DEF 14A of Bread Financial Holdings, Inc.
Filed Apr 3, 2024 · FY20230001193125-24-085494
01 | ELECTION OF DIRECTORS
01 | ELECTION OF DIRECTORS The Board of Directors recommends that stockholders vote FOR the election of each of the nominees.
03 | APPROVAL OF THE 2024 OMNIBUS INCENTIVE PLAN
03 | APPROVAL OF THE 2024 OMNIBUS INCENTIVE PLAN The Board of Directors recommends that stockholders vote FOR the approval of the 2024 Omnibus Incentive Plan.
Awards & Recognitions
| Bloomberg Gender Equality Index | Benchmark Portal Center of Excellence | Great Place to Work Certified | | Ragan Workplace Wellness Award | Newsweek’s America’s Most Responsible Companies | Newsweek’s America’s Most Trustworthy Companies |
2024 Director Nominees
2024 Director Nominees
2024 Director Nominees
| | | | | | | Committee Memberships | | | | | | Directors | | Occupation | Age | Director Since | Independent | Audit | Compensation & HC | N&CG | Risk & Technology | | | | Ralph J. Andretta | President and CEO, Bread Financial Holdings, Inc. | 63 | 2020 | | | | | | | | | Roger H. Ballou | Former CEO and Director of CDI Corporation | 73 | 2001 | ● | ● | ● | | | | | | John J. Fawcett | Former EVP and Chief Financial Officer of CIT Group Inc. | 65 | N/A | ● | ● | | ● | | | | | John C. Gerspach, Jr. | Former CFO of Citigroup, Inc. | 70 | 2020 | ● | • | | | ● | | | | Rajesh Natarajan | Chief Product and Strategy Officer of Globalization Partners | 54 | 2020 | ● | | | ● | | ● | | | Joyce St. Clair | Former EVP and Chief Human Resources Officer of Northern Trust Corporation | 65 | 2023 | ● | | ● | | | ● | | | Timothy J. Theriault | Former EVP, Global CIO and Advisor to CEO of Walgreens Boots Alliance, Inc. | 63 | 2016 | ● | ● | | | | • | | | Laurie A. Tucker | Founder and Chief Strategy Officer of Calade Partners LLC | 67 | 2015 | ● | | ● | • | | | | | Sharen J. Turney | Former CEO of Victoria’s Secret | 67 | 2019 | ● | | • | ● | | |
2024 Director Nominees
• Chair ● Member
2024 Director Nominees
| Bread Financial | 2024 Proxy Statement | v |
Director Nominees Snapshot
Director Nominees Snapshot
Director Nominees Snapshot
| INDEPENDENCE | | DIRECTOR TENURE | | AGE DISTRIBUTION | | DIVERSITY | | | Independent | 8 | 0-4 years | 5 | <50 years | 0 | Female | 33.3% | | | | | | | | | | | Non-Independent | 1 | 5-9 years | 3 | 50-60 years | 1 | National Diversity | 11% | | | | | | | | | | | | | 10-14 years | 0 | 61-75 years | 8 | Ethnic Diversity | 11% | | | | | | | | | | | | | 15+ years | 1 | Average Age: 65 | | Director Self-Identification of Race/Ethnicity: | | | | | | | | | 1 Asian 0 Black 0 Hispanic or Latinx 8 White | | | | | Average Director Tenure: 6.4 years | | | | | |
Empowering Our Customers
| • | “Center of Excellence” certification from Benchmark Portal for industry-leading 18th consecutive time |
Director Succession and Retirement Policy
Director Succession and Retirement Policy Director succession planning is also a focus of the Nominating & Corporate Governance Committee with an emphasis on striking a balance between board refreshment and the need for new or additional skill sets, with maintaining the institutional knowledge about our business and operating history. Our Corporate Governance Guidelines provide for a mandatory retirement age of 75, but allow directors turning 75 to complete their term. Our guidelines also allow our Board of Directors to nominate for re-election a director who has surpassed the age of 75 if it is in the best interests of the Company and its stockholders. Within the next few years, two of our current Board members, Mr. Ballou (age 73) and Mr. Gerspach (age 70), will reach our mandatory retirement age of 75. Mr. Ballou is our Board Chair and serves on our Audit Committee and Compensation & Human Capital Committee and Mr. Gerspach is the Chair of our Audit Committee and also serves on our Risk & Technology Committee. With this in mind, our Nominating & Corporate Governance Committee has been actively engaged in director succession planning to help ensure the Board is well-positioned with directors who have the appropriate leadership, expertise and other valuable attributes that these directors currently provide.
Director Succession and Retirement Policy
| Bread Financial | 2024 Proxy Statement | 13 |
Certain Relationships and Related Party Transactions
| (1) compensation of directors that has been approved in accordance with the Compensation & Human Capital Committee charter; |
Customers
Customers Bread Financial creates opportunities for our customers through digitally-enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Our digital offerings and market-leading payment, lending and saving solutions are relevant across generational segments and provide flexibility to meet consumers’ evolving payment needs. Our strategy is rooted in driving best-in-class experiences and building trust through choices that offer ease to customers, to both meet them where they are and provide solutions to help them on their financial journeys. Creating a seamless, secure and value-added customer experience is critical to the success of our financial services business. We consistently monitor and gather real-time customer insights and feedback across customer financial journeys to ensure our services match our standards. We leverage these insights to better understand, anticipate and respond to the needs of both our customers and associates. Our goal is to consistently create personalized and effortless experiences across all channels. Bread Financial recognizes that we are uniquely qualified to help promote financial wellness and help our customers, associates and communities meet their financial goals. We empower people by providing education and training, expanding access to financial literacy tools, supporting community programs, and exercising fair and responsible banking. We are an active member of Financial Health Network, an organization of business leaders, policy makers and innovators working together to improve financial health for everyone. Helping individuals make informed decisions that allow them to thrive financially is part of our mission at Bread Financial. Strategic vision for financial wellness: Design and deliver solutions that support and improve financial wellness for all. Bread Financial continues to build out a comprehensive financial wellness platform to deliver content and tools that support our customers and associates in their decision-making. In 2023, we launched the Financial Education Hub on breadfinancial.com with 50+ articles on a wide range of personal finance topics. One of our brand partners is linking their site to the Hub and rewarding customers for educating themselves through the articles. We were certified as a Center of Excellence by BenchmarkPortal for the quality of our customer service operations for the 18th time since 2003. BenchmarkPortal awards this designation to customer service contact centers that rank in the top 10% of those surveyed, demonstrating superior performance on both cost- and quality-related metrics compared with industry peers.
Community
Community At Bread Financial, community-centric values are woven into our Company and culture. We’re committed to making bold, strategic investments that strengthen our communities, foster independence, and create opportunities for our associates to engage through volunteerism and supported giving. We work hard to align our community initiatives with our business priorities in a way that will be good for society and good for our business. Notable 2023 highlights include:
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| • | $8 million in total community investment. |
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| • | Awarded $1 million in grants to 21 charities focused on financial wellness. |
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| • | Partnered with the Cleveland Cavaliers to support The Nature Conservancy through their “Plant a Billion Trees” program. |
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| • | In 2023 My Possibilities opened the Employment Innovations School powered by Bread Financial. Additionally, Bread Financial invested $60,000 to support vocational training programs within the school for adults with intellectual or developmental disabilities. |
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| • | Committed $7.5 million to the Pelion Ventures VIII Fund, a small business investment company that makes equity investments in early-stage technology companies. The Fund supports permanent job creation and retention, working closely with entrepreneurs to build innovative, enduring and job-creating companies. |
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| • | Associates donated more than $1.0 million to non-profits through associate giving campaigns and programs. |
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| 30 | Bread Financial | 2024 Proxy Statement |
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Our Board and Executive Leadership Team believe we have the responsibility and resources to enable positive change in building a more sustainable, resilient future for all those we serve. The Office of Sustainability works together with our associate-driven Sustainability & Community Relations Committee and our BRGs to activate our non-profit partnerships, coordinate and plan volunteer opportunities, and execute internal fundraising campaigns. We define success in terms of our ongoing efforts to reduce inequalities through quality education, addressing food insecurities, good health and well-being, and empowering individuals in low to moderate income communities. Our charitable giving efforts include various foodbanks, Nationwide Children’s Hospital, The Nature Conservancy, My Possibilities, and Junior Achievement, among others. We provide our associates with volunteer opportunities and encourage them to give back, which helps us advance one of our core values, to “Pay it Forward” in the communities where we live and do business. We provide a generous matching gifts benefit and a “dollars-for-doers” program, each of which create opportunities for our associates to give back in their own way. Through Help Right Here, associates can help each other during times of financial hardship. Our associates can apply anonymously for a grant of up to $1,250 for assistance during events like critical illness or injury, domestic violence, or loss due to extreme weather. We match associate donations to the program and partner with other social services organizations to provide supporting services, such as temporary shelter, food and clothing, or other financial support. In 2023, 106 associates received a grant from Help Right Here. Our commitment to our communities has always been core to our culture and values. We will continue to empower our communities through bold, strategic investments that create opportunity by reducing barriers to self-sufficiency. We routinely engage with our stockholders to better understand their views on environmental, social and governance matters, carefully considering the feedback we receive and acting when appropriate. For more information, please visit our corporate website: https://investor.breadfinancial.com/sustainability/our-strategy
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| Bread Financial | 2024 Proxy Statement | 31 |
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| Proposal 1: Election of Directors |
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Our Nominating & Corporate Governance Committee evaluated and recommended to our Board of Directors, and our Board has nominated, the following nine individuals, Ralph J. Andretta, Roger H. Ballou, John J. Fawcett, John C. Gerspach, Jr., Rajesh Natarajan, Joyce St. Clair, Timothy J. Theriault, Laurie A. Tucker and Sharen J. Turney, for election as a director, each to hold office for a term of one year until the annual meeting of stockholders in 2025 and until his or her respective successor is duly elected and qualified. With the exception of Mr. Fawcett, each of the director nominees currently serves on our Board of Directors. Mr. Fawcett was recommended to the Nominating & Corporate Governance Committee by a third-party search firm. The Nominating & Corporate Governance Committee and the Board of Directors determined that each nominee brings a strong and unique background and set of skills to our Board of Directors, enhancing, as a whole, our Board’s competence and experience in a variety of areas, including executive management and board service, internal controls and corporate governance, financial and accounting acumen, digital technology, data security and privacy, an understanding of the industries in which we operate, including financial institutions and related risk management and regulatory compliance, as well as risk assessment and management. Specifically, in nominating these nine directors for election at our 2024 annual meeting of stockholders, consideration was given to such directors’ past service on our Board of Directors and its committees, as applicable, and the information illustrated in our skills matrix and discussed in each of such directors’ individual biographies set forth below. Our Board of Directors recommends that our stockholders vote in favor of each of these director nominees.
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| | The Board of Directors recommends that stockholders vote FOR the election of each of the nine director nominees. |
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| 32 | Bread Financial | 2024 Proxy Statement |
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Skills Matrix and Description of Director Knowledge, Skills and Experience: The matrix below provides information regarding our nominees’ knowledge, skills and experience that are most relevant in light of our Company’s business, long-term strategies and risks. Additional description regarding each of these categories is available in the key following this matrix. Our nominees represent a broad range of backgrounds and experience, and each nominee possesses numerous other competencies not identified below. The fact that a nominee is not designated as having a particular attribute does not indicate that the nominee does not possess that attribute or would not be able to make a meaningful contribution to the Board’s decision-making or oversight in that area. Demographic information regarding our nominees, including diversity, is also included in the matrix.
