |
|
14.5% |
|
12.4% |
(1) |
|
Excludes equity related to
preferred stock of $1,746 million, $1,746 million, $1,746 million and $780
million as of December 31, 2016, 2015, 2014 and 2013,
respectively. |
92 |
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Other Information |
|
2017 Proxy Statement |
Appendix B Categorical Standards of
Independence
In accordance with the Director
Independence Standards, the Board has determined that the nature of the
following relationships with the corporation do not create a conflict of
interest that would impair a directors independence.
1. |
An Allstate directors relationship
arising from (i) only such directors position as a director of another
corporation or organization; (ii) only such directors direct or indirect
ownership of a 5% or less equity interest in another corporation or
organization (other than a partnership); (iii) both such position and such
ownership; or (iv) such directors position only as a limited partner in a
partnership in which he or she has an interest of 5% or
less. |
2. |
An Allstate directors relationship
arising from an interest of the director, or any entity in which the
director is an employee, director, partner, stockholder or officer, in or
under any standard-form insurance policy or other financial product
offered by the Allstate Group in the ordinary course of
business. |
3. |
An Allstate directors relationship
with another company that participates in a transaction with the Allstate
Group (i) where the rates or charges involved are determined by
competitive bid or (ii) where the transaction involves the rendering of
services as a common or contract |
|
carrier (including any airline) or
public utility at rates or charges fixed in conformity with law or
governmental authority. |
4. |
An Allstate directors relationship
with another company that has made payments to, or received payments from,
the Allstate Group for property or services in an amount which, in the
last fiscal year, does not exceed the greater of $1 million or 2% of such
other companys consolidated gross revenues for such
year. |
5. |
An Allstate directors position as
an executive officer of a tax exempt organization to which the aggregate
amount of discretionary contributions (other than employee matching
contributions) made by the Allstate Group and The Allstate Foundation in
any of the last three fiscal years of the tax exempt organization were
equal to or less than the greater of $1 million or 2% of such
organizations consolidated gross revenues for such
year. |
6. |
An Allstate directors relationship
with another company (i) in which the Allstate Group makes investments or
(ii) which invests in securities issued by the Allstate Group or
securities backed by any product issued by the Allstate Group, all in the
ordinary course of such entitys investment business and on terms and
under circumstances similar to those available to or from entities
unaffiliated with such director. |
Appendix C Executive Officers
The following table lists the names and
titles of our executive officers as of March 1, 2017. AIC refers to Allstate
Insurance Company.
Name |
|
Principal Positions and Offices
Held |
Thomas J. Wilson |
|
Chair of the Board and Chief Executive Officer of The
Allstate Corporation and of AIC. |
Matthew E. Winter |
|
President of The Allstate Corporation and of
AIC. |
Don Civgin |
|
President, Emerging Businesses of AIC. |
John Dugenske |
|
Executive Vice President and Chief Investment Officer of
AIC. |
Mary Jane Fortin |
|
President, Allstate Financial of AIC. |
Sanjay Gupta |
|
Executive Vice President, Marketing, Innovation and
Corporate Relations of AIC. |
Suren Gupta |
|
Executive Vice President, Enterprise Technology and
Strategic Ventures of AIC. |
Harriet K. Harty |
|
Executive Vice President, Human Resources of
AIC. |
Susan L. Lees |
|
Executive Vice President, General Counsel, and Secretary
of The Allstate Corporation and of AIC (Chief Legal Officer). |
Samuel H. Pilch |
|
Senior Group Vice President and Controller of The
Allstate Corporation and of AIC. |
Steven E. Shebik |
|
Executive Vice President and Chief Financial Officer of
The Allstate Corporation and of AIC. |
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Appendix D The Allstate Corporation 2017 Equity Compensation
Plan for Non-Employee Directors
ARTICLE I. ESTABLISHMENT, PURPOSE AND
DURATION
Section 1.1. Establishment of the
Plan. The Allstate Corporation, a Delaware corporation (hereinafter referred
to as the Company), hereby establishes an equity compensation plan for
non-employee directors, to be known as The Allstate Corporation 2017 Equity
Compensation Plan for Non-Employee Directors (hereinafter referred to as the
Plan), as set forth in this document. The Plan permits the grant of Stock
Options, Election Shares, Stock, Restricted Stock, Restricted Stock Units, and
any other type of award permitted under Article IX to Non-Employee Directors of
the Company.
