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Proxy statement table of contents
Compensation discussion and analysis
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ý | ||
Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12 |
U.S. Bancorp | ||||
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Payment of Filing Fee (Check the appropriate box): |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(2) | Aggregate number of securities to which transaction applies: |
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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(4) | Proposed maximum aggregate value of transaction: |
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(5) | Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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A message from our CEO Fellow shareholders: At a time of dynamic and customer-driven change for the banking industry, one thing remains unchanged: U.S. Bancorp continues to deliver industry-leading financial performance, while also investing for an even stronger future. We are proud of the value U.S. Bancorp created for its shareholders in 2018 and grateful for our hard-working and dedicated employees who embrace our culture of ethics and integrity while diligently serving customers, communities, shareholders and each other. With our core values guiding us, we firmly believe that "doing the right thing" is our formula for success. As we reflect on all we accomplished in 2018, we also have sights set on maintaining our industry leadership in 2019 and beyond. Our long-term success requires balancing a best-in-class financial performance for shareholders with the right, forward-looking investments in our businesses. We are confident in our ability to meet this challenge because we manage the company both for today and for the future. U.S. Bancorp's value creation for its shareholders is centered on our strategic platform and leveraging culture, customer passion, efficiency, innovation, financial discipline and delivering the entirety of the bank's value proposition to drive our future performance. In 2018, U.S. Bancorp achieved record net income, revenue and earnings per diluted share. As Chairman, President and CEO of U.S. Bancorp, it is my privilege to be the steward of our trust-based relationships with shareholders, customers, communities and employees. I view it as one of my highest priorities. I am proud of the financial performance we delivered in 2018. Most importantly, I am proud of the 74,000 employees who carry our banner of trust every day. |
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Sincerely, |
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Andrew Cecere Chairman, President and Chief Executive Officer |
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March 5, 2019 |
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U.S. Bancorp 2019 Proxy Statement |
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A message from our Lead Director Fellow shareholders: The Board of Directors believes that U.S. Bancorp's commitment to the highest standards of corporate governance and conduct drives success and builds long-term, sustainable value for its shareholders. As Lead Director, I want to take this opportunity to share with you some of the ways my fellow directors and I pursue these objectives. Business strategy. Our Board is actively engaged in overseeing the development and execution of U.S. Bancorp's long-term strategy. At each Board meeting and during our annual strategic planning session, we engage with and challenge, as appropriate U.S. Bancorp's senior leadership about the company's strategic direction. Our committees all undertake their work with a strategic perspective as well, from the Risk Management Committee's evaluation of corporate risks based on our strategic priorities to the Compensation and Human Resources Committee's approval of incentive-based compensation programs for our executive officers. Risk oversight. One of our most significant responsibilities as the Board of a major financial services institution is the oversight of our company's risk management framework and effectiveness. We fulfill this responsibility by making sure that we have the information we need about U.S. Bancorp's material risks and then evaluating whether management has reasonable risk management and control processes in place to address those risks. Our Risk Management Committee has primary oversight of the company's risk management framework, and this committee meets in joint session annually with the Audit and Capital Planning Committees to ensure that our most significant risks are considered holistically. A key component to our oversight is responsiveness to emerging risks in a changing world, such as the Risk Management Committee's recent formation of a Cybersecurity Subcommittee to bring more focus to this increasing threat. Ethical culture. "Do the right thing" is one of our long-standing core values, which has long been central to our business and to our reputation as a trusted financial partner. We are recognized for our strong ethical culture, and we know that we must continue to earn our reputation through the day-to-day actions of all U.S. Bancorp employees. In addition, the Board recognizes its unique responsibility to set the appropriate "tone at the top." We partner with management in fostering our company-wide commitment to ethics through modeling appropriate behaviors, emphasizing our corporate values and monitoring unethical conduct risk. Board composition and effectiveness. We believe that our Board cannot do its work effectively unless it is independent of management and composed of qualified, engaged and diverse members. My role as Lead Director which includes approving Board meeting agendas and schedules, acting as a regular channel between the independent directors and the chief executive officer, and leading executive sessions of the Board's independent directors ensures strong independent leadership in the boardroom. Candidates selected for nomination to the Board have business skills and qualifications that directly link to corporate strategy, and we are pleased that 8 out of our Board's 17 members are women and/or people of color. We are confident that our Board is well-positioned to oversee our company's success. |
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U.S. Bancorp 2019 Proxy Statement |
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Thank you for investing in U.S. Bancorp. I look forward to continuing to serve your interests in 2019. Sincerely,
David B. O'Maley March 5, 2019 |
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U.S. Bancorp 2019 Proxy Statement |
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Notice of Annual Meeting of Shareholders of U.S. Bancorp
Date and time: | Tuesday, April 16, 2019, at 11:00 a.m., local time | |||
Place: |
The Hilton Columbus at Easton Easton Grand Ballroom 3900 Chagrin Drive Columbus, OH 43219 |
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Items of business: |
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The election of the 17 directors named in the proxy statement |
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The ratification of the selection of Ernst & Young LLP as our independent auditor for the 2019 fiscal year |
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An advisory vote to approve the compensation of our executives disclosed in the proxy statement |
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Any other business that may properly be considered at the meeting or any adjournment of the meeting |
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Record date: |
You may vote at the meeting if you were a shareholder of record at the close of business on February 19, 2019. |
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Voting by proxy: |
It is important that your shares be represented and voted at the meeting. You may vote your shares by Internet or telephone by no later than 11:59 p.m., Eastern time, on April 15, 2019 (or April 11, 2019, for shares held in the U.S. Bank 401(k) Savings Plan), as directed in the proxy materials. If you received a printed copy of the proxy materials, you may also complete, sign and return the enclosed proxy card or voting instruction form by mail. Voting in any of these ways will not prevent you from attending or voting your shares at the meeting. We encourage you to vote by Internet or telephone to reduce mailing and handling expenses. |
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Internet availability of proxy materials: |
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on April 16, 2019: Our proxy statement and 2018 Annual Report are available at www.proxyvote.com. |
By
order of the Board of Directors
Laura
F. Bednarski
Corporate Secretary
March 5, 2019
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U.S. Bancorp 2019 Proxy Statement |
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Proxy statement table of contents
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U.S. Bancorp 2019 Proxy Statement |
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Proxy statement highlights
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This highlights section does not contain all the information that you should consider before voting. Please read the entire proxy statement carefully.
Voting matters and Board recommendations |
Proposal |
Board recommendation |
For more information |
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Proposal 1 | The election of the 17 director nominees named in the proxy statement | "FOR" all nominees |
Page 10 | |||
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Proposal 2 | The ratification of the selection of Ernst & Young LLP as our independent auditor for the 2019 fiscal year | "FOR" | Page 72 | |||
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Proposal 3 | An advisory vote to approve the compensation of our executives disclosed in the proxy statement | "FOR" | Page 73 | |||
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Casting your vote |
The Board of Directors of U.S. Bancorp is soliciting proxies for use at the annual meeting of shareholders to be held on April 16, 2019, and at any adjournment or postponement of the meeting. The proxy materials were first made available to shareholders on or about March 5, 2019.
Your vote is important! Please cast your vote and play a part in the future of U.S. Bancorp. Even if you plan to attend our annual meeting in person, please cast your vote as soon as possible by:
Internet www.proxyvote.com |
Telephone |
The voting deadline is 11:59 p.m., Eastern time, on April 15, 2019 (or April 11, 2019, for shares held in the U.S. Bank 401(k) Savings Plan).
Attending the annual meeting |
Admission to the 2019 Annual Meeting of Shareholders is limited to our shareholders of record and street name holders as of the record date and their valid representatives. We encourage all of our shareholders who will be attending the meeting to pre-register at www.proxyvote.com and to print an admission ticket to bring with them.
Shareholders in attendance will have an opportunity to submit questions in writing to the CEO at the meeting. Shareholders pre-registering for the meeting at www.proxyvote.com can also submit a written question in advance.
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U.S. Bancorp 2019 Proxy Statement |
Proxy statement highlights
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U.S. Bancorp (NYSE traded: USB), with 74,000 employees and $467 billion in assets as of December 31, 2018, is the parent company of U.S. Bank National Association, the fifth-largest commercial bank in the United States. Founded in 1863, U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner.
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U.S. Bancorp 2019 Proxy Statement |
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Proxy statement highlights
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Corporate performance highlights |
We have consistently outpaced our peers in return on tangible common equity (ROTCE)1
Why we use ROTCE as a key measure of corporate performance
ROTCE which excludes goodwill and identified intangible assets measures the performance of businesses consistently, whether they were acquired or developed internally. We believe that evaluating ROTCE over time, in conjunction with other return and profitability metrics, provides investors with a comprehensive view of how effectively a company is managing shareholders' capital.
Over each of the last 10 years, we have produced an ROTCE that has exceeded the median ROTCE for banks in our financial peer group, and in all but one of those 10 years, we produced the highest ROTCE of any peer bank.
Other measures of our strong performance in 2018
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U.S. Bancorp 2019 Proxy Statement |
Proxy statement highlights
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Director nominees at a glance |
Name |
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Age |
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Director Since |
Primary Occupation |
Committee Memberships |
Independent | |||||
Warner L. Baxter | 57 | 2015 | Chairman, President and CEO, Ameren Corporation | CP (Chair), A, E |
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Dorothy J. Bridges | 63 | 2018 | Former Senior Vice President, Federal Reserve Bank of Minneapolis |
PR, RM | ||||||||
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Elizabeth L. Buse | 58 | 2018 | Former CEO, Monitise PLC | A, CP | ||||||||
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Marc N. Casper | 50 | 2016 | President and CEO, Thermo Fisher Scientific Inc. |
CP, G | ||||||||
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Andrew Cecere | 58 | 2017 | Chairman, President and CEO, U.S. Bancorp |
CP, RM, E | CEO | |||||||
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Arthur D. Collins, Jr. | 71 | 1996 | Retired Chairman and CEO, Medtronic, Inc. |
G (Chair), C, E |
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Kimberly J. Harris | 54 | 2014 | President and CEO, Puget Energy, Inc. | PR (Chair), G, E |
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Roland A. Hernandez | 61 | 2012 | Founding Principal and CEO, Hernandez Media Ventures |
A (Chair), PR, E |
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Doreen Woo Ho | 71 | 2012 | Commissioner, San Francisco Port Commission |
CP, RM | ||||||||
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Olivia F. Kirtley | 68 | 2006 | Business Consultant | RM (Chair), C, E |
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Karen S. Lynch | 56 | 2015 | Executive Vice President, CVS Health Corporation |
A, PR | ||||||||
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Richard P. McKenney | 50 | 2017 | President and CEO, Unum Group | PR, RM | ||||||||
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Yusuf I. Mehdi | 52 | 2018 | Corporate Vice President, Microsoft Corporation |
PR, RM | ||||||||
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David B. O'Maley Lead Director |
72 | 1995 | Retired Chairman, President and CEO, Ohio National Mutual Holdings, Inc. |
C, G, E | ||||||||
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O'dell M. Owens, M.D., M.P.H. |
71 | 1991 | President and CEO, Interact for Health | CP, C | ||||||||
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Craig D. Schnuck | 70 | 2002 | Former Chairman and CEO, Schnuck Markets, Inc. |
G, RM | ||||||||
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Scott W. Wine | 51 | 2014 | Chairman and CEO, Polaris Industries Inc. |
C (Chair), A, E |
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A | Audit Committee | PR | Public Responsibility Committee | |||
CP | Capital Planning Committee | RM | Risk Management Committee | |||
C | Compensation and Human Resources Committee | E | Executive Committee | |||
G | Governance Committee | |||||
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U.S. Bancorp 2019 Proxy Statement |
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Proxy statement highlights
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U.S. Bancorp 2019 Proxy Statement |
Proxy statement highlights
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U.S. Bancorp 2019 Proxy Statement |
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Proxy statement highlights
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Governance highlights |
Board independence |
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Strong Lead Director position: Our independent directors elect from among their ranks a Lead Director, who has broad authority and responsibility over Board governance and operation. |
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Key committees independent: Independent directors comprise 100% of each of the Audit, Compensation and Human Resources, and Governance Committees. |
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Regular executive sessions: The full Board and its standing committees each meet in executive session on a regular basis without members of management present. |
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Board accountability |
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Majority voting: Our directors are elected annually by a majority of votes cast in uncontested elections. All nominees submit a contingent resignation in writing. |
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Board not classified: All our directors are elected annually. |
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Shareholder rights and engagement |
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3/3/20/20 proxy access: A shareholder or group of up to 20 shareholders that has held at least 3% of our company's stock for at least three years is able to nominate directors to fill up to 20% of the Board seats (but at least two directors). |
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Special meeting: Holders of at least 25% of our stock are able to call a special meeting of shareholders. |
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No poison pill: Our company does not maintain a shareholder rights plan. |
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Shareholder outreach: Each year we reach out to our top 50 shareholders to invite a conversation about corporate governance, executive compensation and any other matter of interest to the shareholder. |
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Board effectiveness |
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Board, committee and individual evaluations: The Governance Committee annually conducts rigorous Board assessments, including evaluations of committees and individual directors. |
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Overboarding restrictions: A director may not serve on more than three public company boards in addition to ours, and a director who is a CEO of a public company may not serve on more than two other boards, unless approved by our Board. |
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Retirement policy: Our Board does not have a rigid retirement policy but instead evaluates for appropriateness the re-nomination of an incumbent director after he or she has reached the age of 72. |
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Director/shareholder alignment |
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Stock ownership: Each non-employee director is required to hold stock equal in value to five times the annual cash retainer. |
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No hedging or pledging: Like our executive officers, our directors are prohibited from pledging our company's securities as collateral for a loan and from engaging in any hedging transactions involving the company's securities. |
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U.S. Bancorp 2019 Proxy Statement |
Proxy statement highlights
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Sustainable and responsible business practices |
A commitment to long-term value requires a commitment to business practices that embrace opportunities and reduce risk in a changing world. Some of our key sustainable and responsible business practices are highlighted below.
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Our customers | ||||||||||||
Protecting data |
We align our information security program with multiple industry standards to provide comprehensive coverage against threats to customer data. Our information security strategy is intelligence-driven and risk-based, allowing for agility and preparation against cyberthreats. |
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Expanding access |
When developing products for customers who have a challenging credit history, like the Simple Loan product we launched in August 2018, we are deliberate about meeting those customers' needs for a safe source of credit with solutions that we believe we can offer on a sustainable basis. |
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Respecting privacy |
We maintain an enterprise privacy program that provides guidance to business lines and corporate functions on the collection, use and sharing of customers' personal information. This program helps us deliver responsive customer service and develop new products and services that meet or anticipate customer needs, while respecting the privacy preferences our customers have expressed. |
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Our employees | ||||||||||||
Business ethics |
Our global ethics program is designed to give employees the information, tools and training they need to make the right choices, find guidance when they need it, and report concerns without fear of retaliation. |
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Diversity and inclusion |
Our strategic approach to D&I is to create and sustain an inclusive workplace that allows us to drive business growth. We signified our approach when we signed the CEO Pledge for Action alongside other Fortune 500 companies to foster inclusion and champion diversity across industries. |
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Pay equity |
We are committed to fair and equitable pay and believe that a consistent focus on managing pay equity is an important part of promoting diversity. As part of this commitment, we have an ongoing process of reviewing compensation to ensure all employees are paid appropriately for their contributions to the success of our company. |
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U.S. Bancorp 2019 Proxy Statement |
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Proxy statement highlights
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Our environment | ||||||||||||
Responsible lending |
Environmental sensitivity is an important component of our credit, investment, underwriting and payment procedures and is integrated into our overall risk management philosophy. We maintain additional environmental due diligence and review requirements for firms operating within certain sensitive industries to better guide our decisions regarding new or prospective relationships. |
To read our Environmental Responsibility Policy, go to www.usbank.com/environment. |
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Company operations |
We have committed to reducing our operational greenhouse gas (GHG) emissions by 40% by 2029 and 60% by 2044, using a 2014 baseline. We also build all new branches to Leadership in Energy and Environmental Design (LEED) certified standards. |
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Our communities | ||||||||||||
Corporate giving and engagement |
Through our Community Possible platform, we invest our time, resources and passion in economic development by supporting efforts to create stable jobs, better homes and vibrant communities. |
To learn more about our corporate social responsibility initiatives, go to page 33. |
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Recognition for our sustainable and responsible business practices | ||||||||||||
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▶ Named one of the World's Most Ethical Companies® by the Ethisphere Institute in 2019, the fifth year in a row |
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▶ Included on the FTSE4Good Index |
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▶ Ranked #6 on Fortune's 2018 Most Admired Companies list for Social Responsibility |
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▶ Three of our leaders have been included on the American Banker "Most Powerful Women" list |
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▶ Named one of the "Best Places to Work for LGBT Equality" by the Human Rights Campaign (HRC) and received a score of 100 percent on the 2018 HRC Corporate Equality Index |
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▶ Included in the Military Times' Best for Vets list |
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▶ Named one of the Leading Disability Employers by the National Organization on Disability in 2018 |
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▶ Named one of America's Best Employers for Women by Forbes |
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▶ Named one of America's Best Employers for Diversity by Forbes |
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▶ Received a score of A- from CDP (formerly known as the Carbon Disclosure Project) in 2016, 2017 and 2018 |
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U.S. Bancorp 2019 Proxy Statement |
Proposal 1 Election of directors
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Proposal 1 Election of directors
Our Board of Directors currently has 17 members, and directors are elected annually to one-year terms. All of our current directors have been nominated for election by the Board to hold office until the 2020 annual meeting and the election of their successors.
All of the nominees currently serve on our Board. Elizabeth L. Buse and Yusuf I. Mehdi were appointed directors by the Board in June 2018, and Dorothy J. Bridges was appointed a director by the Board in July 2018 (effective in October 2018). Each of the other nominees has previously been elected by the shareholders. The Board has determined that, except for Andrew Cecere, our Chairman, President and Chief Executive Officer, each nominee for election as a director at the annual meeting is independent from U.S. Bancorp as discussed later in this proxy statement under "Corporate Governance Director Independence."
Director nominee selection process
The selection process for first-time director candidates includes the following steps:
Director candidates recommended by shareholders are given the same consideration as candidates suggested by a search firm, directors or executive officers. A shareholder seeking to recommend a prospective candidate for the Governance Committee's consideration should submit the candidate's name and sufficient written information about the candidate to permit a determination by the Governance Committee of whether the candidate meets the director selection criteria set forth in our Corporate Governance Guidelines. Recommendations should be sent to the Chair of the Governance Committee in care of the Corporate Secretary of U.S. Bancorp at the address listed on page 82 of this proxy statement.
