DEF 14A of Travelers Companies, Inc.
Filed Apr 8, 2022 · FY20210000086312-22-000019
Director Nominees
Director Nominees
Director Nominees
| | Alan L. Beller INDEPENDENT Senior Counsel of Cleary Gottlieb Steen & Hamilton LLP Committees: Audit, Risk Director Since: 2007 | | Philip T. Ruegger III INDEPENDENT Chairman of the Executive Committee of Simpson Thacher & Bartlett LLP (retired) Committees: Compensation, Executive, Investment and Capital Markets, Nominating and Governance (Chair) Director Since: 2014 | | | Janet M. Dolan INDEPENDENT President of Act 3 Enterprises, LLC Committees: Compensation, Executive, Investment and Capital Markets (Chair), Nominating and Governance Director Since: 2001 | | Rafael Santana INDEPENDENT President and CEO of Westinghouse Air Brake Technologies Corporation Committees: Compensation, Investment and Capital Markets, Nominating and Governance Director Since: 2022 | | | Patricia L. Higgins INDEPENDENT President and Chief Executive Officer of Switch and Data Facilities, Inc. (retired) Committees: Audit, Risk Director Since: 2007 | | Todd C. Schermerhorn INDEPENDENT Senior Vice President and Chief Financial Officer of C. R. Bard, Inc. (retired) Independent Lead Director Committees: Audit, Executive, Risk (Chair) Director Since: 2016 | | | William J. Kane INDEPENDENT Audit Partner with Ernst & Young (retired) Committees: Audit (Chair), Executive, Risk Director Since: 2012 | | Alan D. Schnitzer Chairman and Chief Executive Officer of Travelers Committees: Executive (Chair) Director Since: 2015 | | | Thomas B. Leonardi INDEPENDENT Executive Vice President of American International Group, Inc. and Vice Chairman of AIG Life Holdings, Inc. (retired) Committees: Compensation, Investment and Capital Markets, Nominating and Governance Director Since: 2021 | | Laurie J. Thomsen INDEPENDENT Partner and Co-Founder of Prism Venture Partners (retired) Committees: Audit, Risk Director Since: 2004 | | | Clarence Otis Jr. INDEPENDENT Chairman and Chief Executive Officer of Darden Restaurants, Inc. (retired) Committees: Compensation (Chair), Executive, Investment and Capital Markets, Nominating and Governance Director Since: 2017 | | Bridget van Kralingen INDEPENDENT Senior Vice President of International Business Machines Corporation (retired) Committees: Audit, Risk Director Since: 2022 | | | Elizabeth E. Robinson INDEPENDENT Global Treasurer of The Goldman Sachs Group, Inc. (retired) Committees: Compensation, Investment and Capital Markets, Nominating and Governance Director Since: 2020 | | |
Director Nominees
| 2022 Proxy Statement | The Travelers Companies, Inc. | | 1 |
Director Nominees
The nominees represent a broad range of expertise, experience, viewpoints and backgrounds, as well as a mix of tenure of service on the Board.
Director Nominees
| INDEPENDENCE 12 of 13 | AGE ~64 years average | TENURE ~8 years average | DIVERSITY ~54% diverse | | | | | |
Director Nominees
For a discussion of the specific considerations with respect to these nominees, see “Director Nominations—Specific Considerations Regarding the 2022 Nominees” on page 17.
Nominees for Election of Directors
Nominees for Election of Directors
Nominees for Election of Directors
| | | | | Alan L. Beller INDEPENDENT Director Since: 2007 Committees: Audit, Risk |
Background
Background Mr. Beller, age 72, is Senior Counsel of the law firm of Cleary Gottlieb Steen & Hamilton LLP (“Cleary”), based in the New York City office. Mr. Beller joined Cleary in 1976 and was a partner in the firm from 1984 through 2001. From 2002 to 2006, he served as the Director of the Division of Corporation Finance of the SEC and as Senior Counselor to the SEC. He returned to Cleary in August 2006 and was a partner in the firm until 2014 when he became Senior Counsel.
Other Board Service
Other Board Service Mr. Beller is a member of the Board of Directors of the Value Reporting Foundation.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Mr. Beller’s senior-level public service and his significant experience and expertise in the areas of law, risk management oversight and corporate governance. In addition, the Committee considered Mr. Beller’s significant experience and expertise with respect to financial reporting, financial accounting, auditing, audit quality and audit committee matters and their regulation and his expertise in the area of sustainability standards, sustainability governance and disclosure.
Nomination Considerations
| | | | | Janet M. Dolan INDEPENDENT Director Since: 2001 Committees: Compensation, Executive, Investment and Capital Markets (Chair), Nominating and Governance |
Background
Background Ms. Dolan, age 72, has been President of Act 3 Enterprises, LLC, a consulting services company, since August 2006. She served as President and Chief Executive Officer of Tennant Company, a manufacturer of nonresidential floor maintenance equipment and products, from April 1999 until her retirement in December 2005, and she had served in a number of senior executive positions with Tennant Company from 1986 until April 1999. Prior to joining Tennant Company, Ms. Dolan was a director of the Minnesota Lawyers’ Professional Responsibility Board.
Other Board Service
Other Board Service Ms. Dolan was a director of Wenger Corporation until December 2018. The Board and the Nominating and Governance Committee considered in particular Ms. Dolan’s experience as a public company CEO and her significant experience and expertise in management and in legal and compliance matters.
Other Board Service
| 2022 Proxy Statement | The Travelers Companies, Inc. | | 5 |
Other Board Service
| | | | | Patricia L. Higgins INDEPENDENT Director Since: 2007 Committees: Audit, Risk |
Other Board Service
Ms. Higgins, age 72, served as President and Chief Executive Officer of Switch and Data Facilities, Inc., a provider of neutral interconnection and collocation services, from September 2000 until her retirement in February 2004. In 1999 and 2000, Ms. Higgins served as Executive Vice President of the Gartner Group and Chairman and Chief Executive Officer of the Research Board, a segment of the Gartner Group. From 1997 to 1999, she served as Corporate Vice President and Chief Information Officer of Alcoa Inc., and from 1995 to 1997, she served as Vice President and President (Communications Market Business Unit) of Unisys Corporation. From 1977 to 1995, she served in various managerial positions, including as Corporate Vice President and Group Vice President (State of New York) for Verizon (NYNEX) and Vice President, International Sales Operations (Lucent) for AT&T Corporation/Lucent.
Other Board Service
Other Board Service Ms. Higgins was a director of CoreSite Realty Corporation until December 2021, Dycom Industries until May 2021, Barnes & Noble, Inc. until August 2019 and Internap Corporation until June 2018.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Ms. Higgins’ experience as a public company Chief Information Officer and her significant experience and expertise in management, as well as information technology strategy and operations.
Nomination Considerations
| | | | | William J. Kane INDEPENDENT Director Since: 2012 Committees: Audit (Chair), Executive, Risk |
Background
Background Mr. Kane, age 71, served as an audit partner with Ernst & Young for 25 years until his retirement in 2010, during which time he specialized in providing accounting, auditing and consulting services to the insurance and financial services industries. Prior to that, he served in various auditing roles with Ernst & Young.
Other Board Service
Other Board Service Mr. Kane is a director of Transamerica Corporation.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Mr. Kane’s experience as an audit partner of a registered public accounting firm and his significant experience and expertise in financial controls, financial reporting, management and the insurance industry.
Nomination Considerations
| | | | | Thomas B. Leonardi INDEPENDENT Director Since: 2021 Committees: Compensation, Investment and Capital Markets, Nominating and Governance |
Background
Background Mr. Leonardi, age 68, served as Executive Vice President of American International Group, Inc. and Vice Chairman of AIG Life Holdings, Inc. from November 2017 until his retirement in May 2020, where he was responsible for Government Affairs, Public Policy, Communications and Sustainability. From January 2015 to October 2017, he was a Senior Advisor to Evercore Inc., a global investment banking advisory firm. Previously, Mr. Leonardi was Commissioner of the Connecticut Insurance Department from February 2011 to December 2014. For 22 years prior to his appointment as Commissioner, he was Chairman and Chief Executive Officer of Northington Partners Inc., a venture capital and investment banking firm. Before Northington, he was head of the investment banking and venture capital divisions of Conning & Company and President of Beneficial Corporation’s insurance subsidiaries. He began his career as a litigation attorney in Connecticut.
Other Board Service
Other Board Service Mr. Leonardi is a director of Athene Co-Invest Reinsurance Affiliate, Ltd and is a member of the Advisory Board of Athene Holdings, Ltd. The Board and the Nominating and Governance Committee considered in particular Mr. Leonardi’s experience as an insurance commissioner and his significant experience and expertise in management, investments, finance, mergers and acquisitions and the insurance industry.
Other Board Service
| 6 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Other Board Service
| | | | | Clarence Otis Jr. INDEPENDENT Director Since: 2017 Committees: Compensation (Chair), Executive, Investment and Capital Markets, Nominating and Governance |
Other Board Service
Mr. Otis, age 65, served as Chairman and Chief Executive Officer of Darden Restaurants, Inc., the largest company-owned and operated full-service restaurant company in the world. He became Darden’s Chief Executive Officer in 2004, assumed the additional role of Chairman in 2005 and served in both capacities until his retirement in 2014. Mr. Otis joined Darden Restaurants, Inc. in 1995 and served in various roles with Darden, including Vice President and Treasurer, and Senior Vice President and Chief Financial Officer.
Other Board Service
Other Board Service Mr. Otis is a director of Verizon Communications, Inc., VF Corporation and MFS Mutual Funds.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Mr. Otis’s experience as a public company CEO and his significant experience and expertise in operations, financial oversight and risk management.
Nomination Considerations
| | | | | Elizabeth E. Robinson INDEPENDENT Director Since: 2020 Committees: Compensation, Investment and Capital Markets, Nominating and Governance |
Background
Background Ms. Robinson, age 53, served as Global Treasurer, Partner and Managing Director of The Goldman Sachs Group, Inc., the global financial services company, from 2005 to 2015. Prior to that, she served in various roles within Corporate Treasury of The Goldman Sachs Group, Inc., including Americas Treasurer and Managing Director, and in the Financial Institutions Group within the Investment Banking Division of Goldman Sachs.
Other Board Service
Other Board Service Ms. Robinson is a director of The Bank of New York Mellon Corporation and the non-executive Chairman of the Board of Directors of BNY Mellon Government Securities Services Corp. Ms. Robinson is also a director of Russell Reynolds Associates, a trustee and Chairman of the Board of Williams College, Chairman of the Board of Directors of Every Mother Counts and a trustee of Blair Academy. She was, until August 2016, a director of Goldman Sachs Bank USA.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Ms. Robinson’s experience as treasurer of a large global financial institution, a position she held during the 2008 financial crisis, her significant experience in managing a financial services company through challenging financial conditions and her expertise in finance, risk management, capital management and strategic transactions.
Nomination Considerations
| | | | | Philip T. (Pete) Ruegger III INDEPENDENT Director Since: 2014 Committees: Compensation, Executive, Investment and Capital Markets, Nominating and Governance (Chair) |
Background
Background Mr. Ruegger, age 72, served as Chairman of the Executive Committee of the law firm Simpson Thacher & Bartlett LLP from 2004 until his retirement in 2013. He was a member of the firm’s executive committee from 1993 through June 2013. Mr. Ruegger joined Simpson Thacher & Bartlett LLP in 1974 and became a partner in 1981. At Simpson Thacher & Bartlett LLP, he advised clients on mergers and acquisitions, corporate governance, investigations, corporate finance and general corporate and securities law matters.
Other Board Service
Other Board Service Mr. Ruegger is Chairman of the Executive Committee of the Henry Street Settlement, a New York City based not-for-profit organization. The Board and the Nominating and Governance Committee considered in particular Mr. Ruegger’s experience as the leader of a large international corporate law firm and his significant experience and expertise in mergers and acquisitions and other corporate transactional matters, as well as risk management.
Other Board Service
| 2022 Proxy Statement | The Travelers Companies, Inc. | | 7 |
Other Board Service
| | | | | Rafael Santana INDEPENDENT Director Since: 2022 Committees: Compensation, Investment and Capital Markets, Nominating and Governance |
Other Board Service
Mr. Santana, age 50, is President and Chief Executive Officer of Westinghouse Air Brake Technologies Corporation (“Wabtec”), a leading global provider of equipment, systems, digital solutions, and value-added services for the freight and transit rail sectors. Previously, from November 2017 to February 2019, Mr. Santana served as President and Chief Executive Officer of GE Transportation, a division of General Electric Company. Mr. Santana joined GE in 2000 and held a variety of global leadership roles in the transportation, power, and oil and gas businesses, including President and Chief Executive Officer of GE, Latin America, President and Chief Executive Officer of GE Oil and Gas Turbomachinery Solutions, Chief Executive Officer of GE Gas Engines and Chief Executive Officer of GE Energy Latin America.
Other Board Service
Other Board Service Mr. Santana is a director of Wabtec.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Mr. Santana’s experience as a public company CEO and his significant experience and expertise in management, international operations and financial oversight.
Nomination Considerations
| | | | | Todd C. Schermerhorn INDEPENDENT Lead Director Director Since: 2016 Committees: Audit, Executive, Risk (Chair) |
Background
Background Mr. Schermerhorn, age 61, served as Senior Vice President and Chief Financial Officer of C. R. Bard, Inc., a multinational developer, manufacturer and marketer of life-enhancing medical technologies, from 2003 until his retirement in 2012. Prior to that, he had been Vice President and Treasurer of C. R. Bard from 1998 to 2003. From 1985 to 1998, Mr. Schermerhorn held various other management positions with C. R. Bard.