Section 1.2. Purpose of the Plan.
The purpose of the Plan is to appropriately compensate the non-employee members
of the Companys Board of Directors (the Board).
Section 1.3. Duration of the Plan.
The Plan shall become effective when approved by the stockholders at the 2017
Annual Meeting of Stockholders on May 25, 2017 (the Effective Date). The Plan
shall continue in effect until the earlier of its termination by the Board or
the date on which all of the shares of Stock available for issuance under the
Plan have been issued and all restrictions on such shares under the terms of the
Plan and the agreements evidencing Awards granted under the Plan have lapsed.
However, no Awards shall be granted after the tenth anniversary of the Effective
Date.
ARTICLE II.
DEFINITIONS
Whenever used in the Plan, the following
terms shall have the meanings set forth below and, when such meaning is
intended, the initial letter of the word is capitalized:
Section 2.1. Award means,
individually or collectively, a grant under the Plan of Stock Options, Election
Shares, Stock, Restricted Stock, and Restricted Stock Units or any other type of
award permitted under Article IX.
Section 2.2. Award Agreement
means an agreement setting forth the terms and provisions applicable to an Award
granted to a Participant under the Plan.
Section 2.3. Board shall have the
meaning set forth in Section 1.2 herein.
Section 2.4. Change of Control
means, except as otherwise provided at the end of this Section, the occurrence
of any one or more of the following:
(a) |
(Voting Power) any Person or
group (as such term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), other than a Subsidiary or
any employee benefit plan (or any related trust) of the Company or any of
its Subsidiaries, acquires or has acquired during the 12-month period
ending on the date of the most recent acquisition by such Person or
Persons, ownership of stock of the Company possessing 30% or more of the
combined voting power of all Voting Securities of the Company (such a
Person or group that is not a Similarly Owned Company (as defined below),
a More than 30% Owner), except that no Change of Control shall be
deemed to have occurred solely by reason of such ownership by a
corporation with respect to which both more than
70% |
|
of the common stock of such
corporation and Voting Securities representing more than 70% of the
combined voting power of the Voting Securities of such corporation are
then owned, directly or indirectly, by the Persons who were the direct or
indirect owners of the common stock and Voting Securities of the Company
immediately before such acquisition in substantially the same proportions
as their ownership, immediately before such acquisition, of the common
stock and Voting Securities of the Company, as the case may be (a
Similarly Owned Company); or |
(b) |
(Majority Ownership) any Person
or group (as such term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), other than a Subsidiary or any employee benefit plan (or
any related trust) of the Company or any of its Subsidiaries, acquires
ownership of more than 50% of the voting power of all Voting Securities of
the Company or of the total fair market value of the stock of the Company
(such a Person or group that is not a Similarly Owned Company, a
Majority Owner), except that no Change of Control shall be deemed
to have occurred solely by reason of such ownership by a Similarly Owned
Company; or |
(c) |
(Board Composition) a majority of
the members of the Board is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of
the members of the Board before the date of the appointment or election
(Board Turnover); or |
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(d) |
(Reorganization) the consummation
of a merger, reorganization, consolidation, or similar transaction, or of
a plan or agreement for the sale or other disposition of all or
substantially all of the consolidated assets of the Company, or a plan of
liquidation of the Company (any of the foregoing, a Reorganization
Transaction) that, does not qualify as an Exempt Reorganization
Transaction. |
Notwithstanding anything contained herein
to the contrary: (i) no transaction or event shall constitute a Change of
Control for purposes of this Plan unless the transaction or event constituting
the Change of Control also constitutes a change in the ownership of a
corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)), a
change in effective control of a corporation (as defined in Treasury Regulation
Section 1.409A-3(i)(5)(vi)) or a change in the ownership of a substantial
portion of the assets of a corporation (as defined in Treasury Regulation
Section 1.409A-3(i)(5)(vii)); and (ii) no sale or disposition of one or more
Subsidiaries (Sale Subsidiary) or the assets thereof shall constitute a Change
of Control for purposes of this Plan if the investments in and advances by the
Company and its Subsidiaries (other than the Sale Subsidiaries) to such Sale
Subsidiary as of immediately prior to the sale or disposition determined in
accordance with Generally Accepted Accounting Principles (GAAP) (but after
intercompany eliminations and net of the effect of intercompany reinsurance) are
less than 51% of the Consolidated Total Shareholders Equity of the Company as
of immediately prior to the sale or disposition. Consolidated Total
Shareholders Equity means, at any date, the total shareholders equity of the
Company and its Subsidiaries at such date, as reported in the consolidated
financial statements prepared in accordance with GAAP.
