Why is PNC adjusting its executive compensation?

PNC is adjusting executive compensation to comply with the Interim Final Rule on TARP Standards for Compensation and Corporate Governance, issued by the U.S. Department of the Treasury. As a TARP participant, PNC must adhere to these regulations which impose restrictions on executive pay.

How will the stock units be valued and settled?

The stock units will be valued based on the closing price of PNC common stock on the New York Stock Exchange on the payment date. They will include dividend equivalents paid in cash. Settlement will occur in cash on the earlier of March 31, 2011, or the executive's death, at the then-current stock price.

Are all bonuses and equity grants being forfeited?

No. The new rules prohibit bonuses (including equity-based incentive compensation) for senior executive officers and the next 20 most highly compensated employees, with a limited exception for long-term restricted stock. While service-based forfeiture provisions were removed from some existing equity grants, a portion of these grants will still be forfeited as mandated by the TARP regulations.

PNC 8-K: Leadership Changes

Q: What specific changes are being made to executive compensation?

A portion of the base salaries for five key senior executives will be paid in stock units instead of cash. Additionally, certain service-based forfeiture provisions on existing equity grants (restricted stock and stock options) have been removed, although some forfeiture of these grants is still required by TARP rules.

Summary

This 8-K filing from PNC Financial Services Group, Inc. (PNC) on August 21, 2009, details adjustments to executive compensation in response to the U.S. Department of the Treasury's Interim Final Rule on TARP Standards for Compensation. These changes are necessary because PNC is a participant in the TARP Capital Purchase Program. The primary focus of the filing is the modification of compensation for five senior executive officers to comply with new regulations that restrict bonuses and mandate salary adjustments. These adjustments include a shift in a portion of their base salaries to be paid in stock units rather than cash and the elimination of certain service-based forfeiture provisions on existing equity grants, though a portion of these grants will still be forfeited as required by the TARP rules.

Key Highlights

1PNC is adjusting executive compensation to comply with new TARP compensation standards issued by the U.S. Treasury.
2A portion of the base salaries for five senior executives (James E. Rohr, Richard J. Johnson, William S. Demchak, Joseph C. Guyaux, and Timothy G. Shack) will be paid in stock units instead of cash.
3These stock units are issued under the 2009 Incentive Award Plan and will be settled in cash on a future date.
4The company has eliminated service-based forfeiture provisions on certain restricted stock and stock option grants made in February 2009.
5Despite the elimination of some forfeiture provisions, a portion of these equity grants will still be forfeited as required by TARP regulations.
6The salary adjustments and forfeiture modifications are effective starting July 1, 2009, and August 19, 2009, respectively.
7The filing also includes Exhibit 10.63, detailing the 'Form of Agreement Regarding Portion of Salary Payable in Stock Units'.

PNC FINANCIAL SERVICES GROUP, INC. 8-K Report, Executive Changes (Aug 21, 2009)

Summary

Key Highlights

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