Other Board Service
Other Board Service Mr. Schermerhorn is a director of Metabolon, Inc. and LivaNova, PLC. He was a director of The Spectranetics Corporation until August 2017.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Mr. Schermerhorn’s experience as a public company Chief Financial Officer and his significant experience and expertise in management, accounting and business operations, including international operations.
Nomination Considerations
| | | | | Alan D. Schnitzer Chairman of the Board Director Since: 2015 Committees: Executive (Chair) |
Background
Background Mr. Schnitzer, age 56, is Chairman and Chief Executive Officer of Travelers. He was previously the Company’s Vice Chairman and Chief Executive Officer, Business and International Insurance from July 2014 to December 2015. He joined Travelers as Vice Chairman and Chief Legal Officer in April 2007, and between that time and July 2014 he held operating and functional positions of increasing responsibility. Prior to joining the Company, he was a partner at Simpson Thacher & Bartlett LLP.
Other Board Service
Other Board Service Mr. Schnitzer serves as a trustee of the University of Pennsylvania and Memorial Sloan Kettering Cancer Center, and as a director of New York City Ballet and ReadyCT. The Board and the Nominating and Governance Committee considered in particular Mr. Schnitzer’s position as Chief Executive Officer of the Company and his significant experience in the management of the Company in various roles, including as Chief Executive Officer of Business and International Insurance, the Company’s largest business segment, as well as his significant experience and expertise in management, finance and law.
Other Board Service
| 8 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Other Board Service
| | | | | Laurie J. Thomsen INDEPENDENT Director Since: 2004 Committees: Audit, Risk |
Other Board Service
Ms. Thomsen, age 64, served as an Executive Partner of New Profit, Inc., a venture philanthropy firm, from 2006 to 2010, and she served on its board from 2001 to 2006. Prior to that, from 1995 to 2004, she was a co-founder, General Partner and Retiring General Partner of Prism Venture Partners, a venture capital firm investing in healthcare and technology companies. From 1984 until 1995, she worked at the venture capital firm Harbourvest Partners in Boston, where she was a General Partner from 1988 until 1995. Ms. Thomsen was in commercial lending at U.S. Trust Company of New York from 1979 until 1984.
Other Board Service
Other Board Service Ms. Thomsen is a director of Dycom Industries and MFS Mutual Funds. She is also an emeritus Trustee of Williams College.
Nomination Considerations
Nomination Considerations The Board and the Nominating and Governance Committee considered in particular Ms. Thomsen’s experience as a general partner of a venture capital firm and her significant experience and expertise in investments, finance and the development of emerging businesses.
Nomination Considerations
| | | | | Bridget van Kralingen INDEPENDENT Director Since: 2022 Committees: Audit, Risk |
Non-Employee Director Compensation
Non-Employee Director Compensation The Nominating and Governance Committee of the Board recommends to the full Board for approval the amount and composition of Board compensation for non-employee directors. Directors who are our employees are not compensated for their service on the Board. In accordance with the Company’s Governance Guidelines, the Nominating and Governance Committee reviews the significance and appropriateness of each of the components of the Director Compensation Program at least once every two years. The Compensation Committee’s independent compensation consultant, FW Cook, advises the Nominating and Governance Committee with respect to director compensation. The objectives of the Nominating and Governance Committee are to compensate directors in a manner that closely aligns the interests of directors with those of our shareholders, to attract and retain highly qualified directors and to structure and set total compensation in such a manner and at such levels that will not call into question any director’s objectivity. The Committee works with its independent compensation consultant to ensure that its compensation program is consistent with current market practices. It is the Board’s practice to provide a mix of cash and equity-based compensation to non-employee directors, as discussed below.
Non-Employee Director Compensation
| Elements of Non-Employee Director Compensation |
Non-Employee Director Compensation
| | Element | | Timing | | | Annual Retainer | Each non-employee director receives an annual retainer of $135,000. | Annual retainers and committee chair fees are paid in quarterly installments, in arrears at the end of each quarter, either (1) in cash or (2) if the director so elects, in common stock units credited to his or her deferred compensation account (discussed under “Director Deferral Plan” below) and distributed at a later date designated by the director. | | | Committee Chair Fees and Lead Director Retainer | The chairs of certain committees are paid additional fees in cash in connection with their services as follows: •Audit Committee - $30,000 •Compensation Committee - $30,000 •Nominating and Governance Committee - $25,000 •Investment and Capital Markets Committee - $25,000 •Risk Committee - $30,000 The Lead Director is paid an additional $50,000 annual cash retainer. | | | | Annual Deferred Stock Award | Under the Director Compensation Program, during 2021, each non-employee director nominated for re-election to the Board was awarded $175,000 in deferred stock units. The deferred stock units were granted under our Amended and Restated 2014 Stock Incentive Plan (the “2014 Stock Incentive Plan”) and vest in full one day prior to the date of the annual shareholder meeting occurring in the year following the year of the date of grant so long as the non-employee director continuously serves on the Board through that date. The value of deferred stock units rises or falls as the price of our common stock fluctuates in the market. Dividend equivalents (in an amount equal to the dividends paid on shares of our common stock) on the deferred stock units are deemed “reinvested” in additional deferred stock units. Directors are subject to a stock ownership target as described under “Director Stock Ownership” below. In May 2021, the Director Compensation Program was amended to increase the value of the annual deferred stock award to non-employee directors to $180,000 beginning with the 2022 award. | The accumulated deferred stock units, including associated dividend equivalents, in a director’s account are distributed in the form of shares of our common stock either in a lump sum or in annual installments, at the director’s election, beginning at least six months following termination of his or her service as a director. |
Non-Employee Director Compensation
| 24 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Non-Employee Director Compensation
| Director Deferral Plan |
Non-Employee Director Compensation
In addition to receiving the annual deferred stock award in the form of deferred stock units, non-employee directors may elect to have all or any portion of their annual retainer and any lead director or committee chair fees paid in cash or deferred through our Deferred Compensation Plan for Non-Employee Directors. Deferrals of the annual retainer and any lead director or committee chair fees are notionally “invested” in common stock units. Any director who elects to have any of his or her fees credited to his or her deferred compensation plan account as common stock units will be deemed to have purchased shares on the date the fees would otherwise have been paid in cash, based on the closing market price of our common stock on such date. The value of common stock units rises or falls as the price of our common stock fluctuates in the market. In addition, dividend equivalents (in an amount equal to the dividends paid on shares of our common stock) on the units are deemed “reinvested” in additional common stock units. The accumulated common stock units, including associated dividend equivalents, in a director’s account are distributed in the form of shares of our common stock on pre-designated dates. Shares of common stock issued in payment of the deferred fees are awarded under our 2014 Stock Incentive Plan.
Non-Employee Director Compensation
| Director Stock Ownership |
Non-Employee Director Compensation
The Board believes its non-employee directors should accumulate and retain a level of ownership of our equity securities to align the interests of the non-employee directors and the shareholders. Accordingly, the Board has established an ownership target for each non-employee director equal to four times the director’s most recent annual deferred stock award. Each new director is expected to meet or exceed this target within four years of his or her initial election to the Board, except that, if the annual deferred stock award for any of those four years is less than the most recent previous annual deferred stock award, the director is expected to meet or exceed the higher target within five years of his or her initial election to the Board. All of our current non-employee directors have achieved stock ownership levels in excess of the target amount or have joined the board within the last five years and are expected to meet the target within the required time period. Non-employee directors currently receive more than 50% of their annual board and committee compensation in the form of deferred stock units. The shares underlying these units are not distributed to a director until at least six months after the director leaves the Board. Accordingly, all of our non-employee directors hold equity interests that they cannot sell for so long as they serve on the Board and at least six months afterwards.
Non-Employee Director Compensation
| 2022 Proxy Statement | The Travelers Companies, Inc. | | 25 |
Non-Employee Director Compensation
| Director Compensation for 2021 |
Non-Employee Director Compensation
The 2021 compensation of non-employee directors is displayed in the table below.(1)
Non-Employee Director Compensation
| Name | Fees Earned or Paid in Cash(2) ($) | Stock Awards(3) ($) | All Other Compensation ($) | Total ($) | | Alan L. Beller | 133,077 | 175,067 | — | 308,144 | | Janet M. Dolan | 156,154 | 175,067 | — | 331,221 | | Patricia L. Higgins | 133,077 | 175,067 | — | 308,144 | | William J. Kane | 161,154 | 175,067 | — | 336,221 | | Thomas B. Leonardi | 83,077 | 175,009 | — | 258,086 | | Clarence Otis Jr. | 161,154 | 175,067 | — | 336,221 | | Elizabeth E. Robinson | 133,077 | 175,067 | — | 308,144 | | Philip T. Ruegger III | 156,154 | 175,067 | — | 331,221 | | Todd C. Schermerhorn | 211,154 | 175,067 | — | 386,221 | | Donald J. Shepard(4) | 50,371 | — | — | 50,371 | | Laurie J. Thomsen | 133,077 | 175,067 | — | 308,144 |
Non-Employee Director Compensation
(1)Mr. Santana and Ms. van Kralingen did not receive any director compensation for 2021 as each was appointed to the Company’s Board of Directors in 2022. (2)The fees earned for non-employee directors consist of an annual retainer along with committee chair fees and a lead director annual retainer, to the extent applicable. The annual retainer was increased to $135,000 in May 2021. All of the non-employee directors, other than Mr. Otis and Ms. Robinson, received all of their fees in cash. Mr. Otis and Ms. Robinson elected to receive the 2021 annual retainer and, as applicable, committee chair fees in the form of common stock units, which will be accumulated in their respective deferred compensation plan accounts and distributed, together with associated dividend equivalents, at a later date (Mr. Otis—1,059 common stock units and Ms. Robinson—874 common stock units). The table above does not include a value for dividend equivalents attributable to the common stock units received in lieu of cash fees because they are earned at the same rate as the dividends on the Company’s common stock and are not preferential. (3)The dollar amounts represent the grant date fair value of deferred stock units granted in 2021, calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC Topic 718”), without taking into account estimated forfeitures, based on the closing market price on the NYSE of our common stock on the grant date. The dividend equivalents attributable to the annual deferred stock unit awards are deemed “reinvested” in additional deferred stock units and are distributed, together with the underlying deferred stock units, in the form of shares of our common stock beginning at least six months following termination of service as a director. In accordance with the SEC’s rules, dividend equivalents on stock awards are not required to be reported because the amounts of future dividends are factored into the grant date fair value of the awards. For a discussion of annual deferred stock awards, see “Elements of Non-Employee Director Compensation – Annual Deferred Stock Award” above. On February 2, 2021, each non-employee director nominated for re-election to the Board at that time was granted 1,252 deferred stock units (determined by dividing $175,000 by the closing market price on the NYSE of our common stock of $139.83 on February 2, 2021). Upon his election to the Board on May 20, 2021, Mr. Leonardi was granted 1,102 deferred stock units (determined by dividing $175,000 by the closing market price on the NYSE of our common stock of $158.81 on May 20, 2021). Each award is subject to forfeiture if a director leaves the Board before May 24, 2022 (the day prior to the Annual Meeting). The following table provides information with respect to aggregate holdings of common stock units and unvested and vested deferred stock units beneficially owned by our non-employee directors at December 31, 2021. The amounts below include dividend equivalents credited (in the form of additional common stock units or deferred stock units, respectively) on common stock units and deferred stock units.
Non-Employee Director Compensation
| Name | Unvested Deferred Stock Units (#) | Common Stock Units and Vested Deferred Stock Units (#) | | Alan L. Beller | 1,280 | 37,070 | | Janet M. Dolan | 1,280 | 50,586 | | Patricia L. Higgins | 1,280 | 37,070 | | William J. Kane | 1,280 | 17,467 | | Thomas B. Leonardi | 1,121 | 0 | | Clarence Otis Jr. | 1,280 | 10,378 | | Elizabeth E. Robinson | 1,280 | 2,727 | | Philip T. Ruegger III | 1,280 | 11,956 | | Todd C. Schermerhorn | 1,280 | 7,640 | | Laurie J. Thomsen | 1,280 | 51,738 |
Non-Employee Director Compensation
(4) Mr. Shepard retired from the Company’s Board of Directors effective May 20, 2021, the date of our 2021 annual meeting of shareholders. The fees earned by Mr. Shepard consist of the pro-rated portion of the annual retainer for the period through such date.