Section 2.5. Code means the
Internal Revenue Code of 1986, as amended from time to time, or any successor
code thereto.
Section 2.6. Committee means the
Companys Nominating and Governance Committee or such other committee as the
Board shall select.
Section 2.7. Company shall have
the meaning set forth in Section 1.1 herein, or any successor to the Company as
provided in Article XI herein.
Section 2.8. Disability means an
impairment which renders a Participant disabled within the meaning of Code
Section 409A(a)(2)(C).
Section 2.9. Dividend Equivalent
means, with respect to Stock subject to an Award, a right to be paid an amount
equal to cash dividends declared on an equal number of outstanding shares of
Stock.
Section 2.10. Effective Date
shall have the meaning set forth in Section 1.3 herein.
Section 2.11. Election Shares
means any shares of Stock issued to a Non-Employee Director pursuant to the
election of such person to receive such shares of Stock in lieu of cash
compensation made in accordance with Section 8.2 herein.
Section 2.12. Exchange Act means
the Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto.
Section 2.13. Exempt Reorganization
Transaction means a Reorganization Transaction (as that term is defined in
Section 2.4(d)) that fails to result in (a) any Person or group (as such term is
defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)) becoming a More
than 30% Owner (as that term is defined in Section 2.4(a)) or a Majority Owner
(as that term is defined in Section 2.4(b)), (b) Board Turnover (as that term is
defined in Section 2.4(c)), or (c) a sale or disposition to any Person or group
(as such term is defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)) of
the assets of the Company that have a total Gross Fair Market Value equal to at
least forty percent (40%) of the total Gross Fair Market Value of all of the
assets of the Company immediately before such transaction.
Section 2.14. Exercise Period
means the period during which a Stock Option is exercisable, as set forth in the
related Award Agreement.
Section 2.15. Fair Market Value
means the price at which a share of the Stock was last sold in the principal
United States market for the Stock as of the date for which fair market value is
being determined. Notwithstanding anything herein to the contrary, to the extent
necessary to comply with or be exempt from Section 409A, Fair Market Value shall
be determined in accordance with Treasury Regulation Section 1.409A-1(b)(5)(iv).
Section 2.16. Family Member means
any spouse, domestic partner, child, stepchild, sibling, parent, stepparent,
grandparent, or grandchild, including adoptive relationships; a trust in which
these persons have more than fifty (50) percent of the beneficial interest; a
foundation in which these persons (or the Non-Employee Director) control the
management of assets; and any other entity in which these persons (or the
Non-Employee Director) own more than fifty (50) percent of the voting
interests.
Section 2.17. Gross Fair Market
Value means the value of the assets of the Company, or the value of the
assets being disposed of, determined without regard to any liabilities
associated with such assets.
Section 2.18. Non-Employee
Director means each member of the Board who is not an officer or employee
of the Company or any of its Subsidiaries.
Section 2.19. Option Exercise
Price means the price at which a share of Stock may be purchased by a
Participant pursuant to a Stock Option, as determined by the Committee and set
forth in the applicable Award Agreement.
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Section 2.20. Participant means a
Non-Employee Director who has an outstanding Award granted under the
Plan.
Section 2.21. Period of
Restriction means the period during which the transfer of Restricted Stock
or Restricted Stock Units is limited in some way, as provided in Article VII
herein.
Section 2.22. Person means any
individual, sole proprietorship, partnership, joint venture, limited liability
company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity, or government instrumentality,
division, agency, body, or department.
Section 2.23. Plan shall have the
meaning set forth in Section 1.1 herein.
Section 2.24. Restricted Stock
means an Award of shares of Stock granted to a Participant pursuant to Article
VII herein. Delivery of Restricted Stock shall be effected by either (i) a stock
certificate or certificates or (ii) book-entry form, in an appropriate number of
shares of Stock based upon the number of shares of Restricted Stock
issued.
Section 2.25. Restricted Stock
Unit means an Award granted to a Participant as provided in Article VII
herein.