Director nomination considerations
Our Governance Committee continuously assesses the evolving opportunities and challenges facing our company in order to align the Board's composition with our company's leadership needs and strategic direction. When nominating new and incumbent directors, our Governance Committee considers the following factors:
When evaluating which business skills and qualifications each director or nominee possesses, the Governance Committee applies certain criteria to identify the skills, experiences and professional qualifications that are likely
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U.S. Bancorp 2019 Proxy Statement |
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Proposal 1 Election of directors
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to be strong indicators of an individual's contribution to the Board's collective oversight work. These criteria, along with the number of our current directors and nominees who possess each skill or qualification and information about the strategic contributions of these skills and qualifications, are as follows:
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Chief executive experience | 10 | Are current or former CEOs of publicly held or large private corporations | Have experience overseeing senior leadership, finance, marketing and execution of corporate strategy, from both a management and a board perspective | ||||||||||||||
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Financial services industry expertise | 7 | Have executive-level experience in the financial services industry | Possess deep knowledge of the business challenges and opportunities facing our company | ||||||||||||||
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Risk management | 7 | Have specific risk-management expertise, gained through leadership at either a critical infrastructure company or a financial services institution | Are particularly adept at identifying and assessing the varied risks facing our company as a large financial institution | ||||||||||||||
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Financial reporting and accounting | 6 | Have specialized financial reporting qualifications, such as experience as a CPA or as the CFO of a large corporation | Are particularly well suited to overseeing the quality and integrity of our company's financial statements | ||||||||||||||
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Regulated industry expertise | 4 | Have executive-level experience in a regulated industry other than financial services | Provide a valuable perspective on how an extensive regulatory framework intersects with strategic and operational planning | ||||||||||||||
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Corporate governance | 3 | Have significant experience serving on and leading the boards of other large corporations and/or professional experience in the corporate governance field | Help our Board fulfill its oversight function effectively | ||||||||||||||
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Customer experience | 3 | Have executive-level experience in a consumer-focused industry other than financial services | Provide insight into how our company interacts with retail customers | ||||||||||||||
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Community leadership | 2 | Have significant leadership experience in community service organizations and/or in public policy roles | Provide perspective on our company's connections to the communities it serves and responsible business practices | ||||||||||||||
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Technological transformation | 1 | Has executive-level experience in an industry driving technological change | Contributes expertise regarding product innovation and evolving customer expectations | ||||||||||||||
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U.S. Bancorp 2019 Proxy Statement |
Proposal 1 Election of directors
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incorporates this broad view of diversity into its director nomination process and is committed to ensuring that the Board's composition as a whole appropriately reflects the current and anticipated needs of the Board and our company. The Governance Committee actively seeks women and people of color as candidates in every search effort.
For some time, the Governance Committee has been aware that several directors are expected to retire from the Board before the end of 2020, in accordance with the retirement policy described below. In order to avoid an abrupt loss of valuable institutional knowledge at that time, the Governance Committee has recommended the election of new directors at a rate exceeding the rate of director departure over the past several years. The Board has been willing to allow the number of directors to increase recently to give these newer directors the opportunity to serve on the Board alongside the longer-tenured directors for some time and benefit from their experience. The size of the Board is expected to be reduced following this transition period.
The Governance Committee's decision to renominate an incumbent director is informed by the director's past attendance, participation in the work of the Board and overall contribution to the Board, as assessed in the annual Board evaluation process. The Board is committed to effective succession planning and refreshment, which can require having difficult conversations with individual directors when the Governance Committee has determined that these directors are no longer contributing to the Board's effectiveness. As a result of these conversations, directors may decide or be asked not to stand for re-election at the next annual meeting.
Each of the director nominees named below has agreed to serve as a director if elected. Proxies may not be voted for more than 17 nominees. If, for any reason, any nominee becomes unable to serve before the election, the persons named as proxies will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the Board of Directors may choose to reduce the number of directors that are nominated for election. In addition, as described below under "Corporate Governance Majority Vote Standard for Election of Directors," each of the nominees has tendered his or her contingent resignation as a director in accordance with our Corporate Governance Guidelines, to be effective if he or she fails to receive a majority of the votes cast in an uncontested election and the Board accepts the tendered resignation.
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U.S. Bancorp 2019 Proxy Statement |
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Proposal 1 Election of directors
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Included below is certain information that the director nominees have provided as well as additional information that the Board considered in nominating them. Board service dates listed include service as directors of U.S. Bancorp's predecessor companies.
Committees ▶ Chair, Capital Planning ▶ Audit ▶ Executive |
Business experience: Mr. Baxter, 57, is the Chairman, President and Chief Executive Officer of Ameren Corporation, a regulated electric and gas utility company
serving customers in Missouri and Illinois. He has served in these positions since 2014. Mr. Baxter served as Chairman, President and Chief Executive Officer of Ameren Missouri from 2009 to 2014 and as Executive Vice President and Chief
Financial Officer of Ameren Corporation from 2003 to 2009. In addition, he also served as President and Chief Executive Officer of Ameren Services from 2007 to 2009. Other directorships: ▶ Ameren Corporation since 2014 (Chairman) ▶ UMB Financial Corporation from 2013 to 2015 Skills and qualifications: ▶ Chief executive experience: Mr. Baxter's experience as a current CEO of a Fortune 500 company provides valuable leadership insight to the Board. ▶ Financial reporting and accounting: Through his past experience as the CFO and Controller of a large publicly traded company, Mr. Baxter brings extensive financial reporting and accounting expertise to our Board. ▶ Regulated industry expertise: As the current President and CEO of a company in a highly regulated industry, Mr. Baxter provides valuable perspective on regulatory and business challenges facing our company. ▶ Risk management: As the current President and CEO of a company in a critical infrastructure industry, Mr. Baxter brings valuable risk management expertise to our Board of Directors. |
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Committees ▶ Public Responsibility ▶ Risk Management |
Business experience: Ms. Bridges, 63, is the former Senior Vice President of Public Affairs, Outreach and Community Development of the Federal Reserve Bank of
Minneapolis, one of the twelve regional banks in the Federal Reserve System. She served as Senior Vice President from July 2011 until June 2018. Prior to joining the Federal Reserve Bank of Minneapolis, Ms. Bridges served as the President and
Chief Executive Officer of City First Bank, a commercial bank providing financial services in low- and moderate-income communities, from 2008 until July 2011, and as President and Chief Executive Officer of Franklin National Bank, a Minneapolis
commercial bank, from 1999 to 2008. Skills and qualifications: ▶ Financial services industry expertise: Ms. Bridges's extensive experience in the banking industry, as a senior leader of a reserve bank and as the CEO of two commercial banks, gives her valuable industry and regulatory oversight expertise. ▶ Community leadership: Through her experience as the senior leader in charge of public affairs, outreach and community development, and as the CEO of a commercial bank focusing on low- and moderate-income communities, Ms. Bridges brings to our Board expertise in understanding the financial needs of the individuals living in the communities we serve. |
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U.S. Bancorp 2019 Proxy Statement |
Proposal 1 Election of directors
|
Committees ▶ Audit ▶ Capital Planning |
Business experience: Ms. Buse, 58, is the former Chief Executive Officer of Monitise PLC, a global mobile banking and payments company based in the United
Kingdom. She served as Co-Chief Executive Officer and Chief Executive Officer of Monitise during 2014 and 2015, after retiring from Visa, Inc., the world's leading payment network, as Executive Vice President of Global Services, a position she
held from 2013 to 2014. Ms. Buse held various senior leadership positions at Visa prior to that time, including as Group President for Asia-Pacific, Central Europe, Middle East and Africa from 2010 to 2013. Other directorships: ▶ Travelport Worldwide Ltd. since 2014 (Compensation and Nominating and Corporate Governance Committees) ▶ Monitise PLC from 2014 to 2015 Skills and qualifications: ▶ Financial services industry expertise: As the former CEO of Monitise and as a director for several public and private financial services technology companies, Ms. Buse gained broad financial industry expertise that is particularly relevant to our Board. |
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Committees ▶ Capital Planning ▶ Governance |
Business experience: Mr. Casper, 50, is the President and Chief Executive Officer of Thermo Fisher Scientific Inc., a leader in life sciences and healthcare
technologies. He has served as President and Chief Executive Officer since 2009. He served as Executive Vice President and Chief Operating Officer from 2008 to 2009 and Executive Vice President of Thermo Fisher and President of its Analytical
Technologies business from 2006 to 2008. He joined Thermo Electron Corporation, a predecessor to Thermo Fisher Scientific, in 2001 and held various leadership positions within that company before being named Executive Vice President of Thermo Fisher
in 2006. Other directorships: ▶ Thermo Fisher Scientific Inc. since 2009 Skills and qualifications: ▶ Chief executive experience: Mr. Casper's experience as the CEO of a large life sciences and healthcare technologies company gives him broad and valuable leadership experience. ▶ Regulated industry expertise: Mr. Casper's experience as the leader of a company in a heavily regulated industry gives him valuable insight on regulatory challenges. |
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U.S. Bancorp 2019 Proxy Statement |
| 14 |
Proposal 1 Election of directors
|
Committees ▶ Capital Planning ▶ Risk Management ▶ Executive |
Business experience: Mr. Cecere, 58, is the Chairman, President and Chief Executive Officer of U.S. Bancorp. He has served in this position since April 2018. He
served as President and Chief Executive Officer from April 2017 to April 2018, as well as President and Chief Operating Officer from January 2016 to April 2017, after having served as Vice Chairman and Chief Operating Officer from January 2015 until
January 2016. From February 2007 until January 2015, Mr. Cecere served as U.S. Bancorp's Vice Chairman and Chief Financial Officer, after having served as Vice Chairman, Wealth Management and Investment Services of U.S. Bancorp since the merger
of Firstar Corporation and U.S. Bancorp in February 2001. Previously, he had served as an executive officer of the former U.S. Bancorp, including as Chief Financial Officer from May 2000 through February 2001. Other directorships: ▶ Donaldson Company, Inc. since 2013 (Audit Committee) Skills and qualifications: ▶ Chief executive experience: As CEO of U.S. Bancorp, Mr. Cecere brings to all Board discussions and deliberations deep knowledge of our company and its business. ▶ Financial reporting and accounting: Through his service on the audit committee of a public company, as well as his past experience as CFO of U.S. Bancorp, Mr. Cecere brings valuable financial reporting and accounting expertise to our Board. ▶ Financial services industry expertise: Mr. Cecere has deep expertise in the financial services industry, gained through a career of more than 30 years at U.S. Bancorp. ▶ Risk management: Mr. Cecere brings to our Board valuable risk management expertise gained through his work as CFO, Chief Operating Officer, and then CEO of U.S. Bancorp during the challenging regulatory and market environment of recent years. |
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Committees ▶ Chair, Governance ▶ Compensation and Human Resources ▶ Executive |
Business experience: Mr. Collins, 71, is the retired Chairman and Chief Executive Officer of Medtronic, Inc., a leading medical device and technology
company. Mr. Collins served as Chairman of Medtronic from 2002 until August 2008 and Chief Executive Officer from 2002 until August 2007. Mr. Collins served as President of Medtronic from 1996 to 2002 and also as Chief Operating Officer
from 1994 to 2002. Since April 2009, Mr. Collins has acted as a senior advisor for Oak Hill Capital Partners, which manages a private equity portfolio of over $8 billion of private equity capital and over $20 billion of investment
capital. He is also a managing partner of Acorn Advisors, LLC, which provides consulting services to nonprofit organizations. Other directorships: ▶ The Boeing Company since 2007 (Compensation Committee Chair; Governance, Organization and Nominating Committee) ▶ Arconic Inc. (formerly Alcoa Inc.) since 2010 (Compensation and Benefits Committee Chair; Governance and Nominating Committee) ▶ Cargill, Incorporated from 2000 to 2018 Skills and qualifications: ▶ Chief executive experience: Mr. Collins's experience as CEO of Medtronic gives him a broad perspective on a variety of complex business and financial issues that is valuable in his service on our Board. ▶ Corporate governance: Mr. Collins's experience on the boards of several large public companies has given him significant corporate governance expertise. ▶ Regulated industry expertise: Mr. Collins gained extensive regulated industry expertise through his service as Chairman and CEO of a medical device and technology company. |
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U.S. Bancorp 2019 Proxy Statement |
Proposal 1 Election of directors
|
Committees ▶ Chair, Public Responsibility ▶ Governance ▶ Executive |
Business experience: Ms. Harris, 54, is the President and Chief Executive Officer of Puget Energy, Inc., an energy services holding company, and its
subsidiary Puget Sound Energy, Inc., a utility company providing electric and natural gas service in the northwest United States. She has served in these positions since March 2011. Ms. Harris served as President of Puget Energy and Puget
Sound Energy from July 2010 through February 2011 and as Executive Vice President and Chief Resource Officer from May 2007 until July 2010. Ms. Harris served as Senior Vice President, Regulatory Policy and Energy Efficiency, of these companies
from 2005 until May 2007. Other directorships: ▶ Puget Energy, Inc. and Puget Sound Energy, Inc. since 2011 Skills and qualifications: ▶ Chief executive experience: Ms. Harris's experience as a current CEO provides valuable leadership perspective to our Board gained by leading a large company through the current economic and regulatory environment. ▶ Regulated industry expertise: Ms. Harris's experience as the leader of a company in a heavily regulated industry gives her valuable expertise in managing a complex business in the context of an extensive regulatory regime. ▶ Risk management: As the current President and CEO of a company in a critical infrastructure industry, Ms. Harris brings valuable risk management experience to our Board. |
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Committees ▶ Chair, Audit ▶ Public Responsibility ▶ Executive |
Business experience: Mr. Hernandez, 61, is the Founding Principal and Chief Executive Officer of Hernandez Media Ventures, a privately held company engaged in
the acquisition and management of media assets. He has served in this capacity since January 2001. Mr. Hernandez served as Chairman of Telemundo Group, Inc., a Spanish-language television and entertainment company, from 1998 to 2000 and as
President and Chief Executive Officer from 1995 to 2000. Other directorships: ▶ MGM Resorts International since 2002 (Lead Director; Compensation Committee Chair; Audit and Corporate Social Responsibility Committees) ▶ Vail Resorts, Inc. since 2002 (Lead Director; Nominating and Governance Committee Chair; Executive and Audit Committees) ▶ Belmond Ltd. (formerly Orient Express Hotels Ltd.) since 2013 (Chairman) Skills and qualifications: ▶ Chief executive experience: As the Founding Principal and CEO of Hernandez Media Ventures and the former Chairman, President and CEO of a television and entertainment company, Mr. Hernandez has gained business expertise that is particularly relevant to a major consumer bank such as U.S. Bank. ▶ Corporate governance: As the Chairman or Lead Director of three public companies, Mr. Hernandez brings to our Board significant expertise in current corporate governance issues and practices. ▶ Financial reporting and accounting: With his extensive past and current experience on the audit committees of the boards of public companies, Mr. Hernandez brings broad financial reporting and accounting expertise to our Board. |
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U.S. Bancorp 2019 Proxy Statement |
| 16 |
Proposal 1 Election of directors
|
Committees ▶ Capital Planning ▶ Risk Management |
Business experience: Ms. Woo Ho, 71, is a Commissioner of the San Francisco Port Commission, the governing board responsible for the San Francisco, California,
waterfront adjacent to San Francisco Bay. She has served on the Port Commission since May 2011 and served as President from 2012 to 2014. Ms. Woo Ho served as President and Chief Executive Officer of United Commercial Bank, a California
commercial bank, from September 2009 to November 2009. She served as President of Community Banking at United Commercial from January 2009 to September 2009. Ms. Woo Ho served as Executive Vice President responsible for Enterprise Marketing,
Student Loans and Corporate Trust at Wells Fargo & Company, a diversified financial services company, in 2008. She served as President of the Consumer Credit Group of Wells Fargo from 1998 to 2007. Ms. Woo Ho was also a member of the
Wells Fargo Management Committee from 1999 to 2008. Prior to joining Wells Fargo, she worked in various credit and lending roles in the Corporate and Consumer Banking groups at Citibank for 25 years. Other directorships: ▶ Hercules Capital, Inc. since 2016 (Nominating Committee Chair; Compensation Committee) Skills and qualifications: ▶ Financial services industry expertise: Ms. Woo Ho's over 35 years of commercial and consumer banking experience brings valuable industry experience and knowledge to our Board. ▶ Risk management: Through her experience as a senior leader in the banking industry, Ms. Woo Ho brings experience identifying, assessing and managing risk exposures of large, complex financial firms. |
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Committees ▶ Chair, Risk Management ▶ Compensation and Human Resources ▶ Executive |
Business experience: Ms. Kirtley, 68, a Certified Public Accountant and Chartered Global Management Accountant, has served as a business consultant on strategic,
risk and corporate governance issues since 2000. She also served as the President of the International Federation of Accountants ("IFAC"), the global organization for the accountancy profession which facilitates the establishment of international
auditing, ethics and education standards, from 2014 to 2016, and as Deputy President of IFAC from 2012 to 2014. Prior to 2000, she served as a senior manager at a predecessor to accounting firm Ernst & Young LLP, and as Treasurer, Vice
President and Chief Financial Officer at Vermont American Corporation. Other directorships: ▶ Papa John's International, Inc. since 2003 (Compensation Committee Chair; Corporate Governance and Nominating Committee) ▶ Randgold Resources Ltd. from 2017 to 2019 Skills and qualifications: ▶ Corporate governance: Ms. Kirtley brings to our Board a deep understanding of a wide range of current governance issues gained by her work as a corporate governance consultant and a faculty member of The Conference Board Directors' Institute. ▶ Financial reporting and accounting: Ms. Kirtley gained extensive audit, financial reporting, and risk management experience as the CFO of an international company, as a CPA at a large international accounting firm and through her service as President of IFAC. |
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U.S. Bancorp 2019 Proxy Statement |
Proposal 1 Election of directors
|
Committees ▶ Audit ▶ Public Responsibility |
Business experience: Ms. Lynch, 56, is an Executive Vice President of CVS Health Corporation, a leading pharmacy and health care company, and President of its
Aetna Business Unit. She has served in this position since November 2018. Ms. Lynch served as President of Aetna, Inc., a diversified health care benefits company, from 2014 until CVS Health's acquisition of Aetna in November 2018. She
served as Executive Vice President of Aetna's Local and Regional business from 2013 to 2014 and Executive Vice President of Aetna's Specialty Products business from 2012 to 2013. Ms. Lynch served as President of Magellan Health
Services Inc., a health care management company, from 2009 to 2012. Ms. Lynch began her career as a Certified Public Accountant at auditing firm Ernst & Young LLP. Skills and qualifications: ▶ Financial reporting and accounting: Ms. Lynch's past experience as a CPA and public company auditor provides valuable financial reporting and accounting expertise to our Board. ▶ Financial services industry expertise: Ms. Lynch's extensive insurance industry experience provides her with valuable financial services industry expertise. ▶ Risk management: Ms. Lynch contributes valuable risk management expertise in the financial services industry through her experience leading a large health care benefits company. |
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Committees ▶ Public Responsibility ▶ Risk Management |
Business experience: Mr. McKenney, 50, is the President and Chief Executive Officer of Unum Group, a workplace financial protection benefits company. He has
served as President since April 2015 and as Chief Executive Officer since May 2015. Mr. McKenney served as Executive Vice President and Chief Financial Officer of Unum from 2009 to 2015. Prior to joining Unum in 2009, he served as Executive Vice