Non-Employee Director Compensation
| 26 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
2021 Performance-Based Compensation
| | Element | CEO Outcomes | Other NEO Considerations | | | Annual Bonus | •Mr. Schnitzer’s cash bonus increased from $6.2 million to $6.5 million year-over-year, an increase of 5%. | •The average annual cash bonus for each of Messrs. Frey and Kess increased by approximately 9% year-over-year. •The average annual cash bonus for each of Messrs. Klein and Toczydlowski increased approximately 17% year-over-year to reflect the factors discussed above and to position their total direct compensation at levels more comparable to those of similarly situated executives of the companies in our Compensation Comparison Group. | | | Long-Term Incentives | •Mr. Schnitzer’s annual equity award increased from $11.5 million to $12.9 million year-over-year, an increase of 12%. | •Consistent with the prior year, the annual equity awards for each of Messrs. Frey and Kess were set at 3.0 times base salary. •The annual equity awards for Messrs. Klein and Toczydlowski were increased from 3.0 times base salary to approximately 4.0 times base salary to reflect the factors discussed above and to position their total direct compensation at levels more comparable to those of similarly situated executives of the companies in our Compensation Comparison Group. |
CEO TOTAL DIRECT COMPENSATION AND ADJUSTED CORE ROE WITH CATS AT AVERAGE LEVEL AND AS REPORTED(1)
| Objective | | | Link compensation to the achievement of our short- and long-term financial and strategic objectives | The Compensation Committee believes that a properly structured compensation system should measure and reward performance on multiple bases. To ensure an appropriate degree of balance in the program, the compensation system is designed to measure short- and long-term financial and operating performance, the efficiency with which capital is employed in the business, the effective management of risk, the achievement of strategic initiatives and the individual performance of each executive. The Compensation Committee further believes that the most senior executives, who are responsible for the development and execution of our strategic and financial plans, should have the largest portion of their compensation tied to performance-based incentives, including stock-based compensation, the ultimate value of which is dependent on the performance of our stock price over time and on our three-year core return on equity. Accordingly, the proportion of total compensation that is performance-based increases with successively higher levels of responsibility. In addition, in evaluating the Company’s overall performance, the Compensation Committee considers that our business is subject to year-to-year volatility outside of management’s control, including natural and man-made catastrophic events. The Compensation Committee believes that, because the impact of catastrophes in any given year can produce significant volatility, the effective management of catastrophes can only be evaluated over a longer period of time. As a result, although the Compensation Committee believes that the impact of catastrophes on the Company’s financial results should be reflected in its executive compensation decisions, the Compensation Committee does not believe it is appropriate for compensation levels to be subject to as much volatility year-to-year as may be caused by actual catastrophes. | | Provide competitive compensation opportunities to attract, retain and motivate high-performing executive talent | Our overall compensation levels are designed to attract and retain the best executives in light of the competition for executive talent. We recognize that to continue to produce industry-leading results over time, we need to continuously cultivate that talent. We do so with competitive compensation programs that are designed to attract, motivate and retain our best people, development programs that foster personal and professional growth, and a focus on diversity and inclusion as a business imperative. In addition, the Compensation Committee believes that, when we generally exceed our performance goals and the named executive officers individually perform at superior levels in achieving that performance, total compensation for these executive officers should be set at superior levels compared to the compensation levels for equivalent positions in our Compensation Comparison Group. When we do not generally exceed our performance goals or the named executive officers individually do not perform at superior levels, total compensation for these executives should be set at lower levels. The Compensation Committee may also consider other relevant facts and circumstances in awarding compensation in order to attract, retain and motivate high-performing talent. |
CEO TOTAL DIRECT COMPENSATION AND ADJUSTED CORE ROE WITH CATS AT AVERAGE LEVEL AND AS REPORTED(1)
| Objective | | | Align the interests of management and shareholders by paying a substantial portion of total compensation in stock-based incentives and ensuring that executives accumulate meaningful stock ownership stakes over their tenure | The Compensation Committee believes that the interests of executives and shareholders should be aligned. Accordingly, a significant portion of the total compensation for the named executive officers is in the form of stock-based compensation. The components of the annual stock-based compensation granted to the named executive officers in 2022 and 2021 were stock options and performance shares. Stock options provide value only if our stock appreciates, and performance shares vest only if specified core return on equity thresholds are met. In addition, as discussed below, senior executives are expected to achieve specified stock ownership targets prior to selling any stock acquired upon the exercise of stock options or the vesting of performance shares or restricted stock units. Both the portion of total compensation attributable to stock-based programs and the expected level of executive stock ownership increase with successively higher levels of responsibility. | | Maximize, to the extent equitable and practicable, the financial efficiency of the overall compensation program | As part of the process of approving the initial design of incentive plans, or any subsequent modifications made to such plans, and determining awards under the plans, the Compensation Committee evaluates the aggregate economic costs and dilutive impact to shareholders of such compensation, the expected tax and accounting treatment and the impact on our financial results. The Compensation Committee attempts to balance the various financial implications of each program to ensure that the system is as efficient as possible and that unnecessary costs are avoided. | | Reflect established and evolving corporate governance standards | The Compensation Committee, with the assistance of our Human Resources Department and the Compensation Committee’s independent compensation consultant, stays abreast of current and developing corporate governance standards and trends with respect to executive compensation and adjusts the various elements of our executive compensation program, from time to time, as it deems appropriate. |
OTHER NEO AVERAGE
| Cash-based Compensation Consistent with recent years, the Compensation Committee has determined that the allocation of compensation between performance-based annual cash bonus and stock-based long-term incentives should be somewhat more heavily weighted towards cash bonus as compared to our Compensation Comparison Group. The Compensation Committee believes that this allocation is appropriate in light of the fact that a higher percentage of the named executive officers’ total compensation (and total direct compensation) is performance-based as compared to the peer average and peer median of the Compensation Comparison Group. In particular, unlike a number of other companies in our Compensation Comparison Group that grant time-vesting restricted stocks, annual equity awards made to the named executive officers are typically all performance-based. | Stock-based Compensation Annual awards of stock-based compensation are typically in the form of performance shares and stock options. Because our performance shares only vest if specified core return on equity thresholds are met, and because stock options provide value only if our stock price appreciates, the Compensation Committee believes that such compensation is all performance-based; that is, the compensation typically awarded annually to our Chief Executive Officer and other named executive officers generally does not include awards that are earned solely due to the passage of time without regard to performance. |
PEER CEO AVERAGE
(1)Pay mix of total direct compensation for the 2021 performance year as reported in the Supplemental Table on page 56. (2)Peer Average CEO Pay Mix reflects the pay mix of total direct compensation for our Compensation Comparison Group for their 2020 performance year (the most recent year for which data was publicly available) and was calculated by the Company using data provided by the Compensation Committee’s independent compensation consultant. As part of that calculation, the independent compensation consultant annualized special non-recurring long-term incentive grants (for example, new hire, retention and promotion awards) to reflect an estimate of “per year” value when appropriate. We also provide benefits and modest perquisites. In addition, from time to time, the Compensation Committee may make special cash or equity awards to one or more of our named executive officers. No special cash or equity awards were made to our named executive officers for the 2021 performance year.
Annual Cash Bonus
Annual Cash Bonus The named executive officers are eligible to earn performance-based annual cash bonuses. The annual bonuses are based on the performance of the Company as a whole, taking into consideration performance against predetermined metrics as approved by the Board at the beginning of the year, as well as the individual performance of each executive. The annual cash bonuses are designed to further our goals described under “—Objectives of Our Executive Compensation Program”, including motivating and promoting the achievement of our short- and long-term financial and strategic objectives.
Annual Cash Bonus
| Metrics The Compensation Committee evaluates a broad range of financial and non-financial metrics in awarding performance-based incentives each year. The Compensation Committee believes that a formulaic approach to the determination of performance-based compensation, particularly in the property and casualty insurance industry, could result in unintended consequences and is not an appropriate substitute for the Compensation Committee’s informed and thorough deliberation and the application of its reasoned business judgment. The Compensation Committee believes that there is no substitute for understanding the Company’s results and how those results were achieved. The Compensation Committee’s current approach allows it to appropriately assess the quality of performance results and ensures that executives are not unduly rewarded, or disadvantaged, based purely on the application of a mechanical formula. Core Return on Equity Core return on equity is a principal factor in the Compensation Committee’s evaluation of the Company’s performance. The Compensation Committee believes that core return on equity should not be viewed as a single metric. Rather, by being a function of both core income and shareholders’ equity (excluding unrealized gains and losses on investments), core return on equity is a function of both the Company’s income statement and balance sheet. | | | | When evaluating core return on equity, the Compensation Committee considers: •the Company’s cost of equity; •recent and historical trends with respect to interest rates; •recent and historical trends with respect to core return on equity for the Company; and •recent and historical trends with respect to return on equity for the domestic property and casualty insurance industry, including the industry peers included in the Compensation Comparison Group. Additional Metrics The Compensation Committee also evaluates the Company’s performance with respect to a wide range of other financial metrics included in the financial plan approved by the Board prior to the beginning of the year, including: •Core income and core income per diluted share, and the metrics that contribute to those results, such as: | | | | •earned premiums; •investment income; | •insurance losses; and •expense and capital management. | | | In evaluating performance against the metrics, however, the Compensation Committee does not use a formula or pre-determined weighting, and no one metric is individually material other than core return on equity and core income. | | | | In light of the Company’s objective to create shareholder value by generating significant earnings and taking a balanced approach to capital management, the Compensation Committee also reviews per share growth in book value and adjusted book value over time. However, because (1) book value can be volatile due to, among other things, the impact of changing interest rates on the fair value of the Company’s fixed-income investment portfolio and (2) the Company’s capital management strategy also emphasizes returning excess capital to shareholders, the Compensation Committee does not set a specific target for per share growth in book value or adjusted book value. Further, while it evaluates changes in book value and adjusted book value in the context of overall results, the Compensation Committee does not believe such changes, by themselves, are always the most meaningful indicators of relative performance. | | | | | | Link to Strategy Senior executives, as well as other employees with management responsibility, are encouraged to focus on multiple performance objectives that are important for creating shareholder value, including the quality and profitability of our underwriting and investment decisions, the pricing of our policies, the effectiveness of our claims management and the efficacy of our capital and risk management. In addition, senior executives are encouraged to focus on executing the Company’s ambitious innovation agenda to position the Company for continued success. |
Annual Cash Bonus
| 42 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Factors Considered in Awarding 2021 Bonuses
Factors Considered in Awarding 2021 Bonuses In determining the actual annual bonuses awarded, the Compensation Committee considered a number of factors, including: our exceptionally strong financial performance, including the increase in core income and core return on equity as compared to 2020, particularly in the face of a challenging environment, including the second year of a global pandemic, a historically high level of catastrophe losses and the continued low interest rate environment; our successful execution of our marketplace strategies, including the growth of net written premiums by 7% to a record $32.0 billion. Each of our operating segments contributed to this growth, with Business Insurance growing 4%, Bond & Specialty Insurance growing 14% and Personal Insurance growing 10%; the successful execution of the Company’s long-term strategic plan for continued success in light of the forces of change the Company has identified as impacting the industry, as described under “—Strategic Focus in Light of Forces of Change;” the consolidated, business segment and/or investment results relative to the various financial measures set forth in our 2021 business plan that was established and approved by the Board at the end of 2020; our successful execution of our long-term strategy to “transform” Travelers into the insurance company of the future, including our ongoing investments in improving productivity and efficiency which have allowed us to meaningfully increase the amount we spend on technology and direct more of our technology dollars to strategic technology initiatives and our ambitious innovation agenda, all within an improving expense ratio; our claim organization’s excellent performance in delivering for our customers, including our effective response to a historically high number of catastrophes, including the unprecedented winter freeze in Texas; Hurricane Ida; and a severe multi-state tornado in December, which included one of the longest (if not the longest) tornado tracks on record; and our exceeding our objective of closing 90% of all claims arising out of catastrophe events within 30 days; our success in establishing Travelers as a thought leader in the ESG space, including our thoughtful and comprehensive ESG reports and disclosures; which are consistent with the standards and recommendations of the TCFD and SASB; our successful execution of our comprehensive human capital management strategies as evidenced by the level of employee engagement and satisfaction exhibited throughout the organization, as well as progress on the Company’s diversity and inclusion initiatives; our performance relative to the companies in our Compensation Comparison Group and other companies in the property and casualty insurance industry, with a particular emphasis on core return on equity; compensation market practices as reflected by the Compensation Comparison Group in the most recent publicly available data; the performance of the executive; the tenure and compensation history of the executive; and the demonstration of leadership and teamwork and a commitment to a culture of collaboration. In addition, in connection with Mr. Schnitzer’s compensation for the 2021 performance year, the Compensation Committee also considered Mr. Schnitzer’s exceptional leadership in navigating the Company through the second year of the pandemic. The Compensation Committee generally weighs financial performance measures, particularly core return on equity and core income, and comparable compensation information more heavily than other factors. In particular, when assessing results, the Compensation Committee considers the Company’s overall financial performance relative to prior years’ performance, the financial plan, the performance of industry peers and, in the case of core return on equity, the Company’s cost of equity and the risk-free rate. The achievement, or inability to achieve, any particular financial or operational measure in a given year neither guarantees, nor precludes, the payment of an award, but is considered by the Compensation Committee as one of several factors among the other factors noted above and any additional information available to it at the time, including market conditions in general. The Compensation Committee does not use a formula or assign any particular relative weighting to any performance measure. As discussed under “—Annual Cash Bonus—Metrics” on page 42, the Compensation Committee believes that a formulaic approach to compensation is not appropriate in the property and casualty insurance industry and is not an appropriate substitute for the Compensation Committee’s informed and thorough deliberation and the application of its reasoned business judgment as it would not allow the Compensation Committee to assess the quality of the performance results and could result in negative unintended consequences. For example, a formulaic bonus plan tied to revenue growth (a common metric used in formulaic bonus plans) could create an incentive for management to relax underwriting or investment standards to increase revenue and reported profit on a short-term basis, thereby driving higher short-term bonuses, but creating excessive risk for shareholders over the longer term. This is of particular concern in the property and casualty insurance industry due to the fact that the “cost of goods sold” (that is, the amount of insured losses) is not known at the time of sale and develops over time — in some cases over many years.