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| KNOWLEDGE, SKILLS & EXPERIENCE | | | | | | | | | | | | Accounting/Auditing/Risk Management | | ● | ● | ● | ● | ● | ● | ● | ● | ● | | Business Operations | | ● | ● | ● | ● | ● | ● | ● | ● | ● | | CEO/Executive Leadership | | ● | ● | ● | ● | ● | ● | ● | ● | ● | | Corporate Governance/Ethics | | | ● | | | | | ● | ● | ● | | Corporate Finance/Capital Management | | ● | ● | ● | ● | | ● | | | | | Financial Expertise/Literacy | | ● | ● | ● | ● | ● | ● | ● | ● | ● | | Human Capital/Compensation | | ● | ● | ● | | ● | ● | ● | ● | ● | | Independence | | | ● | ● | ● | ● | ● | ● | ● | ● | | Information Technology/Cybersecurity/Privacy | | ● | ● | | | ● | ● | ● | ● | | | International Operations | | ● | ● | ● | ● | ● | ● | ● | ● | ● | | Mergers & Acquisitions | | ● | ● | ● | ● | | ● | | | | | Other Public Company Board Experience | | | ● | | | ● | | ● | ● | ● | | Relevant Industry Experience | Banking/Financial Services | ● | ● | ● | ● | ● | ● | ● | | | | | Business Services | ● | ● | | ● | ● | ● | ● | ● | ● | | | Data Processing | | | | | ● | | ● | | | | | e-Commerce/Digital | ● | | ● | | ● | | ● | ● | ● | | | Loyalty/Marketing | ● | ● | | | | | | ● | ● | | | Regulated Industry | ● | ● | ● | ● | ● | ● | ● | | | | | Retail | ● | | | | | | ● | ● | ● | | DEMOGRAPHICS | | | | | | | | | | | | RACE/ETHNICITY (per the U.S. Census) | | | | | | | | | | | | African American/Black | | | | | | | | | | | | American Indian/Alaska Native | | | | | | | | | | | | Asian | | | | | | ● | | | | | | Native Hawaiian/Pacific Islander | | | | | | | | | | | | White | | ● | ● | ● | ● | | ● | ● | ● | ● | | Other | | | | | | | | | | | | GENDER | | | | | | | | | | | | Male | | ● | ● | ● | ● | ● | | ● | | | | Female | | | | | | | ● | | ● | ● | | AGE (as of May 14, 2024) | | 63 | 73 | 65 | 70 | 54 | 65 | 63 | 67 | 67 | | BOARD TENURE (years served as of May 14, 2024) | | 4 | 23 | 0 | 4 | 4 | 1 | 8 | 9 | 5 | | OTHER PUBLIC BOARDS (serving on as of March 20, 2024) | | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 1 | 1 |
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| Bread Financial | 2024 Proxy Statement | 33 |
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| | ACCOUNTING / AUDITING / RISK MANAGEMENT As a public company, our complex accounting and financial reporting functions are subject to a rigorous program of controls and procedures and our Board plays an important role in oversight of our robust audit and enterprise risk management organizations. Directors with experience in these areas are critical to evaluating and providing effective oversight of our consolidated financial statements and financial reporting and our management of the risks inherent in our business operations. | | CORPORATE FINANCE / CAPITAL MANAGEMENT Our corporate finance activities include debt financing transactions, debt and equity market transactions and stock repurchase programs. We allocate capital in various ways to run our operations, grow our business and return value to stockholders. Director experience in these areas is important for effective oversight of our Company’s financial affairs and capital planning and management. | | | BUSINESS OPERATIONS Our business is complex, employing approximately 7,000 associates worldwide and using sophisticated technologies to provide tech-forward payment, lending and saving solutions. Directors with “hands-on” experience developing and implementing operating plans and business strategies at companies with similarly sophisticated business operations have a practical understanding of how such organizations operate in increasingly sophisticated and disruptive competitive environments. | | FINANCIAL EXPERTISE / LITERACY Our business involves complex financial transactions, accounting and reporting requirements. Directors with an understanding of finance and financial reporting processes are able to effectively monitor and assess our operating and strategic performance and ensure accurate financial reporting and robust controls. Substantially all of our nominees are financially literate and two of our nominees satisfy the “accounting or related financial management expertise” criteria set forth in the New York Stock Exchange listing standards. | | | CEO / EXECUTIVE LEADERSHIP Executive leaders have an understanding of organizations and the drivers of individual and team growth and development. Directors with experience serving as a CEO or senior executive enhance the Board’s perspective of our organization’s operations and challenges. | | HUMAN CAPITAL / COMPENSATION The success of our enterprise depends in part on our ability to attract, retain and develop top leaders and a high-performing workforce in markets that are highly competitive for available talent. Directors who have board-level experience with public company executive compensation and broad-based incentive planning, or who have managed or overseen the human resources/compensation function at an operating company help position our Company for success in these areas. | | | CORPORATE GOVERNANCE / ETHICS We are an ethics-driven organization, and our Board – and in particular the Nominating & Corporate Governance Committee – provides a foundation for and oversight of our integrity-based culture. Our Board’s good governance practices and our Company’s focus on ESG matters and sustainability benefit from directors who are well-informed with respect to today’s dynamic governance and ethics environment and who have experience serving on the nominating & corporate governance or comparable committees of other boards. | | INDEPENDENCE Independent directors are uniquely situated to provide unbiased oversight of our management and to work with our senior leaders to develop our Company’s strategic plans. Our Board currently consists of, and if all of the director nominees are elected at the annual meeting, will continue to consist exclusively of independent directors, other than the CEO. All directors currently serving on the Board’s standing committees are independent, and if all of the director nominees are elected at the annual meeting, each of those committees will continue to be populated exclusively by independent directors. |
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| 34 | Bread Financial | 2024 Proxy Statement |
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| | INFORMATION TECHNOLOGY / CYBERSECURITY / PRIVACY Our tech-forward business depends on the effective use of complex information technology systems, the safeguarding of data from cybersecurity risks and the protection and use of consumer data in accordance with applicable privacy regulations and good stewardship practices. Directors with experience implementing or overseeing sophisticated technology and technology strategies, the management and mitigation of cybersecurity and information technology risks and compliance with privacy regulations help ensure proper risk management and oversight of these important drivers of our business. | | MERGERS & ACQUISITIONS We have historically made acquisitions and dispositions and may continue to do so in the future. Board members with experience in material M&A transactions enhance the decision-making underlying strategic M&A activities and ensure informed oversight of the processes attendant to completing complex transactions. | | | INTERNATIONAL OPERATIONS While our business operations are currently primarily operated in the United States, we have associates and offices in countries located outside of the United States, principally in India, and may expand international operations at some point in the future. The quality of our Board’s oversight and strategic guidance is enhanced by directors whose understanding of diverse business environments, economic conditions and cultures has been informed by service as a director or senior leader at one or more companies with international operations. | | OTHER PUBLIC COMPANY BOARD EXPERIENCE Public companies must comply with a variety of complex accounting, disclosure and other compliance obligations, and public company boards have significant oversight and other duties. Directors with experience serving on the boards and board committees of other public companies understand public company reporting responsibilities, corporate governance trends and practices and other issues commonly faced by public companies, and have insight into board operations, board/management relations, agenda setting, succession planning and other board duties and activities. Our Corporate Governance Guidelines include limits on the number of other public company boards and audit committees on which our directors may serve. |
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| | RELEVANT INDUSTRY EXPERIENCE Our Nominating & Corporate Governance Committee uses a skills matrix to identify the diverse skills and experience our Board needs to address the dynamic environment in which we operate our business. Directors with experience in industries in which we or our customers operate provide us with a better understanding of the challenges and opportunities facing our business |
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| Bread Financial | 2024 Proxy Statement | 35 |
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2024 Director Nominees and Proposed Committee Memberships:
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| | | Committee Membership | | | | | Name | Independent | Audit | Compensation & HC | N&CG | Risk & Technology | | Ralph J. Andretta | | | | | | | Roger H. Ballou (Chair) | ● | ● | ● | | | | John J. Fawcett | ● | ● | | ● | | | John C. Gerspach, Jr. | ● | Chair | | | ● | | Rajesh Natarajan | ● | | | ● | ● | | Joyce St. Clair | ● | | ● | | ● | | Timothy J. Theriault | ● | ● | | | Chair | | Laurie A. Tucker | ● | | ● | Chair | | | Sharen J. Turney | ● | | Chair | ● | |
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| AGE 63 DIRECTOR SINCE 2020 COMMITTEES: None | Ralph J. Andretta PRESIDENT | CEO, BREAD FINANCIAL HOLDINGS, INC. | | | | Experience and Qualifications • President and Chief Executive Officer of Bread Financial since February 2020 • Managing Director and Head of US Cards for Citigroup from 2011 to November 2019; and prior to that, he held positions in charge of loyalty, co-brand and product development • Global affinity and international card executive at Bank of America from 2010 to 2011 • Served 18 years with American Express prior to 2010 • Member of Nationwide Children’s Hospital Board of Trustees from 2020 to present • Member of Women’s Sports Foundation Board of Trustees from January 2023 to present • Bachelor’s degree in accounting and finance from Siena College | | | | Skills | | | | • Mr. Andretta’s role as our current Chief Executive Officer provides a link to the Company’s management and a unique level of insight into the Company’s operations | • His financial, capital allocation and global operations experience together with his expertise in the banking and financial services, data and loyalty/marketing industries add important and relevant diversity to the Board’s overall mix of skills • Our Board of Directors believes Mr. Andretta is well-qualified for re-election as a Director |
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| 36 | Bread Financial | 2024 Proxy Statement |
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| AGE 73 DIRECTOR SINCE 2001 CHAIR OF THE BOARD SINCE 2020 COMMITTEES: Audit Compensation & Human Capital | Roger H. Ballou FORMER CEO AND DIRECTOR OF CDI CORPORATION | | | | Experience and Qualifications • Chief Executive Officer and a Director of CDI Corporation, a public company engaged in providing staffing and outsourcing services, from October 2001 until January 2011 • Self-employed consultant from October 2000 to October 2001, and since 2012 • Chairman and Chief Executive Officer of Global Vacation Group, Inc. from April 1998 to September 2000 • Senior advisor for Thayer Capital Partners from September 1997 to April 1998 • From April 1995 to August 1997, he served as Vice Chairman and Chief Marketing Officer, then as President and Chief Operating Officer, of Alamo Rent-a-Car, Inc. • Bachelor’s degree from the Wharton School of the University of Pennsylvania • MBA from the Tuck School of Business at Dartmouth | | | | Skills | | | | • Mr. Ballou’s qualifications include executive and/or board-level experience in the banking, financial services, business services, data and marketing industries and information technology, financial, global operations and M&A expertise and service on public company boards, including as a member or chair of public company Audit, Compensation, Nominating and Corporate Governance, Risk and Executive Committees | • Our Board of Directors values Mr. Ballou’s significant executive and public company Board experience as well as his Audit Committee financial expertise which, together with his global operations, banking and other relevant industry experience, strengthen and diversify the Board’s mix of skills, and the Board believes Mr. Ballou is well-qualified for re-election as a Director | | | | Other Public Directorships in the Past Five Years • Univest Financial Corporation • Chair of the Compensation Committee • Member of the Audit Committee, Risk Committee and Executive Committee • RCM Technologies, Inc. • Lead Independent Director • Member of the Audit Committee and Nominating & Corporate Governance Committee • Loyalty Ventures Inc. • Chairman of the Board • Member of the Compensation Committee and Corporate Governance and Nominating Committee |
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| Bread Financial | 2024 Proxy Statement | 37 |
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| AGE 65 NOMINEE FOR DIRECTOR COMMITTEES: Audit Nominating & Corporate Governance (beginning after the annual meeting, if elected) | John J. Fawcett FORMER EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF CIT GROUP INC. | | | | Experience and Qualifications • Executive Vice President and Chief Financial Officer of CIT Group Inc. from April 2017 until its acquisition by First Citizens BancShares in January 2022 • Interim Chief Financial Officer of Citizens Financial Group, Inc. from December 2016 to March 2017 • Director of Rabobank (Utrecht-Americas Holding Company), a Dutch multinational banking and financial services company from 2016 to 2017, where he served as the chair of the Audit Committee • Executive Vice President and Chief Financial Officer of Royal Bank of Scotland (RBS) Americas and Citizens Financial Group from January 2008 to April 2015 • Served in senior financial leadership positions with increasing responsibility at Citigroup Inc. from 1987 to 2007, including as Chief Financial Officer, Global Transactions Services and Chief Financial Officer, Commercial Markets Business • KPMG senior audit manager from 1980 to 1987, specializing in banking and financial services audit engagements • Bachelor’s degree in accounting and MBA from St. John’s University | | | | Skills | | | | • Mr. Fawcett’s qualifications include significant executive-level banking and financial services experience in all aspects of finance, including strategic planning, financial analysis, accounting, treasury management, tax, M&A, complex transactions and investor relations experience. | • Our Board of Directors believes Mr. Fawcett’s significant executive banking and financial expertise, particularly with respect to banking, financial, accounting, international operations and business operations will benefit our business and the Board’s overall mix of skills, making him well-qualified for election as a Director. |
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| 38 | Bread Financial | 2024 Proxy Statement |
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| AGE 70 DIRECTOR SINCE 2020 COMMITTEES: Audit (Chair) Risk & Technology | John C. Gerspach, Jr. FORMER CFO OF CITIGROUP, INC. | | | | Experience and Qualifications • Self-employed consultant since March 2022 • Chief Financial Officer of Citigroup, Inc. from 2009 to 2019 and was employed by Citigroup, Inc. in various capacities of increasing experience and responsibilities since 1990 • Chief Financial Officer of Penn Central Industries Group from 1986 to 1990 • Comptroller of the Defense Contracting Group at ITT Corporation from 1980 to 1986 • Served in various roles with Arthur Andersen & Company at the beginning of his career • Member of the Financial Accounting Standards Advisory Council (FASAC) from 2010 to 2013 • Bachelor’s degree in accountancy from the University of Notre Dame • Certified Public Accountant in the State of New York from 1977 to 2019. | | | | Skills | | | | • Mr. Gerspach’s qualifications include executive-level experience in the banking and financial services industry for a global corporation, including roles in audit, accounting, risk management and international operations | • Our Board of Directors believes Mr. Gerspach’s expertise, particularly with respect to banking, financial, audit, risk management and global operations, will benefit our business and the Board’s overall mix of skills, making him well-qualified for re-election as a Director |