President and Chief Financial Officer at Sun Life Financial, Inc., an international financial services company, from 2006 to 2009. Other directorships: ▶ Unum Group since 2015 Skills and qualifications: ▶ Chief executive experience: Mr. McKenney's experience as a current CEO provides valuable expertise to our Board gained by leading a large company through the current economic and regulatory environment. ▶ Financial reporting and accounting: Through his past experience as CFO of several companies, Mr. McKenney brings extensive financial reporting and accounting expertise to our Board. ▶ Financial services industry expertise: As the current President and CEO of a financial services company, Mr. McKenney brings to our Board discussions expertise in managing the business environment facing financial services companies. ▶ Risk management: Through his experience as the leader of a financial services company, Mr. McKenney brings experience identifying, assessing and managing risk exposures of large, complex financial firms. |
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U.S. Bancorp 2019 Proxy Statement |
| 18 |
Proposal 1 Election of directors
|
Committees ▶ Public Responsibility ▶ Risk Management |
Business experience: Mr. Mehdi, 52, is the Corporate Vice President of the Modern Life and Devices Group of Microsoft Corporation, a multinational technology
company, representing the Windows, Surface, Office, and Bing businesses. He has served in this position since June 2018. From 2015 to June 2018, he served as Corporate Vice President of the Windows and Devices Group and from 2011 to 2015 as the
Corporate Vice President and Chief Marketing and Strategy Officer of the Interactive Entertainment Division, including Xbox. Mr. Mehdi joined Microsoft in 1992 and held various leadership positions within the company prior to being named Senior
Vice President of Microsoft's Online Services Division in 2001. Skills and qualifications: ▶ Customer experience: Mr. Mehdi's role driving customer experience at a large multinational company brings valuable current retail and online business expertise to our Board. ▶ Technological transformation: Mr. Mehdi's significant experience in an industry that must adapt in real time to rapid changes in technology and customer expectations is a valuable resource in executing U.S. Bancorp's corporate strategy. |
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Lead Director Committees ▶ Compensation and Human Resources ▶ Governance ▶ Executive |
Business experience: Mr. O'Maley, 72, is the retired Chairman, President and Chief Executive Officer of Ohio National Mutual Holdings, Inc. and its
subsidiary Ohio National Financial Services, Inc., an intermediate insurance holding company that markets insurance and financial products through its affiliates, including The Ohio National Life Insurance Company. Mr. O'Maley served as
Executive Chairman of these companies from November 2010 to May 2012 after serving as Chairman, President and Chief Executive Officer of Ohio National Mutual Holdings and Ohio National Financial Services from 1994 until November 2010. He joined Ohio
National in 1992. Skills and qualifications: ▶ Chief executive experience: Mr. O'Maley's experience as the CEO of a large, complex company provides leadership and management expertise to our Board. ▶ Financial services industry expertise: As the retired Chairman, President and CEO of a large financial services company, Mr. O'Maley brings to our Board discussions expertise in managing regulatory and business challenges facing financial services companies. ▶ Risk management: Mr. O'Maley brings valuable risk management expertise to our Board through his experience leading a large financial services company. |
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U.S. Bancorp 2019 Proxy Statement |
Proposal 1 Election of directors
|
Committees ▶ Capital Planning ▶ Compensation and Human Resources |
Business experience: Dr. Owens, 71, is the President and Chief Executive Officer of Interact for Health, a regional health and wellness company, and has served
in this role since October 2016. He previously served as the Interim Health Commissioner and Medical Director for the Cincinnati Health Department from November 2015 to October 2016 and as the President of Cincinnati State Technical and Community
College from September 2010 until September 2015. Dr. Owens has been a member of the Federal Reserve Bank of Cleveland's Cincinnati Business Advisory Council since 2012. He has also been providing services as an independent consultant in
medicine, business, education and work-site employee benefits since 2001 and served as the President and Chairman of the Board for Project GRAD (Graduation Really Achieves Dreams), a national non-profit organization formed to improve inner-city
education, from 2001 until 2015. Skills and qualifications: ▶ Community leadership: Through his experience in public service leadership roles as a medical doctor, coroner, college president and health commissioner, Dr. Owens brings a unique perspective to our Board by combining business expertise and leadership with a strong focus on community service and public policy. |
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Committees ▶ Governance ▶ Risk Management |
Business experience: Mr. Schnuck, 70, is the former Chairman and Chief Executive Officer of Schnuck Markets, Inc., a regional supermarket chain. He was
elected President of Schnuck Markets in 1984 and served as Chief Executive Officer from 1989 until January 2006. He also served as Chairman from January 1991 until December 2006. Mr. Schnuck continued to be active in the Schnuck Markets business
as Chair of its Executive Committee from 2007 until 2014 and was named Chairman Emeritus in 2014. Skills and qualifications: ▶ Chief executive experience: Mr. Schnuck brings to our company substantial leadership experience gained as the long-serving Chairman, CEO and Chair of the Executive Committee of a large, regional food retailer. ▶ Customer experience: In addition to leading a large consumer goods business, Mr. Schnuck also served for nine years on the board of governors of the Uniform Code Council, the agency that oversees his industry's most fundamental technologies, serving as Chairman for two terms. This work has given him additional insight into technological innovation in retail business, which is an important focus in various U.S. Bancorp business lines. |
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U.S. Bancorp 2019 Proxy Statement |
| 20 |
Proposal 1 Election of directors
|
Committees ▶ Chair, Compensation and Human Resources ▶ Audit ▶ Executive |
Business experience: Mr. Wine, 51, is the Chairman and Chief Executive Officer of Polaris Industries Inc., a worldwide manufacturer and marketer of
innovative high-performance motorized products. He has served as Chairman since 2013, and Chief Executive Officer since 2008. Mr. Wine served as President of Fire Safety Americas, a division of United Technologies Corporation, from 2007 to 2008.
Prior to that time, Mr. Wine held various senior leadership positions at Danaher Corporation and Honeywell International, Inc. from 1996 to 2007. Other directorships: ▶ Polaris Industries Inc. since 2008 (Technology Committee) ▶ Terex Corporation since 2011 (Compensation and Governance and Nominating Committees) Skills and qualifications: ▶ Chief executive experience: Mr. Wine's experience as the CEO of a large international manufacturing company gives him broad and valuable experience in a business focused on growing operations within domestic and overseas markets. ▶ Customer experience: Mr. Wine contributes to our Board a current perspective on retail business gained from his leadership of a consumer-focused company. |
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FOR |
The Board of Directors recommends a vote "FOR" election of the 17 director nominees to serve until the next annual meeting and the election of their successors.
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U.S. Bancorp 2019 Proxy Statement |
Corporate governance
|
Our Board of Directors and management are dedicated to exemplary corporate governance. Good corporate governance is vital to our continued success. Our Board of Directors has adopted Corporate Governance Guidelines to provide a corporate governance framework for our directors and management to effectively pursue our objectives for the benefit of our shareholders. The Board reviews and updates these guidelines and the charters of the Board committees at least annually in response to evolving best practices and the results of annual Board and committee evaluations. Our Corporate Governance Guidelines can be found at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Governance Documents."
Our Board of Directors has determined that each of the following directors, comprising all of our non-employee directors, has no material relationship with U.S. Bancorp and is independent: Warner L. Baxter, Dorothy J. Bridges, Elizabeth L. Buse, Marc N. Casper, Arthur D. Collins, Jr., Kimberly J. Harris, Roland A. Hernandez, Doreen Woo Ho, Olivia F. Kirtley, Karen S. Lynch, Richard P. McKenney, Yusuf I. Mehdi, David B. O'Maley, O'dell M. Owens, M.D., M.P.H., Craig D. Schnuck and Scott W. Wine. Andrew Cecere is not independent because he is an executive officer of U.S. Bancorp.
Our Board has adopted a set of standards in our Corporate Governance Guidelines to assist it in assessing the independence of each of our non-employee directors. A director of U.S. Bancorp who meets the independence qualifications of the New York Stock Exchange (the "NYSE") listing standards may be deemed "independent" by the Board of Directors after consideration of the relationships between U.S. Bancorp or any of its affiliates and the director or any of his or her immediate family members or other related parties. Our Board deems the following relationships to be categorically immaterial such that they will not, by themselves, affect an independence determination:
The only relationships between U.S. Bancorp and our directors or the directors' related interests that were considered by the Board when assessing the independence of our non-employee directors are the relationships between U.S. Bancorp and both Microsoft Corporation, a corporation with which our director Yusuf I. Mehdi is affiliated, and Schnuck Markets, Inc., a corporation with which our director Craig D. Schnuck is affiliated. The Board determined that these relationships, which are described later in this proxy statement under the heading "Certain Relationships and Related Transactions Related Person Transactions," did not impair Mr. Mehdi's or Mr. Schnuck's independence. This determination was based on the Board's conclusion that the amounts involved in transactions between U.S. Bancorp and Microsoft or Schnuck Markets, as the case may be, are immaterial to Microsoft's and Schnuck Markets' gross revenues, respectively, and that the relationships had no unique characteristics that could influence Mr. Mehdi's or Mr. Schnuck's impartial judgment as a director of U.S. Bancorp.
The Board of Directors conducts its business through meetings of the Board and the following standing committees: Audit, Capital Planning, Compensation and Human Resources, Governance, Public Responsibility, Risk Management, and Executive. The standing committees report on their deliberations and actions at each full Board meeting. Each of the standing committees has the authority to engage outside experts, advisers and counsel to the extent it considers
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U.S. Bancorp 2019 Proxy Statement |
| 22 |
Corporate governance
|
appropriate to assist the committee in its work. Each of the standing committees has adopted and operates under a written charter. These charters can be found on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Board Committees."
The independent directors meet in executive session (without the CEO or any other member of management present) at the end of each regularly scheduled Board meeting and may also meet in executive session at any other time. The Lead Director presides over these executive sessions. See "Board Leadership Structure." During each committee meeting, the committees have the opportunity to hold executive sessions without members of management present.
The Board of Directors held nine meetings during 2018. Each director attended at least 75% of the total meetings of the Board and Board committees on which he or she served during the year. The average attendance rate of all directors at Board and Board committee meetings in 2018 was 98%.
Directors are expected to attend all meetings of shareholders. All directors serving at the time attended the 2018 annual meeting, except Mr. Casper.
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U.S. Bancorp 2019 Proxy Statement |
Corporate governance
|
Our Governance Committee conducts an annual assessment of the Board's performance to determine whether the Board, its committees and its members are functioning effectively and to identify areas for growth and improvement. The annual process is as follows:
Based on director feedback received over the last several years through this annual evaluation process and through less formal channels, management has adjusted the content and style of its written materials and oral presentations for committee meetings. In addition, the Governance Committee has received information about the skills and qualifications that directors would like future Board or committee members to have. Director feedback has also led to discussion of how to appropriately balance oversight responsibility for critical matters affecting our company among the Board and its committees, and how committee action is most effectively communicated to the full Board.
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U.S. Bancorp 2019 Proxy Statement |
| 24 |
Corporate governance
|
We believe that it is of utmost importance that our directors receive additional information and training about issues that are critical to exercising prudent oversight of the management of our company. We have implemented a robust director education program that begins with in-depth training covering our industry and each of our lines of business, and that continues with special education sessions throughout the year that highlight current business, industry, regulatory and governance topics presented by internal and external experts.
We value the views of our investors and welcome feedback from them. Our standard engagement practice is to initiate conversations with our largest investors each fall. In the fall of 2018, we reached out to our top 50 shareholders and invited them to talk to us about corporate governance and executive compensation, along with other topics they want to discuss. We also consider requests for engagement from shareholders outside of the fall outreach effort.
All of our engagement meetings with shareholders in 2018 were held telephonically. The fall meetings were attended by members of management from the following functions: executive compensation, investor relations, and the Corporate Secretary's office. Meetings requested by shareholders at other times were attended by management representatives from various corporate functions according to the topics to be discussed. When investors requested participation by an independent director, Mr. O'Maley joined the call in his capacity as Lead Director.
Management shares the feedback received from shareholders with the Governance Committee, and shares feedback related to executive compensation matters with the Compensation and Human Resources Committee. The committees take the views expressed by our shareholders into consideration when making decisions. For example, shareholder feedback played a large role in the changes the Compensation and Human Resources Committee made to our executive compensation program in 2018. Management also considers shareholder feedback about disclosure practices when preparing our company's public filings.
All of the Audit Committee members meet the independence and experience requirements of the NYSE and the Securities and Exchange Commission (the "SEC"). As part of those requirements, our Board of Directors has determined that each member of the Audit Committee is independent and financially literate. All of the Governance Committee members and Compensation and Human Resources Committee members also meet the independence requirements of the NYSE, including, with respect to the Compensation and Human Resources Committee members, the NYSE's independence requirements specific to members of compensation committees.
The Audit Committee charter generally prohibits Audit Committee members from serving on more than two other public company audit committees. Currently, no Audit Committee member exceeds this limitation. At all times, one or more members of our Audit Committee possess the education or experience required to qualify as an "audit committee financial expert" as defined by the SEC, and one or more members of our Risk Management Committee have experience identifying, assessing and managing the risk exposures of large, complex financial firms, in accordance with rules promulgated by the Federal Reserve Board.
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U.S. Bancorp 2019 Proxy Statement |
Corporate governance
|
The charter of each of our standing committees fully describes that committee's responsibilities. The following summary highlights the committees' key areas of oversight.
Committee | Primary responsibilities and membership | |
Audit Held 13 meetings during 2018 |
▶ Assisting the Board of Directors in overseeing the quality and integrity of our financial statements, including matters related to internal controls; our compliance with legal and regulatory requirements; the qualifications, performance and independence of our independent auditor; and the integrity of the financial reporting processes, both internal and external; ▶ appointing, compensating, retaining and overseeing the work of the independent auditor; ▶ reviewing the effectiveness of systems that implement our company's ethics guidelines; and ▶ overseeing the internal audit function and approving the appointment and compensation of the Chief Audit Executive. |
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Current members: Roland A. Hernandez (Chair), Warner L. Baxter, Elizabeth L. Buse, Karen S. Lynch and Scott W. Wine |
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Audit committee financial experts: Roland A. Hernandez, Warner L. Baxter, Karen S. Lynch and Scott W. Wine |
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Capital Planning Held 8 meetings during 2018 |
▶ Overseeing the capital planning and capital management processes and actions, including stress testing processes, scenarios and results; ▶ reviewing and approving the Comprehensive Capital Analysis and Review and recommending approval to the Board of Directors; ▶ monitoring our company's capital adequacy; ▶ reviewing and approving our resolution and recovery plans and recommending approval to the Board of Directors; and ▶ reviewing and approving the issuance or repurchase of equity securities and other significant financial transactions and equity investments. |
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Current members: Warner L. Baxter (Chair), Elizabeth L. Buse, Marc N. Casper, Andrew Cecere, Doreen Woo Ho and O'dell M. Owens, M.D., M.P.H. |
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Compensation and Human Resources Held 7 meetings during 2018 |
▶ Discharging the Board's responsibilities relating to our compensation programs and employee benefit plans, including reviewing and approving our executive officers' compensation; ▶ overseeing our human capital strategy, including recruitment, evaluations and development activities; ▶ overseeing and reviewing the results of our employee diversity and inclusion initiatives; ▶ recommending to the Board for approval all equity-based incentive plans; ▶ recommending to the independent directors for approval the compensation program for our non-employee directors; ▶ evaluating and discussing with the appropriate officers of our company the incentives for risk taking contained in our incentive compensation plans and programs; ▶ overseeing management's efforts to foster a desired corporate culture in alignment with our strategy; and ▶ evaluating the CEO's performance and overseeing succession planning for executive officers other than our CEO. |
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Current members: Scott W. Wine (Chair), Arthur D. Collins, Jr., Olivia F. Kirtley, David B. O'Maley and O'dell M. Owens, M.D., M.P.H. |
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U.S. Bancorp 2019 Proxy Statement |
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Corporate governance
|
Committee | Primary responsibilities and membership | |
Governance Held 6 meetings during 2018 |
▶ Evaluating and making recommendations to the Board with respect to the size, composition and leadership of the Board and its committees; ▶ discharging the Board's responsibilities relating to corporate governance matters, including developing and recommending to the Board a set of corporate governance guidelines; ▶ overseeing succession planning for our CEO; ▶ identifying and recommending to the Board individuals qualified to become directors; ▶ evaluating related person transactions; ▶ conducting an annual performance evaluation of the Board, its committees and its members; ▶ overseeing our engagement with shareholders and other interested parties concerning corporate governance and related matters; and ▶ making recommendations to the Board regarding any shareholder proposals. |
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Current members: Arthur D. Collins, Jr. (Chair), Marc N. Casper, Kimberly J. Harris, David B. O'Maley and Craig D. Schnuck |
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Public Responsibility Held 4 meetings during 2018 |
▶ Overseeing our management of reputation risk and reviewing our company's reputation and brand management activities; ▶ reviewing and considering our position and practices on matters of public interest and public responsibility and similar social issues involving our relationship with the community at large; ▶ reviewing our activities, performance and compliance with the Community Reinvestment Act and fair lending regulations; and ▶ overseeing our policies and programs related to other corporate social responsibility matters, including environmental sustainability. |
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Current members: Kimberly J. Harris (Chair), Dorothy J. Bridges, Roland A. Hernandez, Karen S. Lynch, Richard P. McKenney and Yusuf I. Mehdi |
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Risk Management Held 6 meetings during 2018 |
▶ Overseeing our overall risk management function, which governs the management of credit, interest rate, liquidity, market, capital, operational, compliance and strategic risk and the management of key risks in those areas, including cybersecurity; ▶ reviewing and approving our company's Risk Management Framework and Risk Appetite Statement; ▶ monitoring our company's risk profile relative to its risk appetite; and ▶ reviewing and evaluating significant capital expenditures and potential mergers and acquisitions. |
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Current members: Olivia F. Kirtley (Chair), Dorothy J. Bridges, Andrew Cecere, Doreen Woo Ho, Richard P. McKenney, Yusuf I. Mehdi and Craig D. Schnuck |
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Executive No meetings were necessary in 2018 |
▶ The Executive Committee has authority to exercise all powers of the Board of Directors, as permitted by law and our bylaws, between regularly scheduled Board meetings. |
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U.S. Bancorp 2019 Proxy Statement |
Corporate governance
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Board-level oversight of risk management structure
As part of its responsibility to oversee the management, business and strategy of our company, the Board of Directors has approved a Risk Management Framework that establishes governance and risk management requirements for all risk-taking activities. This framework includes company-level and business unit Risk Appetite Statements that set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives.