Factors Considered in Awarding 2021 Bonuses
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Factors Considered in Awarding 2021 Bonuses
2021 Financial Metrics,
Amount of 2021 Annual Cash Bonuses
Amount of 2021 Annual Cash Bonuses At its February 2022 meeting, in light of the quantitative and qualitative factors described above and the substantial contributions made by the named executive officers in achieving our exceptionally strong 2021 operating and financial results in the face of a challenging environment, including the second year of a global pandemic, a historically high level of catastrophe losses and the continued low interest rate environment, and to recognize that all of the named executive officers individually performed at superior levels, the Compensation Committee determined in its judgment to set the amounts of the named executive officers’ 2021 cash bonuses at the levels described below:
Amount of 2021 Annual Cash Bonuses
| | Annual cash bonus | Change in annual cash bonus compared to 2020 | | Mr. Schnitzer | $6.5 million | Increased by approximately 5%. | | Mr. Frey | $2.3 million | Average annual cash bonus increased approximately 9% year-over-year. | | Mr. Kess | $3.0 million | | | Mr. Toczydlowski | $2.725 million | Average annual cash bonus increased approximately 17% year-over-year to reflect the factors discussed above and to position their total direct compensation at levels more comparable to those of similarly situated executives of the companies in our Compensation Comparison Group. | | Mr. Klein | $2.5 million | |
Amount of 2021 Annual Cash Bonuses
| 2022 Proxy Statement | The Travelers Companies, Inc. | | 45 |
Long-Term Stock Incentives
Long-Term Stock Incentives The Compensation Committee believes that the interests of executives and shareholders should be closely aligned. Accordingly, a significant portion of the total compensation for the named executive officers is in the form of stock-based long-term incentive awards.
Long-Term Stock Incentives
| Metrics In determining the size of the total long-term incentive opportunity, the Compensation Committee considers a number of factors, including the factors applied with regard to the determination of the annual cash bonus award. Once the performance share award has been granted, the number of shares that a named executive officer will receive upon vesting, if any, depends on the Company’s attainment of specific financial targets related to core return on equity. These targets, which are described on page 48, are specified at the time the awards are granted and, unlike the practice of most companies, disclosed in advance to shareholders to enable a full evaluation of the rigor of our performance goals and how the performance schedule compares to our cost of equity. The value provided by the stock options is determined solely on the appreciation of the stock price subsequent to the time of the award. | Link to Strategy Long-term stock-based incentives ensure that our executive officers have a continuing stake in our long-term success and manage the business with a long-term, risk-adjusted perspective. In addition, senior executives are encouraged to focus on executing the Company’s ambitious innovation agenda to position the Company for continued success. |
Guidelines for the Allocation of Annual Equity Grants
Guidelines for the Allocation of Annual Equity Grants The Compensation Committee, with advice from its independent compensation consultant, has developed guidelines for the allocation of annual grants of equity compensation between performance shares and stock options. Under the guidelines, the mix of long-term incentives, for the named executive officers, based on the grant date fair value of the awards, is approximately:
Guidelines for the Allocation of Annual Equity Grants
| | | | | These allocations are intended to result in a mix of annual long-term incentives that is sufficiently performance-based and will result in: •a large component of total compensation being tied to the achievement of specific, multi-year operating performance objectives and changes in shareholder value (performance shares); and •an appropriate portion being tied solely to changes in shareholder value (stock options). |
Guidelines for the Allocation of Annual Equity Grants
The mix of annual long-term incentive compensation reflects the Compensation Committee’s judgment as to the appropriate balance of these incentives to achieve its objectives. While the aggregate grant date fair values of equity awards granted to the named executive officers consider both individual and Company performance, the mix of equity incentives awarded annually is fixed and generally does not vary from year-to-year. For a description of the equity awards granted in fiscal year 2021, refer to “—Grants of Plan-Based Awards in 2021” on page 58.
Guidelines for the Allocation of Annual Equity Grants
| 46 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Annual Equity Grants
Annual Equity Grants At its February 2022 meeting, the Compensation Committee determined to grant the named executive officers stock-based long-term incentive awards as described in the chart below. In making that determination, the Compensation Committee recognized that all of the named executive officers individually performed at superior levels and contributed substantially to our exceptionally strong 2021 operating and financial results in the face of a challenging environment, including the second year of a global pandemic, a historically high level of catastrophe losses and the continued low interest rate environment.
Annual Equity Grants
| | Stock-based long-term incentive award grant date fair value | Change in grant date fair value compared to awards granted in 2021 | | Mr. Schnitzer | $12.9 million | Increased by $1.4 million (12% higher). | | Messrs. Frey and Kess | 3.0 times base salary | Consistent with prior year. | | Messrs. Toczydlowski and Klein | 4.0 times base salary | Increased from 3.0 times base salary to approximately 4.0 times base salary to position their total direct compensation at levels more comparable to those of similarly situated executives of the companies in our Compensation Comparison Group. |
Annual Equity Grants
These equity awards approved for the named executive officers at the February 2022 meeting, will be reflected in the “Summary Compensation Table” in our Proxy Statement for our 2023 annual meeting. At its February 2021 meeting, the Compensation Committee granted the following stock-based long-term incentive awards:
Annual Equity Grants
| | Stock-based long-term incentive award grant date fair value | Change in grant date fair value compared to awards granted in 2020 | | Mr. Schnitzer | $11.5 million | Increased by $750,000 in consideration of the Company’s strong financial results and Mr. Schnitzer’s strong leadership in navigating the Company through the operating and economic conditions faced by the industry during the first year of the pandemic. | | Messrs. Frey and Kess | 3.0 times base salary | Consistent with prior year. | | Messrs. Toczydlowski and Klein | 3.0 times base salary | Increased from 2.5 times base salary to 3.0 times base salary to reflect their time in their respective roles and superior performance, and to raise their multiple of base salary to be consistent with the multiple of base salary for Messrs. Frey and Kess. |
Annual Equity Grants
These equity awards, approved at the February 2021 meeting, are reflected in the Summary Compensation Table on page 57. The ultimate value of stock-based long-term incentive awards at the time of vesting or, in the case of stock options, exercise, may be greater than or less than the grant date fair value, depending upon our operating performance and changes in the value of our stock price. The grant date fair values of long-term incentive awards are computed in accordance with the accounting standards described in footnote (1) to the “Summary Compensation Table” on page 57. Consistent with our historical practice, 60% of the stock-based long-term incentive awards were granted in the form of performance shares and 40% of the stock-based long-term incentive awards were granted in the form of stock options in each of 2022 and 2021.
Performance Shares
Performance Shares Under our program for granting performance shares, we may grant performance shares to certain of our employees who hold positions of vice president (or its equivalent) or above, including the named executive officers. These awards provide the recipient with the right to receive a variable number of shares of our common stock based upon our attainment of specified performance goals. The performance goals for performance share awards granted in 2022 and 2021 are based upon our attaining various adjusted returns on equity over three-year performance periods commencing January 1, 2022, and ending December 31, 2024, and commencing January 1, 2021, and ending December 31, 2023, respectively (in each case, “Performance Period Return on Equity”). Performance Period Return on Equity represents the average of the “Adjusted Return on Equity” for each of the three calendar years in the performance period. The “Adjusted Return on Equity” for each calendar year is determined by dividing “Adjusted Operating Income” by “Adjusted Shareholders’ Equity” for the year, each as defined in the Performance Share Awards Program and described below. “Adjusted Core Income”, as defined in the performance share awards granted in 2021 and 2022, excludes the after-tax effects of: •specified losses from officially designated catastrophes; •asbestos and environmental reserve charges or releases; •net realized investment gains or losses in the fixed maturities and real estate portfolios; •items that are unusual or infrequently occurring (or both); and •the cumulative effect of accounting changes and federal income tax rate changes, charges for amortization of goodwill to the extent goodwill is amortized and exit or disposal costs, each as defined by GAAP and each as disclosed in our financial statements (including
Performance Shares
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Performance Shares
accompanying footnotes and management’s discussion and analysis); and is then reduced by the after-tax dollar amount for expected “normal” catastrophe losses. In the first year of the performance period, such expected “normal” catastrophe losses are represented by a fixed amount set forth in the terms of the performance shares ($1.24 billion for 2021). In the two subsequent years of the performance period, such fixed amount for catastrophes is adjusted up or down by formula to reflect any increases or decreases, as the case may be, in written premiums in specified catastrophe-exposed commercial and personal lines. “Adjusted Core Income” is also reduced by an amount reflecting the historical level of credit losses (on an after-tax basis) associated with our fixed-income investments. The Compensation Committee believes this reduction of Adjusted Core Income is appropriate because credit losses in our fixed-income portfolio are part of reported net income but not core income and thus, absent making this reduction, would not be reflected in Adjusted Core Income. Specifically, for performance share awards granted in February 2022 and February 2021, the annual reduction is determined by multiplying a fixed factor (expressed as 2.25 basis points) by the amortized cost of the fixed maturity investment portfolio at the beginning of each quarter during the relevant year in the performance period and adding such amounts (on an after-tax basis) for each year in the performance period. “Adjusted Shareholders’ Equity” for each year in the performance period is defined in the Performance Share Awards Program as the sum of our total common shareholders’ equity, as reported on our balance sheet as of the beginning and end of the year (excluding net unrealized appreciation or depreciation of investments and adjusted as set forth in the immediately following sentence), divided by two. In calculating Adjusted Shareholders’ Equity, our total common shareholders’ equity as of the beginning and end of the year is adjusted to remove the cumulative after-tax impact of the following items during the performance period: (1) discontinued operations and (2) the adjustments and reductions made in calculating Adjusted Core Income. The Compensation Committee selected Performance Period Return on Equity as the performance measure in the Performance Share Plan because the Compensation Committee believes it is the best measure of return to shareholders and efficient use of capital over a multi-year period, as described further above under “—Pay-for-Performance Philosophy” and “Objectives of Our Executive Compensation Program”. The Compensation Committee seeks to establish the Performance Period Return on Equity standards such that 100% vesting requires a level of performance over the performance period that is expected to be in the top tier of the industry. In considering what would constitute such top tier performance over a future three-year period, the Compensation Committee considered: •Recent and historical trends in return on equity for the domestic property and casualty insurance industry, including industry peers included in the Company’s Compensation Comparison Group; •Recent and historical trends in core return on equity for the Company; •Current and expected underwriting and investment market conditions; •The Company’s business plan and the Company’s cost of equity; •That performance is measured over a three-year period and the plan and related award agreements do not provide for adjustments to be made during the performance period (other than in the case of specifically enumerated events, such as changes in corporate income tax rates and accounting changes). Accordingly, there is uncertainty, particularly in the second and third years of the performance period, and what actually constitutes top-tier performance during the performance period may differ from expectations due to factors that impact the Company’s performance objectives and are both difficult to forecast in advance and are outside of the control of management. These factors include, among others, changes in the level of economic activity, interest rates and the competitive environment for pricing; •That our financial goal of achieving a mid-teens core return on equity over time will depend on interest rates returning to more normal levels by historical standards and that the ongoing objective of achieving an industry-leading core return on equity over any period, and in particular a short- or medium-term period such as three years, would, in its view, be reasonably difficult to achieve; and •That the Company’s actuarial estimates reflect management’s best estimates of ultimate loss as of the relevant date and, accordingly, the Company’s financial plans do not include any prior year reserve development, positive or negative. Accordingly, while the Compensation Committee does not implement a formulaic calculation based on relative performance, which it believes could result in over or under compensation, it does set the Performance Period Return on Equity standards after considering the level of historical and expected performance that would constitute superior returns relative to other companies in the industry, including industry peers included in our Compensation Comparison Group.
Performance Shares
| 48 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Performance Shares
For performance shares granted in 2022 and 2021, the number of shares that vest, if any, is contingent upon our attaining Performance Period Return on Equity as indicated on the following chart. Performance falling between any of the identified points in the applicable chart below will result in an interpolated vesting percentage (for example, a Performance Period Return on Equity of 9% will yield a vesting of 83.3% for the performance shares granted in 2021 and 2022).