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| Bread Financial | 2024 Proxy Statement | 39 |
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| AGE 54 DIRECTOR SINCE 2020 COMMITTEES: Nominating & Corporate Governance Risk & Technology | Rajesh Natarajan CHIEF PRODUCT AND STRATEGY OFFICER OF GLOBALIZATION PARTNERS | | | | Experience and Qualifications • Chief Product and Strategy Officer of Globalization Partners since March 2022 • Executive Vice President of Products and Engineering of RingCentral, Inc. from December 2020 to December 2021 • Executive Vice President and Chief Product and Technology Officer of Ancestry.com from February 2017 to November 2020 • Served in senior leadership positions with increasing responsibility in the areas of technology and product development at Intuit, Inc. from 2014 to 2017, including as Senior Vice President and Chief Information Security and Fraud Officer • Served in senior leadership positions with increasing responsibility in the areas of technology and product development at PayPal Holdings, Inc. from 2006 to 2014, including as Vice President, Platform Engineering and Operations • Served in various management positions with increasing responsibility in the area of technology from 1995 to 2006 with Sabre Holdings Corporation, including as an early member of the development team that founded Travelocity.com • Bachelor’s degree in mechanical engineering from Jawaharlal Nehru Technology University in India • Master’s degree in industrial engineering from Clemson University | | | | Skills | | | | • Mr. Natarajan’s qualifications include executive experience in roles requiring expertise in information technology, cybersecurity, engineering, operations and product development. | • Our Board of Directors believes Mr. Natarajan’s expertise, particularly with respect to business operations, technology development, information technology and cybersecurity, will benefit our business and the Board’s overall mix of skills, making him well-qualified for re-election as a Director. | | | Other Current Public Directorships • HealthEquity, Inc. • Member of the Cybersecurity and Technology Committee and Audit and Risk Committee | |
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| 40 | Bread Financial | 2024 Proxy Statement |
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| AGE 65 DIRECTOR SINCE 2023 COMMITTEES: Compensation & Human Capital Risk & Technology | Joyce St. Clair FORMER EXECUTIVE VICE PRESIDENT AND CHIEF HUMAN RESOURCES OFFICER OF NORTHERN TRUST CORPORATION. | | | | Experience and Qualifications • Executive Vice President and Chief Human Resources Officer of Northern Trust Corporation from July 2018 until her retirement in April 2022 • Served in senior leadership positions with increasing responsibility at Northern Trust Corporation since joining the firm in 1992, including as Executive Vice President and Chief Capital Management Officer from 2015 to 2018, as President of Enterprise Operations from 2014 to 2015, as President of Operations and Technology from 2011 to 2014, and as Chief Risk Officer from 2007 to 2011 • Served as an associate partner for Accenture prior to joining Northern Trust Corporation • Appointed by President Obama to serve as a member of the advisory committee of the Pension Benefit Guaranty Corporation (PBGC) from 2016 until her term expired in 2019 • Bachelor’s degree from Indiana University, Kelley School of Business • MBA from the Booth School of Business at the University of Chicago | | | | Skills | | | | • Ms. St. Clair’s qualifications include significant executive-level experience in the financial services industry, with expertise in global compliance, risk and control, regulatory relations, transaction processing, securities operations, technology, cyber security, regulatory capital and liquidity requirements, human capital operations and metrics and board governance. | • Our Board of Directors believes Ms. St. Clair’s financial expertise, particularly with respect to compliance, risk, regulatory relations, technology, cyber security, regulatory capital and liquidity requirements and human capital operations will benefit our business and the Board’s overall mix of skills, making her well-qualified for re-election as a Director. |
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| AGE 63 DIRECTOR SINCE 2016 COMMITTEES: Audit Risk & Technology (Chair) | Timothy J. Theriault FORMER EVP, GLOBAL CIO AND ADVISOR TO CEO OF WALGREENS BOOTS ALLIANCE, INC. | | | | Experience and Qualifications • Advisor to the Chief Executive Officer of Walgreens Boots Alliance, Inc. from June 2015 until November 2016 • Executive Vice President and Global Chief Information Officer of Walgreens Boots Alliance, Inc. from July 2014 to June 2015 • Served in senior leadership positions with increasing responsibility at Walgreen Co. from October 2009 to July 2014, including as Senior Vice President and Chief Information, Innovation and Improvement Officer • Served in various executive and management positions with increasing responsibility in the area of information technology with Northern Trust Corporation from May 1991 to October 2009 and July 1982 to October 1989. • Director of End User Computing and Advanced Technologies for S. C. Johnson & Son, Inc., from October 1989 to May 1991 • Current Director and a member of the Financial & Investment Committee and Compliance Committee of Wellmark Blue Cross and Blue Shield • Former lead Director of the Depository Trust Clearing Corporation • Bachelor’s degree from Illinois State University • Completed the Harvard Business School advanced management program | | | | Skills | | | | • Mr. Theriault brings significant expertise in information technology and cybersecurity to our Board • Together with his financial sophistication, banking, global operations, risk management and compensation experience gained as a senior executive in the financial services, health care and retail industries and service on public company Boards, including as a member of public | company Audit and Compensation Committees, Mr. Theriault’s expertise and experience broaden the Board’s skill set and enhance its ability to understand and oversee risk, including those associated with information technology, cybersecurity and bank regulatory matters • The Board of Directors believes Mr. Theriault is well-qualified for re-election as a Director | | | Other Public Directorships in Past Five Years • Vitamin Shoppe, Inc. | |
Community
| 42 | Bread Financial | 2024 Proxy Statement |
Community
| AGE 67 DIRECTOR SINCE 2015 COMMITTEES: Compensation & Human Capital Nominating & Corporate Governance (Chair) | Laurie A. Tucker FOUNDER AND CHIEF STRATEGY OFFICER OF CALADE PARTNERS LLC | | | | Experience and Qualifications • Founder and Chief Strategy Officer for marketing consultancy firm, Calade Partners LLC since January 2014 • Senior Vice President-Corporate Marketing of FedEx Services, Inc., a subsidiary of FedEx Corporation, a public company engaged in transportation, e-commerce and business services, from 2000 to 2013 and was employed by FedEx in various capacities of increasing experience and responsibilities since 1978 • Bachelor’s degree and an MBA from the University of Memphis | | | | Skills | | | | • Ms. Tucker’s qualifications include financial and compensation expertise, global operations experience and strong leadership skills developed as a public company Board member, including as a member of public company Audit, Compensation and Nominating and Corporate Governance Committees, and as a senior executive serving in various roles at a large multinational public company | • These credentials, together with her expertise and experience in e-commerce, retail, technology, customer service and corporate marketing, add significant value to the Board of Directors, making her well-qualified for re-election as a Director | | | Other Current Public Directorships • Forward Air Corporation • Chair of the Corporate Governance and Nominating Committee • Member of the Executive Committee | |
Community
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Community
| AGE 67 DIRECTOR SINCE 2019 COMMITTEES: Compensation & Human Capital (Chair) Nominating & Corporate Governance | Sharen J. Turney FORMER CEO OF VICTORIA’S SECRET | | | | Experience and Qualifications • Chief Executive Officer of Russia-based jeans brand Gloria Jeans from November 2018 until November 2019 • Director of Sweden-based designer sock and underwear brand Happy Socks AB from January 2018 until November 2019 • President and Chief Executive Officer of Victoria’s Secret, a division of publicly-traded national retailer L Brands, Inc., from July 2006 until February 2016 • President and Chief Executive Officer of Victoria’s Secret Direct, the brand’s catalogue and e-commerce arm, from May 2000 until July 2006 • Served for 10 years in various executive roles including President and Chief Executive Officer of Neiman Marcus Direct, the direct marketing division of luxury brand retailer Neiman Marcus Group • Served as an advisor to several retailers and technology companies • Director of FULLBEAUTY Brands from July 2016 to September 2018 • Director of Nationwide Children’s Hospital, Inc., including as Chairman of the Board of its Research Institute, from 2012 to 2018 • Formerly served on the Baker Retailing Center Industry Advisory Board at Wharton School at the University of Pennsylvania • Director of the University of Oklahoma Foundation, where she serves as the Chair of the Audit Committee and a member of the Investment Committee • Bachelor’s degree from the University of Oklahoma | | | | Skills | | | | • Ms. Turney’s qualifications include executive and/or Board-level experience in the retail industry, including as an executive officer of a Fortune 500 fashion retailer, loyalty, marketing and digital/e-commerce expertise, global operations experience, service on public company Boards, including as a member of public company Compensation and Nominating and Corporate Governance Committees, financial expertise and executive | leadership at companies operating in industries relevant to our business • Our Board of Directors believes Ms. Turney’s expertise, particularly with respect to her retail and digital/e-commerce marketing experience, will benefit our business and enhance our understanding of our customers’ businesses, making her well-qualified for re-election as a Director | | | Other Current Public Directorships • Paycom Software, Inc. • Member of the Compensation Committee and Nominating & Corporate Governance Committee | Other Public Directorships in the Past Five Years • M/I Homes, Inc. • Academy Sports and Outdoors, Inc. • Member of the Compensation Committee and Nominating & Corporate Governance Committee |
Community
| 44 | Bread Financial | 2024 Proxy Statement |
Role of Proxies in Election of Directors
Role of Proxies in Election of Directors The persons named as your proxies will have full discretion to cast votes for other persons in the event any nominee is unable to serve. Our Board of Directors has no reason to believe that any nominee will be unable to serve if elected. In an uncontested election, if a quorum is present, directors are elected by a majority of the votes cast, at the meeting or by proxy. This means that the nine nominees will be elected if they receive more “For” votes than “Against” votes. In accordance with Section 3.3.1 of our bylaws, any nominee who is currently serving as a director and does not receive a majority of votes cast shall immediately tender his or her resignation for consideration by our Board of Directors. Our Board of Directors will then evaluate whether to accept or reject such resignation, or whether other action should be taken. The Board of Directors will publicly disclose its decision to accept or reject such resignation and its rationale within 90 days from the date of certification of the director election results.
Role of Proxies in Election of Directors
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Role of Proxies in Election of Directors
| Executive Officers |
Role of Proxies in Election of Directors
| Age: 63 | Ralph J. Andretta PRESIDENT | CHIEF EXECUTIVE OFFICER | DIRECTOR | | | Biographical Information • Mr. Andretta’s biographic information appears under Proposal One: Election of Directors in this proxy statement. |
Role of Proxies in Election of Directors
| Age: 58 | Perry S. Beberman EXECUTIVE VICE PRESIDENT | CHIEF FINANCIAL OFFICER | | | Biographical Information • Joined Bread Financial as Executive Vice President and Chief Financial Officer in July 2021. • Served in various leadership roles with increasing responsibility at Bank of America from 2005 to June 2021, including as Senior Vice President and Finance Executive of Bank of America’s consumer and wealth management lending products from October 2019 to June 2021. • Joined Bank of America following its acquisition of MBNA in 2005, where he had spent more than 17 years in leadership roles with increasing responsibility. • Serves as a member of the Finance Committee, Governance Committee and Advisory Committee of Ronald McDonald House of Greater Delaware. • Director of Reach Riverside Corp., where he serves as the Treasurer and Chair of the Finance Committee and a member of the Executive Committee and Strategic Planning Committee. • Holds a Bachelor’s degree in business administration and an MBA from the University of Delaware. |
Role of Proxies in Election of Directors
| 46 | Bread Financial | 2024 Proxy Statement |
Role of Proxies in Election of Directors
| Age: 45 | Allegra S. Driscoll EXECUTIVE VICE PRESIDENT | CHIEF TECHNOLOGY OFFICER | | | Biographical Information • Joined Bread Financial as Executive Vice President and Chief Technology Officer in January 2024. • Came to Bread Financial from American Express where she served as SVP, Chief Information Officer of the Global Commercial Services Unit from April 2022 to January 2024 and SVP, Chief Information Officer of the Corporate Systems Unit and Head of Technology Strategy & Transformation from January 2020 to April 2022. • Served in senior leadership positions with increasing responsibility at Credit Suisse from September 2010 to December 2019, including as the Managing Director, COO Global Markets Technology and IHC Technology during 2019. • Served in various leadership positions with increasing responsibility at Goldman Sachs from May 2001 to July 2010. • Member of the Advisory Board of the CTO Forum, a not-for-profit organization composed of senior technology executives, business leaders and academicians, focused on key technology issues and accelerating innovation across organizations. • Director of Boscobel House and Gardens, a not-for-profit organization. • Holds a Bachelor’s degree in computer science from Barnard College, Columbia University. |
Role of Proxies in Election of Directors
| Age: 59 | Valerie E. Greer EXECUTIVE VICE PRESIDENT | CHIEF COMMERCIAL OFFICER | | | Biographical Information • Joined Bread Financial as Executive Vice President and Chief Commercial Officer in June 2020. • Before joining Bread Financial, led the U.S. cards co-brand business at Citigroup, where Ms. Greer worked from September 2011 to April 2020. • Served as the General Manager, Partnerships for JPMorgan Chase from 2006 to 2011. • Served in senior leadership positions with increasing responsibility at HSBC from 1994 to 2006, including as the Executive Director of HSBC’s private label business from 2003 to 2006. • Director of Ruling Our eXperiences, Inc., a girls not-for-profit organization where she serves as a member of the Development Committee. • Holds a Bachelor’s degree from University of Manitoba and an MBA from the Kellogg School of Management at Northwestern University. |
Role of Proxies in Election of Directors
| Bread Financial | 2024 Proxy Statement | 47 |
Role of Proxies in Election of Directors
| Age: 50 | Tammy M. McConnaughey EXECUTIVE VICE PRESIDENT, CHIEF CREDIT RISK AND OPERATIONS OFFICER | | | Biographical Information • Has served as Executive Vice President overseeing Operations and Credit Risk of Bread Financial since January 2021; originally joined the Company in 1992. • Prior to her current role, Ms. McConnaughey served in increasingly senior leadership positions over her thirty-year tenure with the Company across collections, customer care, operations and credit risk. • Director of Mid-Ohio Food Collective, a not-for-profit organization. • Holds a Bachelor’s degree in business from Mount Vernon Nazarene University. |
Role of Proxies in Election of Directors
| Age: 62 | Joseph L. Motes III EXECUTIVE VICE PRESIDENT | CHIEF ADMINISTRATIVE OFFICER | GENERAL COUNSEL | SECRETARY | | | Biographical Information • Has served as Executive Vice President, Chief Administrative Officer, General Counsel and Secretary of Bread Financial since June 2019; originally joined the Company as General Counsel and Secretary in July 2015. • Before joining Bread Financial, Mr. Motes was a partner at Akin, Gump, Strauss, Hauer & Feld, LLP, where he worked for nearly 20 years and was the lead relationship partner for the Company. • Holds a Bachelor’s degree in geology from Trinity University and a J.D. from Southern Methodist University Dedman School of Law, where he served as Editor-in-Chief of the SMU Law Review. |