The Board of Directors oversees management's performance relative to the Risk Management Framework, Risk Appetite Statements, and other policy requirements. While management is responsible for defining the various risks facing our company, formulating risk management policies and procedures, and managing risk exposures on a day-to-day basis, the Board's responsibility is to oversee our company's risk management processes by informing itself about our material risks and evaluating whether management has reasonable risk management and control processes in place to address those material risks.
The Board's risk oversight responsibility is primarily carried out through its standing committees, as follows:
In addition, the Board has created a special committee dedicated to overseeing our company's work to enhance its Bank Secrecy Act/anti-money laundering compliance program.
The Risk Management, Audit and Capital Planning Committees meet annually in joint session to give each committee the opportunity to review the risk areas primarily overseen by the other, and all Board members attend this meeting to benefit from the discussion. Finally, at each meeting of the full Board of Directors, each committee gives a detailed review of the matters it discussed and conclusions it reached during its recent meetings.
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Corporate governance
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The Board is very focused on the risks that cybersecurity threats pose to our company as a major financial services institution. The Board has established a comprehensive oversight framework to address those increasing risks:
Management-level risk structure underlying Board oversight
Each Board committee carries out its risk management responsibilities using reports from management containing information relevant to the risk areas under that committee's oversight. The committees must therefore be confident that an appropriate risk monitoring structure is in place at the management level in order to be provided accurate and useful informational reports. The management-level risk oversight structure is robust. Our company relies on comprehensive risk management processes to identify, aggregate and measure, manage, and monitor risks. This system enables the Board of Directors to establish a mutual understanding with management of the effectiveness of our company's risk management practices and capabilities, to review our company's risk exposure and to elevate certain key risks for discussion at the Board level. A framework exists to account for the introduction of emerging risks or any increase in risks routinely taken, which would either be largely controlled by the risk limits in place or identified through the frequent risk reporting that occurs throughout our company.
The Executive Risk Committee, which is chaired by our Chief Risk Officer and which includes the CEO and other members of the executive management team, oversees execution against the Risk Management Framework and company-level Risk Appetite Statement. The Executive Risk Committee meets monthly, and more frequently when circumstances merit, to provide executive management oversight of our Risk Management Framework, assess appropriate levels of risk exposure and actions that may be required for identified risks to be adequately mitigated, promote effective management of all risk categories, and foster the establishment and maintenance of an effective risk culture. The Executive Risk Committee members manage large, sophisticated groups within our company that are dedicated to controlling and monitoring risk to the levels deemed appropriate by the Board of Directors and executive management. These individuals, together with our company's controller, treasurer and others, also provide the Board's committees with the information the committees need and request in order to carry out their oversight responsibilities.
The Executive Risk Committee focuses on current and emerging risks, including strategic and reputational risks, directing timely and comprehensive actions. The following senior operating committees have also been established, each responsible for overseeing a specified category of risk:
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U.S. Bancorp 2019 Proxy Statement |
Corporate governance
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Our Board and management-level committees are supported by a "three lines of defense" model for establishing effective checks and balances. The first line of defense, primarily the revenue-generating business lines, manages risks in conformity with established limits and policy requirements. In turn, business leaders and their risk officers establish programs to ensure conformity with these limits and policy requirements. The second line of defense, primarily the Chief Risk Officer's organization, but also including the policy and oversight activities of corporate support functions, translates risk appetite and strategy into actionable risk limits and policies. The second line of defense monitors the first line of defense's compliance with limits and policies, and provides reporting and escalation of emerging risks and other concerns to senior management and the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee and senior management with independent assessment and assurance regarding the effectiveness of our company's governance, risk management and control processes.
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Corporate governance
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Board leadership policies and practices
Our Board believes that a strong, independent Board of Directors is critical to effective oversight of management. The Board regularly and carefully considers the critical issue of the best independent leadership structure for the Board, and maintains a flexible policy regarding the issue of whether the position of Chairman should be held by an independent director. At least annually, the Board reviews the Board's and company's needs and the leadership attributes of its directors and executives to determine whether our company is best served at that particular time by having the CEO or another director hold the position of Chairman.
In order to ensure strong independent Board leadership, the independent directors elect a Lead Director with the substantial leadership responsibilities detailed below when the position of Chairman is not held by an independent director. The Lead Director is elected annually upon the recommendation of the Governance Committee, with the expectation that he or she will generally serve three, and may serve up to five, consecutive terms.
In addition to strong independent leadership of the full Board, each of the Audit Committee, Governance Committee, and Compensation and Human Resources Committee is composed solely of independent directors. Independent directors, therefore, oversee critical, risk-sensitive matters such as the quality and integrity of our financial statements; the compensation of our executive officers, including the CEO; the nomination of directors; and the evaluation of the Board, its committees, and its members. Each of the remaining committees is chaired by an independent director. The full Board and each of its committees meet in executive session on a regular basis.
Andrew Cecere, our President and Chief Executive Officer, became Chairman of the Board on the date of the 2018 annual meeting. He succeeded Richard K. Davis, who had served as Chairman of our Board since December 2007 and as CEO from December 2006 to April 2017. David B. O'Maley has served as the Board's independent Lead Director since January 2017.
The independent directors believe that Mr. Cecere is the member of the Board best suited to contribute to long-term shareholder value by serving as Chairman, because he has the knowledge, expertise and experience to understand and clearly articulate to the Board the opportunities and risks facing our company and to lead discussions on important matters affecting our business.
When the Chairman is also the CEO, that person's primary responsibilities as Chairman are as follows:
Mr. O'Maley brings a wealth of experience in the financial services industry and on our Board to his role as Lead Director. As the former Chairman and CEO of a large financial services company, Mr. O'Maley contributes substantial financial industry and risk management expertise to the Board. He has served as Chair of the Compensation and Human Resources Committee, and is currently a member of the Compensation and Human Resources and Governance Committees, as well as the Executive Committee.
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Corporate governance
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The independent directors entrust the Lead Director with the following responsibilities and authority:
Our bylaws provide that in uncontested elections, a nominee for director will be elected to the Board if the number of votes cast "FOR" the nominee's election exceeds the number of votes cast "AGAINST" that nominee's election. The voting standard for directors in a contested election is a plurality of the votes cast at the meeting.
Our Corporate Governance Guidelines provide that director nominees must submit a contingent resignation in writing to the Governance Committee, which becomes effective if the director fails to receive a sufficient number of votes for re-election at the annual meeting of shareholders and the Board accepts the resignation. The Board will nominate for election or re-election as director only candidates who have tendered such a contingent resignation.
Our Corporate Governance Guidelines further provide that if an incumbent director fails to receive the required vote for re-election, our Governance Committee will act within 90 days after certification of the shareholder vote to determine whether to accept the director's resignation, and will submit a recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding his or her resignation. The Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director's resignation.
If each member of the Governance Committee fails to receive the required vote in favor of his or her election in the same election, then those independent directors who did receive the required vote will appoint a committee amongst themselves to consider the resignations and recommend to the Board whether to accept them. However, if the only directors who received the required vote in the same election constitute three or fewer directors, all directors may participate in the decision regarding whether to accept the resignations.
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Corporate governance
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Each director nominee named in this proxy statement has tendered an irrevocable, contingent resignation as a director in accordance with our Corporate Governance Guidelines, which resignation will become effective if he or she fails to receive the required vote for election at the annual meeting and the Board accepts his or her resignation.
A primary responsibility of the Board is planning for succession with respect to our company's CEO, as well as overseeing succession planning for other senior management positions. The Board's process targets the building of enhanced management depth, considers continuity and stability within our company, and responds to our company's evolving needs and changing circumstances. To achieve these goals, the executive talent development and succession planning process is integrated into the Board's annual activities.
The Board works with the Governance Committee to evaluate a number of potential internal and external candidates as successors to the CEO, and considers emergency, temporary scenarios as well as long-term succession. The Compensation and Human Resources Committee is responsible for reviewing succession planning for executive officer positions other than the CEO. The CEO makes available to the Board his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for those individuals.
Our key corporate social responsibility initiatives include the following:
We add strength and vitality to our communities through our Community Possible platform focused on closing the gaps between people and possibility. In 2018, we provided $57 million in U.S. Bank Foundation grants and corporate contributions to nonprofit organizations across the country. Our Community Possible platform is focused on the areas of Work, Home and Play.
Financial education is an investment in our collective future. We offer extensive financial education resources through Financial IQ, our online financial education resource hub which provides helpful knowledge, tools and inspiration for all consumers and business owners. We also offer financial education modules through our Student Union program; during 2018, 70,000 modules were completed through the program. In addition, our employees share their banking expertise with our communities every day. In 2018, our employees reached 131,000 people by spending 8,000 volunteer hours hosting 2,700 financial education seminars.
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Corporate governance
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We care deeply about promoting sustainable business practices while supporting economic growth. It's one of the reasons that we have invested $20.5 billion in environmentally beneficial business opportunities since 2008. We serve a broad spectrum of enterprises across a diverse array of industries we embrace a balanced approach as we address climate change and the needs of our stakeholders. Environmental sensitivity is an important component of our business practice and is integrated into our overall risk management philosophy.
We are committed to reducing our corporate greenhouse gas emissions by 40% by 2029 and 60% by 2044. Additionally, we are proud to have received a score of A- from the CDP (formerly known as the Carbon Disclosure Project) in 2016, 2017 and 2018.
Inclusive, equitable actions and diverse perspectives are essential to maintaining our best-in-class culture of ethics and integrity.
Our employee population is diverse as of the end of 2018, more than half of our employees were women. Three of our executive women leaders have been honored by American Banker as among the Most Powerful Women in Banking and Finance in 2018. We were recognized last year by Forbes as a Best Employer for Women and Diversity. Additionally, approximately 2,000 of our employees are military veterans. Through our Business Resource Groups, which work to bring together employees who have similar backgrounds, experiences, or interests and their allies, we work to engage employees and drive business growth. Our current Business Resource Groups include: Women, Veterans, African American, Asian, Hispanic, LGBTQ, Disabilities, Native American, Alumni, and our Development Network.
Our 74,000 employees are the heartbeat of U.S. Bancorp. Each year, they invest their hands, hearts and minds to give back to their local communities. This continued commitment is what brings our Community Possible platform to life. In 2018, employees donated 209,000 hours of volunteer time, which we have valued at $5 million, to the communities in which we work, live and play. Our employees also gave generously through our Employee Giving Campaign in 2018, donating $9 million to nonprofit organizations across the country.
Relationships are the heart of our business. We build those relationships on trust through every interaction with our customers and the communities we serve. Our commitment to the highest ethical standards is what makes that trust possible. We're proud to have been named one of the World's Most Ethical Companies® by the Ethisphere Institute for five years in a row. Our commitment to ethical leadership comes with a responsibility. We believe in actively engaging our customers, our industry and the broader business community in authentic conversations about the importance of business ethics. To reinforce our company's commitment to the highest ethical standards, we have adopted a Code of Ethics and Business Conduct, which can be found at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Governance Documents" and then "Code of Ethics."
We have an intention behind creating products and services that serve communities, considering what the most thoughtful mix is to ensure all members of our community are served. We enable customer and business-driven growth while protecting existing revenue.
In today's world, protecting information is a top priority and a significant part of our corporate responsibility. We anticipate emerging threats through risk-based, intelligence-driven, and predictive strategies. We safeguard our company's information and assets through adaptive security enhancements and with a cybersecurity center and team that continuously monitors activity.
To learn more about our corporate social responsibility efforts, visit our website at www.usbank.com/communitypossible.
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Certain relationships and related transactions
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Certain relationships and related transactions
The Board has adopted a written Related Person Transactions Policy for the review, evaluation and approval or ratification of transactions between our company and its related persons. "Related persons" under this policy include our directors, director nominees, executive officers, holders of more than 5% of our common stock, and their respective immediate family members. Their "immediate family members" include children, stepchildren, parents, stepparents, spouses, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and any person (other than a tenant or employee) sharing the person's household.
Except as described below, the policy requires the Governance Committee of the Board to review and evaluate and either approve or disapprove all transactions or series of transactions in which:
The Board has determined that the Governance Committee does not need to review or approve certain transactions even if the amount involved will exceed $120,000, including the following transactions:
When considering whether to approve or ratify a transaction, the Governance Committee will consider facts and circumstances that it deems relevant to its determination, including:
No director is allowed to participate in the deliberations or vote on the approval or ratification of a transaction if that director is a related person with respect to the transaction under review. On an annual basis, the Governance Committee assesses all ongoing relationships with related persons to confirm that the transactions are still appropriate.
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U.S. Bancorp 2019 Proxy Statement |
Certain relationships and related transactions
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During 2018, U.S. Bancorp and our banking and investment subsidiaries engaged in transactions in the ordinary course of business with some of our directors, executive officers and the persons that we know beneficially owned more than 5% of our common stock on December 31, 2018, and the entities with which they are associated. All loans and loan commitments and any transactions involving other financial products and services in connection with these transactions were made in the ordinary course of business, on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to our banking and investment subsidiaries and did not involve more than the normal risk of collectibility or present other unfavorable features.
Transactions with entities affiliated with directors or executive officers
During 2018, U.S. Bank operated 32 branches and 68 ATMs in grocery stores owned by Schnuck Markets, Inc., of which Craig D. Schnuck, one of our directors, beneficially owns approximately 13% of the outstanding capital stock. Mr. Schnuck's sister, Nancy A. Diemer, and his four brothers, Scott C. Schnuck, Todd R. Schnuck, Mark J. Schnuck and Terry E. Schnuck, each beneficially own approximately 13% of the outstanding capital stock of Schnuck Markets as well. In addition, each of Mr. Schnuck's brothers is a director of Schnuck Markets, and three of his brothers hold officer positions: Todd R. Schnuck is the Chairman and Chief Executive Officer; Mark J. Schnuck is the Vice President; and Terry E. Schnuck is the Assistant Secretary. Rent and fee payments by U.S. Bank to Schnuck Markets were approximately $2.8 million in 2018. The consolidated gross revenues of Schnuck Markets in 2018 were approximately $3.1 billion.
Our director Yusuf I. Mehdi currently serves as a Corporate Vice President of Microsoft Corporation. During 2018, we paid $37 million to Microsoft for software and services in the ordinary course of business, including desktop software, server and cloud enrollment services, and support and development of products. Microsoft's annual revenue was approximately $90 billion for fiscal year 2018.
These transactions were conducted at arm's length in the ordinary course of business by each party to the transactions. As discussed above under the heading "Corporate Governance Director Independence," the Board of Directors has determined that these relationships are immaterial to Messrs. Mehdi and Schnuck, and that Messrs. Mehdi and Schnuck are both independent directors.
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Compensation discussion and analysis
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Compensation discussion and analysis
This section explains how we compensated the individuals who served as our CEO or CFO for 2018, each of our three other most highly compensated executive officers serving as such at the end of 2018, and an additional individual who would have been among the latter group had he not retired before the end of the year (our named executive officers, or "NEOs"):
Reference guide |
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Compensation discussion and analysis
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In response to feedback received from our shareholder engagement process in 2017, our Compensation and Human Resources Committee (referred to as the "Committee" in this "Compensation Discussion and Analysis" section) made the following changes to compensation awarded to our executive officers in 2018:
Our shareholders responded positively to these changes: our Say on Pay support increased from 74.7% in 2017 to 95.5% in 2018. The Committee considers this vote to be a strong endorsement of the restructured program.
Payout for NEOs' 2018 annual cash incentive awards ranged from 96.1% to 110.9% of their respective target amounts, reflecting corporate and business line performance largely in line with our company's financial plans. The ROE target for the PRSUs granted in February 2018 is 14.5%, which was based on the profitability goals announced at the company's most recent Investor Day conference in September 2016 and adjusted upward to reflect the expected impact of tax reform over the awards' three-year performance period.
In 2018 our company once again led its financial peer group in the most commonly used performance metrics for the banking industry.
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Compensation discussion and analysis
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Our executive compensation program incorporates many strong governance features, including the following:
What we do | |||||
Most of each executive officer's compensation is at risk |
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We may cancel unvested equity awards and reduce cash incentive compensation for executives who demonstrate inadequate sensitivity to risk |
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We have a clawback policy that allows us to recoup annual cash incentive payouts attributable to incorrectly reported earnings |
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We have meaningful stock ownership and hold-until-retirement requirements |
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The Committee retains an independent compensation consultant that provides no other services to our company |
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What we don't do | ||
Our executive officers do not have employment agreements or severance agreements |
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We do not allow executive officers to hedge or pledge their company stock |
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We do not have single-trigger accelerated vesting of equity awards |
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We do not provide tax gross-ups |
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We do not pay dividends on any PRSUs that are not earned through satisfaction of the awards' performance metrics; dividends on earned PRSUs are not paid until the awards vest |
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Compensation discussion and analysis
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Compensation program objective
The Committee has structured the executive compensation program to create long-term shareholder value by attracting and retaining talented leaders and rewarding them for top performance. The Committee achieves this objective through a compensation package that:
U.S. Bancorp operates in a highly complex business environment, where it competes with many well-established financial institutions and, increasingly, with non-banks offering products and services that traditionally were offered only by banks. Our long-term business objective is to maximize shareholder value by consistently delivering superior returns on common equity that exceed the cost of equity. If we are successful in achieving this objective, the Committee believes the results will benefit our shareholders.
Accordingly, our executive compensation program is designed to reward our executives for achieving annual and long-term financial results that further our long-term business objective. The annual cash incentive plan rewards performance relative to corporate and business line financial plans established at the beginning of the fiscal year, and the PRSUs are earned based on achievement of ROE targets that directly measure the return generated by the company on its shareholders' investment. The ultimate value of both the PRSUs and RSUs is dependent on our long-term financial success as reflected in the price of U.S. Bancorp stock. At the same time, the Committee carefully weighs the risks inherent in these programs against the goals of the programs and the company's risk appetite. Additional discussion of the risk oversight undertaken by the Committee can be found below under "Decision Making and Policies Risk Considerations."