PERFORMANCE PERIOD RETURN ON EQUITY STANDARDS
| | | Performance Period Return on Equity for Performance Shares | | | | Vesting Percentage | Granted in 2020 | Granted in 2021 and 2022 | | Threshold | 0% | <8.0% | <8.0% | | | 50% | 8.0% | 8.0% | | | 75% | 8.5% | 8.5% | | | 100% | 10.0% | 10.0% | | | 110% | 13.5% | 10.5% | | | 120% | 14.5% | 11.0% | | | 130% | 15.0% | 11.5% | | | 140% | 15.5% | 12.0% | | | 150% | ≥ 16.0% | 12.5% | | | 160% | — | 13.0% | | | 180% | — | 14.5% | | Maximum | 200% | — | 16.0% |
PERFORMANCE PERIOD RETURN ON EQUITY STANDARDS
In setting the Performance Period Return on Equity of 10.0% that is required for 100% vesting for both the performance shares granted in 2021 and the performance shares granted in 2022, the Compensation Committee considered that, in each case, a Performance Period Return on Equity of 10% would meaningfully exceed the average return on equity for the domestic property and casualty insurance industry of 6.7% for 2020, and 4.6% for 2021, respectively. In addition, the Compensation Committee considered that a Performance Period Return on Equity of 10.0% would exceed our cost of equity and meaningfully exceed the actual average return on equity for the domestic property and casualty industry for the immediately preceding ten years. See the chart on page 34 which shows the historical returns on equity for the Company and the domestic property and casualty insurance industry. Because the performance shares are a long-term incentive intended to align a significant portion of our executives’ compensation with return on equity objectives over time, the Compensation Committee generally seeks to maintain consistency in the Performance Period Return on Equity standards from year-to-year. However, the Compensation Committee does from time to time make adjustments if it determines that there have been significant changes in the returns that it expects will constitute top tier performance. In setting the Performance Period Return on Equity levels for the performance shares granted in February 2022, the Compensation Committee decided not to make any changes to the Performance Period Return on Equity standards as compared to the levels for the performance shares granted in 2021. In setting the Performance Period Return on Equity levels for the performance shares granted in February 2021, the Compensation Committee decided not to make any changes to the Performance Period Return on Equity levels for 100% or less vesting as compared to the levels for the performance shares granted in February 2020. However, based in part on the advice of its independent compensation consultant, the Compensation Committee recalibrated the levels of Performance Period Return on Equity required for greater than 100% vesting in order to more appropriately balance potential payouts and performance relative to the Compensation Comparison Group. In making these decisions with respect to the performance shares granted in February 2021, the Compensation Committee considered that: •the Company’s return on equity was slightly above the 60th percentile over the past six performance share cycles prior to the 2021 performance share grant, yet it had the lowest average payout for performance share awards over the same six performance cycles, in each case, as compared to the property and casualty companies included in the Compensation Comparison Group; and •under the prior performance vesting grid, the Company’s maximum vesting percentage of 150% was substantially below (1) the average maximum vesting percentage for our Compensation Comparison Group of 176% and (2) the median maximum vesting percentage for our Compensation Comparison Group of 200%. To support our recruitment and retention objectives and to encourage a long-term focus on our operations, the performance shares vest subject to both the satisfaction of the requisite performance goals and the participant meeting specified service period criteria. The program provides for accelerated vesting and/or waiver of service requirements in the event of death, disability or a qualifying “retirement”, as defined in the awards. The performance shares granted in 2020 vest pro-rata upon a qualified retirement and the performance shares granted in 2021 and 2022 continue to fully vest according to the original vesting schedule upon a qualified retirement. Beginning with the performance shares granted in 2021, the Compensation Committee modified the retirement treatment for the performance shares to be more consistent with the retirement treatment of awards granted by more than 90% of the peer companies in the Company’s Compensation Comparison Group, based in part on the advice of the Compensation Committee’s independent compensation consultant. Beginning with the performance shares granted in 2022, the Compensation Committee modified the treatment for death and disability under the performance shares to continue to fully vest according to the original vesting schedule upon death or disability consistent with the retirement treatment under the awards. In the event of a participant’s voluntary termination for “good reason” or involuntary termination without “cause” within 24 months following a change in control of the Company, the service vesting requirements with respect to the performance share grants will be waived. Further, under his employment agreement, Mr. Schnitzer is entitled to conversion of all of his performance shares into time-vesting awards upon a change in control and he is entitled to accelerated vesting of all of his equity awards if his
Payment of Performance Shares Granted for the 2019-2021 Period
Payment of Performance Shares Granted for the 2019-2021 Period In February 2022, the Compensation Committee reviewed and subsequently certified the results for the performance shares granted to the named executive officers in 2019. Payout of shares under these performance share awards was subject to attaining specified adjusted returns on equity over the three-year performance period commencing on January 1, 2019, and ending on December 31, 2021. The adjusted return on equity for such performance period was 13.0%, which resulted in the vesting of the performance shares at 108.6%. No discretionary adjustments were made by the Committee to modify the performance share payouts due to factors related to the pandemic.
Stock Options
Stock Options All stock options are granted with an exercise price equal to the closing price of the underlying shares on the date of grant. Our annual award of stock options generally vests 100% three years after the date of grant and has a maximum expiration date of ten years from the date of grant. The named executive officers are entitled to accelerated vesting of their stock options following a qualified retirement, death or disability or in the event of a voluntary termination for “good reason” or involuntary termination without “cause” within 24 months following a change in control of the Company. For a description of other vesting events see “—Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”.
Compensation Comparison Group
As of December 31, 2021, the Company’s net income and revenue were at approximately the 46th percentile and the 38th percentile of the Compensation Comparison Group, respectively, and its market cap was at 81% of the median of the Compensation Comparison Group. The Compensation Committee reviews the composition of our peer group annually to ensure that the companies constituting the peer group continue to provide meaningful and relevant compensation comparisons. The Compensation Committee did not make any changes to our Compensation Comparison group in 2021 as a result of this review.
Non-Competition Agreements
Non-Competition Agreements All members of our Management Committee, including the named executive officers, have signed non-competition agreements. The agreements provide that, upon an executive’s termination of employment, we may elect to, and in the event of Mr. Schnitzer’s voluntary termination for “good reason” or involuntary termination without “cause” within the 24-month period following a change in control, we have elected to, impose a six-month non-competition obligation upon the executive that would preclude the executive, subject to limited exceptions, from (1) performing services for or having any ownership interest in any entity or business unit that is primarily engaged in the property and casualty insurance business or (2) otherwise engaging in the property and casualty insurance business. This restriction will apply in the United States and any other country where we are physically present and engaged in the property and casualty insurance business as of the executive’s termination date. If we elect to enforce the non-competition terms, and the executive complies with all of the obligations under the agreement, then the executive will be entitled to: •receive a lump sum payment at the end of the six-month restricted period equal to the sum of (1) six-months’ base salary plus (2) 50% of the executive’s average annual bonus for the prior two years plus (3) 50% of the aggregate grant date fair value of the executive’s average annual equity awards for the prior two years; and •reimbursement for the cost of continuing health benefits on similar economic terms as in place immediately prior to the executive’s termination date during the six-month non-competition period or payment of an equivalent amount, payable at the end of the six-month restricted period.
Timing and Pricing of Equity Grants
Timing and Pricing of Equity Grants The Compensation Committee typically makes annual awards of equity at its meeting held in early February, which is set in advance as part of the Board’s annual calendar of scheduled meetings. The Compensation Committee has in the past, and may in the future, make limited grants of equity on other dates in order to retain key employees, to compensate an employee in connection with a promotion or to compensate newly hired executives for equity or other benefits lost upon termination of their previous employment or to otherwise induce them to join us. Under our Governance Guidelines, the Compensation Committee may make off-cycle equity grants only on previously determined dates in each calendar month, which will be either (1) the date of a regularly scheduled Board or Compensation Committee meeting, (2) the next succeeding 15th day of the calendar month (or if the 15th is not a business day, the business day immediately preceding the 15th) or (3) in the case of grants in connection with new hires and/or promotions, on, or within 15 days of, the first day of employment or other personnel change. The grant date of equity grants to executives is the date of Compensation Committee approval. As discussed above, the exercise price of stock option grants is the closing market price of our common stock on the date of grant. As discussed under “Governance of Your Company—Committees of the Board and Meetings—Compensation Committee” on page 13, the Compensation Committee has delegated to the Chief Executive Officer, subject to the prior written consent of our Executive Vice President and General Counsel, the authority to make limited “off-cycle” grants to employees who are not Committee Approved Officers on the grant dates established by our Governance Guidelines. For these grants, as discussed above, the grant date is the date of such approval, and the exercise price of all stock options is
Timing and Pricing of Equity Grants
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Timing and Pricing of Equity Grants
the closing market price of our common stock on the date of grant. Under the 2014 Stock Incentive Plan, stock options cannot be “repriced” unless such repricing is approved by our shareholders. See “Governance of Your Company—Dating and Pricing of Equity Grants” on page 21. We monitor and periodically review our equity grant policies to ensure compliance with plan rules and applicable law. We do not have a program, plan or practice to time our equity grants in coordination with the release of material, non-public information.
Severance and Change in Control Agreements
Severance and Change in Control Agreements All of our current senior executives, other than Mr. Schnitzer, are covered by our severance plan. Mr. Schnitzer’s letter agreement, discussed at greater length below under “—Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control—Summary of Key Agreements” on page 67, contains severance benefits that are triggered under some circumstances, including some circumstances related to a change in control of the Company. Each of our named executive officers, other than Mr. Schnitzer, has entered into an agreement with us pursuant to which the named executive officer is granted enhanced severance benefits in exchange for agreeing to non-solicitation and non-disclosure provisions. Under the terms of such agreements, these named executive officers are eligible to receive a severance benefit if they are involuntarily terminated due to a reduction in force or for reasons other than “cause” or if they are asked to take a substantial demotion. The terms of these agreements are described more fully under “—Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control—Summary of Key Agreements” on page 67. In addition, based on the advice of the Compensation Committee’s independent compensation consultant and consistent with market practice, the equity awards made in February 2022 and 2021, including those made to the named executive officers, provide for waiver of service vesting conditions in the event of a voluntary termination for “good reason” or an involuntary termination without “cause” within 24 months of a change in control. The Compensation Committee believes that these severance agreements and, in some circumstances, change in control arrangements are necessary to attract and retain the talent necessary for our long-term success. The Compensation Committee also believes that these severance and change in control programs allow our executives to focus on duties at hand and provide security should their employment be terminated as a result of an involuntary termination without cause or a constructive discharge or following a change of control, as applicable. For these reasons, and based on advice of the Compensation Committee’s independent compensation consultant, the Compensation Committee believes that these arrangements are appropriate and consistent with similar provisions agreed to by members of our Compensation Comparison Group and their executive officers. None of the severance and change in control agreements with the named executive officers include excise tax gross-up protections.
Recapture/Forfeiture Provisions
Recapture/Forfeiture Provisions Our Board has adopted a policy requiring the reimbursement and/or cancellation of all or a portion of any incentive cash bonus or stock-based incentive compensation awarded after February 1, 2010 to members of our Management Committee or other officers who are subject to Section 16 of the Exchange Act when the Compensation Committee has determined that all of the following factors are present: •the award and/or payout of an award was predicated upon the achievement of financial results that were subsequently the subject of a restatement; •the employee engaged in fraud or willful misconduct that was a significant contributing factor in causing the restatement; and •a lower award and/or payout of an award would have been made to the employee based upon the restated financial results. Incentive compensation is granted subject to the policy that, in each such instance described above, the Company will, to the extent permitted by applicable law and subject to the discretion and approval of the Compensation Committee, taking into account such facts and circumstances as it deems appropriate, including the costs and benefits of doing so, seek to recover the employee’s cash bonus and/or stock-based incentive compensation paid or issued to the employee in excess of the amount that would have been paid or issued based on the restated financial results. If the Compensation Committee determines, however, that, after recovery of an excess amount from an employee, the employee is nonetheless unjustly enriched, it may seek recovery of more than such excess amount up to the entire amount of the bonus or other incentive compensation. In addition, under the terms of our executive equity award agreements, in the event that the employment of an executive, including the named executive officers, is terminated for gross misconduct or for cause, as determined by the Compensation Committee, all outstanding vested and unvested awards are cancelled upon his or her termination. Further, in connection with equity awards, the named executive officers and other recipients of equity awards are parties to an agreement that provides for the forfeiture of unexercised or unvested awards and the recapture by us of any compensatory value, including any amount included as compensation in his or her taxable income, that the former executive received or realized by way of payment, exercise or vesting during the period beginning 12 months prior to the date of termination of employment with us, and ending 12 months after the date of the termination of employment with us, if during the 12-month period following his or her termination, the executive: •fails to keep all confidential information strictly confidential; •uses confidential information to solicit or encourage any person or entity that is a client, customer, policyholder, vendor, consultant or agent of ours to discontinue business with us after accepting a position with a direct competitor; •is directly and personally involved in the negotiation or solicitation of the transfer of business away from us; or •solicits, hires or otherwise attempts to affect the employment of any person employed by us at any time during the last three months of the executive’s employment or thereafter, without our consent.