Role of Proxies in Election of Directors
| 48 | Bread Financial | 2024 Proxy Statement |
Role of Proxies in Election of Directors
| Age: 51 | J. Bryan Campbell SENIOR VICE PRESIDENT | CHIEF ACCOUNTING OFFICER | | | Biographical Information • Joined Bread Financial as Senior Vice President and Chief Accounting Officer in November 2021. • Came to Bread Financial from American Express Company, where he served as Vice President of Finance within the Controllership leadership team from February 2017 to November 2021, Vice President of Finance – Head of External Reporting from March 2015 to February 2017, and in other roles of increasing responsibility from August 2007 to March 2015. • Served as Assistant Controller at General Electric Company from 2006 to 2007. • Held various strategic and finance roles at Credit Suisse, Deloitte and KPMG from 1995 to 2006. • Holds a Bachelor’s degree in accounting and finance from the University of Colorado at Boulder and is a Certified Public Accountant in the state of Colorado. |
Role of Proxies in Election of Directors
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Role of Proxies in Election of Directors
| Compensation & Human Capital Committee Report |
Role of Proxies in Election of Directors
The Compensation & Human Capital Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation & Human Capital Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. This report has been furnished by the members of the Compensation & Human Capital Committee. Roger H. Ballou Joyce St. Clair Laurie A. Tucker Sharen J. Turney, Chair
Role of Proxies in Election of Directors
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Role of Proxies in Election of Directors
| Compensation Discussion & Analysis |
Defined Terms in this CD&A
| • AIC — | Annual Incentive Compensation | | • CHCC — | Compensation & Human Capital Committee | | • DEIB — | Diversity, Equity, Inclusion and Belonging | | • ERM — | Enterprise Risk Management | | • ESG — | Environmental, Social & Governance | | • LTIC — | Long-Term Equity Incentive Compensation | | • NCL — | Net Credit Loss | | • NEO — | Named Executive Officer |
Defined Terms in this CD&A
| • NPS — | Net Promoter Score | | • PBRSU — | Performance-Based Restricted Stock Unit | | • PPNR — | Pretax Pre-provision Earnings | | • ROE — | Return on Equity | | • RSU — | Restricted Stock Unit | | • rTSR — | Relative Total Stockholder Return | | • SLAs — | Service Level Agreements | | • TBRSU — | Time-Based Restricted Stock Unit |
2023 Focus Areas and Achievements
| 2023 Key Focus Area | Key Achievements within Focus Area | Compensation Program Metrics that Support Focus Area | | Responsible Growth | • Average loans of $18.2 billion increased 3%, in line with our guidance • Grew year-over-year PPNR during each quarter of 2023 • Successful launch of new iconic brand partners and renewal of key partners, including Dell Technologies, Michaels, the New York Yankees, and Signet • Secured top five brand partners through at least 2028 | • ROE (LTIC plan metric) • PPNR (27% weighting on AIC scorecard) • Average Loans (9% weighting on AIC scorecard) • NCLs (9% weighting on AIC scorecard) • Operating leverage (9% weighting on AIC scorecard) • NPS (8.33% weighting on AIC scorecard) | | Enhance Balance Sheet | • Paid down $500 million of parent-level debt in 2023 and extended maturities • Grew end-of-period direct-to-consumer deposits by $1 billion, or 18%, to $6.5 billion • Obtained inaugural issuer credit rating from Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch) • Improved capital ratios and strategically tightened credit | • Successful development and execution of a long-term debt plan was included as a strategic modifier (+/-5%) to the 2023 AIC scorecard • Average Loans (9% weighting on AIC scorecard) • NCLs (9% weighting on AIC scorecard) • Supervisory matters was included as a strategic modifier (+/-5%) to the 2023 AIC scorecard | | Strategically Invest / Optimize Data & Technology | • New system capabilities and enhancements, including launch of mobile app • Successful conversion and introduction of new Bread Rewards(TM) American Express® Credit Card • Enhanced value propositions for our partners | • Successful launch and adoption of our mobile app was included as a strategic modifier (+/-5%) to the 2023 AIC scorecard • Successful resolution of all high/critical issues related to 2022 core processing outsourcing project was included as a strategic modifier (+/-5%) to the 2023 AIC scorecard • Active Digital User Rate (8.33% weighting on AIC scorecard) |
Other 2023 Achievements
| • | BenchmarkPortal Center of Excellence (18th consecutive year on the list) |
Say-On-Pay and Stockholder Engagement
| Feedback we heard | How we are responding | | LTIC: Dissatisfaction with the removal of the rTSR modifier from our PBRSU grants | In designing our 2022 PBRSUs, the CHCC elected to remove the rTSR modifier (+/- 20%) that had been in our 2021 PBRSUs for the following reasons: • The Company’s stated capital priorities at the time were (and remain today) paying down debt, strengthening our balance sheet, improving capital ratios and investing in digital and technology initiatives that are necessary to remain competitive over the long-term. For more on these priorities, see “—Company Highlights and 2023 Focus Areas” above. • Given the Company’s capital priorities, funds for stock repurchase programs or increased dividends were inherently limited. • The CHCC also recognized that Company’s legacy business model (private label credit card programs, which are designed to appeal to a broader spectrum of consumers, including lower-income/credit score consumers) has been challenged by macroeconomic conditions over the last several years, including persistent inflation. • At the time, the Company’s Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer were all relatively new hires, each joining the Company in either 2020 or 2021 with decades of experience at large financial institutions. • Considering all these factors, the CHCC viewed it as highly improbable that the Company would perform favorably on an rTSR metric during the performance period, even with exceptional performance by management. • Accordingly, the CHCC felt that inclusion of the rTSR modifier would be punitive to our NEOs, potentially encourage behavior inconsistent with our stated capital priorities, and could adversely impact the Company’s ability to hire and retain the types of executives needed to execute on our business transformation strategy. For these same reasons, for our 2023 PBRSU grants, the CHCC again chose to not include the rTSR modifier. In response to our 2023 say-on-pay vote and stockholder engagement throughout the year, the CHCC, our independent compensation consultant and management conducted a detailed evaluation as to whether 2024 was the appropriate time to re-insert an rTSR modifier (or other second metric) into our PBRSU grants. In February 2024, the CHCC ultimately chose to leave the 2024 PBRSU structure as-is and not re-insert the rTSR metric, for this year at least. While the Company has made significant progress on paying down debt, strengthening its balance sheet, improving capital ratios and investing in digital and technology initiatives, there is still work to do. Moreover, the Consumer Financial Protection Bureau (CFPB) recently issued a final rule on credit card late fees that could have a meaningful impact on the Company’s results of operations and stock performance for an extended period of time, which is largely outside of our NEOs’ control. Finally, the CHCC believes that we have assembled a highly-qualified management team to lead us through the next phase of the Company’s journey, and that re-inserting an rTSR modifier at this time could adversely impact us in terms of retention/hiring and positioning the Company for long-term growth and profitability. |
Say-On-Pay and Stockholder Engagement
| Feedback we heard | How we are responding | | | While the CHCC did not ultimately make significant changes to the design of our PBRSU structure for 2024, the CHCC is highly sensitive to our stockholders’ point of view on this topic. The CHCC will again closely evaluate during the next year, including through proactive engagement with our stockholders, whether 2025 is the appropriate time to make such a program design change. | | AIC: Questioning whether the annual incentive compensation scorecard could be simplified, with more focus on the stockholder metrics | The CHCC appreciated this feedback and made the following modifications in approving the Company’s 2024 AIC scorecard: • Increased weighting of the Stockholder metrics from 60% to 70% • Capped total payout on scorecard at 100% (before modifiers) unless the Stockholder metrics achieve at least 85% of target • Reduced number of strategic modifiers from 4 to 2 | | Disclosure: Stockholders would benefit from more disclosure regarding the linkage between the Company’s compensation practices and the Company’s business transformation over the last several years | We appreciated this feedback, and we have expanded the disclosure under “—Company Highlights and 2023 Focus Areas” above to provide more context regarding the Company’s strategic goals and priorities as we have transformed the Company over the last several years, and how those goals and priorities are linked to, and incentivized by, our compensation practices. | | Disclosure: Stockholders would benefit from forward-looking ROE targets for PBRSU grants | We have included the forward-looking ROE targets for our PBRSU grants under “—Compensation Programs—Long-Term Equity Compensation—PBRSU Targets and Results” below. | | Disclosure: Stockholders were appreciative of the comprehensive disclosure and transparency regarding AIC scorecard | We were thankful to hear this feedback. Transparency in our disclosures regarding our compensation practices and decision-making remains a key priority for us. |
Say-On-Pay and Stockholder Engagement
| • | 60% of LTIC Grants are Performance-Based. Since 2021, 60% of our NEOs’ long-term equity incentive compensation awards have been PBRSUs, with the remaining 40% in TBRSUs, emphasizing the performance component of our NEOs’ long-term equity incentive compensation. |
Say-On-Pay and Stockholder Engagement
| • | 3-Year Cliff-Vesting for PBRSUs. Since 2021, our PBRSUs have been based on the average performance on pre-determined annual ROE targets over a three-year period, with cliff vesting at the end of the three-year period. The ROE targets for all three years are set at the beginning of the three-year period. Prior to 2021, our PBRSUs vested over shorter periods. |
Say-On-Pay and Stockholder Engagement
| • | Integration of ESG Metrics into Scorecard. Many of our scorecard metrics are tied to our broader ESG priorities, including Environmental (advancing our paperless initiatives by increasing Active Digital Users), Social (through our Associate Engagement, Opportunity Index, DEIB, Turnover, SLA and NPS metrics) and Governance (through our ERM metrics and supervisory matters modifier). |
Say-On-Pay and Stockholder Engagement
| • | Added Strategic Modifiers to Scorecard. Beginning in 2022, we added four strategic modifiers (each +/-5%) to the scorecard, which are intended to incentivize management to successfully execute on key initiatives for the year that are crucial in driving the Company’s longer-term transformation and growth. |
Say-On-Pay and Stockholder Engagement
| • | Enhanced Disclosure of Our AIC Balanced Scorecard. We provide comprehensive disclosure regarding our AIC awards, including full detail of the targets that are set for each metric and our performance against those targets. See “—2023 Balanced Scorecard Targets and Results.” |
Say-On-Pay and Stockholder Engagement
| • | Updated Our Peer Group. In September 2022, in consideration of our current size and focus on the financial services sector following the transformative events of recent years, the CHCC made changes to our peer group used to determine the level and components of our NEO compensation. We removed certain of the larger companies from our prior peer group and replaced them with smaller companies, which are more comparable to us in terms of market cap, revenue and/or other metrics. |
Key Compensation Policies and Practices
| | What We Do | | | What We Don’t Do | | PERFORMANCE-BASED PAY We emphasize pay for performance. For 2023, executive compensation included both annual cash and long-term equity components tied to financial and non-financial performance. STOCKHOLDER ALIGNMENT Our compensation program is designed to be aligned with our long-term interests and those of our stockholders, with a majority of our CEO’s target direct compensation delivered as LTIC awards (of which 60% are performance-based). ROBUST GOAL-SETTING We set challenging goals that align with Company strategy. CLAWBACK PROVISIONS We have adopted a comprehensive clawback policy providing for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws, which policy is compliant with the requirements of Section 10D of the Exchange Act and Section 303A.14 of the NYSE Listed Company Manual. DOUBLE-TRIGGER CHANGE IN CONTROL We use double trigger acceleration provisions upon a change in control in our equity incentive plans and related equity award agreements. SIGNIFICANT STOCK OWNERSHIP Our directors and executive officers are required to hold a minimum amount of stock to further enhance alignment with stockholders. BALANCED COMPENSATION STRUCTURE We utilize a balanced approach to compensation, combining fixed and variable, short-term and long-term, and cash and equity components. INDEPENDENT COMPENSATION COMMITTEE Each member of our CHCC meets the independence requirements under SEC rules and NYSE listing standards. INDEPENDENT COMPENSATION CONSULTANT The CHCC engages an independent compensation consultant. | | | NO EMPLOYMENT, SEVERANCE OR CHANGE IN CONTROL AGREEMENTS We do not have employment, severance or change in control agreements with our executive officers. NO TAX GROSS-UP PROVISIONS We do not enter into excise tax gross-up arrangements with any of our executive officers. NO EXCESSIVE PERQUISITES We provide only limited perquisites to our executive officers. NO SPECULATIVE TRADING Our directors and executive officers are prohibited from trading in puts or calls or engaging in short sales with respect to our securities. NO EXCESSIVE RISK-TAKING We regularly review our compensation program to ensure that the program does not promote unnecessary or excessive risk-taking. NO PLEDGING OF OUR SECURITIES Our directors and executive officers are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan. NO HEDGING OF OUR SECURITIES Our directors, executive officers and associates are prohibited from engaging in hedging transactions with respect to our securities. NO DIVIDENDS ON EQUITY GRANTS UNLESS VESTED We do not pay dividends or dividend equivalent rights on any equity granted to directors or executive officers unless those grants vest. | |
Overview of 2023 NEO Compensation Program Elements
| | Form of Payment | | Performance Period | Performance Criteria | Objectives | For More Information | | Base Salary | | Cash; Fixed | Ongoing | Alignment of salary with performance is evaluated on an annual basis | • Compensates for day-to-day performance • Attracts, retains and rewards NEOs with competitive fixed pay • Reflects experience and job scope | Page 64 | | Annual Incentive Compensation (AIC) | | Cash; Performance-Based | One Year | Results of metrics on balanced scorecard, adjusted upwards or downwards by strategic modifiers | • Incentivizes performance on a range of financial and non-financial metrics in the following categories: Stockholder, Associate and Customer • Rewards successful execution of key annual strategic goals | Page 64 | | Long-Term Equity Incentive Compensation (LTIC) | | 60% PBRSUs | Three-Year Cliff Vesting | ROE | • Aligns incentives with stockholder interests and long-term financial objectives • Focuses our executives on delivering exceptional performance | Page 72 | | | | 40% TBRSUs | Vests Ratably Over Three-Year Period | Time-based, subject to continued employment | • Increases retention • Promotes direct alignment with stockholder interests • Rewards creation of long-term value | Page 72 |
Annual Incentive Compensation
Annual Incentive Compensation AIC is the annual cash-denominated performance-based component of our executive compensation program designed to provide an incentive to our NEOs and other executive officers to contribute to our annual objectives, including key strategic priorities for the year. The CHCC focuses on matching rewards with results and encourages executive officers to make significant contributions toward our financial results and other objectives by providing a basic reward for reaching threshold expectations, plus an upside for reaching our aspirational goals. Our formulaic AIC program is structured to reflect specific and measurable financial and non-financial goals (including ESG-related matters), which are approved by the CHCC at the beginning of the year and set forth on the Company’s annual balanced scorecard.