Section 2.26. Section 409A shall
have the meaning set forth in Section 12.5 herein and the Plan and any Awards,
as appropriate, shall be administered in accordance with Section
12.5.
Section 2.27. Securities Act
means the Securities Act of 1933, as amended.
Section 2.28. Stock means the
common stock, $.01 par value, of the Company.
Section 2.29. Stock Option means
an option to purchase shares of Stock granted under Article VI
herein.
Section 2.30. Subsidiary means
any corporation, business trust, limited liability company, or partnership with
respect to which the Company owns, directly or indirectly, (a) more than 50% of
the equity interests or partnership interests or (b) Voting Securities
representing more than 50% of the aggregate Voting Power of the then-outstanding
Voting Securities.
Section 2.31. Voting Power for
purposes of Section 2.30 means the combined voting power of the then-outstanding
Voting Securities entitled to vote generally in the election of
directors.
Section 2.32. Voting Securities
of a corporation means securities of such corporation that are entitled to vote
generally in the election of directors of such corporation.
ARTICLE III.
ADMINISTRATION
Section 3.1. The Committee. The
Plan shall be administered by the Committee.
Section 3.2. Authority of the
Committee. The Committee shall have full power except as limited by law, the
articles of incorporation or the bylaws of the Company, subject to such other
restricting limitations or directions as may be imposed by the Board and subject
to the provisions herein, to recommend to the full Board the size and types of
Awards and the terms and conditions of such Awards, in a manner consistent with
the Plan; to construe and interpret the Plan and any agreement or instrument
entered into under the Plan; to establish, amend or waive rules and regulations
for the Plans administration; to recommend the amendment of the terms and
conditions of any outstanding Award; and to authorize any action of or make any
determination by the Company as the Committee shall deem necessary or advisable
for carrying out the purposes of the Plan; provided, however, that the terms and
conditions of any outstanding Award shall not be amended so as to adversely
affect in any material way such Award without the written consent of the
Participant holding such Award (or if the Participant is not then living, the
Participants personal representative or estate), unless such amendment is
required by applicable law. Further, the Committee shall interpret and make all
other determinations which
may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may delegate its
authorities as identified hereunder.
Section 3.3. Delivery of Stock by
Company; Restrictions on Stock.
Notwithstanding any other provision of the Plan, the Company shall have no
liability to deliver any shares of Stock or benefits under the Plan unless such
delivery would comply with all applicable laws (including, without limitation,
the Code, the Securities Act and the Exchange Act) and applicable requirements
of any securities exchange or similar entity. The Committee may recommend that
the Board impose such restrictions on any shares of Stock acquired under the
Plan as it may deem advisable, including, without limitation, restrictions to
comply with applicable Federal securities laws, with the requirements of any
stock exchange or market upon which such Stock is then listed and/or traded, and
with any blue sky or state securities laws applicable to such Stock.
Section 3.4. Approval. The
Committee or the full Board shall approve all Awards made under the Plan and all
elections made by Participants, prior to their effective date, to the extent
necessary to comply with Rule 16b-3 under the Exchange Act.
Section 3.5. Decisions Binding. All
determinations and decisions made by the Committee pursuant to the provisions of
the Plan and all related orders or resolutions of the Board shall be final,
conclusive
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and binding on all persons, including the
Company, its stockholders, Participants and their estates. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Award.
Section 3.6. Costs. The Company
shall pay all costs of administration of the Plan.
ARTICLE IV. STOCK SUBJECT TO THE
PLAN
Section 4.1. Number of Shares.
Subject to Section 4.3 herein, the maximum number of shares of Stock that may be
issued pursuant to Awards under the Plan shall be 400,000. Shares of Stock
underlying lapsed or forfeited Awards of Restricted Stock shall not be treated
as having been issued pursuant to an Award under the Plan. Shares of Stock that
are potentially deliverable under an Award that expires or is cancelled,
forfeited, settled in cash or, in the case of an Award that is not a Stock
Option, otherwise settled without delivery of shares of Stock shall not be
treated as having been issued under the Plan. Shares of Stock that are withheld
to satisfy the Option Exercise Price related to a Stock Option or other Award
shall be deemed to be shares of Stock issued under the Plan. Shares of Stock
issued pursuant to the Plan may be (i) authorized but unissued shares of Stock
or (ii) treasury stock.
Section 4.2. Award Limitations.