Our NEOs' total direct compensation consists of three elements: base salary, annual cash incentive compensation, and long-term incentive compensation. In 2018, 60% of the value of each NEO's long-term incentive award was delivered in PRSUs with a three-year performance period, and 40% was delivered in RSUs. Each of these elements of total direct compensation is described in detail below. When evaluating an NEO's compensation compared to market levels and those of other members of our company's executive officer group, the Committee considers both the value of each element and of the total direct compensation package.
NEOs are also eligible to receive health benefits under the same plans available to our other employees, matching contributions to their U.S. Bank 401(k) Savings Plan accounts on the same basis as our other employees, and retirement benefits that are earned over their career with the company. No NEO has a severance or standalone change-in-control agreement. NEOs do not receive gross-up payments for tax liabilities resulting from perquisites.
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Compensation discussion and analysis
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The Committee considers the salary of executive officers relative to comparable executives in our compensation peer group and will make market-based adjustments as it deems appropriate. Salaries can also be adjusted to reflect experience and tenure in a position, internal pay equity within the executive officer group, increased scope of responsibilities, individual performance, and retention considerations.
2018 salary actions: The Committee increased Mr. Cecere's salary by 10% to position his salary more closely with the salaries of CEOs in our peer group as he entered his first full year in that role. Other NEOs' salaries were increased more modestly to reflect market considerations.
NEO |
2017 base salary |
2018 base salary |
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Andrew Cecere |
| | $ | 1,000,000 | * | | | $ | 1,100,000 | | | |
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Terrance R. Dolan |
| | $ | 650,000 | | | | $ | 675,000 | | | |
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Jeffry H. von Gillern |
| | $ | 575,000 | | | | $ | 600,000 | | | |
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Shailesh M. Kotwal |
| | $ | 525,000 | | | | $ | 550,000 | | | |
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Gunjan Kedia |
| | $ | 525,000 | | | | $ | 550,000 | | | |
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P.W. (Bill) Parker |
| | $ | 625,000 | | | | $ | 625,000 | | | |
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* Salary set for Mr. Cecere in April 2017 upon his promotion to CEO.
How we determine our NEOs' annual cash incentive awards
All executive officers have the opportunity to earn annual cash incentive awards that reflect their responsibility levels and reward achievement of corporate and business line goals, as well as reflect individual performance and risk sensitivity. The awards made to our NEOs for 2018 performance were granted under our 2006 Executive Incentive Plan (the "EIP").
The formula for calculating each NEO's Annual Cash Incentive Payout consists of the following elements:
Setting the Target Award Amounts
The Target Award Amount for each executive officer is based on the officer's level of responsibility within the organization as well as market-based and internal pay equity considerations. The Target Award Amount is considered by the Committee to be an important tool in establishing an appropriate balance between short-term, cash-based compensation and long-term, equity-based compensation in each NEO's total compensation package.
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Compensation discussion and analysis
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NEO |
Target Award Percentage for 2018 |
Target Award Amount for 2018 |
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Andrew Cecere |
| | 240 | % | | | $ | 2,640,000 | | | ||
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Terrance R. Dolan |
| | | | | $ | 945,000 | | | |||
Jeffry H. von Gillern |
| | | | | $ | 840,000 | | | |||
Shailesh M. Kotwal |
| | 140 | % | | | $ | 770,000 | | | ||
Gunjan Kedia |
| | | | | $ | 770,000 | | | |||
P.W. (Bill) Parker |
| | | | | $ | 729,167 | * | | |||
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Calculating the Bonus Funding Percentage
Each year, the Committee targets an aggregate amount of annual cash incentive awards to be granted to all management-level employees in each business line. The actual size of the pool that funds payouts can range from 0% to 200% of the target amount (the Bonus Funding Percentage) based on the company's and the business line's performance against earnings per share ("EPS") and pretax income targets included in the annual financial plan. The Board establishes these financial targets at the beginning of the fiscal year with the intent that they are challenging yet reasonably achievable goals.
The Bonus Funding Percentage for each of our revenue-producing business lines is based on the company's EPS performance compared to the target amount in the annual financial plan (weighted 35% for 2018) and that business line's pretax income performance compared to the target amount in the annual financial plan (weighted 65% for 2018); for each of the business lines in a support function, the 65% of the Bonus Funding Percentage assigned to pretax income performance is calculated based on the weighted average results of all of the revenue-producing business lines in its group. The calculation is described in detail below.
The Bonus Funding Percentage for the Technology and Operations Services business line, led by Mr. von Gillern, is calculated differently from all other business lines in that 35% is based on EPS performance, 50% is based on business line pretax income performance, and 15% is based on that business line's expense management performance. The Committee considers expense management to be particularly important to Technology and Operations Services because this business line has responsibility for a significant portion of the company's overall expenditures.
When structuring the awards for 2019 performance, the Committee adjusted the payout formula so that EPS performance moved from 35% to 50% weighting for all executive officers. The Committee increased the emphasis on EPS, which reflects overall corporate performance, to better align executive compensation with shared business strategies.
For purposes of computing the Bonus Funding Percentage, our standard practice is to adjust EPS results so that the effect of any variation in our loan loss reserve build or release is reduced by 50%. We routinely adjust EPS in this manner, whether the loan loss reserve variation is favorable or unfavorable. The Committee will also consider whether EPS should be further adjusted from reported amounts to normalize any notable items.
The Committee believes that EPS and business line pretax income are appropriate performance metrics for the executive officers' annual cash incentive awards for the following reasons:
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Compensation discussion and analysis
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The Bonus Funding Percentage for each business line is calculated as follows:
The Business Line Component used to calculate the Bonus Funding Percentage applicable to executives with leadership responsibilities for the entire company or for a corporate-wide support function the Overall Bonus Funding Percentage is based on the weighted average Pretax Income Bonus Funding Results of all the company's business lines.
2018 Corporate Component results: The target level of EPS in 2018 was $4.06. The company reported EPS of $4.14 for 2018, including notable items from the fourth quarter related to the impact of the gain from the sale of the company's ATM servicing business and the sale of a majority of the company's FDIC covered loans, charges related to severance, certain asset impairments, an accrual for legal matters, and the favorable impact to deferred tax assets and liabilities related to changes in estimates from tax reform. Combined, these notable items had a net positive impact of $0.03 on EPS for the year.
To determine the EPS value used to calculate the Corporate Component of the Annual Cash Incentive Payouts, the Committee started with the company's core EPS results for 2018 of $4.11 (that is, excluding the impact of the notable items from reported EPS described above). In accordance with its standard practice, the Committee then adjusted the EPS results downward by another $0.03 to offset by 50% the positive effect that our lower-than-planned increase of
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Compensation discussion and analysis
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loan loss reserves had on earnings. The resulting EPS value used to calculate the Corporate Component was $4.08. After applying the leverage factor to the difference between target and actual EPS results, the EPS Bonus Funding Result for executive officers' awards was 102.3%.
2018 Business Line Component results: Pretax income results ranged from 82.8% to 129.3% of target performance across our company's 23 revenue-producing business lines, which generated Pretax Income Bonus Funding Results of 31.2% to 200.0% following application of the leverage factor and the 200% earn-out cap. The weighted average Pretax Income Bonus Funding Results of all the company's business lines, which was used to calculate the Overall Bonus Funding Percentage, was 100.2%.
2018 bonus funding results: The Bonus Funding Percentage used to calculate the payouts for executive officers with leadership responsibilities for the entire company or for a corporate-wide support function, including Messrs. Cecere, Dolan and Parker (our CEO, CFO and Chief Risk Officer, respectively), was the Overall Bonus Funding Percentage.
The Bonus Funding Percentage for each executive officer who leads a revenue-producing group, including Mr. Kotwal (who leads our Payment Services group) and Ms. Kedia (who leads our Wealth Management and Investment Services group), equaled a weighted average of the Bonus Funding Percentages of all the business lines for which he or she has responsibility.
The Bonus Funding Percentage for Mr. von Gillern was calculated based on the unique formula for the Technology and Operations Services business line he leads: 35% based on the EPS Bonus Funding Result, 50% based on the weighted-average Pretax Income Bonus Funding Results of all the company's revenue-producing business lines, and 15% based on that business line's expense management performance compared to plan.
The resulting Bonus Funding Percentages were as follows for the NEOs:
NEO | Bonus Funding Percentage | |||
|
|
|||
Andrew Cecere Terrance R. Dolan P.W. (Bill) Parker |
| 100.9% (the Overall Bonus Funding Percentage) | | |
| | | | |
Jeffry H. von Gillern | | 99.8% (the Bonus Funding Percentage for the Technology and Operations Services business line, for which Mr. von Gillern has responsibility) | | |
| | | | |
Shailesh M. Kotwal | | 102.8% (equal to the weighted average of Bonus Funding Percentages for the 5 business lines for which Mr. Kotwal has responsibility) | | |
| | | | |
Gunjan Kedia | | 96.1% (equal to the weighted average of Bonus Funding Percentages for the 8 business lines for which Ms. Kedia has responsibility) | | |
| | | | |
Factoring in individual performance and risk sensitivity
The Committee considers the performance of the business lines managed by each executive officer and that executive officer's individual performance during the year. Individual performance criteria for all executive officers include performance relative to risk management, leadership, employee engagement, community involvement, involvement in special projects and new initiatives, and talent management, as well as factors including credit quality and audit, regulatory and compliance results. The Bonus Funding Percentage to be applied to an executive's Target Award Amount can be adjusted downward as well as upward based on these performance reviews.
The Committee also uses a formal "risk scorecard" assessment, which can result in downward or upward adjustments to the Bonus Funding Percentage to reflect the executives' demonstrated sensitivity to risk. The Committee believes that it is important to retain the ability to recognize outstanding individual performance and risk mitigation in determining Annual Cash Incentive Payouts, as well as to acknowledge circumstances where individual performance improvements are suggested or where inappropriate risk-taking behaviors have occurred.
2018 individual performance and risk sensitivity actions: The Committee determined that each NEO's applicable Bonus Funding Percentage appropriately reflected that executive's performance and contribution to the company in 2018. Accordingly, no individual performance-based modifications were made to the NEOs' Bonus Funding Percentages. Following an analysis of the NEOs' risk scorecard results, the Committee increased the Bonus Funding Percentage applicable to Mr. Parker's Target Award Amount by 10% in recognition of the substantial improvements made to the company's anti-money laundering compliance program and overall risk management function under his leadership.
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2018 Annual Cash Incentive Payout results: The resulting payouts made to the NEOs in February 2019 for 2018 performance under the annual cash incentive plan were as follows:
NEO |
Percentage of Target Award Amount paid out |
Dollar value of payout |
||||||||||
Andrew Cecere |
| | 100.9 |
% |
|
|
$ |
2,663,760 |
| | ||
| | | | | | | ||||||
Terrance R. Dolan |
| | 100.9 | % | | | $ | 953,505 | | | ||
| | | | | | | ||||||
Jeffry H. von Gillern |
| | 99.8 | % | | | $ | 838,320 | | | ||
| | | | | | | ||||||
Shailesh M. Kotwal |
| | 102.8 | % | | | $ | 791,560 | | | ||
| | | | | | | ||||||
Gunjan Kedia |
| | 96.1 | % | | | $ | 739,970 | | | ||
| | | | | | | ||||||
P.W. (Bill) Parker |
| | 110.9 | % | | | $ | 808,646 | | | ||
| | | | | | |
Establishing the structure of the equity awards
Long-term, stock-based compensation represents the most significant portion of our NEOs' total compensation package. In 2018, 66% of our CEO's target total direct compensation and 63% of our other NEOs' target total direct compensation consisted of equity awards. The Committee uses equity awards to align the NEOs' interests with those of long-term shareholders.
The Committee grants equity awards to executive officers under the U.S. Bancorp 2015 Stock Incentive Plan. In 2018, 60% of the value of each executive officer's long-term incentive award was granted in the form of PRSUs that will cliff vest (if earned) at the end of a three-year performance period, and 40% was granted in the form of RSUs that will vest ratably over three years. Cash dividends on unvested PRSUs are accrued during the performance period, but accrued dividends are only paid after the end of the performance period on shares earned, if any, by the executives.
The mix of performance-based and time-based equity vehicles is designed to motivate achievement of financial objectives while encouraging retention and stock ownership.
Prior to 2018, the executives' long-term incentive awards had been structured differently: 75% of the value had been granted in the form of PRSUs with a one-year performance period that vested ratably over four years, and 25% had been granted in the form of stock options. The Committee changed the performance period of the PRSUs and swapped the options for RSUs based largely on feedback we had received through our shareholder engagement process following our 2017 Say on Pay vote. Because of the change from one-year to three-year performance periods, no PRSUs were earned at the end of 2018.
Setting the value of the equity awards
Each year in January, the Committee determines the dollar value of the long-term incentive awards to be granted to the executive officers, and the grants are made on a pre-determined date in mid-February. In setting each year's award amounts, the Committee considers the relative market position of the awards and the total compensation for each executive, the proportion of each executive's total direct compensation to be delivered as a long-term incentive award, internal pay equity, executive performance and changes in responsibility, retention considerations, and corporate performance.
2018 equity value actions: The Committee significantly increased the value of the long-term incentive awards granted to Messrs. Cecere and Kotwal and Ms. Kedia in 2018 to align those NEOs' total compensation with the opportunities
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Compensation discussion and analysis
|
available to executives in similar roles at other companies. The size of the increase to Mr. Cecere's award further reflects that 2018 was his first full year as CEO.
NEO |
Value of equity awards granted in 2017 |
Value of equity awards granted in 2018 |
||||||||||
Andrew Cecere |
| |
$ |
6,000,000 |
| | |
$ |
7,260,000 |
| | |
| | | | | | | ||||||
Terrance R. Dolan |
| | $ | 3,100,000 | | | | $ | 3,250,000 | | | |
| | | | | | | ||||||
Jeffry H. von Gillern |
| | $ | 2,300,000 | | | | $ | 2,300,000 | | | |
| | | | | | | ||||||
Shailesh M. Kotwal |
| | $ | 1,600,000 | | | | $ | 2,000,000 | | | |
| | | | | | | ||||||
Gunjan Kedia |
| | $ | 1,600,000 | | | | $ | 2,000,000 | | | |
| | | | | | | ||||||
P.W. (Bill) Parker |
| | $ | 2,500,000 | | | | $ | 2,500,000 | | | |
| | | | | | |
Selecting the performance metrics for the PRSU awards
The number of PRSUs earned is determined according to a formula that uses a comparison of our actual ROE to target results, as well as our ROE performance relative to that of our peer financial institutions. ROE is used as the performance metric because:
The Committee uses a performance matrix reflecting both the absolute and relative ROE scales to determine the final PRSU award amounts earned during the performance period. Target levels of both absolute and relative ROE are established, with maximum and minimum levels also identified. Earn-out amounts are determined using interpolation.
The Committee believes that the PRSU earn-out structure provides an important balance between rewarding the achievement of absolute performance goals and strong relative performance. Executives are not rewarded for poor performance simply because members of our financial peer group have even worse performance, nor are they rewarded for exceeding expectations if performance relative to peers is substandard. In addition, by using a sliding scale for each ROE performance metric, the matrix takes into account the amount of variance from the ROE target and peer group ROE results, rewarding performance while mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award.
Setting the levels of absolute and relative ROE for the PRSU performance matrix
The target and maximum ROE levels selected by the Committee for the three-year performance period contained in the PRSU awards granted in February 2018 were based on the ROE range included in the company's profitability goals announced at its most recent Investor Day conference, held in September 2016. While the Investor Day presentation provided an ROE range of 13.5% to 16.5%, the Committee adjusted the goals contained in the PRSUs granted in 2018 upward to reflect the impact tax reform is expected to have on the company's ROE results over the awards' three-year performance period. As reflected below, the target award level was set at 14.5%, with a maximum result of 17.5%.
The Committee also established a sliding scale of ROE achieved relative to the ROE of our financial peer group, which consists of the following institutions: Bank of America, BB&T, Fifth Third, J.P. Morgan, KeyCorp, PNC, Regions, SunTrust, and Wells Fargo. This group is used by the company for financial comparison purposes because these companies, along with U.S. Bancorp, are the ten largest financial services companies based in the United States that provide broadly comparable retail and commercial banking services. Performance above the median of peers will result
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Compensation discussion and analysis
|
in increases in the award payout, while performance below the median of peers will result in decreases in the award payout.
Our ROE result for 2018 was 15.4%, which placed us in the top quartile of our financial peer group for the year. Our absolute and relative ROE performance could change during the remaining two years of the performance period.
Who is involved in making compensation decisions
Executive compensation policy, practices and amounts are determined by the Committee, which is composed entirely of independent directors. The Committee has responsibility for setting each component of compensation for our CEO with the assistance and guidance of its independent compensation consultant. The Committee has retained Meridian Compensation Partners, LLC ("Meridian"), as its independent compensation consultant. At the direction of the Committee, Meridian also works with members of management to facilitate the Committee's review of compensation practices and management's recommendations.
Our CEO and senior members of our human resources group, also with the assistance of the compensation consultant, develop initial recommendations for all components of compensation for the executive officers other than the CEO and present their recommendations to the Committee for review and approval. The Committee also annually reviews the total amount and types of compensation paid to non-employee members of the Board of Directors and recommends any changes to the independent directors for approval.
The Committee retains an independent compensation consultant to:
Meridian does not provide any other services to our company. Following a review of the relationship between the company and its independent compensation consultant in 2018, the Committee concluded that Meridian's work for the Committee does not raise any conflicts of interest.