Annual Incentive Compensation
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HOW AIC AWARDS ARE CALCULATED
HOW AIC AWARDS ARE CALCULATED During fiscal year 2023, each of our NEOs was eligible to earn an AIC award. Each NEO’s target AIC award was expressed as a percentage of his or her base salary, reflecting peer and industry data and practice, internal equity among executive officers, the intended value and mix of target total direct compensation and the other factors set forth under “Compensation Determination Process” below. After the end of the fiscal year, the CHCC determined the amount of each NEO’s AIC award based upon the Company’s achievement against pre-determined goals, as set forth in the Company’s 2023 balanced scorecard and as modified by the four strategic modifiers that were adopted as part of the 2023 AIC program. The CHCC established threshold, target and maximum goal levels, with threshold equating to a 50% payout level, target equating to a 100% payout level, and maximum equating to a 200% payout level. The CHCC also established four strategic modifiers, each of which could either increase or decrease the total payout percentage by 5%, for a maximum modification of 20%, upwards or downwards. Threshold refers to the minimum acceptable level of performance that will result in payout, target is the desired level of performance, and maximum is the level of performance that will result in a maximum payment, which cannot be exceeded (except to the extent related to achievement of the strategic modifiers discussed below). Results are interpolated for performance between threshold and target, and between target and maximum. Because the metric goals are evenly distributed between threshold, target and maximum, while metric funding is set at 50% for threshold, 100% for target and 200% for maximum, this means that performance above target results in a steeper funding curve, driving motivation. The score for each individual metric is then multiplied by the weighting assigned to that metric (see “—2023 Balanced Scorecard Targets and Results” below), and the weighted scores for all metrics are added together to determine the total scorecard results. Establishing a maximum payout amount under our AIC plan deters excessive risk-taking, while having an equitable payout amount that can be earned at a defined performance threshold encourages goal attainment. No payout is made for performance below the threshold performance amount.
2023 AIC BALANCED SCORECARD DESIGN
2023 AIC BALANCED SCORECARD DESIGN Our 2023 balanced scorecard encompassed a selection of both financial and non-financial metrics important to all stakeholders, including metrics relating to our Stockholders, Customers and Associates. The scorecard consists of rigorous, quantitative performance metrics that were pre-established early in 2023 in these three categories (Stockholders, Customers, Associates). See “Compensation Determination Process—Target Setting” below for additional detail. The CHCC then reviewed progress against each metric throughout the year and evaluated achievement of the metrics in January 2024. The scorecard metrics were established by reference to our corporate strategy, which is designed to create value for our stockholders and benefit our customers and associates, and in turn the communities in which we operate. The financial metrics selected for 2023 were designed to incentivize strong financial results and align our NEOs’ interests with those of our stockholders, with
2023 AIC BALANCED SCORECARD DESIGN
the inclusion of non-financial metrics allowing us to also prioritize initiatives of significance in value-creation, including in the areas of risk, controls, regulatory matters, ESG-related matters, customer and brand partner relationships and human capital management. The goals were designed to be challenging and incentivize our NEOs to advance our strategic and operational priorities, in the face of uncertain macroeconomic and regulatory conditions. Below is a description of the AIC scorecard metrics selected by the CHCC for 2023, along with detail regarding the rationale for each metric’s inclusion in the scorecard. Each of the 2023 metrics was also included as part of the Company’s 2022 scorecard, with the exception of Net Promoter Score (NPS), which replaced a Customer Complaints metric, within the Customer category of metrics. NPS is a widely-used metric within our industry to capture the extent of our customer advocacy and loyalty within the marketplace, as NPS is intended to measure those customers who are true advocates of our brand, based on their experiences.
2023 AIC BALANCED SCORECARD DESIGN
| (1) At the time of the CHCC’s approval of the 2023 Balanced Scorecard, the CHCC pre-approved certain adjustments that would impact the calculation of Average Loans, NCLs, PPNR and Operating Leverage metrics. These adjustments are discussed below under “2023 Balanced Scorecard Targets and Results.” |
2023 STRATEGIC MODIFIERS TO SCORECARD
2023 STRATEGIC MODIFIERS TO SCORECARD In addition, similar to 2022, the CHCC approved four strategic modifiers to the 2023 scorecard, which were based on four key business initiatives for the Company in 2023. These strategic modifiers were:
2023 BALANCED SCORECARD TARGETS AND RESULTS
2023 BALANCED SCORECARD TARGETS AND RESULTS Below is detail regarding the threshold, target and maximum performance goals for each metric in our 2023 AIC balanced scorecard, as well as the Company’s results on each metric, the weighted scoring for each metric, and the final total scorecard result:
2023 BALANCED SCORECARD TARGETS AND RESULTS
| | Measure | Threshold | Target | Maximum | Annual Results | Score | Assigned Scorecard Weight | Final Weighted Score | | Stockholder (60%) | Average Loans ($mm)(1) | $17,549 | $18,549 | $19,549 | $18,050 | 75.05% | 9% | 6.75% | | | NCLs ($mm)(1) | $1,484 | $1,306 | $1,128 | $1,343 | 89.57% | 9% | 8.06% | | | PPNR ($mm)(1)(2) | $1,798 | $1,970 | $2,114 | $1,980 | 107.07% | 27% | 28.91% | | | Operating Leverage(1)(2) | (2.00)% | 0% | 2.00% | (1.19)% | 70.25% | 9% | 6.32% | | | ERM – % of Self-Identified Issues | 65% | 75% | 85% | 74.7% | 98.61% | 3% | 2.96% | | | ERM – Timely Remediation of Issues | 85% | 90% | 95% | 64.5% | –% | 3% | –% | | Customer (25%) | SLAs | 85% | 90% | 95% | 100.00% | 200.00% | 8.33% | 16.67% | | | Active Digital User Rate | 61.50% | 62.75% | 64.00% | 62.40% | 86.00% | 8.33% | 7.17% | | | NPS | 35.00% | 45.00% | 55.00% | 43.60% | 93.00% | 8.33% | 7.75% | | Associate (15%) | Associate Engagement | 71% | 76% | 81% | 80.20% | 184.52% | 3.75% | 6.92% | | | Opportunity Index(2) | 51% | 56% | 61% | 51.90% | 59.00% | 3.75% | 2.21% | | | DEIB | 78% | 82% | 86% | 83.90% | 148.21% | 3.75% | 5.56% | | | Turnover | 26.10% | 23.10% | 20.10% | 23.30% | 96.67% | 3.75% | 3.63% | | (1) Results impacted by certain pre-approved adjustments; see discussion below for additional details. (2) Both the performance targets and results for these metrics excluded the impact from the sale of the BJ’s Wholesale Club portfolio, which closed in early 2023 and was pending at the time these performance targets were established. (3) Result impacted by a normalizing adjustment (2.4%) made due to increased 2023 hiring in India in various technical/IT roles and operational excellence roles. | | | | | | | Scorecard Result | 102.90% |
2023 BALANCED SCORECARD TARGETS AND RESULTS
As shown above, the Company’s results on the 2023 balanced scorecard (before applying the strategic modifiers) yielded a payout percentage of 102.90%. On the Stockholder metrics, the Company’s performance was generally between threshold and target, although PPNR came in at 107% of target, reflecting our management team’s continued focus on delivering quality growth. ERM: Timely Remediation of Issues scored below threshold, yielding a 0% payout on that metric. We believe this performance was due to the heightened focus on resolving high/critical issues, many of which were related to the 2022 transition of our core processing services (see “—2023 Strategic Modifiers to Scorecard”), which resulted in delays in remediating lower-priority issues. Within the Customer metrics, the Company had a perfect 100% score on the SLA metric, yielding a maximum payout percentage of 200% on that metric. This score was a significant achievement, given that the prior year the Company’s achievement on the SLA metric failed to achieve threshold performance, primarily as a result of service interruptions experienced in connection with the transition. On Active Digital User Rate and NPS, the Company had solid performance on each of these metrics, although they were both slightly under target, resulting in scores of 86% and 93%, respectively, on these metrics. In the Associate metrics on the scorecard, the Company’s performance was very strong on the Associate Engagement and DEIB metrics, significantly exceeding target, which we believe is reflective of our NEOs’ commitment to promoting a diverse, inclusive and engaged workforce that drives our long-term growth and sustainability. On both Opportunity Index and Turnover, the Company’s performance was between threshold and target. Additional detail regarding our human capital strategies, as well as our broader ESG and sustainability efforts, can be found in the “Commitment to Sustainability” section included elsewhere in this proxy statement. As referenced above, Average Loans, NCLs, PPNR and Operating Leverage were impacted by certain adjustments that were approved by the CHCC. When the scorecard was adopted in early 2023, the CHCC pre-approved adjustments for the following: (i) unplanned acquisitions, divestitures, mergers or strategic early renewals, including credit card portfolio M&A; (ii) unplanned impacts from past/legacy businesses, including amounts associated with the Company’s former Epsilon and LoyaltyOne segments; (iii) matters relating to required regulatory changes, including a CFPB rule on credit card late fees; (iv) material one-time accounting impacts; and (v) certain impairments (e.g., brand partner bankruptcies). Certain of these pre-approved adjustments did result in impacts to the Company’s results on the Average Loans, NCLs, PPNR and Operating Leverage metrics, some of which were favorable to the Company’s results while others were unfavorable. A summary of the impact of these adjustments is below:
2023 BALANCED SCORECARD TARGETS AND RESULTS
In total, three passing scores and one failing score on the strategic modifiers resulted in a 10% net increase to the 2023 balanced scorecard, yielding a total payout percentage of 112.90%.
SUMMARY OF 2023 PERFORMANCE-BASED AIC PAYMENTS
SUMMARY OF 2023 PERFORMANCE-BASED AIC PAYMENTS The following table sets forth a summary of the AIC payments for the 2023 performance year, calculated using the final payout percentage of 112.90% from the 2023 balanced scorecard. These AIC payments are also included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below. The target AIC percentages reflected below were unchanged from 2022. For fiscal year 2023, no discretionary adjustments were made by the CHCC for any of our NEOs.
SUMMARY OF 2023 PERFORMANCE-BASED AIC PAYMENTS
| | Annual Base Salary ($)x | Target AIC (%) | = | Target AIC ($)x | Final Payout Percentage | = | AIC Payment ($) | | Ralph J. Andretta | 1,155,000 | 180% | | 2,079,000 | 112.90% | | 2,347,191 | | Perry S. Beberman | 650,000 | 150% | | 975,000 | 112.90% | | 1,100,775 | | Valerie E. Greer | 650,000 | 150% | | 975,000 | 112.90% | | 1,100,775 | | Tammy M. McConnaughey | 640,000 | 150% | | 960,000 | 112.90% | | 1,083,840 | | Joseph L. Motes III | 645,000 | 150% | | 967,500 | 112.90% | | 1,092,308 |
Long-Term Equity Incentive Compensation
Long-Term Equity Incentive Compensation We grant long-term equity incentive awards to align the interests of our NEOs and other executive officers with those of our stockholders and foster a focus on long-term results, as well as to encourage retention. Awards of performance-based LTIC pay out solely upon attainment of a threshold level of pre-determined performance targets, as well as continued employment of the executive officer. In determining the size of LTIC awards, the CHCC generally considers the following factors: (i) the value of total direct compensation for comparable positions at our proxy peer group and other market data; (ii) Company and individual performance against strategic plans; (iii) the number and value of LTIC awards previously granted; (iv) the allocation of overall equity awards attributed to our executive officers relative to all equity awards; and (v) the relative proportion of long-term incentives within the total direct compensation mix. In 2023, we granted LTIC awards to our senior management and executive officers, including our NEOs, pursuant to our 2022 Omnibus Incentive Plan. As permitted by the 2022 Omnibus Incentive Plan, the Board of Directors has delegated its authority under the plan to the CHCC, except for purposes of awards to the CEO.
