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PNC FINANCIAL SERVICES GROUP, INC. 8-K Report, Executive Changes (Aug 16, 2016)

Filed August 16, 2016For Securities:PNC

Summary

This 8-K filing from PNC Financial Services Group, Inc. reports on two significant corporate governance changes effective in August 2016. Firstly, the company revised its Change of Control Employment Agreements for executive officers, standardizing terms and notably eliminating excise tax gross-up payments. This move aims to align all executives under a consistent agreement, reduce potential costs associated with change of control events, and clarify severance provisions, including a two-times salary and bonus multiple, capped at 2.99 times total compensation, and adjusted for executives over 65. Secondly, PNC amended its By-Laws to implement a proxy access provision. This new by-law allows eligible shareholders, who collectively hold at least 3% of the voting power for a minimum of three years, to nominate director candidates for inclusion in PNC's proxy materials. This reform enhances shareholder rights and participation in the director election process, subject to specific ownership thresholds, holding periods, and procedural requirements. Both changes reflect a strategic approach to executive compensation and corporate governance.

Key Highlights

  • 1Revised Change of Control Employment Agreements for executive officers standardize terms and eliminate excise tax gross-up payments.
  • 2New severance packages include a two-times base salary and bonus multiple, capped at 2.99 times total compensation.
  • 3Severance multiples for executives aged 65 and older will be reduced to one time.
  • 4Supplemental Executive Retirement Plan benefits will not include additional payments or service credits post-termination.
  • 5PNC adopted a proxy access by-law, allowing eligible shareholders to nominate directors for inclusion in proxy materials.
  • 6Shareholder nominations require a minimum 3% ownership stake held continuously for at least three years.
  • 7The proxy access provision permits nominations of up to 2 directors or 20% of the board, whichever is greater.

Frequently Asked Questions

The primary changes include the elimination of excise tax gross-up payments, a standardized two-times severance pay multiple (reduced to one time for executives aged 65 and older), a cap on severance benefits at 2.99 times the sum of annual base salary and bonus, and no additional payments or service credits for Supplemental Executive Retirement Plan benefits post-termination. These revisions standardize the agreements for all executive officers.

Proxy access is a by-law provision that allows long-term shareholders, under specific conditions, to nominate director candidates and have those nominations included in the company's proxy materials for annual meetings. For PNC, this means shareholders who have continuously owned at least 3% of the voting power for at least three years can nominate up to two directors or 20% of the board (whichever is greater), subject to other eligibility and procedural requirements.

Severance is calculated as a lump sum including: accrued unpaid amounts, two times the executive's annual base salary and bonus, the target bonus for the fiscal year of termination, two years of company matching contributions for savings plans, and two years of group term life insurance premiums. This total is capped at 2.99 times the sum of base salary and bonus, and the multiplier is reduced to one for executives aged 65 or older.

Yes, the revised agreements will not provide any additional payments or service credits following termination of employment under the Corporation’s Supplemental Executive Retirement Plan, which was frozen to new participants in 2007. This aligns the executive compensation structure by limiting future liabilities.