Shareholder Engagement
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Equity Awards ($) | Total ($) | Increase from Prior Year (%) | | Alan D. Schnitzer Chairman and Chief Executive Officer | 2021 | 1,300,000 | 6,500,000 | 12,900,000 | 20,700,000 | 9 | | | 2020 | 1,300,000 | 6,200,000 | 11,500,000 | 19,000,000 | 7 | | | 2019 | 1,000,000 | 6,000,000 | 10,750,000 | 17,750,000 | 17 | | Daniel S. Frey Executive Vice President and Chief Financial Officer | 2021 | 737,739 | 2,300,000 | 2,250,000 | 5,287,739 | 8 | | | 2020 | 700,000 | 2,100,000 | 2,100,000 | 4,900,000 | 8 | | | 2019 | 687,739 | 1,750,000 | 2,100,000 | 4,537,739 | 47 | | Avrohom J. Kess Vice Chairman and Chief Legal Officer | 2021 | 900,000 | 3,000,000 | 2,700,000 | 6,600,000 | 4 | | | 2020 | 900,000 | 2,755,000 | 2,700,000 | 6,355,000 | 1 | | | 2019 | 887,739 | 2,675,000 | 2,700,000 | 6,262,739 | 4 | | Gregory C. Toczydlowski Executive Vice President and President, Business Insurance | 2021 | 750,000 | 2,725,000 | 3,080,000 | 6,555,000 | 23 | | | 2020 | 750,000 | 2,315,000 | 2,250,000 | 5,315,000 | 9 | | | 2019 | 737,739 | 2,250,000 | 1,900,000 | 4,887,739 | 3 | | Michael F. Klein Executive Vice President and President Personal Insurance | 2021 | 700,000 | 2,500,000 | 2,900,000 | 6,100,000 | 23 | | | 2020 | 700,000 | 2,165,000 | 2,100,000 | 4,965,000 | n/a |
Summary Compensation Table
Summary Compensation Table The following table provides summary information concerning compensation paid or accrued by us to our Chairman and Chief Executive Officer, our Executive Vice President and Chief Financial Officer and each of our three other most highly compensated executive officers who served in such capacities at December 31, 2021. We refer to these individuals collectively as the “named executive officers”.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings(4) ($) | All Other Compensation(5) ($) | Total ($) | | Alan D. Schnitzer Chairman and Chief Executive Officer | 2021 | 1,300,000 | — | 6,900,051 | 4,598,852 | 6,500,000 | 471,951 | 82,843 | 19,853,697 | | | 2020 | 1,300,000 | — | 6,450,017 | 4,300,009 | 6,200,000 | 701,662 | 38,582 | 18,990,270 | | | 2019 | 1,000,000 | — | 5,399,999 | 3,600,004 | 6,000,000 | 676,671 | 102,135 | 16,778,809 | | Daniel S. Frey Executive Vice President and Chief Financial Officer | 2021 | 737,739 | — | 1,260,008 | 839,801 | 2,300,000 | 183,704 | 7,000 | 5,328,252 | | | 2020 | 700,000 | — | 1,260,040 | 840,004 | 2,100,000 | 215,402 | 7,000 | 5,122,446 | | | 2019 | 687,739 | — | 974,993 | 649,994 | 1,750,000 | 160,906 | 6,939 | 4,230,571 | | Avrohom J. Kess Vice Chairman and Chief Legal Officer | 2021 | 900,000 | — | 1,619,931 | 1,079,737 | 3,000,000 | 157,508 | 7,000 | 6,764,176 | | | 2020 | 900,000 | — | 1,619,995 | 1,080,003 | 2,755,000 | 214,441 | 7,000 | 6,576,439 | | | 2019 | 887,739 | — | 1,530,059 | 1,020,006 | 2,675,000 | 183,974 | 6,662 | 6,303,440 | | Gregory C. Toczydlowski Executive Vice President and President, Business Insurance | 2021 | 750,000 | — | 1,350,059 | 899,785 | 2,725,000 | 176,949 | 23,860 | 5,925,653 | | | 2020 | 750,000 | — | 1,140,055 | 760,004 | 2,315,000 | 457,448 | 23,860 | 5,446,367 | | | 2019 | 737,739 | — | 1,049,944 | 700,004 | 2,250,000 | 509,846 | 10,088 | 5,257,621 | | Michael F. Klein Executive Vice President and President, Personal Insurance | 2021 | 700,000 | — | 1,260,008 | 839,801 | 2,500,000 | 157,963 | 28,607 | 5,486,379 | | | 2020 | 700,000 | — | 1,050,034 | 700,008 | 2,165,000 | 450,908 | 70,648 | 5,136,598 |
Summary Compensation Table
(1)The dollar amounts represent the aggregate grant date fair value of stock awards granted during each of the years presented. The grant date fair value of a stock award is measured in accordance with the guidance in FASB ASC Topic 718 using the assumptions discussed in Note 14 to our financial statements for the fiscal year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 17, 2022 (the “Form 10-K”), without taking into account estimated forfeitures. Stock awards during the years presented reflect performance shares. With respect to the performance shares, the estimate of the grant date fair value determined in accordance with the guidance in FASB ASC Topic 718 assumes the vesting of 100% of the performance shares awarded. Assuming the highest level of performance is achieved (which would result in the vesting of 150% of the performance shares granted in 2019 and 2020 and in the vesting of 200% of the performance shares granted in 2021), the aggregate grant date fair value of the performance shares reflected in the table above would be:
Summary Compensation Table
| Name | 2021 | 2020 | 2019 | | Alan D. Schnitzer | $13,800,102 | $9,675,026 | $8,099,999 | | Daniel S. Frey | $2,520,016 | $1,890,060 | $1,462,552 | | Avrohom J. Kess | $3,239,861 | $2,430,059 | $2,295,088 | | Gregory C. Toczydlowski | $2,700,117 | $1,710,149 | $1,574,979 | | Michael F. Klein | $2,520,016 | $1,575,050 | n/a |
Summary Compensation Table
The dividend equivalents attributable to performance shares are deemed “reinvested” in additional performance shares and will only be distributed upon the vesting, if any, of the performance shares in accordance with the performance share award terms. In accordance with the SEC’s rules, dividend equivalents on performance shares, as well as cash dividends on restricted stock units, are not required to be reported because the values of such future dividends are factored into the grant date fair value of the awards. For a discussion of specific stock awards granted during 2021, see “Grants of Plan-Based Awards in 2021” below and the narrative discussion that follows. (2)The dollar amounts represent the grant date fair value of stock option awards granted during each of the years presented. The grant date fair value of a stock option award is measured in accordance with the guidance in FASB ASC Topic 718 using the assumptions discussed in Note 14 to our financial statements for the fiscal year ended December 31, 2021 included in the Company’s Form 10-K, without taking into account estimated forfeitures. For a discussion of specific stock option awards granted during 2021, see “Grants of Plan-Based Awards in 2021” below and the narrative discussion that follows. (3)Reflects annual cash incentive compensation paid in 2022 for performance year 2021, cash incentive compensation paid in 2021 for performance year 2020 and cash incentive compensation paid in 2020 for performance year 2019, respectively. For a discussion of the Company’s annual cash bonus determinations, see “Compensation Discussion and Analysis—Compensation Elements and Decisions—Annual Cash Bonus”. (4)These amounts represent the aggregate change in actuarial present value of accumulated pension benefits for each of the years presented, using the same pension plan measurement date used for financial statement reporting purposes. We do not provide any of our executives with any above-market or preferential earnings on non-qualified deferred compensation. For additional information about pension benefits, see “Post-Employment Compensation—Pension Benefits for 2021” below. (5)For 2021, “All Other Compensation” for Mr. Schnitzer includes $30,275 for personal use of a Company car and driver and other ground transportation arrangements, calculated as described below, $14,824 of personal security expenses, calculated at the actual cost to us, incurred on his behalf pursuant to the Company’s executive security program, and $16,860 for tax and financial planning services calculated at the actual cost to us.
Summary Compensation Table
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Summary Compensation Table
Pursuant to our security policy, in 2021, we provided a car and driver or other ground transportation arrangements to Mr. Schnitzer for business and personal travel. We calculated the incremental cost to us for the personal use of any Company car and driver (including commuting and business travel not considered directly and integrally related to the performance of the executive’s duties) based on the operating costs, such as fuel and maintenance, related to such travel. Compensation and benefits for the employee drivers are not included in the calculation of incremental cost because the employee drivers are members of our security staff and, consistent with our executive security policy, we would have otherwise incurred such cost for business purposes, whether or not the driver was available to Mr. Schnitzer for personal travel. The incremental cost of personal trips using other ground transportation arrangements, such as car services, are valued at the actual cost to us. Mr. Schnitzer uses Company aircraft for business and personal air travel as required by our security policy. Mr. Schnitzer reimburses the Company for personal travel on Company aircraft in an amount equal to the incremental cost to the Company associated with such travel up to the maximum amount legally payable under FAA regulations. Incremental costs in excess of the amount legally payable under FAA regulations in the amount of $13,706 is included in “All Other Compensation” for 2021. For 2021, “All Other Compensation” for Messrs. Toczydlowski and Klein includes the cost of tax and financial planning services, and the amount for Mr. Klein also includes costs under our executive physical program. For more information about these perquisites, see “Compensation Discussion and Analysis—Other Compensation—Other Benefits”.
Grants of Plan-Based Awards in 2021
Grants of Plan-Based Awards in 2021 The following table provides information on stock awards and stock options granted in 2021 to each of our named executive officers.
Grants of Plan-Based Awards in 2021
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards Target(1) ($) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Option Awards: Number of Securities Underlying Options(3) (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(4) ($) | | | | | Threshold (#) | Target (#) | Maximum (#) | | | | | Alan D. Schnitzer | 2/2/2021 | | 24,673 | 49,346 | 98,692 | | | 6,900,051 | | | 2/2/2021 | | | | | 197,343 | 139.83 | 4,598,852 | | | | n/a | | | | | | | | Daniel S. Frey | 2/2/2021 | | 4,506 | 9,011 | 18,022 | | | 1,260,008 | | | 2/2/2021 | | | | | 36,037 | 139.83 | 839,801 | | | | n/a | | | | | | | | Avrohom J. Kess | 2/2/2021 | | 5,793 | 11,585 | 23,170 | | | 1,619,931 | | | 2/2/2021 | | | | | 46,333 | 139.83 | 1,079,737 | | | | n/a | | | | | | | | Gregory C. Toczydlowski | 2/2/2021 | | 4,828 | 9,655 | 19,310 | | | 1,350,059 | | | 2/2/2021 | | | | | 38,611 | 139.83 | 899,785 | | | | n/a | | | | | | | | Michael F. Klein | 2/2/2021 | | 4,506 | 9,011 | 18,022 | | | 1,260,008 | | | 2/2/2021 | | | | | 36,037 | 139.83 | 839,801 | | | | n/a | | | | | | |
Grants of Plan-Based Awards in 2021
(1)Our annual Senior Executive Performance Plan does not include thresholds, targets or maximums that are determinable at the beginning of the performance year. For additional information regarding annual cash bonuses, see “Compensation Discussion and Analysis—Compensation Elements and Decisions—Annual Cash Bonus” above. The actual cash bonuses paid to our named executive officers are disclosed in the “Summary Compensation Table” in the “Non-Equity Incentive Plan Compensation” column. (2)Represents performance shares granted as part of the annual long-term equity grant with respect to performance year 2020. All performance shares were granted under the Company’s 2014 Stock Incentive Plan. Performance shares represent the right to earn shares of our common stock based on our attainment of specified performance goals, as described above under “Compensation Discussion and Analysis—Compensation Elements and Decisions—Long-Term Stock Incentives—Performance Shares”. As described in more detail in that section, for awards granted in 2021, if our return on equity (as defined in the award agreement) over the three-year performance period meets the minimum threshold of 8%, then 50% of the number of performance shares awarded and accumulated dividend equivalents will vest. If our return on equity over the three-year performance period is 10%, then 100% of the number of shares awarded and accumulated dividend equivalents will vest. If our return on equity over the three-year performance period equals or exceeds 16%, then a maximum of 200% of the number of shares awarded and accumulated dividend equivalents will vest. The estimated future payouts of performance shares in the table above do not include additional shares that may be allocated to recipients of performance shares as a result of the phantom reinvestment of dividend equivalents on unvested performance shares, but the value of such additional shares is factored into the grant date fair values of the performance shares in the table above. (3)Represents stock options granted in 2021 as part of the annual long-term equity grant with respect to performance year 2020. All stock options were granted under the Company’s 2014 Stock Incentive Plan. (4)The amount represents the grant date fair value of stock and option awards measured in accordance with the guidance in FASB ASC Topic 718, utilizing the assumptions discussed in Note 14 to our financial statements for the fiscal year ended December 31, 2021 included in the Company’s Form 10-K, without taking into account estimated forfeitures. With respect to the performance shares, the estimate of the grant date fair value determined in accordance with the guidance in FASB ASC Topic 718 assumes the vesting of 100% of the performance shares awarded.
Grants of Plan-Based Awards in 2021
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Narrative Supplement to Summary Compensation Table and Grants of Plan-Based Awards in 2021
Narrative Supplement to Summary Compensation Table and Grants of Plan-Based Awards in 2021
Narrative Supplement to Summary Compensation Table and Grants of Plan-Based Awards in 2021
| Employment Arrangements |
Option Exercises and Stock Vested in 2021
Option Exercises and Stock Vested in 2021 The following table provides information regarding the values realized by our named executive officers upon the exercise of stock options and the vesting of stock awards in 2021.
Option Exercises and Stock Vested in 2021
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting(2) (#) | Value Realized on Vesting(3) ($) | | Alan D. Schnitzer | 114,225 | 8,143,805 | 50,092 | 7,835,955 | | Daniel S. Frey | — | — | 9,044 | 1,414,815 | | Avrohom J. Kess | — | — | 14,193 | 2,220,272 | | Gregory C. Toczydlowski | 44,954 | 2,443,242 | 9,739 | 1,523,576 | | Michael F. Klein | 51,106 | 2,879,814 | 9,044 | 1,414,815 |
Option Exercises and Stock Vested in 2021
(1)Value realized on exercise is equal to the difference between the fair market value of the stock acquired upon exercise on the exercise date less the exercise price, multiplied by the number of options exercised. (2)The shares acquired upon vesting represent performance shares that are treated as vested on December 31, 2021, the last day of the relevant three-year performance period, including the following shares in respect of phantom dividend equivalents on such performance shares: Mr. Schnitzer (3,615 shares), Mr. Frey (652 shares), Mr. Kess (1,024 shares), Mr. Toczydlowski (703 shares) and Mr. Klein (652 shares). (3)The value realized on vesting is based on the closing price of our common stock on the NYSE on the vesting date. If vesting occurs on a day on which the NYSE is closed, the value realized on vesting is based on the closing price on the last trading day prior to the vesting date.