2023 LTIC PLAN DESIGN
| Element | Key Metrics | Features | | Performance-Based Restricted Stock Units (60% of Award) | • Pre-determined annual ROE targets over 3-year period (0-150% achievement) • Annual ROE achievement averaged at end of 3-year period | • 3-year cliff vesting period (2023-2025) • Payout tied to performance • ROE targets established at the time of grant by the CHCC | | Time-Based Restricted Stock Units (40% of Award) | • Vest ratably over 3-year period | • Units encourage long-term retention and align NEOs interests with stockholders |
LTIC AWARDS GRANTED DURING 2023
| (1) The target numbers of RSUs were determined by dividing the total grant value of the award by the 45-day average fair market value of the Company’s common stock as quoted on the NYSE as of the date of grant. |
2023-2025 PBRSU DESIGN
2023-2025 PBRSU DESIGN The PBRSUs we granted in 2023 are subject to an annual ROE metric with threshold, target and maximum goals for each of 2023, 2024 and 2025. For the ROE metric, threshold, target and maximum goals from 50% to 150% achievement are to be calculated on a scale interpolated between the fixed threshold, target and maximum goal amounts, with a maximum payout of 150% of target. After consideration of market practices and consultation with our independent compensation consultant, the CHCC continued the use of ROE as the performance metric for our PBRSU grants in 2023. ROE is a valuable performance metric because:
2023-2025 PBRSU DESIGN
We average the annual ROE results at the end of the three-year performance period so that ROE results relative to the goals are not disproportionately impacted by unforeseeable market factors outside the NEOs’ control over a multi-year period. This approach provides a performance and retention incentive over the long term with three-year cliff vesting. In the event threshold performance is not achieved in one or more fiscal years, the total payout could be less than 50%, and as low as 0%. To the extent earned, these PBRSUs will vest in February 2026, provided that the executive is employed by us on the vesting date. The CHCC believes the combined annual ROE over three years for the PBRSUs can be characterized as challenging to achieve, but attainable with the application of significant skill and effort on the part of our executive officers.
PBRSU TARGETS AND RESULTS
| (2) 3-year relative TSR modifier (-20%) applied at end of 3-year term for the 2021-2023 PBRSUs. |
FINAL PAYOUT OF 2021- 2023 PBRSUS
FINAL PAYOUT OF 2021- 2023 PBRSUS As described above under “PBRSU Targets and Results,” the 2021-2023 PBRSUs awarded to our NEOs in February 2021 completed their three-year performance period at the end of fiscal year 2023. As a result, the CHCC determined and certified the Company’s final results of these PBRSUs over the three-year period in February 2024, which determined the final number of shares earned pursuant to those awards. As illustrated below, based on the annual ROE results for fiscal years 2021, 2022 and 2023, and our rTSR performance over the three-year period, the shares earned on account of these PBRSUs equated to 130.0% of the target award established in February 2021.
FINAL PAYOUT OF 2021- 2023 PBRSUS
| Primary Metric | Threshold (%) | Target (%) | Maximum (%) | Result (%) | ROE Result as a % of Target | | Fiscal Year 2021 ROE | 21.0% | 26.8% | 29.0% | 40.7% | 150.0% | | Fiscal Year 2022 ROE (Continuing Ops) | 18.7% | 23.6% | 27.7% | 30.7% | 150.0% | | Fiscal Year 2023 ROE (Continuing Ops) | 20.6% | 26.1% | 30.3% | 31.3% | 150.0% | | Average Result | | | | | 150.0% |
FINAL PAYOUT OF 2021- 2023 PBRSUS
| Modifying Metric | ≤ 25th Percentile | Median | ≥ 75th Percentile | Result | ROE Result as a % of Target | | TSR Percentile Ranking v. 2021 Peer Group | -20% | 0% | +20% | 8th Percentile | -20% |
FINAL PAYOUT OF 2021- 2023 PBRSUS
| Primary Metric Result | +/- Modifying Metric Result | Equals | Final Payout Result as a % of Target | | 150% | -20% | = | 130% |
FINAL PAYOUT OF 2021- 2023 PBRSUS
Based on this final payout result of 130.0%, on February 16, 2024, our NEOs earned a number of shares equal to 130.0% of the target number of shares granted to each of them under their respective PBRSU in February 2021. Accordingly, Mr. Andretta earned 51,319 shares versus his target of 39,476 shares, Mr. Beberman earned 4,710 shares versus his target of 3,623 shares, Ms. Greer earned 13,442 shares versus her target of 10,340 shares, Ms. McConnaughey earned 12,220 shares versus her target of 9,400 shares, and Mr. Motes earned 13,442 shares versus his target of 10,340 shares, in each case before giving effect to any shares withheld for federal tax withholding purposes. Each of these awards vested on February 16, 2024, except for Mr. Beberman’s award, which was made in connection with Mr. Beberman joining the Company in July 2021 and will not vest until July 15, 2024, subject to Mr. Beberman’s continued employment through that date.
FINAL PAYOUT OF 2021- 2023 PBRSUS
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Role of the Compensation Consultant
Role of the Compensation Consultant The CHCC has the authority to retain outside advisors, including compensation consultants, to assist it in evaluating actual and proposed compensation for our officers and non-employee directors. The CHCC directly engages Meridian Compensation Partners, LLC (Meridian), as its external executive compensation consultant for its industry knowledge and experience in advising on executive compensation matters. The CHCC has considered and assessed all relevant factors, including, but not limited to, those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, as amended, that could give rise to a potential conflict of interest
Role of the Compensation Consultant
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Role of the Compensation Consultant
with respect to Meridian. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Meridian. In particular, Meridian assisted the CHCC in 2023 with competitive market analysis, peer assessment, and consultation and review of compensation policies and practices. Meridian also assisted the CHCC with a variety of other issues, including an analysis of the share usage, dilution and overhang of our equity compensation plan, the design and establishment of performance metrics and goals under our variable incentive plans, reviewing our compensation risk analysis, reviewing our non-management director compensation program, responding to our 2023 say-on-pay vote outcome, and reviewing this CD&A.
Competitive Considerations
Competitive Considerations In determining appropriate levels of compensation, the CHCC seeks to set target pay levels that are competitive with the market for which we compete for talent. The CHCC considers the competitive market for talent and compensation levels provided by comparable companies to minimize significant differences that could negatively impact our ability to attract and retain skilled executive officers. As referenced above, the CHCC engaged Meridian to, among other things, assist with competitive market analysis and peer assessment. For conducting market reviews, Meridian formed and surveyed two data sets, both of which were approved by the CHCC: a general industry group and a proxy peer group. The general industry group encompasses financial services industry data for companies of similar size based on revenue. The proxy peer group consists of public companies that are selected based on the criteria described below.
PROXY PEER GROUP
PROXY PEER GROUP Our pay program is designed to reward achievement of financial and strategic goals and to attract, retain and motivate our leaders in a competitive talent market. Each year, the CHCC reviews the pay levels and practices of peer companies in order to assess the competitive positioning of the Company’s pay levels and plan designs. For fiscal year 2023, the CHCC approved a compensation peer group comprised of the following 16 companies:
PROXY PEER GROUP
| • Ally Financial Inc. | • Fifth Third Bancorp | • LendingClub Corporation | | • Associated Banc-Corp. | • Green Dot Corporation | • OneMain Holdings, Inc. | | • Capital One Financial Corporation | • Huntington Bancshares Incorporated | • Regions Financial Corporation | | • Citizens Financial Group, Inc. | • KeyCorp | • SoFi Technologies, Inc. | | • Comerica Incorporated | • LendingTree, Inc. | • Synchrony Financial | | • Discover Financial Services | | |
PROXY PEER GROUP
We selected peer companies by taking into account the following factors: size (including revenue and market capitalization); competitiveness for brand partners/customers and executive talent; organizational structure and complexity; proxy advisor peer criteria; location; and other factors. We believe such companies are likely to have executive positions comparable in breadth, complexity and scope of responsibility to ours. We consider median market levels of compensation when setting total target compensation levels for our officers, although the actual positioning of target compensation relative to the median varies based on each executive’s experience, skill set and other factors. We emphasize variable compensation because it minimizes fixed expense associated with salary and enables total compensation to fluctuate directly with performance against operating goals, strategic and operational performance objectives and changes in share price. This approach aligns overall costs with performance and provides executives with a leveraged and attractive compensation opportunity that varies based on results. The CHCC, together with our independent compensation consultant, annually reviews our peer group. In September 2022, the CHCC removed from the peer group M&T Bank Corporation, Mastercard Incorporated, PayPal Holdings, Inc., and SVB Financial Group, and added to the peer group Associated Banc-Corp, Green Dot Corporation, LendingTree, Inc., LendingClub Corporation, OneMain Holdings, Inc. and SoFi Technologies, Inc. These
PROXY PEER GROUP
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PROXY PEER GROUP
changes were effective for 2023 compensation decisions and were made to remove certain of the largest companies from our prior peer group and replace them with smaller companies, which are either similar to or us or smaller in term of market cap, revenue and other metrics. Data with respect to comparable elements of total target compensation is compiled for the peer group of companies described above by our independent compensation consultant from available sources, including, in most cases, from both published proxy data and Equilar’s Executive Compensation Survey.
MARKET REVIEW
MARKET REVIEW Market data provides an important benchmark by indicating what an executive officer could expect to earn at a comparable company and what we might expect to pay if we should have to recruit and compete for outside executive talent. Market data, however, is only one factor that the CHCC considers in assessing the reasonableness of compensation provided to our NEOs. The CHCC also considers other relevant factors, including an NEO’s role and responsibilities, experience, performance, talent supply and demand that may be industry or application specific, cost constraints, internal pay equity considerations, tenure, expected future contributions, prior compensation and retention risk for each NEO. When conducting the market review, the CHCC reviews each component of compensation in relation to certain percentiles of both the proxy peer group and the general industry group surveyed. While we consider median market levels of compensation when setting total target compensation levels for our officers, the actual positioning of target compensation relative to the median varies based on each executive’s experience, skill set and the other factors set forth above.
Target Setting
| • | corporate strategy, including key strategic initiatives that continue to drive our transformation and long-term success; |
Target Setting
| • | annual and long-term operating plans; |
Target Setting
| • | input from our independent compensation consultant and management; and |
Assessment of Risk in Compensation Program Design
| • | a balance of both short- and long-term performance-based incentive compensation; |
Assessment of Risk in Compensation Program Design
| • | a balance within equity incentive compensation of both TBRSUs and PBRSUs; |
Assessment of Risk in Compensation Program Design
| • | the use of multiple performance metrics in incentive compensation, utilizing a mix of financial and non-financial objectives; |
Assessment of Risk in Compensation Program Design
| • | the definition of performance metrics at the beginning of the performance period, which may include adjustments for one-time or other pre-determined events; |
Assessment of Risk in Compensation Program Design
| • | inclusion of maximum payout limitations under our omnibus incentive plans; |
Assessment of Risk in Compensation Program Design
| • | standardized equity grant and forfeiture procedures; |
Assessment of Risk in Compensation Program Design
| • | ability of the CHCC to apply discretion in determining payouts for incentive compensation; and |
Change in Control—Impact on Outstanding Equity
Change in Control—Impact on Outstanding Equity Under our equity incentive plans, the CHCC, as the plan administrator, may accelerate vesting of stock options and restricted stock or RSUs in the event of a change in control. Further, if a participant’s employment or other service is terminated by the Company or other surviving entity without cause or the participant resigns for good reason within 12 months after a change in control, all restrictions on any awards held by the participant will lapse and the awards will be immediately and fully vested. Further, stock options will be exercisable until the earlier of the end of the option term or the end of the one year period following such event.
