8-KLeadership Changes

STATE STREET CORP 8-K Report, Executive Changes (Mar 3, 2010)

Filed March 3, 2010For Securities:STTSTT-PG

Summary

This Form 8-K filing from State Street Corporation (STT) on March 3, 2010, details the incentive compensation awarded to its executive officers for the 2009 fiscal year. Notably, several key executives, including Ronald E. Logue and Joseph L. Hooley, who did not receive incentive compensation in 2008, were awarded compensation for 2009. This compensation package is comprised of performance-based restricted stock units with a four-year vesting schedule tied to return on common equity, and a mix of deferred and non-deferred cash awards. The performance-based restricted stock has a performance-contingent vesting feature, where awards can vest at 100% to 130% of the target if State Street's average return on common equity meets or exceeds 14% and 17% respectively, but can be reduced to zero if below 5%. The deferred cash awards vest over eight quarters and accrue 3% annual interest, with provisions for continued vesting under certain termination scenarios, subject to adherence to confidentiality and non-competition clauses. Furthermore, these incentive awards include robust "clawback" provisions to recover compensation in cases of fraud, gross negligence, misconduct, or material financial restatements.

Key Highlights

  • 1State Street Corporation awarded incentive compensation for the 2009 fiscal year to key executive officers, including Ronald E. Logue and Joseph L. Hooley, who had not received such compensation in the prior year.
  • 2The 2009 incentive compensation package consists of performance-based restricted stock units (PSUs) and a combination of deferred and non-deferred cash.
  • 3Performance-based restricted stock units vest over four years and are directly tied to State Street's average return on common equity (ROCE), with potential vesting adjustments from 0% to 130% based on ROCE levels ranging from below 5% to 17% or higher.
  • 4Deferred cash awards vest ratably over eight fiscal quarters and accrue 3% interest annually.
  • 5The Supplemental Cash Incentive Plan underpins the deferred cash awards, allowing for continued vesting upon involuntary termination (not for cause) or voluntary retirement, subject to certain conditions.
  • 6All incentive awards include 'clawback' provisions allowing for the recovery of compensation in cases of fraud, gross negligence, misconduct, or material financial restatements.
  • 7The filing also notes leadership changes effective March 1, 2010, with Ronald E. Logue retiring as CEO and becoming non-executive Chairman, and Joseph L. Hooley assuming the roles of President and CEO.

Frequently Asked Questions

The primary purpose of this 8-K filing is to disclose the incentive compensation awarded to State Street Corporation's executive officers for the 2009 fiscal year. It details the components of these awards, their vesting schedules, and performance-related conditions.

The performance-based restricted stock units are tied to State Street's average return on common equity (ROCE) over the full term of the award. If the average ROCE is 14% or higher, 100% or more of the installment vests, with potential increases up to 130% for ROCE of 17% or more. Conversely, vesting is reduced by 10% for each 1% below 14% ROCE, and drops to zero if ROCE is below 5%.

The 'clawback' provisions, also known as compensation recovery, allow State Street to reduce or cancel incentive awards (both performance-based restricted stock and deferred cash) if an executive engages in fraud, gross negligence, or misconduct detrimental to the company, or if a material financial restatement or miscalculation would have resulted in a smaller or no award.

Effective March 1, 2010, Ronald E. Logue retired as Chief Executive Officer and became the non-executive Chairman of the Board. Joseph L. Hooley transitioned to the roles of President and Chief Executive Officer.