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How compensation is determined
The executive compensation outcomes described in the preceding pages are the culmination of a year's worth of analysis and decision making by the Committee, as follows:
JanuaryFebruary |
||||
|
Review the company's recent performance in several key financial metrics and compare it to the performance of its peer institutions in the financial services industry |
|
||
|
Determine the payouts to be made under the annual cash incentive plan based on the previous year's corporate, business line and individual performance and sensitivity to risk |
|
||
|
Calculate the percentage of target PRSU awards earned for the last completed performance period, as applicable |
|
||
|
Set the coming year's base salaries and target award percentages for the annual cash incentive plan |
|
||
|
Establish the structure and performance targets for the upcoming annual cash incentive plan |
|
||
|
Set the structure and amount of long-term incentive awards |
|
||
|
Establish performance targets for the upcoming PRSU awards and grant equity awards |
|
||
|
Consider risks arising from the company's incentive compensation plans (see below for more information about the risk consideration process) |
|
||
April |
||||
|
Review total compensation tally sheets for each executive officer, including compensation outcomes under various termination scenarios |
|
||
|
Review Say on Pay voting recommendations from proxy advisors and consider the results of the shareholder vote |
|
||
JulyOctober |
||||
|
Review comparative compensation information from peer institutions (see below for more information about our compensation peer group), as well as a larger group of diversified financial companies |
|
||
|
Compensation consultant reports on compensation practices and trends in the financial services industry |
|
||
|
Review market information and recommend non-employee director compensation for approval by the independent directors |
|
||
December |
||||
|
Management reports on feedback from fall shareholder engagement conversations |
|
||
|
Establish design of executive compensation program for upcoming year and make preliminary decisions about target levels of compensation |
|
||
|
Review executive officers' performance evaluations |
|
||
Ongoing |
||||
|
Review the company's year-to-date financial performance relative to the targets included in its incentive compensation plans |
|
||
|
Evaluate the structure of the executive compensation program and assess its effectiveness in creating long-term shareholder value |
|
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Compensation discussion and analysis
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The Committee uses the following group of financial services companies to perform market checks on the compensation of our executive officers (listed in descending order of assets held at December 31, 2018):
| | | | | | | | | | |
Company name |
|
Assets1 ($ in millions) |
|
Market capitalization1 ($ in millions) |
|
Revenue2 ($ in millions) |
||||
| | | | | | | | | | |
JPMorgan Chase & Co. |
$2,622,532 | $324,580 | $104,158 | |||||||
| | | | | | | | | | |
Bank of America Corporation |
$2,354,507 | $241,822 | $87,965 | |||||||
| | | | | | | | | | |
Citigroup Inc. |
$1,917,288 | $127,138 | $65,500 | |||||||
| | | | | | | | | | |
Wells Fargo & Company |
$1,895,883 | $216,910 | $84,664 | |||||||
| | | | | | | | | | |
The PNC Financial Services Group, Inc. |
$382,315 | $53,945 | $16,724 | |||||||
| | | | | | | | | | |
Capital One Financial Corporation |
$372,538 | $35,804 | $22,220 | |||||||
| | | | | | | | | | |
BB&T Corporation |
$225,697 | $33,383 | $10,992 | |||||||
| | | | | | | | | | |
SunTrust Banks, Inc. |
$215,543 | $22,662 | $9,005 | |||||||
| | | | | | | | | | |
Fifth Third Bancorp |
$146,069 | $15,427 | $6,693 | |||||||
| | | | | | | | | | |
U.S. Bancorp |
| $467,374 | | $73,855 | | $21,142 | ||||
| | | | | | | | | | |
U.S. Bancorp percentile ranking |
| 51% | | 53% | | 48% | ||||
| | | | | | | | | | |
The Committee believes that these peers represent the company's most meaningful competitors in the marketplace for executive talent. As shown above, U.S. Bancorp is positioned near the median of its compensation peer group with respect to significant financial metrics.
The Committee also reviews and uses compensation data from a large group of diversified financial services companies as an additional point of comparison. As a result of this ongoing analysis and resulting compensation adjustments, our executive compensation positioning is generally within market range, recognizing that several positions are unique to our company and do not have clear market comparisons.
Stock ownership and retention requirements
The Committee believes that ownership of our common stock by our executive officers directly aligns their interests with those of our other shareholders and helps balance the incentives for risk taking inherent in equity-based awards. We require our executives to hold significant amounts of company stock. We also require that they retain until retirement a substantial portion of their vested stock awards (net of shares withheld to satisfy tax obligations), even after minimum ownership levels have been met. The current ownership and retention requirements are as follows:
Vested PRSUs, exercised (and held) stock options, and all RSUs are included in determining whether an executive officer satisfies his or her applicable minimum ownership level. As of December 31, 2018, all our executive officers were in compliance with the stock ownership and retention requirements.
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Clawback and forfeiture provisions
Termination of employment provisions
Overview: Prudent risk taking is an integral part of any business strategy, and our compensation program is not intended to encourage management decisions that completely eliminate risk. Rather, the combination of various elements in our program is designed to encourage appropriate sensitivity to risk and mitigate the potential to reward risk taking that may produce short-term results that appear in isolation to be favorable, but that may undermine the successful execution of our long-term business strategy and negatively affect shareholder value. Our compensation practices are also designed to reward performance while maintaining our core commitment to customer service and ethical principles. Together with the company's processes for strategic planning, its internal control over financial reporting and other financial and compliance policies and practices, the design of our compensation program helps to discourage management actions that demonstrate insensitivity to risk.
Role of the Incentive Review Committee: As a large financial services company, we were subject to a continuing horizontal industry review of incentive compensation policies and practices undertaken by the Federal Reserve Board. We routinely undertake a thorough risk analysis of every incentive compensation plan of the company, the individuals covered by each plan and the risks inherent in each plan's design and implementation. We also conduct validation and back-testing activities to ensure that compensation plans are correctly risk rated, the plans are designed to adequately mitigate risk inherent therein, and the plans are administered effectively. The Incentive Review Committee was created to oversee that review and to provide more comprehensive oversight of the relationship between the various kinds of risk we manage and our company's incentive compensation plans and programs. The Incentive Review Committee meets throughout the year and reviews and approves all company incentive plans.
The Incentive Review Committee reviews incentive plan elements such as risk controls, plan participants, performance measures, performance and payout curves or formulas, how target level performance is determined (including whether any thresholds and caps exist), how frequently payouts occur, and the mix of fixed and variable compensation that the plan delivers. The plans and programs are also reviewed from the standpoint of reasonableness (for example, how target pay levels compare to similar plans for similar employee groups at other companies, and how payout amounts relate to the results that generate the payments), how well the plans and programs are aligned with U.S. Bancorp's goals and objectives and with the company's risk appetite, and from an overall standpoint, whether these plans and programs represent an appropriate mix of short-term and long-term compensation.
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As part of this review by the Incentive Review Committee, our management team, including senior risk officers and individuals from the compensation department, have identified the risks inherent in these programs and have modified plans and controls where appropriate to mitigate certain potential risks. For example, most business line incentive compensation plans with a credit component track early defaults, or defaults that occur within the first 12 months, and must include a provision that allows the company to offset future payments by the amount of the previously paid incentives related to the early default.
In addition, a "risk scorecard" assessment measuring adequacy of risk management is undertaken for senior management-level employees who have the individual ability to pose material risk to the company, including the executive officers; all employees who have credit responsibility and who participate in annual corporate cash incentive plans; and all employees who, as part of a group, can engage in risk-taking behavior that could be material to the company and who participate in annual corporate cash incentive plans. This analysis serves as the basis for annual cash incentive plan adjustments for these employees. Annually, the Incentive Review Committee also addresses risk events that pose a material adverse impact to the company or business line to determine whether an event should trigger cancellation of equity awards. The Incentive Review Committee has reviewed its process with the Compensation and Human Resources Committee and discussed the areas where compensation-related risks were being addressed by plan modifications, or were mitigated by internal controls or otherwise.
Role of the Compensation and Human Resources Committee: The Compensation and Human Resources Committee also conducts an annual review of the compensation packages and components for the executive officers. The Committee assesses the incentives for risk taking contained in the compensation program and balances them with the other goals of the compensation program. The Committee meets at that time with members of senior management for a discussion of the material risks our company faces, to assess those risks and the overall risk tolerance of the company approved by the Board of Directors in relation to the levels of risk inherent in the compensation plans and programs and the performance targets set each year.
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In evaluating the incentives for risk taking in compensation plans and policies for executive officers, the Committee considered the following risk-mitigating aspects of those plans and policies:
Overall compensation program risk mitigation factors |
||||
|
Long-term incentive focus: The majority of the total compensation received by executive officers is in the form of equity awards with multi-year vesting schedules, which helps to ensure that executives have significant value tied to long-term stock price performance and mitigates incentives to manage the company with an excessive focus on short-term gain. |
|
||
Annual cash incentive risk mitigation factors |
||||
|
Broad corporate focus: The award payouts for all participants in the annual cash incentive plan, including our executive officers, are dependent to a large degree on our corporate EPS performance. This structure provides a common, consistent focus on the achievement of annual goals important to our overall success, while mitigating the incentives to take excessive risks to achieve goals that are more closely linked to individual performance. |
|
||
|
Specific risk sensitivity analysis: A "risk scorecard" assessment is performed for senior management-level employees who have the individual ability to pose material risk to the company, including executive officers, and is reviewed by our Incentive Review Committee. The results of this analysis may result in adjustments to award payouts under the annual cash incentive plan. |
|
||
|
Clawback policy: The company's incentive compensation clawback policy discourages risk taking that would lead to improper financial reporting. |
|
||
Long-term incentive risk mitigation factors |
||||
|
Equity cancellation provisions: Executive officers' unvested equity awards can be cancelled if their conduct has subjected the company to significant financial, reputational or other risk. |
|
||
|
Choice of performance metric: The PRSUs use ROE as the measure of corporate performance for determining the final number of units earned under the award. Achieving a high ROE requires an appropriate balance between achieving the highest return on invested capital and managing risk within the company's established risk tolerance levels. |
|
||
|
Maximum PRSU payout limited: The number of units that may be earned under the performance formula is capped at 150%, which limits the potential incentive to take excessive risk to receive a greater number of shares. |
|
||
|
Sliding scale earn-out calculation: The PRSU performance matrix takes into account the amount of variance from the ROE target and peer group ROE results, mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award. |
|
||
|
Meaningful stock ownership and retention requirements: Executives are required to hold significant amounts of company stock, a portion of which must be held until retirement, which fosters the alignment of executives' interests with those of our long-term shareholders. |
|
||
|
Policy prohibiting hedging of shares: Our insider trading policy prohibits our executives from taking actions designed to hedge or offset any decrease in the market value of our common stock. |
|
Based on a consideration of the foregoing reviews and factors, the Committee has determined that risks arising from the company's compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the company.
Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for certain executive officers. For tax years beginning before January 1, 2018, qualifying "performance-based" compensation was exempt from Section 162(m)'s deduction limit. The Tax Cuts and Jobs Act of 2017, which became law in December 2017, eliminated the performance-based exemption, except for remuneration provided pursuant to a written binding contract that was in effect on November 2, 2017, and not modified in any material respect on or after such date. The parameters of these grandfathering provisions were not known until mid-2018 when the IRS released further guidance.
As a result, the Committee continued to structure 2018 annual cash incentive awards granted to our NEOs under the EIP, and 2018 equity PRSUs granted to our NEOs under the U.S. Bancorp 2015 Stock Incentive Plan, to satisfy Section 162(m)'s performance-based exemption. IRS guidance issued in 2018 clarified that the grandfathering provisions
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Compensation discussion and analysis
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will not apply to these awards. Therefore, the Committee adopted a new annual executive incentive plan for 2019 that does not prescribe a payout formula as set forth in the EIP but maintains a performance-based structure. Annual cash incentive awards granted to the executive officers in early 2019 under the new plan include maximum payout amounts equal to 200% of target value. The Committee continues to grant equity awards under the U.S. Bancorp 2015 Stock Incentive Plan and did not change the structure of the PRSUs granted in 2019 even though the performance-based exemption is no longer available.
The elimination of the performance-based exemption from Section 162(m)'s deduction limit has not altered the Committee's commitment to a pay-for-performance executive compensation program. The Committee believes that the Section 162(m) related tax deduction is only one of several relevant considerations in setting compensation. The Committee also believes that the Section 162(m) tax deduction limitation should not be permitted to compromise its ability to design and maintain executive compensation arrangements that, among other things, are intended to attract, retain and motivate talented, high-performing leaders. The Committee expects that it will continue to approve compensation in excess of $1,000,000 to named executive officers that will not be deductible under Section 162(m) when it believes doing so is in the best interests of the company and its shareholders.
The Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation and Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our 2018 Annual Report on Form 10-K.
Compensation and Human Resources Committee of the Board of Directors of U.S. Bancorp
Scott W. Wine, Chair | David B. O'Maley | |||
Arthur D. Collins, Jr. | O'dell M. Owens, M.D., M.P.H. | |||
Olivia F. Kirtley |
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Executive compensation
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The following table shows the cash and non-cash compensation awarded to or earned by our NEOs in 2018.
Name and |
|
Year |
|
Salary ($) |
|
Stock awards ($)1 |
|
Option awards ($)2 |
|
Non-equity incentive plan compensation ($)3 |
|
Change in pension value and non-qualified deferred compensation earnings ($)4 |
|
All other compensation ($)5 |
|
Total ($) |
|||||||||
Andrew Cecere |
2018 |
1,100,000 |
7,260,000 |
|
2,663,760 |
2,369,125 |
44,243 |
13,437,128 |
|||||||||||||||||
Chairman, President and |
2017 | 941,538 | 4,500,000 | 1,500,000 | 1,659,867 | 3,381,404 | 31,947 | 12,014,756 | |||||||||||||||||
Chief Executive Officer |
2016 | 800,000 | 4,331,250 | 1,443,750 | 1,160,400 | 884,538 | 31,478 | 8,651,416 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Terrance R. Dolan |
2018 | 675,000 | 3,250,000 | | 953,505 | 234,766 | 23,451 | 5,136,722 | |||||||||||||||||
Vice Chairman and |
2017 | 650,000 | 2,325,000 | 775,000 | 768,040 | 579,394 | 16,188 | 5,113,622 | |||||||||||||||||
Chief Financial Officer |
2016 | 545,833 | 1,230,000 | 410,000 | 695,031 | 357,515 | 15,672 | 3,254,051 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Jeffry H. von Gillern |
2018 | 600,000 | 2,300,000 | | 838,320 | 15,670 | 25,226 | 3,779,216 | |||||||||||||||||
Vice Chairman, Technology |
2017 | 575,000 | 1,725,000 | 575,000 | 655,270 | 186,832 | 31,935 | 3,749,037 | |||||||||||||||||
and Operations Services |
2016 | 575,000 | 1,320,000 | 440,000 | 692,156 | 133,795 | 18,595 | 3,179,546 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Shailesh M. Kotwal6 |
2018 | 550,000 | 2,000,000 | | 791,560 | 50,547 | 79,244 | 3,471,351 | |||||||||||||||||
Vice Chairman, Payment |
|||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gunjan Kedia6 |
2018 | 550,000 | 2,000,000 | | 739,970 | 63,461 | 94,821 | 3,448,252 | |||||||||||||||||
Vice Chairman, Wealth |
2017 | 525,000 | 1,200,000 | 400,000 | 611,520 | | 69,327 | 2,805,847 | |||||||||||||||||
Management and Investment |
|||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
P.W. (Bill) Parker |
2018 | 552,763 | 2,500,000 | | 808,646 | 197,513 | 30,717 | 4,089,639 | |||||||||||||||||
Former Vice Chairman and |
2017 | 625,000 | 1,875,000 | 625,000 | 782,250 | 325,854 | 23,971 | 4,257,075 | |||||||||||||||||
Chief Risk Officer |
2016 | 625,000 | 1,815,000 | 605,000 | 755,469 | 163,105 | 24,868 | 3,988,442 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
The amounts in this column are calculated based on the number of time-based restricted stock units, or RSUs, and performance-based restricted stock units, or PRSUs, awarded and the fair market value of U.S. Bancorp common stock on the date the award was made in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718.
The 2018 values in this table reflect the fair market value of each officer's RSUs plus the target payout for the PRSUs on the grant date. The number of PRSUs subject to each of these awards will be determined after a three-year performance period beginning on January 1, 2018 and ending Decebmber 31, 2020. Depending on our company performance during this time, 0% to 150% of the target number of PRSUs granted to the executive officers can be earned. The fair market value of RSUs plus the maximum potential payout amouts for the PRSUs on the grant date were as follows: (i) Mr. Cecere, $9,438,000; (ii) Mr. Dolan, $4,225,000; (iii) Mr. von Gillern, $2,990,000; (iv) Mr. Kotwal, $2,600,000; (v) Ms. Kedia, $2,600,000; and (vi) Mr. Parker, $3,250,000.
The amounts in this column are based on the fair value of the stock option awards as estimated using the Black-Scholes option-pricing model in accordance with FASB ASC Topic 718. No stock options were granted in 2018.
The 2018 amounts in this column relate to awards granted under our EIP in January 2018, determined in January 2019 based on 2018 performance, and paid out in February 2019. The EIP and these awards are discussed above in the "Compensation Discussion and Analysis" section of this proxy statement.
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U.S. Bancorp 2019 Proxy Statement |
| 54 |
Executive compensation
|
The amounts in this column represent the increase in the actuarial net present value of all future retirement benefits under the U.S. Bank Pension Plan and the U.S. Bancorp Non-Qualified Retirement Plan. A number of factors can cause the amounts reflected in this column to vary significantly, including volatility in the discount rate applied to determine the value of future payment streams and changes to mortality assumptions.
The change in present value amounts reported for 2018 are smaller than those reported for 2017 for the respective NEOs. The decrease in these "change" values is partially due to the higher discount rates used for year-end 2018, which are approximately 60 to 65 basis points higher than for year-end 2017. Increases in age and service, as well as updated lump-sum mortality factors, also impacted the amounts.
The net present values of the pension benefits as of December 31, 2018, used to calculate the net change in pension benefits were determined using the same assumptions used to determine our pension obligations and expense for financial statement purposes. See Note 16 to our consolidated financial statements included in our 2018 Annual Report on Form 10-K for these specific assumptions. Additional information about our Pension Plan and Non-Qualified Retirement Plan is included below under the heading "Pension Benefits." We have not provided above-market or preferential earnings on any nonqualified deferred compensation and, accordingly, no such amounts are reflected in this column.
The following table describes each component of the All Other Compensation column for 2018:
Name |
|
Parking reimbursement ($) |
|
Matching contribution into 401(k) savings plan ($) |
|
Reimbursement of financial planning expenses ($) |
|
Executive physical ($) |
|
Home security system expenses ($) |
|
Commuting expenses ($)a |
|
Housing expenses ($)a |
|
Club dues |
|
Other ($)b |
|
Total ($) |
|||||||||||
Mr. Cecere |
4,850 |
11,000 |
14,025 |
|
7,623 |
|
|
6,281 |
464 |
44,243 |
|||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Dolan |
4,850 | 11,000 | | | 623 | | | 6,978 | | 23,451 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. von Gillern |
4,850 | 11,000 | | 3,263 | 850 | | | 5,263 | | 25,226 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Kotwal |
| 11,000 | | | | 38,304 | 29,940 | | | 79,244 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ms. Kedia |
| 11,000 | 14,520 | | | 36,109 | 33,192 | | | 94,821 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Parker |
3,600 | 11,000 | 2,145 | 8,353 | | | | | 5,619 | 30,717 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Our company occasionally allows its executives the personal use of tickets for sporting and cultural events previously acquired by our company for the purpose of business entertainment. In addition, an executive's spouse might accompany him or her on a business-related flight aboard a company-owned aircraft if a seat on that aircraft would otherwise be empty. There is no incremental cost to our company for the use of such tickets or for such flights.