Bread Financial 401(k) Plan
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | | Ralph J. Andretta President and Chief Executive Officer | 2023 | 1,155,000 | – | 4,039,912 | 2,347,191 | – | 155,483 | 7,697,586 | | | 2022 | 1,138,846 | – | 4,840,698 | 2,615,590 | – | 99,548 | 8,694,682 | | | 2021 | 1,045,385 | 135,000 | 7,900,354 | 2,063,040 | – | 35,459 | 11,179,238 | | Perry S. Beberman EVP and Chief Financial Officer | 2023 | 648,462 | – | 1,171,000 | 1,100,775 | – | 75,225 | 2,995,462 | | | 2022 | 625,385 | – | 1,597,947 | 1,188,905 | – | 39,320 | 3,451,557 | | | 2021 | 297,692 | 600,000 | 1,304,665 | 1,002,600 | – | 431 | 3,205,388 | | Valerie E. Greer EVP and Chief Commercial Officer | 2023 | 649,231 | – | 1,171,000 | 1,100,775 | – | 83,091 | 3,004,097 | | | 2022 | 636,923 | – | 1,210,283 | 1,207,776 | – | 52,069 | 3,107,051 | | | 2021 | 618,462 | 43,638 | 2,069,298 | 1,156,362 | – | 39,913 | 3,927,673 | | Tammy M. McConnaughey EVP, Chief Credit Risk and Operations Officer | 2023 | 639,231 | – | 841,655 | 1,083,840 | 42,936 | 61,406 | 2,669,068 | | | 2022 | 617,692 | – | 1,100,204 | 1,188,905 | 56,387 | 43,787 | 3,006,975 | | | 2021 | 541,495 | 42,180 | 1,881,141 | 732,820 | 47,783 | 41,908 | 3,287,327 | | Joseph L. Motes III EVP, Chief Administrative Officer, General Counsel and Secretary | 2023 | 643,846 | – | 900,201 | 1,092,308 | – | 76,863 | 2,713,218 | | | 2022 | 625,384 | – | 1,210,283 | 1,188,905 | – | 53,294 | 3,077,866 | | | 2021 | 592,308 | 29,000 | 2,422,007 | 921,000 | – | 45,623 | 4,009,938 |
Fiscal Year 2023 Grants of Plan-Based Awards
Fiscal Year 2023 Grants of Plan-Based Awards The following table provides information about equity and non-equity awards granted to our NEOs in 2023, including AIC and LTIC awards. For a discussion of the material terms of these awards, see “Compensation Discussion and Analysis – Compensation Programs” above.
Fiscal Year 2023 Grants of Plan-Based Awards
| | | | Estimated Future Payouts Under Non- Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | Full Grant Date Fair Value of Equity Awards Granted in 2023 ($)(2) | | Name | Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Ralph J. Andretta | Performance- Based AIC | | 623,700 | 2,079,000 | 4,573,800 | | | | | | | | PBRSUs(3) | 3/24/2023 | | | | 43,660 | 87,319 | 130,979 | | 2,423,975 | | | TBRSUs(4) | 3/24/2023 | | | | | | | 58,211 | 1,615,937 | | Perry S. Beberman | Performance- Based AIC | | 292,500 | 975,000 | 2,145,000 | | | | | | | | PBRSUs(3) | 3/24/2023 | | | | 12,655 | 25,310 | 37,965 | | 702,606 | | | TBRSUs(4) | 3/24/2023 | | | | | | | 16,873 | 468,394 | | Valerie E. Greer | Performance- Based AIC | | 292,500 | 975,000 | 2,145,000 | | | | | | | | PBRSUs(3) | 3/24/2023 | | | | 12,655 | 25,310 | 37,965 | | 702,606 | | | TBRSUs(4) | 3/24/2023 | | | | | | | 16,873 | 468,394 | | Tammy M. McConnaughey | Performance- Based AIC | | 288,000 | 960,000 | 2,112,000 | | | | | | | | PBRSUs(3) | 3/24/2023 | | | | 9,096 | 18,191 | 27,287 | | 504,982 | | | TBRSUs(4) | 3/24/2023 | | | | | | | 12,128 | 336,673 | | Joseph L. Motes III | Performance- Based AIC | | 290,250 | 967,500 | 2,128,500 | | | | | | | | PBRSUs(3) | 3/24/2023 | | | | 9,729 | 19,457 | 29,186 | | 540,126 | | | TBRSUs(4) | 3/24/2023 | | | | | | | 12,971 | 360,075 |
Fiscal Year 2023 Grants of Plan-Based Awards
| (1) The actual payout amounts of these 2023 performance-based AIC awards have already been determined and were paid in February 2024, and are included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. The threshold amounts assume that threshold performance is achieved (50% payout amount), but that none of the four strategic modifiers are achieved (minus 20%), resulting in a 30% payout amount. The maximum amounts assume maximum performance is achieved (200%), and further that all of the four strategic modifiers are achieved (plus 20%), resulting in a 220% payout amount.. |
Fiscal Year 2023 Grants of Plan-Based Awards
| (2) Full grant date fair value of equity awards granted in 2023 is computed in accordance with ASC 718 and reflects the total amount of the award to be spread over the applicable vesting period. The amount recognized for financial reporting purposes under ASC 718 of the target awards granted is included in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table above. |
Fiscal Year 2023 Grants of Plan-Based Awards
| (3) These share amounts represent the potential payouts for the PBRSUs granted as part of our 2023-2025 LTIC Awards. These PBRSUs will cliff-vest in February 2026 to the extent earned and subject to continued employment (subject to certain limited exceptions). The share amounts in the “Threshold” column represent the achievement of threshold ROE goals over the performance period. The share amounts in the “Maximum” column represent the achievement of maximum ROE goals over the performance period. If threshold performance is not achieved in one or more fiscal years, the potential payout could be as low as 0%. |
Fiscal Year 2023 Grants of Plan-Based Awards
| (4) These amounts reflect TBRSUs granted as part of our 2023-2025 LTIC Awards. Of these TBRSUs, 33% vested on 3/24/23, 33% will vest on 2/15/25, and the remaining 34% will vest on 2/18/26, subject to continued employment (subject to certain limited exceptions) by the applicable NEO on such dates. |
Fiscal Year 2023 Grants of Plan-Based Awards
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Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End The following table provides information on the holdings of Bread Financial equity awards by our NEOs as of the 2023 fiscal year-end. This table includes unvested RSUs with vesting conditions that were not yet satisfied as of December 31, 2023. Each equity award is shown separately for each NEO, with the corresponding vesting schedule for each award in the footnotes following this table.
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| | Stock Awards | | | | | Name | Number Of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Ralph J. Andretta | 98,496(4) | 3,244,458 | | | | | 51,319(5) | 1,690,448 | | | | | | | 60,158(2)(6) | 1,981,605 | | | | | 87,319(3)(7) | 2,876,288 | | Perry S. Beberman | 26,657(8) | 878,082 | | | | | 4,710(9) | 155,147 | | | | | | | 19,859(2)(10) | 654,155 | | | | | 25,310(3)(11) | 833,711 | | Valerie E. Greer | 27,211(12) | 896,330 | | | | | 13,442(13) | 442,779 | | | | | | | 15,041(2)(14) | 495,451 | | | | | 25,310(3)(15) | 833,711 | | Tammy M. McConnaughey | 21,526(16) | 709,066 | | | | | 12,220(17) | 402,527 | | | | | | | 13,673(2)(18) | 450,389 | | | | | 18,191(3)(19) | 599,212 | | Joseph L. Motes III | 24,426(20) | 804,592 | | | | | 13,442(21) | 442,779 | | | | | | | 15,041(2)(22) | 495,451 | | | | | 19,457(3)(23) | 640,914 |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
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Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (1) Market values of the RSU awards shown in this table are based on the closing market price of our common stock on December 29, 2023, which was $32.94, and assumes the satisfaction of the applicable vesting conditions. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (2) Based on SEC guidance, the number of shares and payout values represent the maximum number of shares the executive may receive under the PBRSUs granted since ROE performance as measured through the first two years of the 2022-2024 PBRSUs exceeded target levels. The actual number of shares an executive receives under a PBRSU is dependent on the Company’s performance over the applicable three-year performance period and will not be determined until after the end of the performance period. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (3) Based on SEC guidance, the number of shares and payout values represent the target number of shares the executive may receive under the PBRSUs granted since ROE performance as measured through the first year of the 2023-2025 PBRSUs exceeded threshold levels but fell below target levels. The actual number of shares an executive receives under a PBRSU is dependent on the Company’s performance over the applicable three-year performance period and will not be determined under after the end of the performance period. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (4) Of these TBRSUs, 8,823 units vested on 2/15/24, 22,371 units vested on 2/16/24, 19,210 units vested on 3/24/24, 28,301 units are scheduled to vest on 2/15/25, and 19,791 units are scheduled to vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (5) PBRSUs subject to additional time-based restrictions. On 2/16/24, based on the Company’s performance over the 2021-2023 performance period, 51,319 units vested. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (6) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/25. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (7) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (8) Of these TBRSUs, 2,913 units vested on 2/15/24, 5,568 units vested on 3/24/24, 3,870 units are scheduled to vest on 7/15/24, 8,569 units are scheduled to vest on 2/15/25, and 5,737 units are scheduled to vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (9) PBRSUs subject to additional time-based restrictions. On 7/15/24, based on the Company’s performance over the 2021-2023 performance period, 4,710 units will vest, subject to continued employment on that date. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (10) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/25. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (11) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (12) Of these TBRSUs, 2,206 units vested on 2/15/24, 5,859 units vested on 2/16/24, 5,568 units vested on 3/24/2024, 7,841 units are scheduled to vest on 2/15/25, and 5,737 units are scheduled to vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (13) PBRSUs subject to additional time-based restrictions. On 2/16/24, based on the Company’s performance over the 2021-2023 performance period, 13,442 units vested. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (14) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/25. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (15) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (16) Of these TBRSUs, 2,005 units vested on 2/15/24, 5,326 units vested on 2/16/2024, 4,002 units vested on 3/24/2024, 6,069 units are scheduled to vest on 2/15/25, and 4,124 units are scheduled to vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (17) PBRSUs subject to additional time-based restrictions. On 2/16/24, based on the Company’s performance over the 2021-2023 performance period, 12,220 units vested. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (18) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/25. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (19) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (20) Of these TBRSUs, 2,206 units vested on 2/15/24, 7,457 units vested on 2/16/24, 4,120 units vested on 3/24/24, 6,393 units are scheduled to vest on 2/15/25, and 4,250 units are scheduled to vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (21) PBRSUs subject to additional time-based restrictions. On 2/16/24, based on the Company’s performance over the 2021-2023 performance period, 13,442 units vested. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (22) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/25. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| (23) 3-year cliff-vesting PBRSUs, which are subject to adjustment up or down based on predetermined performance measures at the time of vesting. To the extent earned, and following any such adjustment, these PBRSUs will vest on 2/15/26. |
Fiscal Year 2023 Outstanding Equity Awards at Fiscal Year-End
| 88 | Bread Financial | 2024 Proxy Statement |
Fiscal Year 2023 Option Exercises and Stock Vested
Fiscal Year 2023 Option Exercises and Stock Vested The following table provides information on stock option exercises and RSUs vested during 2023:
Fiscal Year 2023 Option Exercises and Stock Vested
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Ralph J. Andretta | 44,555(1) | 1,817,291 | | Perry S. Beberman | 6,670(2) | 250,787 | | Valerie E. Greer | 15,904(3) | 604,162 | | Tammy M. McConnaughey | 7,869(4) | 323,191 | | Joseph L. Motes III | 11,016(5) | 448,655 |
Fiscal Year 2023 Option Exercises and Stock Vested
| (1) Of the 44,555 shares acquired by Mr. Andretta on vesting, 20,209 shares were withheld to pay withholding taxes. |
Fiscal Year 2023 Option Exercises and Stock Vested
| (2) Of the 6,670 shares acquired by Mr. Beberman on vesting, 2,861 shares were withheld to pay withholding taxes. |
Fiscal Year 2023 Option Exercises and Stock Vested
| (3) Of the 15,904 shares acquired by Ms. Greer on vesting, 6,770 shares were withheld to pay withholding taxes. |
Fiscal Year 2023 Option Exercises and Stock Vested
| (4) Of the 7,869 shares acquired by Ms. McConnaughey on vesting, 3,552 shares were withheld to pay withholding taxes. |
Fiscal Year 2023 Option Exercises and Stock Vested
| (5) Of the 11,016 shares acquired by Mr. Motes on vesting, 4,629 shares were withheld to pay withholding taxes. |
Fiscal Year 2023 Option Exercises and Stock Vested
All values in this table reflect gross amounts before payment of any applicable withholding tax and broker commissions. The value realized on vesting is calculated by multiplying the number of shares vested by the average of the high and low prices of our common stock on the NYSE during trading hours on the date of vesting.