Option Exercises and Stock Vested in 2021
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Outstanding Equity Awards at December 31, 2021
Outstanding Equity Awards at December 31, 2021 The following table provides information with respect to the option awards and stock awards held by the named executive officers at December 31, 2021.
Outstanding Equity Awards at December 31, 2021
| | Option Awards | | | | | Stock Awards | | | | | | | | | | | Equity Incentive Plan Awards | | | | Option Award Grant Date | Number of Securities Underlying Unexercised Options(1) (#) | | Option Exercise Price ($) | Option Expiration Date | Stock Award Grant Date | Number of Unearned Shares, Units or Other Rights That Have Not Vested(2) (#) | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) ($) | | Name | | Exercisable | Unexercisable | | | | | | | Alan D. Schnitzer | 2/03/2015 | 66,522 | — | 106.04 | 2/03/2025 | | | | | | 2/02/2016 | 150,829 | — | 106.03 | 2/02/2026 | | | | | | 2/09/2017 | 222,901 | — | 118.78 | 2/09/2027 | | | | | | 2/06/2018 | 162,927 | — | 140.85 | 2/06/2028 | | | | | | 2/05/2019 | — | 216,246 | 126.18 | 2/05/2029 | | | | | | 2/04/2020 | — | 298,368 | 132.58 | 2/04/2030 | | | | | | | | | | | 2/04/2020 | 76,900 | 12,029,440 | | | 2/02/2021 | — | 197,343 | 139.83 | 2/02/2031 | | | | | | | | | | | 2/02/2021 | 100,976 | 15,795,671 | | Daniel S. Frey | 2/02/2016 | 6,787 | — | 106.03 | 2/02/2026 | | | | | | 2/09/2017 | 5,573 | — | 118.78 | 2/09/2027 | | | | | | 2/06/2018 | 5,812 | — | 140.85 | 2/06/2028 | | | | | | 2/05/2019 | — | 39,044 | 126.18 | 2/05/2029 | | | | | | 2/04/2020 | — | 58,286 | 132.58 | 2/04/2030 | | | | | | | | | | | 2/04/2020 | 15,023 | 2,350,006 | | | 2/02/2021 | — | 36,037 | 139.83 | 2/02/2031 | | | | | | | | | | | 2/02/2021 | 18,439 | 2,884,424 | | Avrohom J. Kess | 12/30/2016 | 30,358 | — | 122.42 | 12/30/2026 | | | | | | 2/09/2017 | 63,155 | — | 118.78 | 2/09/2027 | | | | | | 2/06/2018 | 47,686 | — | 140.85 | 2/06/2028 | | | | | | 2/05/2019 | — | 61,270 | 126.18 | 2/05/2029 | | | | | | 2/04/2020 | — | 74,939 | 132.58 | 2/04/2030 | | | | | | | | | | | 2/04/2020 | 19,314 | 3,021,330 | | | 2/02/2021 | — | 46,333 | 139.83 | 2/02/2031 | | | | | | | | | | | 2/02/2021 | 23,706 | 3,708,362 | | Gregory C. Toczydlowski | 2/02/2016 | 45,249 | — | 106.03 | 2/02/2026 | | | | | | 2/09/2017 | 43,342 | — | 118.78 | 2/09/2027 | | | | | | 2/06/2018 | 34,771 | — | 140.85 | 2/06/2028 | | | | | | 2/05/2019 | — | 42,048 | 126.18 | 2/05/2029 | | | | | | 2/04/2020 | — | 52,735 | 132.58 | 2/04/2030 | | | | | | | | | | | 2/04/2020 | 13,592 | 2,126,231 | | | 2/02/2021 | — | 38,611 | 139.83 | 2/02/2031 | | | | | | | | | | | 2/02/2021 | 19,757 | 3,090,568 | | Michael F. Klein | 2/02/2016 | 41,478 | — | 106.03 | 2/02/2026 | | | | | | 2/09/2017 | 40,246 | — | 118.78 | 2/09/2027 | | | | | | 2/06/2018 | 32,287 | — | 140.85 | 2/06/2028 | | | | | | 2/05/2019 | — | 39,044 | 126.18 | 2/05/2029 | | | | | | 2/04/2020 | — | 48,572 | 132.58 | 2/04/2030 | | | | | | | | | | | 2/04/2020 | 12,519 | 1,958,338 | | | 2/02/2021 | — | 36,037 | 139.83 | 2/02/2031 | | | | | | | | | | | 2/02/2021 | 18,439 | 2,884,424 |
Outstanding Equity Awards at December 31, 2021
(1)Stock options are exercisable 100% on the third anniversary of the stock option award grant date. (2)The number of shares reflected for each of the named executive officers represents the sum of (a) the maximum number of performance shares and (b) the additional shares that have been allocated to the named executive officer through December 31, 2021, as a result of the phantom reinvestment of dividend equivalents on the maximum number of performance shares. We have reflected the maximum number of performance shares for each named executive officer because (a) results for 2020 and 2021, the first and second year of the three-year performance period for the February 4, 2020 awards, were above target and (b) results for 2021, the first year of the three-year performance period for the February 2, 2021 awards, were also above target. The actual numbers of shares that will be distributed with respect to the 2020 and 2021 awards are not yet determinable. The awards granted on February 4, 2020 vest in proportion to actual
Outstanding Equity Awards at December 31, 2021
| 60 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Outstanding Equity Awards at December 31, 2021
performance over the three-year performance period ending on December 31, 2022, and the awards granted on February 2, 2021, vest in proportion to actual performance over the three-year performance period ending on December 31, 2023. For purposes of this column, fractional shares have been rounded to the nearest whole share. See the description of performance shares in the “Compensation Discussion and Analysis—Compensation Elements and Decisions—Long-Term Stock Incentives—Performance Shares” section. (3)The market value is based on the closing price on the NYSE of our common stock on December 31, 2021, the last trading day of 2021 ($156.43), multiplied by the number of performance shares reported in the table.
Post-Employment Compensation
| Pension Benefits for 2021 |
The Company’s Pension Plan
The Company’s Pension Plan The Company’s Pension Plan is a qualified defined benefit pension plan with a cash-balance formula or, for certain legacy participants, traditional final average pay formulas or legacy frozen cash-balance formulas. Each named executive officer participates in the cash-balance formula under which the named executive officer has a hypothetical account balance that grows with interest and pay credits each year. As of December 31, 2021, the named executive officers’ qualified pension account balances were as follows:
The Company’s Pension Plan
| Name | Qualified Account Balance at December 31, 2021(1) | | | Alan D. Schnitzer | | $199,937 | | Daniel S. Frey | | $167,932 | | Avrohom J. Kess | | $47,993 | | Gregory C. Toczydlowski | | $429,382 | | Michael F. Klein | | $524,824 |
The Company’s Pension Plan
(1)These dollar amounts represent the participant’s account balance rather than the present value of the accumulated benefit, which is set forth in the “—Pension Benefits for 2021” table above and calculated as described in footnote (2) to that table. Interest credits are applied quarterly to the prior quarter’s cash-balance pension account balance. These interest credits are generally based on the yield on ten-year treasury bonds, subject to a minimum annual interest rate of 4.01%. Pay credits are calculated on an annual basis as a percentage of compensation, with the percentage determined based on the sum of age plus service at the end of the year under the following schedule:
The Company’s Pension Plan
| Age + Service | Pay Credit | | < 30 | 2.00% | | 30 - 39 | 2.50% | | 40 - 49 | 3.00% | | 50 - 59 | 4.00% | | 60 - 69 | 5.00% | | > 69 | 6.00% |
The Company’s Pension Plan
Service is calculated based on elapsed time with the Company plus any service with TPC, Citigroup and certain of its affiliates and predecessors (prior to August 20, 2002) and The St. Paul. Pay credits are calculated by multiplying the appropriate pay credit percentage by the named executive officer’s compensation for the year, including base salary and bonus, up to the qualified plan compensation limit (which for 2021 was $290,000. The pension plan benefit is subject to the qualified plan benefit limit (if applicable) under Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), income tax provisions. The plan’s normal retirement age is 65. However, under the cash-balance formula, participants are eligible to receive a distribution from the plan any time after they vest (currently after three years of service) and they separate from us. Once separated from us, participants may elect to receive a lump sum payment, life annuity, 50% joint and survivor annuity, 75% joint and survivor annuity, 100% joint and survivor annuity or a ten-year certain and life annuity. All payment forms are actuarially equivalent. Eligible part-time employees who are at least age 62 can apply for an in-service distribution from the plan, calculated as if they separated from us. There are no special early retirement benefits under the cash-balance formula, even in the case of an in-service distribution. Under the plan, the benefits of some participants may be determined in whole or in part under transition benefit rules—that is, legacy benefit provisions.
TPC Benefit Equalization Plan (Non-Qualified Pension Plan)
| Non-Qualified Deferred Compensation for 2021 |
TPC Benefit Equalization Plan (Non-Qualified Pension Plan)
| Name | Non-Qualified Deferred Compensation Plan Name | Executive Contributions in 2021(1) ($) | Company Contributions in 2021 ($) | Aggregate Earnings in 2021 ($) | Aggregate Withdrawals/ Distributions in 2021 ($) | Aggregate Balance at 12/31/21(2) ($) | | Alan D. Schnitzer | Deferred Compensation Plan | — | — | 1,435,240 | — | 11,473,622 | | Daniel S. Frey | | — | — | — | — | — | | Avrohom J. Kess | Deferred Compensation Plan | 1,950,000 | — | 2,153,407 | — | 12,623,928 | | Gregory C. Toczydlowski | | — | — | — | — | — | | Michael F. Klein | Deferred Compensation Plan | — | — | 172,370 | — | 1,067,994 | | | Executive Savings Plan | — | — | 807 | — | 9,912 |
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control The following table describes the potential payments and benefits under the Company’s compensation and benefit plans and contractual agreements to which the named executive officers would have been entitled if a termination of employment or change in control occurred on the last business day of 2021. The only agreements, arrangements or plans that entitle executive officers to severance, perquisites or other enhanced benefits upon termination of their employment or change in control are: •Mr. Schnitzer’s employment letter, as described following the table; •the individual non-solicitation and non-disclosure agreements executed by members of our Management Committee (other than Mr. Schnitzer), as described following the table; •the non-competition agreements executed by all members of the Management Committee, as described in footnote (1) to the table; •the Company’s Executive Severance Plan, as described in footnote (3) to the table; and •the terms of performance share and stock option awards. The amounts shown in the table below do not include: •payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the named executive officers (including welfare benefits that are provided to all U.S. retirees of the Company); •regular pension benefits under our Pension Plan, the Benefit Equalization Plan or the TPC Benefit Equalization Plan (see “Post-Employment Compensation—Pension Benefits for 2021” above); and •distributions of previously vested plan balances under our 401(k) Savings Plan, the Deferred Compensation Plan and the Executive Savings Plan (see “Compensation Discussion and Analysis—Other Compensation—Deferred Compensation” for information about those plans generally and “Post-Employment Compensation—Non-Qualified Deferred Compensation for 2021” above for information about the Deferred Compensation Plan and the Executive Savings Plan).