Subject to Section 4.1 above, the aggregate grant date fair value of any Awards
that are valued in whole or in part by reference to, or otherwise based on
Stock, other than Election Shares that may be granted in any calendar year to
any Participant shall not exceed $800,000.
Section 4.3. Adjustments in Authorized
Stock and Awards. In the event of any equity restructuring (within the
meaning of Financial Accounting Standards Board Accounting Standards
Codification (ASC) Topic 718) that causes the per share value of shares of Stock
to change, such as a stock dividend, stock split, spin off, rights offering, or
recapitalization through a large, nonrecurring cash dividend, the Committee
shall cause there to be made an equitable adjustment to the number and kind of
shares that may be issued under the Plan and to the number and kind of shares or
units subject to and the exercise price (if applicable) of any then outstanding
Awards of Stock Options, Restricted Stock, Restricted Stock Units or any other
Awards related to shares of Stock (to the extent such other Awards would not
otherwise automatically adjust in
the equity restructuring). In the event of
any other change in corporate capitalization, such as a merger, consolidation,
any reorganization (whether or not such reorganization comes within the
definition of such term in Section 368 of the Code) or any partial or complete
liquidation of the Company, such equitable adjustments described in the
foregoing sentence shall be made as may be determined to be appropriate and
equitable by the Board upon recommendation of the Committee to prevent dilution
or enlargement of rights. In either case, any such adjustment shall be
conclusive and binding for all purposes of the Plan. Unless otherwise determined
by the Board upon recommendation of the Committee, the number of shares of Stock
subject to an Award shall always be a whole number. In no event shall an
outstanding Stock Option be amended for the sole purpose of reducing the Option
Exercise Price thereof.
Section 4.4. No Repricing or Reload
Options. Notwithstanding any provision of the Plan to the contrary, except
in connection with a corporate transaction involving the Company (including,
without limitation, a Change of Control or the transactions or events described
in Section 4.3), the Committee shall not, without the approval of the Companys
stockholders, (i) reduce the Option Exercise Price of an Option after it is
granted, (ii) cancel outstanding Options in exchange for other Awards or Options
with an Option Exercise Price that is less than the Option Exercise Price of the
original Options, (iii) cancel an outstanding Option when the Option Exercise
Price, exceeds the Fair Market Value of a share of the Stock in exchange for
cash or other securities, or (iv) take any other action with respect to an
Option that would be treated as a repricing under the rules and regulations of
the New York Stock Exchange.
No Stock Option may be granted to any
Participant on account of the use of Stock by the Participant to exercise a
prior Stock Option.
ARTICLE V. ELIGIBILITY AND
PARTICIPATION
Section 5.1. Eligibility and
Participation. Subject to the provisions of the Plan, the Committee may,
from time to time, recommend to the full Board the
Non-Employee Directors to whom Awards
shall be granted and shall determine the nature and amount of each
Award.
ARTICLE VI. STOCK
OPTIONS
Section 6.1. Grant of Stock
Options. Subject to the terms and conditions of the Plan, Stock Options may
be granted to a Non-Employee Director at any time and from time to time, as
shall be determined by the Board upon recommendation of the Committee. The
Committee shall recommend to the full Board
the number of shares of Stock subject to
Stock Options granted to each Participant (subject to Article IV herein) and,
consistent with the provisions of the Plan, terms and conditions pertaining to
such Stock Options. No Dividend Equivalents shall be provided with respect to
Options.
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Section 6.2. Stock Option Award
Agreement. Each Stock Option grant shall be evidenced by an Award Agreement
that shall specify the Option Exercise Price, the term of the Stock Option
(which shall not be greater than ten years), the number of shares of Stock to
which the Stock Option pertains, the Exercise Period, vesting and such other
provisions as the Board shall determine upon recommendation of the Committee.
The Option Exercise Price shall not be less than 100% of the Fair Market Value
of the Stock on the date of grant.