Fiscal Year 2023 Option Exercises and Stock Vested
| Bread Financial | 2024 Proxy Statement | 89 |
Fiscal Year 2023 Nonqualified Deferred Compensation
Fiscal Year 2023 Nonqualified Deferred Compensation The table below provides information on the nonqualified deferred compensation of our NEOs in 2023, including contributions by each NEO and by the Company and earnings on contributions credited during 2023:
Fiscal Year 2023 Nonqualified Deferred Compensation
| Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | | Ralph J. Andretta | — | — | — | — | — | | Perry S. Beberman | — | — | — | — | — | | Valerie E. Greer | — | — | — | — | — | | Tammy M. McConnaughey | 210,298 | — | 102,799 | — | 1,266,013 | | Joseph L. Motes III | — | — | — | — | — |
Fiscal Year 2023 Nonqualified Deferred Compensation
| (1) In 2023, $31,962 was deferred from Ms. McConnaughey’s salary, and $178,336 was deferred from Ms. McConnaughey’s AIC payment received in 2023 based on 2022 performance. |
Fiscal Year 2023 Nonqualified Deferred Compensation
| (2) The amounts in this column include all interest accrued on contributions under the Executive Deferred Compensation Plan. The above-market portion of such earnings, as defined by the SEC, is included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table above. |
Fiscal Year 2023 Nonqualified Deferred Compensation
| 90 | Bread Financial | 2024 Proxy Statement |
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control The information below shows estimated payouts to our NEOs in the event of a termination of employment following a change in control, assuming such termination occurred as of December 31, 2023. In accordance with rules prescribed by the SEC, the amounts included with respect to equity awards have been calculated using the closing market price of our common stock on December 29, 2023, which was $32.94. A change in control, however, did not occur on December 31, 2023, and our NEOs were not terminated on that date. While the information below provides an estimate of the payments that may be made to NEOs, actual payments upon termination can only be determined at the time of such NEO’s actual termination. The information below includes only those benefits, if any, that are enhanced or increased as a result of the event of termination and do not include benefits that the NEO is entitled to receive regardless of the termination, including (1) any base salary earned but not yet paid; (2) amounts contributed to or accrued and earned under broad-based employee benefit plans or deferred compensation plans; and (3) basic continuation of medical, dental, life and disability benefits. We do not have any employment, severance or other change in control agreements with continuing benefits with any of our NEOs, except for certain change in control provisions included in our long-term equity grant agreements discussed below. Pursuant to our long-term equity grant agreements, in the event of a change in control, if the CHCC fails to exercise its discretion to accelerate the award or fails to provide for the award’s assumption, substitution or other continuation, or in any event, if the executive is terminated within 12 months after a change in control, such awards would automatically vest, resulting in a payout of $9,132,253, $2,303,033, $2,218,575 $2,503,111 and $2,011,053, respectively, to each of Messrs. Andretta, Beberman and Motes and Mses. Greer and McConnaughey assuming target payouts of 100% and that such event occurred on December 31, 2023. All unvested shares of restricted stock or RSUs granted to each NEO will be forfeited upon termination of employment for any reason (subject to certain limited exceptions, such as death, disability and qualifying retirements) other than where such NEO’s employment or other service is terminated by the Company or other surviving entity without cause or the NEO resigns for good reason within 12 months after a change in control, in which case all restrictions on any awards held by such NEO will lapse and the awards will be immediately and fully vested (the value of such awards for our NEOs assuming target payouts of 100% and that such event occurred on December 31, 2023 is discussed above). Notwithstanding the foregoing, the CHCC may exercise its discretion to accelerate the vesting of any RSUs granted to the NEO upon that NEO’s termination of employment for any reason other than for cause, subject to any restrictions in the Omnibus Incentive Plan under which such RSUs were granted.
Potential Payments upon Termination or Change in Control
| Bread Financial | 2024 Proxy Statement | 91 |
Director Compensation
Director Compensation The CHCC annually reviews and approves the form and amount of Board compensation for non-employee directors. Members of our Board of Directors who are also officers or associates of our Company, currently only Mr. Andretta, do not receive compensation for their services as a director. The CHCC considers the comprehensive market data collected and analyzed by Meridian as a benchmark for competitive pay. Meridian utilized the same peer group as was used to evaluate executive compensation. In considering and determining director compensation, the CHCC reviews each element of director compensation. All directors are reimbursed for reasonable out-of-pocket expenses incurred while serving on the Board and any Board committee. Non-employee director compensation typically includes annual cash retainers for Board and committee service, supplemental cash retainers for those directors who serve as a Board or committee chair, special cash meeting fees (to the extent applicable), and annual equity awards consisting of TBRSUs. The annual equity awards are paid at the beginning of the director’s service year and the cash retainers are paid quarterly in advance, in July, October, January and April of each year, with any special cash meeting fees paid in the quarter following the quarter in which the meeting fees were incurred.
Annual Equity Award
| Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Roger H. Ballou(2) | 270,000 | 152,645 | – | – | 25,953 | – | 448,598 | | John C. Gerspach, Jr.(3) | – | 289,913 | – | – | – | – | 289,913 | | Rajesh Natarajan(4) | 118,000 | 152,645 | – | – | – | – | 270,645 | | Joyce St Clair(5) | 40,171 | 129,719 | | | | | 169,890 | | Timothy J. Theriault(6) | 246,000 | 152,645 | – | – | – | – | 398,645 | | Laurie A. Tucker(7) | 67,500 | 217,409 | – | – | – | – | 284,909 | | Sharen J. Turney(8) | 135,000 | 152,645 | – | – | 5,297 | – | 292,942 | | Karin J. Kimbrough(9) | 46,615 | 12,573 | | | 1,192 | 4,990 | 65,370 |
CEO Pay Ratio
CEO Pay Ratio In determining compensation for executive officers and non-executive associates, we consider many relevant factors, including responsibility, skills, experience, and market data. Similar to our use of a compensation consultant for NEO compensation, we conduct an extensive analysis of market pay based on the responsibilities and necessary skills for each position at the Company. We seek to compensate all associates on a competitive basis and target mid-market compensation rates for all positions in all geographic locations. Our CEO to “median employee” pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. In our 2022 proxy statement, we identified the median employee for the 2021 fiscal year by examining the annual total cash compensation based on payroll records for all individuals, excluding our CEO, who were employed by us on November 8, 2021, which was the first business day following the completion of the spinoff of our former LoyaltyOne segment. We believed (and still believe) the use of annual total cash compensation for all associates is a consistently applied compensation measure because we do not widely distribute annual equity incentive awards to associates. Our calculation of annual total cash compensation included base salary or earnings, bonus and commissions. We included all Company associates (excluding the CEO), whether employed on a full-time, part-time, temporary or seasonal basis, and we annualized the compensation for those associates who were not employed for the full year of 2021. No exclusions or exemptions were utilized. Because we did not experience any material changes to our employee population, or changes in employee compensation arrangements, during 2022 or 2023, we believe it is reasonable to use the median employee identified and reported in our 2022 proxy statement for purposes of calculating the pay ratio disclosure with respect to fiscal year 2023, and that using this median employee will not significantly affect our pay ratio disclosure. We calculated annual total compensation for such associate using the same methodology we use for our NEOs as set forth in the Summary Compensation Table of this proxy statement. The annual total compensation for fiscal year 2023 for our CEO was $7,697,586 and for our median employee was $83,520. The resulting ratio of the compensation for our CEO to the compensation for our median employee in 2023 is approximately 92:1.
CEO Pay Ratio
| 96 | Bread Financial | 2024 Proxy Statement |
Pay Versus Performance
Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” (CAP) to our CEO and to our other NEOs and certain financial performance of the Company over the period indicated. CAP, as determined under SEC requirements, does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information concerning the Company’s pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the “Compensation Discussion and Analysis” section of this proxy statement.
Pay Versus Performance Table
Pay Versus Performance Table The table below provides information on the compensation for our CEO and the average compensation for our other NEOs, both as reported in the Summary Compensation Table and with certain adjustments to reflect the CAP, as defined under SEC rules, to such individuals, for each of 2023, 2022, 2021 and 2020. The table also provides information on our cumulative TSR, the cumulative TSR of our peer group (S&P Financial Composite Index), our Net Income and our PPNR.
Pay Versus Performance Table
| Year (1) | Summary Compensation Table Total for CEO ($) | Compensation Actually Paid to CEO (2) ($) | Average Summary Comp Table Total for Other NEOs ($) | Average Compensation Actually Paid to Other NEOs (2) ($) | Value of Initial Fixed $100 Investment Based On: | | Net Income ($MM) | Company Selected Performance Measure: PPNR ($MM) (4) | | | | | | | Company Cumulative TSR ($) | Peer Group Cumulative TSR (3) ($) | | | | 2023 | 7,697,586 | 7,660,934 | 2,845,461 | 2,797,744 | 39.55 | 132.42 | 718 | 2197 | | 2022 | 8,694,682 | 3,608,463 | 3,160,862 | 1,828,189 | 44.06 | 118.59 | 223 | 1,894 | | 2021 | 11,179,238 | 11,252,145 | 3,531,923 | 2,936,373 | 76.51 | 131.98 | 801 | 1,588 | | 2020 | 12,299,988 | 10,586,997 | 2,110,732 | 1,794,082 | 67.30 | 98.09 | 214 | 1,567 |
Pay Versus Performance Table
| (1) Our Chief Executive Officer, Ralph Andretta, served as our Principal Executive Officer for each of 2023, 2022, 2021 and 2020. Our other NEOs were as follows: |
Pay Versus Performance Table
- For 2023, Perry Beberman, Valerie Greer, Tammy McConnaughey and Joseph Motes; - For 2022, Perry Beberman, Valerie Greer, Tammy McConnaughey and Joseph Motes; - For 2021, Perry Beberman, Valerie Greer, Timothy King, Tammy McConnaughey and Joseph Motes; and - For 2020, Valerie Greer, Timothy King, Charles Horn, Tammy McConnaughey and Joseph Motes.
Pay Versus Performance Table
| (2) Reconciliations of the Summary Compensation Table data to CAP data are included immediately below this table. |
Pay Versus Performance Table
| (3) “Peer Group Cumulative TSR” represents the cumulative total stockholder return during each measurement period for the S&P Financial Composite Index, which is the industry index reported in our Annual Report on Form 10-K for the year ended December 31, 2023. Each amount assumes that $100 was invested on December 31, 2019, and dividends were reinvested for additional shares. |
Pay Versus Performance Table
| (4) The Company has identified Pretax Pre-provision earnings (PPNR) as the company-selected measure for the pay versus performance disclosure, as we believe it is a key measure to track core earnings over time to demonstrate sustainable, profitable growth, excluding the volatility that can occur within Provision for credit losses. See Appendix A in this proxy statement for a reconciliation of PPNR, a non-GAAP financial measure, to the most directly comparable GAAP measure. PPNR is a key metric on our AIC balanced scorecard; see “Compensation Discussion and Analysis—Compensation Programs—Annual Incentive Compensation” above. |
Pay Versus Performance Table
| Bread Financial | 2024 Proxy Statement | 97 |
Pay Versus Performance Table
To calculate the amounts in the “Compensation Actually Paid to CEO” column in the table above, the following amounts were deducted from and added to (as applicable) our CEO’s “Total” compensation as reported in the Summary Compensation Table (SCT) for that year :
Pay Versus Performance Table
| | 2023 ($) | 2022 ($) | 2021 ($) | 2020 ($) | | Total Compensation for CEO as reported SCT for the covered year | 7,697,586 | 8,694,682 | 11,179,238 | 12,299,988 | | Deduct pension values reported in SCT for the covered year | 0 | 0 | 0 | 0 | | Deduct grant date fair value of equity awards reported in SCT for the covered year | 4,039,912 | 4,840,698 | 7,900,354 | 5,313,281 | | Add pension value attributable to current year’s service and any change in pension value attributable to plan amendments made in the covered year | 0 | 0 | 0 | 0 | | Add fair values as of the end of the covered year of all equity awards granted during the covered year that are outstanding and unvested as of the end of such covered year | 4,713,222 | 2,769,499 | 7,513,091 | 3,600,290 | | Add fair value as of the vesting date of any awards granted in the covered year that vested during the covered year | 0 | 0 | 0 | 0 | | Add dividends paid on unvested shares/share units and stock options | 79,218 | 55,929 | 16,232 | 0 | | Add the change in fair value (whether positive or negative) as of the end of the covered year of any equity awards granted in any prior year that are outstanding and unvested as of the end of such covered year | (939,971) | (3,294,818) | 74,733 | 0 | | Add the change in fair value (whether positive or negative) as of the vesting date of any equity awards granted in any prior year for which all applicable vesting conditions were satisfied during the covered year | 150,791 | 223,870 | 369,204 | 0 | | Subtract the fair value of any equity awards granted in a prior year that were forfeited in the covered year determined as of the end of the prior year | 0 | 0 | 0 | 0 | | Compensation Actually Paid to CEO | 7,660,934 | 3,608,463 | 11,252,145 | 10,586,997 |
Pay Versus Performance Table
| 98 | Bread Financial | 2024 Proxy Statement |
Pay Versus Performance Table
To calculate the amounts in the “Average Compensation Actually Paid to Non-CEO NEOs” column in the table above, the following amounts were deducted from and added to (as applicable) the average of the “Total” compensation of our non-CEO named executive officers for each applicable year, as reported in the SCT for that year:
Pay Versus Performance Table
| | 2023 ($) | 2022 ($) | 2021 ($) | 2020 ($) | | Total Compensation for Other NEOs as reported SCT for the covered year | 2,845,461 | 3,160,862 | 3,531,923 | 2,110,732 | | Deduct pension values reported in SCT for the covered year | 10,734 | 14,097 | 15,740 | 21,481 | | Deduct grant date fair value of equity awards reported in SCT for the covered year | 1,020,964 | 1,279,679 | 1,949,282 | 696,487 | | Add pension value attributable to current year’s service and any change in pension value attributable to plan amendments made in the covered year | 0 | 0 | 0 | 0 | | Add fair values as of the end of the covered year of all equity awards granted during the covered year that are outstanding and unvested as of the end of such covered year | 1,187,162 | 732,140 | 1,416,639 | 465,530 | | Add fair value as of the vesting date of any awards granted in the covered year that vested during the covered year | 4,070 | 0 | 0 | 0 | | Add dividends paid on unvested shares/share units and stock options | 17,308 | 9,498 | 5,096 | 9,791 | | Add the change in fair value (whether positive or negative) as of the end of the covered year of any equity awards granted in any prior year that are outstanding and unvested as of the end of such covered year | (242,674) | (736,167) | (15,854) | (53,531) | | Add the change in fair value (whether positive or negative) as of the vesting date of any equity awards granted in any prior year for which all applicable vesting conditions were satisfied during the covered year | 18,116 | (44,367) | 46,547 | (20,473) | | Subtract the fair value of any equity awards granted in a prior year that were forfeited in the covered year determined as of the end of the prior year | 0 | 0 | 82,957 | 0 | | Compensation Actually Paid to Other NEOs | 2,797,744 | 1,828,189 | 2,936,373 | 1,794,082 |