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
| 64 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
| Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control Table |
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
| Named Executive Officer | Involuntary Termination Without “Cause” or, if Applicable, Voluntary Termination for “Good Reason” ($) | Additional Value if Involuntary Termination without “Cause” or, if Applicable, Voluntary Termination for “Good Reason” Follows a Change in Control ($) | Change in Control ($) | Voluntary Termination without “Good Reason”, including Voluntary Retirement ($) | Disability ($) | Death ($) | | Alan D. Schnitzer | | | | | | | | Cash Severance Payment(1) | 24,062,507 | — | — | 9,262,507 | — | — | | Acceleration of Equity Awards(2) | 16,933,412 | 16,508,684 | — | 16,933,412 | 16,933,412 | 24,907,744 | | Value of Continuing Benefits(3) | 26,705 | — | — | 6,474 | — | — | | Total Termination Benefits | 41,022,624 | 16,508,684 | — | 26,202,393 | 16,933,412 | 24,907,744 | | Daniel S. Frey | | | | | | | | Cash Severance Payment(1) | 7,737,511 | — | — | 2,387,511 | — | — | | Acceleration of Equity Awards(2) | 3,169,416 | — | — | 3,169,416 | 3,169,416 | 4,693,827 | | Value of Continuing Benefits(3) | 9,832 | — | — | 5,202 | — | — | | Total Termination Benefits | 10,916,759 | — | — | 5,562,129 | 3,169,416 | 4,693,827 | | Avrohom J. Kess | | | | | | | | Cash Severance Payment(1) | 9,483,750 | — | — | 3,157,500 | — | — | | Acceleration of Equity Awards(2) | — | 4,409,840 | — | — | 4,409,840 | 6,369,595 | | Value of Continuing Benefits(3) | 11,980 | — | — | 7,350 | — | — | | Total Termination Benefits | 9,495,730 | 4,409,840 | — | 3,164,850 | 4,409,840 | 6,369,595 | | Gregory C. Toczydlowski | | | | | | | | Cash Severance Payment(1) | 8,618,765 | — | — | 2,553,765 | — | — | | Acceleration of Equity Awards(2) | 3,170,624 | — | — | 3,170,624 | 3,170,624 | 4,629,803 | | Value of Continuing Benefits(3) | 11,980 | — | — | 7,350 | — | — | | Total Termination Benefits | 11,801,369 | — | — | 5,731,739 | 3,170,624 | 4,629,803 | | Michael F. Klein | | | | | | | | Cash Severance Payment(1) | 8,043,761 | — | — | 2,378,761 | — | — | | Acceleration of Equity Awards(2) | — | 2,937,737 | — | — | 2,937,737 | 4,288,041 | | Value of Continuing Benefits(3) | 11,980 | — | — | 7,350 | — | — | | Total Termination Benefits | 8,055,741 | 2,937,737 | — | 2,386,111 | 2,937,737 | 4,288,041 |
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
(1)Cash Severance Payments: •Under the terms of Mr. Schnitzer’s employment letter, severance payments in the event of an involuntary termination without “cause” or a voluntary termination for “good reason” (each as defined in his agreement and described following this table) are equal to two times his base salary at termination plus two times the greater of: (a) the average of his two most recent annual cash bonuses and (b) 250% of his base salary at the time of termination. •Pursuant to the terms of the individual non-solicitation and non-disclosure agreements, each of the named executive officers (other than Mr. Schnitzer) is eligible to receive a severance benefit if they are involuntarily terminated due to a reduction in force or for reasons other than “cause” or if they are asked to take a substantial demotion. All such named executive officers are eligible to receive a benefit equal to his total monthly cash compensation for at least 21 months (24 months for Messrs. Frey, Toczydlowski and Klein due to each having at least 10 years of service with the Company). For such named executive officers, total monthly cash compensation is equal to, at least, 1/12th of the executive’s annual base salary in effect at the time of his termination, plus the greater of: (a) 1/12th of the average of the executive’s two most recent annual cash bonuses or (b) 1/12th of 125% of final annual base salary. •The cash severance payments listed assume that there would be no cutback of payments to avoid subjecting the executives to an excise tax under Section 280G of the Internal Revenue Code. •The named executive officers, along with other members of our Management Committee, are each subject to a non-competition agreement that entitles an executive to specified post-termination payments if the Company elects, at the time of termination, to impose a six-month non-compete period. Under the non-competition agreements, if the Company elects to impose a six-month non-compete period with respect to a particular executive and the executive complies with such obligations, the executive will be entitled to receive a lump sum payment at the end of the period equal to the sum of (a) six months’ base salary plus (b) 50% of the executive’s average annual bonus for the prior two years plus (c) 50% of the aggregate grant date fair value of the executive’s average annual equity awards for the prior two years. The table above assumes that the Company will elect to impose the six-month non-compete period and will make the corresponding payments to each named executive officer in the event of a termination without “cause” or for “good reason” (including termination without “cause” or for “good reason” within 24 months following a “change of control”) or a voluntary termination without “good reason”, including voluntary retirement. Under his employment letter, in the case of Mr. Schnitzer’s voluntary termination for “good reason” or involuntary termination without “cause” within 24 months following a “change in control”, the Company has elected to impose the six-month non-compete period. (2)Acceleration of Equity Awards: •“Acceleration of Equity Awards” is presented as the sum of the values as of the last business day of 2021 of the additional benefit from the acceleration of vesting, if any, of stock options and performance shares that would have occurred as a result of termination under the different circumstances presented. Performance share awards for the 2019-2021 performance period are treated as vested as of the last business day of 2021 and are not included in this table because the vesting of these awards is reflected in the “Option Exercises and Stock Vested in 2021” table above and the shares are no longer reflected in the “Outstanding Equity Awards at December 31, 2021” table above.
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
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Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
•The terms of Mr. Schnitzer’s employment letter provide for acceleration of all outstanding equity awards (after giving effect to the conversion of his performance-vesting awards into time-vesting awards upon a change in control) in the event of a termination by the Company without “cause” or voluntary termination for “good reason” but only if such termination occurs within 24 months following a change in control of the Company. Mr. Schnitzer’s outstanding equity awards would also become fully vested in the event of a change in control if the ultimate parent or surviving entity does not assume the awards. The table above assumes the ultimate parent or surviving entity would assume the awards and therefore does not reflect an incremental value for this circumstance. •Outstanding unvested stock options and performance shares granted to all employees include “double triggered” vesting in the event of a termination by the Company without “cause” or voluntary termination for “good reason” that occurs within 24 months following a change in control of the Company (although Mr. Schnitzer’s vesting protection in connection with a change in control would continue to be governed by the terms of his employment letter as described above). In the case of stock option grants, any such termination would result in immediate accelerated vesting of the stock options. In the case of performance share grants, any such termination would result in a waiver of the service vesting conditions for such awards, but the ultimate vesting of the performance shares would remain subject to the achievement of the actual performance goals during the performance period (other than with respect to Mr. Schnitzer, whose performance shares would convert into time-vesting awards in connection with a change in control). •For stock options, the additional benefit to the named executive officer resulting from the acceleration of vesting reflected in the table is the value that the named executive officer would receive if his employment terminated on the last business day of 2021. On the last business day of 2021, Messrs. Schnitzer, Frey and Toczydlowski were “retirement eligible”. Under the current provisions in their option award grants, had Mr. Schnitzer, Mr. Frey or Mr. Toczydlowski terminated employment as a result of involuntary termination, termination for good reason, voluntary retirement, disability or death on the last business day of 2021, each would have been entitled to acceleration of their outstanding unvested stock option awards. These vested stock options may be exercised for up to three years (for grants prior to 2021) or five years (for 2021 grants) from the termination date (one year in the case of disability or death), but no later than the original option expiration date. •On the last business day of 2021, Messrs. Kess and Klein were not “retirement eligible”. Under the current provisions in their applicable option award grants, had the employment of Messrs. Kess or Klein been involuntarily terminated (with or without cause) or voluntarily terminated on the last business day of 2021, vesting would have immediately stopped and all unvested options would have been cancelled. If Messrs. Kess or Klein terminated employment as a result of disability or death, unvested option awards would have become fully vested and exercisable for up to one year from the termination date. •The value of accelerated stock options, for purposes of this table, was determined by subtracting the exercise price of the original stock option from the closing stock price on the NYSE of $156.43 at December 31, 2021, and multiplying the result, if a positive number (in-the-money), by the number of option shares that would vest as a result of termination. •For all of the named executive officers who hold performance shares, in the event of a termination due to death, performance shares plus dividend equivalent shares allocated to date would vest immediately at 100% for the 2020-2022 and 2021-2023 performance periods and would then be paid out on a pro-rated basis for the number of days worked in the performance period. The amounts reflected in “Acceleration of Equity Awards” is determined by multiplying the closing stock price of $156.43 on December 31, 2021, by the number of performance shares and related dividend equivalent shares that would be paid out upon death. In the event of disability, a pro-rata portion of the performance shares and allocated dividend equivalent shares would vest according to their original vesting schedule (that is, at the end of the performance period), to the extent that the goals for the applicable performance periods have been met. For Messrs. Schnitzer, Frey and Toczydlowski in the event of termination due to a qualifying retirement, a pro-rata portion of the 2020-2022 performance shares and all of the 2021-2023 performance shares would vest according to their original vesting schedule, to the extent that the goals for the applicable performance periods have been met. In the event of any other termination circumstances, the performance shares and attributed dividend equivalent shares would be forfeited, other than as described above in connection with some terminations following a change in control. Accordingly, no acceleration of vesting of the performance shares has been included under any termination circumstances other than death (or in the case of a qualifying termination following a change in control in the case of Mr. Schnitzer’s performance shares) in the table above. (3) Value of Continuing Benefits: •For Mr. Schnitzer, the estimated value of continuing benefits as of the last business day of 2021 reflects two years of medical and dental premiums in the event of an involuntary termination without “cause” or a voluntary termination for “good reason”. •For all of the named executive officers (other than Mr. Schnitzer), the value of continuing benefits as of the last business day of 2021 reflects the cash value of nine months of outplacement services under the Company’s Executive Severance Plan in the event of involuntary termination without “cause” or voluntary termination for “good reason”. If the named executive officer has not secured viable employment within nine months, these outplacement services may be extended, at the Company’s discretion, on a month-to-month basis for an additional cost to the Company of $540 per month. •As discussed under “Compensation Discussion and Analysis-Non-Competition Agreements”, the named executive officers, along with other members of our Management Committee, are each subject to a non-competition agreement that entitles an executive to specified post-termination payments if the Company elects, at the time of termination, to impose a six-month non-compete period. Under the non-competition agreements, if the Company elects to impose a six-month non-compete period with respect to a particular executive and the executive complies with such obligations, the executive will be entitled to reimbursement for the cost of continuing health benefits on similar economic terms as in place immediately prior to the executive’s termination date during the six-month non-compete period or to payment of an equivalent amount, payable at the end of the period, and the value of these benefits (other than for Mr. Schnitzer) is reflected in the table above. In the case of Mr. Schnitzer, whose employment arrangement provides for the continuation of health benefits as explained above in this footnote (3) for a period longer than that specified in his non-competition agreement, no additional benefit is reflected with respect to his non-competition agreement in the case of voluntary termination for good reason or involuntary termination without cause.
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
| 66 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control
| Summary of Key Agreements |
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(B) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we provide the following information regarding the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Schnitzer, our Chief Executive Officer. For 2021, our last completed fiscal year: •The median of the annual total compensation of all employees of our company (other than Mr. Schnitzer) was $109,586; •The annual total compensation of Mr. Schnitzer was $19,866,781; and •Based on the foregoing, the ratio of the annual total compensation of Mr. Schnitzer to the median of the annual total compensation of all employees was 181 to 1. In addition to the required ratio, we also provide the following supplemental information regarding the relationship of the annual total compensation of our full-time U.S. employees who worked for us for the entire year and the annual total compensation of Mr. Schnitzer. For 2021: •The median of the annual total compensation of full-time employees of our company (other than Mr. Schnitzer) in the United States who worked for us for the entire year was $115,750; and •Based on the foregoing and the above annual total compensation of Mr. Schnitzer, the ratio of the annual total compensation of Mr. Schnitzer to the median of the annual total compensation of our full-time employees in the U.S. who worked for us for the entire year was 172 to 1. As discussed below, these calculations include Company-paid benefits. We subsidize health benefits more heavily for lower paid employees as compared to higher paid employees and also offer 401(k) Savings Plan matching contributions and pension benefits. In addition, because we provide pension benefits to our U.S. employees, these calculations also include year-over-year change in pension value, calculated in accordance with SEC disclosure rules.
CEO Pay Ratio
| 88 | | The Travelers Companies, Inc. | 2022 Proxy Statement |
CEO Pay Ratio
| Identifying the Median Employee for Purposes of the Required Ratio |
CEO Pay Ratio
There have been no material changes in our employee population or employee compensation arrangements in our last completed fiscal year that we believe would significantly impact our pay ratio disclosure. Accordingly, as permitted under the SEC’s disclosure rules, we are using the same median employee as we used for purposes of our 2020 pay ratio. In accordance with SEC rules, we selected December 31, 2020, which is the last day of our fiscal year, as the date upon which we would identify the “median employee”. We determined that, as of December 31, 2020, we had approximately 30,800 full-time, part-time and temporary employees. These employees were located primarily in the United States, Canada, the United Kingdom and Ireland. For purposes of calculating our median employee compensation, we excluded 1,252 individuals located in the United Kingdom and 56 located in Ireland. As a result of this de minimis exemption, our employee population for purposes of calculating our median employee compensation was reduced to approximately 29,500. In order to identify the median employee, we used annual total compensation, as that term is defined in Item 402(c) (2)(x) of Regulation S-K, as our compensation measure. We included perquisites and personal benefits for each employee, whether or not the amount exceeded $10,000 in the aggregate. We also included the change in pension value for participants in our tax-qualified defined benefit plan with a cash-balance formula but excluded the change in pension value for legacy participants accruing benefits under a final average pay formula. We excluded the change in pension value for legacy participants because of the complexity of calculating change in pension value for such participants and the limited number of such participants. We consistently applied this compensation measure to our employee population. Because our employees are predominantly located in the United States, as is our CEO, we did not make any cost-of-living adjustments in identifying our median employee. In addition, in identifying our median employee, we did not annualize the compensation of all permanent employees included in the employee population who were employed as of December 31, 2020, but did not work for us or our consolidated subsidiaries for the entire fiscal year.
CEO Pay Ratio
| Identifying the Median Employee for Purposes of the Supplemental Ratio |
CEO Pay Ratio
We identified the median employee for purposes of the supplemental ratio in the same manner as we did for the required ratio except: •We excluded all of our non-U.S. employees; •We excluded U.S. employees who were employed as of December 31, 2020, but did not work for us or our consolidated subsidiaries for the entire calendar year; and •We excluded part-time U.S. employees who were employed as of December 31, 2020.
CEO Pay Ratio
| Calculating the Median Employee’s Total Compensation |
CEO Pay Ratio
In order to determine the compensation of the median employee for purposes of the required ratio and for the supplemental ratio, we combined all of the elements of each employee’s compensation for 2021 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $109,586 for the required ratio and $115,750 for the supplemental ratio. For purposes of the foregoing, we included personal benefits that in aggregate were less than $10,000 and, as described above, compensation under non-discriminatory benefit plans and year-over-year change in pension value.
CEO Pay Ratio
| Calculating Mr. Schnitzer’s Total Compensation |
CEO Pay Ratio
Mr. Schnitzer’s annual total compensation for 2021, above, differs from the amount reported in the “total” column in the “Summary Compensation Table” because it includes compensation under benefit plans that do not discriminate in favor of our executive officers and are available generally to all salaried employees, which amounts are excluded from the amount reported in the “Summary Compensation Table”.
CEO Pay Ratio
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