The following table summarizes the equity and non-equity plan-based awards granted in 2018 to the NEOs. The first line of information for each executive contains information about the 2018 annual cash incentive awards that each executive was granted under our EIP, and the remaining information relates to PRSUs and RSUs granted in 2018 under the U.S. Bancorp 2015 Stock Incentive Plan.
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55 |
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U.S. Bancorp 2019 Proxy Statement |
Executive compensation
|
Grants of plan-based awards for fiscal 2018
|
|
|
Date of compensation committee meeting at |
|
Estimated future payouts under non-equity incentive plan awards1 |
|
Estimated future payouts under equity incentive plan awards |
|
All other stock awards: number of shares of stock or |
|
Grant date fair value of stock |
|||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name |
|
Grant date |
|
which grant was approved |
|
Target ($)2 |
|
Maximum ($)3 |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
units (#) |
|
awards ($)6 |
||||||||||
Andrew Cecere |
|
|
2,640,000 |
14,192,000 |
|
|
|
|
|
|||||||||||||||||||
|
2/14/18 | 1/16/18 | | | 0 | 78,756 | 118,134 | (4) | | 4,355,994 | ||||||||||||||||||
|
2/14/18 | 1/16/18 | | | | | | 52,504 | (5) | 2,903,996 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Terrance R. Dolan |
| | 945,000 | 14,192,000 | | | | | | |||||||||||||||||||
|
2/14/18 | 1/16/18 | | | 0 | 35,256 | 52,884 | (4) | | 1,950,009 | ||||||||||||||||||
|
2/14/18 | 1/16/18 | | | | | | 23,504 | (5) | 1,300,006 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Jeffry H. von Gillern |
| | 840,000 | 14,192,000 | | | | | | |||||||||||||||||||
|
2/14/18 | 1/16/18 | | | 0 | 24,950 | 37,425 | (4) | | 1,379,985 | ||||||||||||||||||
|
2/14/18 | 1/16/18 | | | | | 16,634 | (5) | 920,027 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shailesh M. Kowtal |
| | 770,000 | 14,192,000 | | | | | | |||||||||||||||||||
|
2/14/18 | 1/16/18 | | | 0 | 21,696 | 32,544 | (4) | | 1,200,006 | ||||||||||||||||||
|
2/14/18 | 1/16/18 | | | | | | 14,464 | (5) | 800,004 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gunjan Kedia |
| | 770,000 | 14,192,000 | | | | | | |||||||||||||||||||
|
2/14/18 | 1/16/18 | | | 0 | 21,696 | 32,544 | (4) | | 1,200,006 | ||||||||||||||||||
|
2/14/18 | 1/16/18 | | | | | 14,464 | (5) | 800,004 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
P.W. (Bill) Parker |
| | 729,167 | 14,192,000 | | | | | | |||||||||||||||||||
|
2/14/18 | 1/16/18 | | | 0 | 27,120 | 40,680 | (4) | | 1,500,007 | ||||||||||||||||||
|
2/14/18 | 1/16/18 | | | | | | 18,080 | (5) | 1,000,005 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
These columns show the potential payments for each of the NEOs under our EIP for 2018 performance. Actual annual cash incentive payout amounts are determined in accordance with a formula based on corporate EPS performance and business line pretax income performance, in each case ranging from 0% to 200% of target levels, subject to adjustment for individual performance and risk sensitivity. Additional information regarding how the payout amounts for these awards are determined is included above in "Compensation Discussion and Analysis Annual Cash Incentive Awards," and the actual amounts paid based on 2018 performance are reported above in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table.
As described above in "Compensation Discussion and Analysis Annual Cash Incentive Awards," the Compensation and Human Resources Committee establishes a target cash incentive amount for each NEO each year, expressed as a percentage of the executive's base salary.
The Target Award Amount shown for Mr. Parker in this column is a prorated amount reflecting the base salary and Target Award Percentage applicable to him for the portion of 2018 he was an employee of the company.
Our EIP provided the opportunity for each participant in the plan to earn a maximum cash incentive amount equal to 0.2% of our net income for the performance year. Our net income for the 2018 fiscal year was $7.096 billion, and 0.2% of net income was $14.192 million. As described above in "Compensation Discussion and Analysis Tax Considerations" the maximum amounts calculated in accordance with the EIP are not indicative of amounts the Compensation and Human Resources Committee expected to pay out.
The threshold, target and maxiumum columns each show the potential number of PRSUs that could be earned by each of these NEOs during the three-year performance period of January 1, 2018, to December 31, 2020. The number of PRSUs earned will be between 0 and 150% of target based on the company's absolute and relative ROE performance during that period, as set in the applicable award agreements. Additional information regarding how the PRSU awards are earned is included above in "Compensation Discussion and Analysis Long-Term Incentive Awards."
Any PRSUs earned during the performance period will vest on February 14, 2021, the third anniversary of the grant date. Cash dividends on unvested PRSUs are accrued during the performance period, but accrued dividends are only paid after the end of the performance period on shares earned, if any, by the executives.
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U.S. Bancorp 2019 Proxy Statement |
| 56 |
Executive compensation
|
These RSUs vest at the rate of 33% on the first and second anniversaries of the grant date and 34% on the third anniversary of the grant date, with vesting dates of February 14, 2019, 2020, and 2021. The RSUs pay an amount equal to the dividends paid on our shares of common stock.
The grant date fair value of the PRSUs and the RSUs was calculated using the target number of units multiplied by the closing market price of a share of our common stock on the grant date.
The following table shows the unexercised stock options and the unvested RSUs and PRSUs held at the end of fiscal year 2018 by the NEOs.
Outstanding equity awards at 2018 fiscal year-end
|
|
Option awards |
|
Stock awards |
|||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Name |
|
Number of securities underlying unexercised options (#) exercisable |
|
Number of securities underlying unexercised options (#) unexercisable |
|
Option exercise price ($) |
|
Option expiration date |
|
Number of stock units that have not vested (#) |
|
Market value of stock units that have not vested ($)1 |
|
Equity incentive plan awards: number of unearned stock units that have not vested (#) |
|
Equity incentive plan awards: market or payout value of unearned stock units that have not vested ($)1 |
|||||||||
Andrew Cecere |
25,562 | 76,689 | (2) | 55.01 | 2/16/2027 | | | | | ||||||||||||||||
|
70,222 | 70,223 | (3) | 39.49 | 2/18/2026 | | | | | ||||||||||||||||
|
76,533 | 25,511 | (4) | 44.32 | 2/19/2025 | | | | | ||||||||||||||||
|
93,366 | | 40.32 | 2/20/2024 | | | | | |||||||||||||||||
|
84,948 | | 33.99 | 2/14/2023 | | | | | |||||||||||||||||
|
184,187 | | 28.63 | 2/15/2022 | | | | | |||||||||||||||||
|
165,564 | | 28.70 | 2/16/2021 | | | | | |||||||||||||||||
|
| | | | 52,504 | (5) | 2,399,433 | | | ||||||||||||||||
|
| | | | | | 118,134 | (6) | 5,398,724 | ||||||||||||||||
|
| | | | 69,574 | (7) | 3,179,532 | | | ||||||||||||||||
|
| | | | 58,186 | (8) | 2,659,100 | | | ||||||||||||||||
|
| | | | 22,062 | (9) | 1,008,233 | | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Terrance R. Dolan |
13,207 | 39,622 | (2) | 55.01 | 2/16/2027 | | | | | ||||||||||||||||
|
1,165 | 1,166 | (3) | 41.88 | 7/18/2026 | | | | | ||||||||||||||||
|
18,727 | 18,728 | (3) | 39.49 | 2/18/2026 | | | | | ||||||||||||||||
|
19,898 | 6,633 | (4) | 44.32 | 2/19/2025 | | | | | ||||||||||||||||
|
26,583 | | 40.32 | 2/20/2024 | | | | | |||||||||||||||||
|
24,918 | | 33.99 | 2/14/2023 | | | | | |||||||||||||||||
|
| | | | 23,504 | (5) | 1,074,133 | | | ||||||||||||||||
|
| | | | | | 52,884 | (6) | 2,416,799 | ||||||||||||||||
|
| | | | 35,947 | (7) | 1,642,778 | | | ||||||||||||||||
|
| | | | 950 | (8) | 43,415 | | | ||||||||||||||||
|
| | | | 15,517 | (8) | 709,127 | | | ||||||||||||||||
|
| | | | 5,736 | (9) | 262,135 | | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Jeffry H. von Gillern |
9,799 | 29,400 | (2) | 55.01 | 2/16/2027 | | | | | ||||||||||||||||
|
21,401 | 21,401 | (3) | 39.49 | 2/18/2026 | | | | | ||||||||||||||||
|
22,960 | 7,654 | (4) | 44.32 | 2/19/2025 | | | | | ||||||||||||||||
|
29,000 | | 40.32 | 2/20/2024 | | | | | |||||||||||||||||
|
27,183 | | 33.99 | 2/14/2023 | | | | | |||||||||||||||||
|
| | | | 16,634 | (5) | 760,174 | | | ||||||||||||||||
|
| | | | | | 37,425 | (6) | 1,710,323 | ||||||||||||||||
|
| | | | 26,669 | (7) | 1,218,773 | | | ||||||||||||||||
|
| | | | 17,733 | (8) | 810,398 | | | ||||||||||||||||
|
| | | | 6,618 | (9) | 302,443 | | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
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57 |
|
U.S. Bancorp 2019 Proxy Statement |
Executive compensation
|
|
|
Option awards |
| Stock awards | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Name |
|
Number of securities underlying unexercised options (#) exercisable |
|
Number of securities underlying unexercised options (#) unexercisable |
|
Option exercise price ($) |
|
Option expiration date |
|
Number of stock units that have not vested (#) |
|
Market value of stock units that have not vested ($)1 |
|
Equity incentive plan awards: number of unearned stock units that have not vested (#) |
|
Equity incentive plan awards: market or payout value of unearned stock units that have not vested ($)1 |
|||||||||
Shailesh Kotwal |
6,816 | 20,451 | (2) | 55.01 | 2/16/2027 | | | | | ||||||||||||||||
|
18,727 | 18,728 | (3) | 39.49 | 2/18/2026 | | | | | ||||||||||||||||
|
22,670 | 7,557 | (10) | 42.94 | 4/16/2025 | | | | | ||||||||||||||||
|
| | | | 14,464 | (5) | 661,005 | | | ||||||||||||||||
|
| | | | | | 32,544 | (6) | 1,487,261 | ||||||||||||||||
|
| | | | 18,554 | (7) | 847,918 | | | ||||||||||||||||
|
| | | | 15,517 | (8) | 709,127 | | | ||||||||||||||||
|
| | | | 6,375 | (9) | 291,338 | | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gunjan Kedia |
6,816 | 20,451 | (2) | 55.01 | 2/16/2027 | | | | | ||||||||||||||||
|
| | | | 14,464 | (5) | 661,005 | | | ||||||||||||||||
|
| | | | | | 32,544 | (6) | 1,487,261 | ||||||||||||||||
|
| | | | 18,554 | (7) | 847,918 | | | ||||||||||||||||
|
| | | | 13,571 | (11) | 620,195 | | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
P.W. (Bill) Parker |
10,651 | 31,956 | (2) | 55.01 | 2/16/2027 | | | | | ||||||||||||||||
|
| 29,426 | (3) | 39.49 | 2/18/2026 | | | | | ||||||||||||||||
|
| 10,205 | (4) | 44.32 | 2/19/2025 | | | | | ||||||||||||||||
|
| | | | 18,080 | (5) | 826,256 | | | ||||||||||||||||
|
| | | | | | 40,680 | (6) | 1,859,076 | ||||||||||||||||
|
| | | | 28,989 | (7) | 1,324,797 | | | ||||||||||||||||
|
| | | | 24,384 | (8) | 1,114,349 | | | ||||||||||||||||
|
| | | | 8,824 | (9) | 403,257 | | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
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U.S. Bancorp 2019 Proxy Statement |
| 58 |
Executive compensation
|
The following table summarizes information with respect to stock option awards exercised and RSUs and PRSUs vested during fiscal 2018 for each of the NEOs.
Option exercises and stock vested during fiscal 2018
|
|
Option awards |
|
Stock awards |
|||||||||
| | | | | | | | | | | | | |
Name |
|
Number of shares acquired on exercise (#) |
|
Value realized on exercise ($)1 |
|
Number of shares acquired on vesting (#) |
|
Value realized on vesting ($)2 |
|||||
Andrew Cecere |
183,374 |
5,061,122 |
95,056 |
5,274,237 |
|||||||||
| | | | | | | | | | | | | |
Terrance R. Dolan |
| | 31,847 | 1,764,901 | |||||||||
| | | | | | | | | | | | | |
Jeffry H. von Gillern |
13,508 | 299,445 | 30,806 | 1,708,588 | |||||||||
| | | | | | | | | | | | | |
Shailesh M. Kotwal |
| | 20,316 | 1,126,619 | |||||||||
| | | | | | | | | | | | | |
Gunjan Kedia |
| | 12,969 | 680,798 | |||||||||
| | | | | | | | | | | | | |
P.W. (Bill) Parker |
98,485 | 1,441,386 | 39,204 | 2,175,207 | |||||||||
| | | | | | | | | | | | | |
Value determined by subtracting the exercise price per share from the market value per share of our common stock at the time of exercise and multiplying the difference by the number of shares acquired on exercise.
Value determined by multiplying the number of vested shares by the market value on the vesting date (determined for these purposes as the closing market price of a share of our common stock on the date prior to the vesting date, or on the most recent prior business day in the event the date prior to the vesting date is not a business day).
The U.S. Bank Pension Plan was created through the merger of the former U.S. Bancorp's career average pay defined benefit plan, known as the "U.S. Bancorp Cash Balance Pension Plan," and the former Firstar Corporation's non-contributory defined benefit plan, which was primarily a final average pay plan. Under the U.S. Bank Pension Plan, benefits are calculated using a final average pay formula, based upon the employee's years of service and average salary during the five consecutive years of service in which compensation was the highest during the ten years prior to retirement, with a normal retirement age of 65.
Effective January 1, 2010, our company established a new cash balance formula for certain current and all future eligible employees. Participants will receive annual pay credits based on eligible pay multiplied by a percentage determined by their age and years of service. Participants will also receive an annual interest credit. Participants in the pension plan that elected to receive pension benefits using the cash balance formula had their existing benefits in the pension plan frozen and will earn future benefits under the cash balance formula.
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U.S. Bancorp 2019 Proxy Statement |
Executive compensation
|
Substantially all employees are eligible to receive benefits under the U.S. Bank Pension Plan. Participation requires one year of service with U.S. Bancorp or its affiliates, and vesting of benefits requires five years of service for benefits under the final average pay formula and three years of service for benefits under the post-2009 cash balance formula. Mr. Dolan is the only NEO (of those eligible at the time) who elected to remain covered by the final pay formula; all other NEOs are covered by the cash balance formula.
Although no new benefits are accrued under the former U.S. Bancorp Cash Balance Pension Plan formula and Firstar Corporation's plan formula for service after 2001, benefits previously earned under those plans have been preserved and will be part of a retiree's total retirement benefit. In order to preserve the relative value of benefits that use the final average pay formula, subsequent changes in compensation (but not in service) may increase the amount of those benefits.
Federal laws limit the amount of compensation we may consider when determining benefits payable under qualified defined benefit pension plans. We also maintain a non-contributory, non-qualified retirement plan that pays the excess pension benefits that would have been payable under our current and prior qualified defined benefit pension plans if the federal limits were not in effect.
Messrs. Cecere, Dolan, Parker and von Gillern earned benefits under the former U.S. Bancorp Cash Balance Pension Plan that will be included in their ultimate retirement benefits.
Supplemental retirement benefits
All of the NEOs except for Mr. Kotwal and Ms. Kedia are eligible for a supplemental benefit that augments benefits earned under the U.S. Bank Pension Plan and the non-qualified excess benefits discussed above. The supplemental benefit ensures that eligible executives receive a total retirement benefit equal to a fixed percentage of the executive's final average cash compensation. In the case of Messrs. Dolan, Parker and von Gillern, their supplemental benefits were frozen in 2001. For purposes of this supplemental benefit, final average cash compensation includes annual base salary, annual cash bonuses and other cash compensation awards as determined by the Compensation and Human Resources Committee. Eligibility for these supplemental benefits has been determined by the Committee based on individual performance and level of responsibility.
Vesting of the supplemental benefit is generally subject to certain conditions, including that an executive officer provide a certain number of years of service determined by the Compensation and Human Resources Committee. Mr. Cecere is eligible for an amount of total retirement benefits at age 65 equal to 55% of the average cash compensation during his final three years of service, reduced by his estimated retirement benefits from Social Security. Mr. Cecere is fully vested in a portion of his supplemental benefit, with his vested portion increasing on a pro rata basis up to age 60. Mr. Dolan has a frozen monthly annuity of $522 in which he is fully vested, payable as early as his termination date. Mr. von Gillern also has a frozen monthly annuity benefit of $138 in which he is fully vested, payable as early as his termination date.
Per his election, Mr. Cecere's supplemental benefit will be paid in the form of a lump sum. For the supplemental benefits for Messrs. Dolan, Parker and von Gillern, the standard form is either a lump sum or a joint and survivor annuity, depending on the present value of the lump sum at retirement.
The present value of the supplemental benefit for Messrs. Dolan and von Gillern is currently less than $400,000, so in accordance with plan rules, their supplemental benefit will default to payment in a lump sum. Each of Messrs. Dolan and von Gillern has the option to make an election to receive his supplemental benefit as an annuity if the election is made 12 months prior to the applicable officer's termination date, the officer is over age 55, and the present value exceeds $50,000. The amount of the lump sum distribution equals the actuarial equivalent of the annuity form of payment and is calculated using substantially similar actuarial assumptions as for our pension plan obligations discussed in Note 16 to our consolidated financial statements included in our 2018 Annual Report on Form 10-K. The means of calculating the various annuity benefits are described in the pension plan.