Section 6.3. Exercise of and Payment
for Stock Options. Stock Options granted under the Plan shall be exercisable
at such times and shall be subject to such restrictions and conditions as the
Board shall in each instance approve upon recommendation of the Committee and
set forth in the Award Agreement. Without limiting the generality of the
foregoing, a Participant may exercise a Stock Option at any time during the
Exercise Period. Stock Options shall be exercised by the delivery of a written
notice (or other method acceptable to the Company) of exercise to the Company or
its designee, setting forth the number of shares of Stock with respect to which
the Stock Option is to be exercised, accompanied by provision for full payment
of the Stock. The Option Exercise Price shall be payable: (i) in cash or its
equivalent, (ii) by tendering (by actual delivery of shares or by attestation)
previously acquired shares of Stock (owned for at least six months) having an
aggregate Fair Market Value at the time of exercise of not less than the total
Option Exercise Price, (iii) by broker-assisted cashless exercise, (iv) by share
withholding or (v) by a combination of (i), (ii), (iii) and/or (iv). As soon as
practicable after receipt of a written notification (or other method acceptable
to the Company) of exercise of a Stock Option and provisions for full payment
therefor, the Company shall (a) cause to be issued in the Participants name or
the name of the Participants designee, in book entry form, an appropriate
number of shares of Stock based upon the number of shares of Stock purchased
under the Stock Option, or (b) deliver to the Participant, in the Participants
name or the name of the Participants designee, a stock certificate or
certificates in an appropriate
aggregate amount based upon the number of
shares of Stock purchased under the Stock Option.
Section 6.4. Transferability
of Options. Except as otherwise recommended by the Committee to the full Board
and set forth in the applicable Award Agreement, all Stock Options granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or by such Participants guardian or other legal
representative, and no Stock Option granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution; provided, however, that
the vested portions of Stock Options may be transferred by the Participant
during his lifetime to any Family Member. A transfer of a Stock Option pursuant
hereto may only be effected by the Company at the written request of a
Participant and shall become effective only when recorded in the Companys
record of outstanding Stock Options. In the event a Stock Option is transferred
as contemplated herein, such transferred Stock Option may not be subsequently
transferred by the transferee except by will or the laws of descent and
distribution. Otherwise, a transferred Stock Option shall continue to be
governed by and subject to the terms and limitations of the Plan and the
relevant Award Agreement, and the transferee shall be entitled to the same
rights as the Participant, as if no transfer had taken place. In no event shall
a Stock Option be transferred for consideration.
Section 6.5. Change of Control. In
the event of a Change of Control, the Stock Options may be assumed by the
successor corporation or a parent of such successor corporation or substantially
equivalent Stock Options may be substituted by the successor corporation or a
parent of such successor corporation, and if the successor corporation does not
assume the Stock Options or substitute options, then all outstanding and
unvested Stock Options shall become immediately exercisable and all outstanding
Stock Options shall terminate if not exercised as of the date of the Change of
Control (or other prescribed period of time).
ARTICLE VII. RESTRICTED STOCK AND
RESTRICTED STOCK UNITS
Section 7.1. Grant of Restricted Stock
and Restricted Stock Units. Subject to the terms and conditions of the Plan,
Restricted Stock and/or Restricted Stock Units may be granted to a Non-Employee
Director at any time and from time to time, as shall be determined by the Board
upon recommendation of the Committee. The Committee shall recommend to the full
Board the number of shares of Restricted Stock and/or Restricted Stock Units
granted to each Participant (subject to Article IV herein) and, consistent with
the provisions of the Plan, the terms and conditions pertaining to such
Awards.
(a) |
Dividends, Dividend
Equivalents and Other Distributions.
The Committee shall recommend to the full Board whether and to what extent
any Participant shall be entitled to cash dividends, other than large,
nonrecurring cash dividends, Dividend Equivalents and/or other
distributions paid with respect to Restricted Stock and Restricted Stock
Units, provided that any such right shall be evidenced by an Award
Agreement containing terms and conditions that are consistent with the
provisions of Section 409A and applicable guidance promulgated
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Section 7.2. Restricted
Stock/Restricted Stock Unit Award Agreement. Each grant of Restricted Stock
and/or Restricted Stock Units grant shall be evidenced by an Award Agreement
that shall specify the number of shares of Restricted Stock and/or Restricted
Stock Units granted, the Period or Periods of Restriction, and whether, and the
extent to which, Restricted Stock and/or Restricted Stock Units shall be
forfeitable, and such other provisions as recommended by the
Committee.
Section 7.3. Transferability.
Restricted Stock and Restricted Stock Units granted hereunder may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction recommended by the Committee and
specified in the Award Agreement. During the applicable Period of Restriction,
all rights with respect to the Restricted Stock and Restricted Stock Units
granted to a Participant under the Plan shall be available during his or her
lifetime only to such Participant or his or her legal representative.
Section 7.4. Restricted Stock
Certificates. No book entry representing delivery of Stock to a Participant
shall be made, and no certificates representing Stock shall be delivered to a
Participant, until such time as all restrictions applicable to such shares have
been satisfied.
Section 7.5. Forfeiture
Restriction. Restricted Stock shall become freely transferable and no longer
subject to forfeiture after the last day of the Period of Restriction applicable
thereto. The Board, upon recommendation of the Committee, may
determine whether payment of Restricted
Stock Units shall be in cash equal to the aggregate Fair Market Value of the
Stock subject to the Restricted Stock Units at the close of the applicable
Period of Restriction or shares of Stock (or a combination thereof). Delivery of
Stock shall be effected by either (a) book-entry form, in an appropriate number
of shares of Stock based upon the number of shares of Stock underlying the
Restricted Stock Units, or (b) delivery to the Participant, in the Participants
name or the name of the Participants designee, a stock certificate or
certificates in an appropriate aggregate amount based upon the number of shares
of Stock underlying the Restricted Stock Units.
Section 7.6. Voting Rights. Unless
otherwise recommended by the Committee to the full Board and set forth in the
applicable Award Agreement, during the Period of Restriction, Participants may
exercise full voting rights with respect to the Restricted Stock.
Section 7.7. Change of Control. In
the event of a Change of Control, the Restricted Stock Units may be assumed by
the successor corporation or a parent of such successor corporation or
substantially equivalent Restricted Stock Units may be substituted by the
successor corporation or a parent of such successor corporation, and if the
successor corporation does not assume the Restricted Stock Units or substitute
Restricted Stock Units, then all outstanding Restricted Stock Units shall
immediately be payable in Stock upon consummation of the Change of Control of
Control (or other prescribed period of time).
ARTICLE VIII. ELECTION TO RECEIVE
STOCK IN LIEU OF CASH COMPENSATION
Section 8.1. General. In lieu of
receiving the cash compensation, including annual and committee retainer fees
(collectively, the Annual Retainer Fees), payable for services to be rendered
by a Non-Employee Director for any period for which cash compensation is payable
to Non-Employee Directors pursuant to the policies of the Board, a Non-Employee
Director may make a written irrevocable election to reduce the Annual Retainer
Fees by a specified percentage (which percentage shall be in ten percent
increments) and receive an equivalent value in Election Shares granted in
accordance with this Article VIII.
Section 8.2. Election. The election
shall be made on a form prescribed by the Committee and must be returned to the
Committee or its designee no later than one business day prior to the period for
which the election is to be effective. The election form
shall state the amount of cash
compensation to be received in the form of Election Shares (expressed as a
percentage of the cash compensation otherwise payable in cash). Such election
shall remain in effect until revoked or changed for any subsequent period.
Section 8.3. Issuance of Election
Shares. If a Non-Employee Director elects pursuant to Section 8.2 above to
receive Election Shares in lieu of cash compensation, there shall be issued to
such Director in book entry form on the date cash compensation would otherwise
be payable to the Non-Employee Director, a number of Election Shares equal to
the amount of compensation that would otherwise have been paid divided by the
Fair Market Value of the Election Shares. Cash will be paid to the Non-Employee
Director in lieu of any fractional Election Shares based upon the Fair Market
Value of such fractional Election Share.
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ARTICLE IX. STOCK AND OTHER
AWARDS
Section 9.1. Stock Awards. The
Board, upon recommendation of the Committee, shall have the right to issue Stock
free of any forfeiture or transferability restrictions.
Section 9.2. Other Awards. The
Board, upon recommendation of the Committee, shall have the right to grant other
Awards and determine the manner and timing of payment under or settlement of any
such Awards.
(a) |
Dividends, Dividend
Equivalents and Other Distributions.
The Committee shall recommend to the full Board whether and to what extent
any Participant shall be entitled to cash dividends, other than large,
nonrecurring cash dividends, Dividend Equivalents and/or other
distributions paid with respect to such other Awards, provided that any
such right shall be evidenced by an Award Agreement containing terms and
conditions that are consistent with the provisions of Section 409A and
applicable guidance promulgated
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ARTICLE X. AMENDMENT, MODIFICATION
AND TERMINATION
Section 10.1. The Board may, at any time
and from time to time, alter, amend, suspend or terminate the Plan, in whole or
in part, provided that no amendment shall be made which shall increase
the total number of shares of Stock that may be issued under the Plan,
materially modify the requirements
for participation in the Plan, or
materially increase the benefits accruing to Participants under the Plan, in
each case unless such amendment is approved by the stockholders of the Company.
No amendment that requires shareholder approval shall be made without
shareholder approval.
ARTICLE XI. SUCCESSORS
Section 11.1. All obligations of the
Company under the Plan, with respect to Awards granted hereunder, shall be
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or
otherwise of all or substantially all of the business and/or assets of the
Company.
ARTICLE XII. GENERAL
PROVISIONS
Section 12.1. Gender and Number.
Except where otherwise indicated by the context, any masculine term used herein
also shall include the feminine, the plural shall include the singular and the
singular shall include the plural.
Section 12.2. Severability. In the
event any provision of the Plan shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
Section 12.3. Requirements of Law.
The granting of Awards and the issuance of Stock under the Plan shall be subject
to all applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be
required.
Section 12.4. Governing Law. To the
extent not preempted by Federal law, the Plan, and all agreements hereunder,
shall be construed in accordance with, and governed by, the laws of the State of
Delaware, except with regard to conflicts of law provisions.
Section 12.5. Code Section 409A
Compliance. To the extent applicable, it is intended that this Plan and any
Awards granted hereunder comply with or be exempt from the requirements of
Section 409A of the Code and any related regulations or other guidance
promulgated with respect to such
Section by the U.S. Department of the
Treasury or the Internal Revenue Service (Section 409A), and the Plan and any
Awards granted hereunder shall be interpreted and construed in a manner
consistent with such intent. Notwithstanding any provision of the Plan to the
contrary, in the event that following the Effective Date the Committee
determines that any Award may be subject to Section 409A, the Committee may
adopt such amendments to the Plan and the applicable Award Agreement or adopt
other policies and procedures (including amendments, policies, and procedures
with retroactive effect), or take any other actions, that the Committee
determines are necessary or appropriate to (i) exempt the Award from Section
409A and/or preserve the intended tax treatment of the benefits provided with
respect to the Award, or (ii) comply with the requirements of Section 409A and
thereby avoid the application of any penalty taxes under such Section. In the
event that it is reasonably determined by the Committee that, as a result of
Section 409A, payments in respect of any Award under the Plan may not be made at
the time contemplated by the terms of the Plan or the applicable Award
Agreement, as the case may be, without causing the Participant holding such
Award to be subject to taxation under Section 409A, the Company will make such
payment on the first day that would not result in the Participant incurring any
tax liability under Section 409A. No action or failure by the Committee or the
Company in good faith to act, pursuant to this Section 12.5 shall subject the
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Committee, the Company, or any of the
Companys employees, directors, or representatives to any claim, liability, or
expense, and the Company shall not have any obligation to indemnify or otherwise
protect any Participant from the obligation to pay any taxes pursuant to
Section 409A.
Section 12.6. Rights of Board
Members. Nothing in this Plan shall interfere with or limit in any way the
rights of stockholders of the Company or the Board to elect or remove members of
the Board at any time or confer upon any Participant any right to continue as a
member of the Board.
Section 12.7. No Right to Specific
Assets. Nothing contained in the Plan and no action taken pursuant to the
Plan shall create or be construed to create a trust of any kind or any fiduciary
relationship between the Company and any Participant, the executor,
administrator or other personal representative or designated beneficiary of such
Participant, or any other persons. To the extent that any Participant or his
executor, administrator, or other personal representative, as the case may be,
acquires a right to receive any benefit from the Company pursuant to the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company.
Section 12.8. Rights as a
Stockholder. A Participant shall have no rights as a stockholder with
respect to any Stock until he shall have become the holder of record of such
Stock.
Section 12.9. Deferrals and
Settlements. The Board may require or permit Participants to elect to defer
the issuance of shares of Stock, including Election Shares, or the settlement of
Awards in cash subject to such terms and conditions as it shall determine upon
recommendation of the Committee. It may also provide that deferred settlements
include the payment or crediting of Dividend Equivalents on the deferral
amounts. Any such rules or procedures shall comply with the requirements of
Section 409A, including those with respect to the time when a deferral election
may be made, the period of the deferral, and the events that would result in the
payment of the deferred amount.
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