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U.S. Bancorp 2019 Proxy Statement |
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Executive compensation
|
Pension benefits for fiscal 2018
The following table summarizes information with respect to each plan that provides for payments or other benefits at, following, or in connection with the retirement of any of the NEOs.
Name | Plan name |
|
Number of years credited service (#) |
|
Present value of accumulated benefits ($)1, 2 |
|
Payments during last fiscal year ($) |
|||||
Andrew Cecere |
U.S. Bancorp Non-Qualified Retirement Plan: |
|||||||||||
Supplemental benefits |
33 | 7,822,674 | | |||||||||
Excess benefit |
33 | 4,159,026 | | |||||||||
U.S. Bank Pension Plan | 33 | 636,196 | | |||||||||
| | | | | | | | | | | | |
Total | 12,617,896 | (3) | | |||||||||
| | | | | | | | | | | | |
Terrance R. Dolan | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||
Supplemental benefits |
3 | 62,111 | | |||||||||
Excess benefit |
20 | 2,540,579 | | |||||||||
U.S. Bank Pension Plan | 20 | 625,578 | | |||||||||
| | | | | | | | | | | | |
Total | 3,228,268 | (4) | | |||||||||
| | | | | | | | | | | | |
Jeffry H. von Gillern | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||
Supplemental benefits |
1 | 13,400 | | |||||||||
Excess benefit |
18 | 755,137 | | |||||||||
U.S. Bank Pension Plan | 18 | 305,243 | | |||||||||
| | | | | | | | | | | | |
Total | 1,073,780 | (4) | | |||||||||
| | | | | | | | | | | | |
Shailesh M. Kotwal | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||
Supplemental Benefits |
| | | |||||||||
Excess benefit |
4 | 145,851 | | |||||||||
U.S. Bank Pension Plan | 4 | 44,920 | | |||||||||
| | | | | | | | | | | | |
Total | 190,771 | (4) | | |||||||||
| | | | | | | | | | | | |
Gunjan Kedia | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||
Supplemental benefits |
| | | |||||||||
Excess benefits |
2 | 46,652 | | |||||||||
U.S. Bank Pension Plan | 2 | 16,809 | | |||||||||
| | | | | | | | | | | | |
Total | 63,461 | (5) | | |||||||||
| | | | | | | | | | | | |
P.W. (Bill) Parker | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||
Supplemental Benefits |
18 | | 263,237 | |||||||||
Excess Benefit |
35 | 2,355,837 | 10,552 | |||||||||
U.S. Bank Pension Plan | 35 | 789,267 | | |||||||||
| | | | | | | | | | | | |
Total | 3,145,104 | (4) | 273,789 | |||||||||
| | | | | | | | | | | | |
The amounts in this column were calculated based on the earliest age at which the applicable officer is entitled to receive unreduced retirement benefits and ignore any vesting requirements. The earliest age of unreduced retirement benefits is 65 for all our NEOs.
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U.S. Bancorp 2019 Proxy Statement |
Executive compensation
|
benefit may be payable based on certain actuarial calculations. The present value of the payments to an officer's beneficiary would not exceed the total present value of accumulated benefits shown in this column.
Under the U.S. Bank Executive Employees Deferred Compensation Plan (2005 Statement) (the "Executive Deferred Compensation Plan"), members of our senior management, including all of our executive officers, may choose to defer all or a part of their annual base salary and annual cash incentive payments. The minimum amount that can be deferred in any calendar year is $1,000. Cash compensation that is deferred is deemed to be invested in one of several investment funds, including a U.S. Bancorp common stock fund, as selected by the participant.
Shown below are the rates of return for each of the investment options (also known as measurement funds) available under the Executive Deferred Compensation Plan for the period from January 1, 2018, through December 31, 2018:
Fund Name |
2018 Returns | |
Stable Value Fund |
2.13% |
|
| | |
Bond Index Fund |
0.05% | |
| | |
US Large Cap Equity Index Fund |
4.47% | |
| | |
US Small-Mid Equity Index Fund |
9.39% | |
| | |
International Equity Index Fund |
14.50% | |
| | |
Deferred Savings U.S. Bancorp Stock Fund |
12.40% | |
| | |
Amounts deferred under the Executive Deferred Compensation Plan are credited with earnings and investment gains and losses by assuming that deferred amounts were invested in one or more of the hypothetical investment options selected by the plan participant. Plan participants are allowed to change their investment elections at any time, but the changes are only effective at the beginning of the following calendar quarter. The measurement funds are merely measuring tools to determine the amount by which account balances will be debited or credited to reflect deemed investment returns on deferred compensation.
Although the plan administrator has established procedures permitting a plan participant to reallocate deferred amounts among these investment alternatives after the initial election to defer, the election to defer is irrevocable, and the deferred compensation will not be paid to the plan participant until his or her retirement or earlier termination of employment. At that time, the participant will receive, depending upon the payment choice and investment alternatives selected by him or her, payment of the amounts credited to his or her account under the plan in a lump-sum cash payment or in annual installments over 5, 10, 15 or 20 years. Payments are made ratably in cash from each of the investment alternatives in which the participant has a balance, except the U.S. Bancorp stock fund, which is generally paid in shares. If a participant dies before the entire deferred amount has been distributed, the undistributed portion will be paid to the participant's beneficiary. The benefits under the plan otherwise are not transferable by the participant.
Prior to the establishment of the Executive Deferred Compensation Plan, members of our senior management could defer annual salary and annual cash incentive compensation into a prior U.S. Bancorp deferred compensation plan. Mr. Parker has deferred amounts under our prior plan.
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Executive compensation
|
The following table summarizes information with respect to the participation of the NEOs in any defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
Nonqualified deferred compensation for fiscal 2018
Name |
|
Executive contributions in last FY ($)1 |
|
Registrant contributions in last FY ($) |
|
Aggregate earnings in last FY ($)2 |
|
Aggregate withdrawals/ distributions ($) |
|
Aggregate balance at last FYE ($) |
||||||
Andrew Cecere |
|
|
|
|
|
|||||||||||
| | | | | | | | | | | | | | | | |
Terrance R. Dolan | | | | | | |||||||||||
| | | | | | | | | | | | | | | | |
Jeffry H. von Gillern | | | | | | |||||||||||
| | | | | | | | | | | | | | | | |
Shailesh M. Kotwal | 105,325 | | (8,539 | ) | | 96,786 | (3) | |||||||||
| | | | | | | | | | | | | | | | |
Gunjan Kedia | | | | | | |||||||||||
| | | | | | | | | | | | | | | | |
P.W. (Bill) Parker | 391,125 | | 22,105 | 5,557 | 2,176,932 | (4) | ||||||||||
| | | | | | | | | | | | | | | | |
Any NEO whose employment is voluntarily or involuntarily terminated is entitled to the payments or other benefits that the officer has accrued and is vested in under the benefit plans discussed above in this proxy statement, including under the heading "Pension Benefits." Except as is specifically described below with respect to disability, death or termination of employment following a change-in-control of U.S. Bancorp, no NEO is entitled to any other benefits upon any employment termination or change-in-control scenario.
Cash payments: Under the terms of the U.S. Bancorp Non-Qualified Retirement Plan, Mr. Cecere is eligible for an annual disability benefit that is equal to 60% of his current annual cash compensation. The definition of disability is similar to that used for the broad-based disability program described below. The definition of annual cash compensation is the same definition as is used to calculate supplemental pension benefits under this plan, without using a five-year average. His agreement under the non-qualified retirement plan provides that Mr. Cecere is eligible to receive disability payments through the earlier of the cessation of his disability or reaching his normal retirement age.
Messrs. Dolan, von Gillern and Kotwal and Ms. Kedia are eligible for an annual disability benefit of $150,000 (equal to 50% of their annual cash compensation, up to $300,000 of compensation) under the terms of the U.S. Bank Long-Term Disability Insurance Plan insured by Hartford Life and Accident Insurance Company, our broad-based disability program. Optional additional disability insurance is available for purchase by those NEOs. The definition of disability is generally that a participant is unable to perform material duties of his or her own occupation for 24 months following the
| | |
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U.S. Bancorp 2019 Proxy Statement |
Executive compensation
|
six-month elimination period, or any occupation after 24 months, and suffers a loss of at least 20% in predisability earnings. The definition of annual cash compensation is actual cash compensation for a one-year period ending September 30. The disability benefit for any of the officers would be reduced by any benefits payable under the U.S. Bank Pension Plan, Social Security or worker's compensation. The duration of disability payments under this broad-based program is dependent upon the age of the participant when the disability occurs. Because each of Messrs. Dolan, von Gillern and Kotwal and Ms. Kedia is under age 63, payments would continue through the earlier of the cessation of their disability or reaching their normal retirement age, assuming all other plan conditions are met.
Mr. Parker retired in October 2018 and is no longer eligible for disability payments.
Effect on equity awards: If the employment of any of our officers who have received equity compensation awards is terminated due to disability, the terms of our stock option, PRSU, and 2018 RSU agreements provide that the vesting and other terms of those awards will continue as if the termination of employment did not occur. With the exception of Ms. Kedia, no financial information for the event of disability is set forth below in the Potential Payments Upon Disability, Death, or Termination After a Change-in-Control table for the equity awards held by our NEOs, as there is no immediate financial impact upon the occurrence of any of these events. Ms. Kedia holds unvested RSUs she was granted when initially hired, and the agreement governing that award provides for the acceleration of any unvested RSUs in the event of long-term disability.
Cash payments: NEOs are eligible to receive life insurance benefits under the same plans available to our other employees. Their benefit is equal to their annual cash compensation up to $300,000. In addition, optional term life insurance is available for purchase. As this benefit is generally available to all salaried employees and does not discriminate in scope, terms, or operation in favor of the officers, the value has not been quantified in the Potential Payments Upon Disability, Death, or Termination After a Change-in-Control table.
Effect on equity awards: Many of our equity award agreements provide for the acceleration of any unvested award upon the death of the NEO. For PRSUs granted prior to 2018 and RSUs granted in 2018, outstanding units will vest upon death. For PRSUs granted in 2018, the vesting and other terms of the award will continue as if the death did not occur. All of our stock option agreements provide for the acceleration of vesting upon death, and the stock option agreements generally provide that the administrator of the officer's estate has a three-year period after death during which to exercise the options.
Payments upon termination after a change-in-control
Cash payments: None of our NEOs is entitled to any cash payments in connection with a change-in-control of U.S. Bancorp.
Effect on equity awards: Many of our equity award agreements provide for acceleration of the vesting of any unvested award if an NEO's employment is involuntarily terminated within 12 months after a change-in-control of U.S. Bancorp other than for cause. For PRSUs granted prior to 2018 and RSUs, outstanding units will vest upon a qualifying termination. For PRSUs granted in 2018, the vesting and other terms of the award will continue as if the termination did not occur. All of our stock option agreements provide for acceleration after a qualifying termination, and accelerated stock options may be exercised at any time during the 12 months following the NEO's termination.
Quantification of estimated payments and benefits
The following table shows potential annual cash payments to the NEOs upon disability and the potential benefits the NEOs could accrue through accelerated equity vesting upon death or involuntary termination of employment (other than for cause) following a change-in-control of U.S. Bancorp. The table also shows the potential benefit Ms. Kedia could accrue through accelerated vesting of RSUs upon disability. No information regarding pension amounts payable to the NEOs is shown in the following table; applicable pension amounts payable to these executive officers are discussed above under the heading "Pension Benefits."
The amounts shown assume that termination was effective as of December 31, 2018, and are estimates of the amounts that would be paid to the NEOs upon termination in addition to the base salary and cash incentive payments earned by them during 2018. The actual amounts to be paid can only be determined at the time of an NEO's termination.
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| 64 |
Executive compensation
|
Mr. Parker's employment with our company was terminated upon his retirement in October 2018. Accordingly, no estimated payments and benefits are reported for him.
Potential payments upon disability, death, or termination after a change-in-control
Name | Type of payment |
|
Annual disability payments ($) |
|
Payments upon death ($) |
|
Payments upon involuntary termination (other than for cause) after a change-In-control ($) |
|||||
Andrew Cecere | ||||||||||||
Base pay | 660,000 | | | |||||||||
Bonus | 1,598,256 | | | |||||||||
Acceleration of unvested equity awards: | ||||||||||||
Stock options1 |
| 471,290 | 471,290 | |||||||||
RSUs and PRSUs2 |
| 9,246,298 | 9,246,298 | |||||||||
| | | | | | | | | | | | |
Total | 2,258,256 | 9,717,588 | 9,717,588 | |||||||||
| | | | | | | | | | | | |
Terrance R. Dolan | ||||||||||||
Base pay | 150,000 | | | |||||||||
Bonus | | | | |||||||||
Acceleration of unvested equity awards: | ||||||||||||
Stock options1 |
| 129,909 | 129,909 | |||||||||
RSUs and PRSUs2 |
| 3,731,588 | 3,731,588 | |||||||||
| | | | | | | | | | | | |
Total | 150,000 | 3,861,497 | 3,861,497 | |||||||||
| | | | | | | | | | | | |
Jeffry H. von Gillern | ||||||||||||
Base pay | 150,000 | | | |||||||||
Bonus | | | | |||||||||
Acceleration of unvested equity awards: | ||||||||||||
Stock options1 |
| 143,463 | 143,463 | |||||||||
RSUs and PRSUs2 |
| 3,091,788 | 3,091,788 | |||||||||
| | | | | | | | | | | | |
Total | 150,000 | 3,235,251 | 3,235,251 | |||||||||
| | | | | | | | | | | | |
Shailesh M. Kotwal | ||||||||||||
Base Pay | 150,000 | | | |||||||||
Bonus | | | | |||||||||
Acceleration of unvested equity awards: | ||||||||||||
Stock options1 |
| 137,158 | 137,158 | |||||||||
RSUs and PRSUs2 |
| 2,509,387 | 2,509,387 | |||||||||
| | | | | | | | | | | | |
Total | 150,000 | 2,646,545 | 2,646,545 | |||||||||
| | | | | | | | | | | | |
Gunjan Kedia | ||||||||||||
Base pay | 150,000 | | | |||||||||
Bonus | | | | |||||||||
Acceleration of unvested equity awards: | ||||||||||||
Stock options1 |
| | | |||||||||
RSUs and PRSUs2 |
620,195 | (3) | 2,129,117 | 2,129,117 | ||||||||
| | | | | | | | | | | | |
Total | 770,195 | 2,129,117 | 2,129,117 | |||||||||
| | | | | | | | | | | | |
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U.S. Bancorp 2019 Proxy Statement |
Executive compensation
|
Total compensation amounts and ratio for 2018
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information about the relationship between the annual total compensation of our employees and the annual total compensation of our CEO.
The ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K and is not necessarily comparable to the ratios reported by other companies.
Median employee identification and compensation calculation
As allowed by Item 402(u) of Regulation S-K, we are using the same median employee for our 2018 pay ratio disclosure as we used for our 2017 pay ratio disclosure because there has been no change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. The median employee had been identified among persons employed by us on December 31, 2017, on the basis of earnings subject to Medicare tax as reported in Box 5, "Medicare wages and tips," on each employee's 2017 Form W-2.
In accordance with the "de minimis" exemption provided in Item 402(u) of Regulation S-K, we continued to exclude from consideration all of our non-U.S. employees. As of December 31, 2018, we had 2,691 non-U.S. employees, representing approximately 3.6% of our total U.S. and non-U.S. workforce of 74,067 active employees on that date. The excluded employees work in the following jurisdictions: Ireland (830), Poland (736), Mexico (368), United Kingdom (344), Canada (166), Spain (98), Germany (81), Norway (40), Belgium (27), and Cayman Islands (1).
We determined our median employee's total compensation in the same manner that we determined the total compensation of our NEOs as reported in the Summary Compensation Table.
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| 66 |
Director compensation
|
Determining compensation for non-employee directors
The Compensation and Human Resources Committee retained its independent compensation consultant to provide advice regarding non-employee director compensation in 2018. Before recommending a non-employee director compensation program to the independent members of the Board for approval, the Committee reviewed director compensation information for our compensation peer group companies to check the alignment of our compensation package with market practice and current trends. The detailed peer data that was reviewed included information about compensation paid per director, total board compensation cost, the absolute and relative amounts attributable to various compensation components, retainers paid to board and committee leaders, and stock ownership requirements.
During 2018 we changed our payment cycle for directors from a fiscal year to the 12-month period beginning with our annual meeting in April and continuing until the following annual meeting. We made this change to better align our compensation practices with the directors' term of service. Following the market-based analysis described above, no other change was made to the non-employee director compensation program in 2018.
Cash compensation for Board and committee service in the April 2018 April 2019 term
Our non-employee directors received the following cash fees for serving on the Board and committees this term:
| Retainer | |||
Annual retainer for service on the Board |
$ |
90,000 |
||
| | | | |
Additional annual retainer for Lead Director | $ | 50,000 | ||
| | | | |
Additional annual retainer for chairs of Capital Planning, Compensation and Human Resources, Governance, and Public Responsibility Committees | $ | 20,000 | ||
| | | | |
Additional annual retainer for chairs of Audit and Risk Management Committees | $ | 32,500 | ||
| | | | |
Additional annual retainer for other members of Audit and Risk Management Committees | $ | 7,500 | ||
| | | | |
Each non-employee director who served on U.S. Bancorp's primary banking subsidiary's board of directors or on any ad hoc committee of the U.S. Bancorp Board of Directors received $1,500 per meeting for that service. Each non-employee director was also paid $1,500 for each meeting he or she attended that was not a regularly scheduled Board or committee meeting.
Equity award for Board service in the April 2018 April 2019 term
Each non-employee director received an annual award of restricted stock units with a grant date fair value of approximately $150,000 under the U.S. Bancorp 2015 Stock Incentive Plan. This plan provides that no non-employee director may receive an equity award or awards with an aggregate grant date fair value in excess of $600,000 in any calendar year. The restricted stock units were fully vested at the time of grant, but the underlying shares will not be delivered until the director ceases to serve on the Board. Each non-employee director may elect to have all of his or her shares delivered promptly following cessation of service or to have the shares delivered through ten annual installments. Each non-employee director is entitled to receive additional fully vested restricted stock units having a fair market value equal to the amount of dividends he or she would have received had restricted stock been awarded instead of restricted stock units.
Director stock ownership requirements
The Compensation and Human Resources Committee has established stock ownership requirements for each non-employee director equal to five times the value of the annual cash retainer. New directors must satisfy this minimum ownership level within five years after joining the Board. As of December 31, 2018, all the directors had sufficient holdings to meet or exceed the stock ownership requirements, or had not yet served on our Board for five years.
Deferred compensation plan participation
Under the U.S. Bank Outside Directors Deferred Compensation Plan (2005 Statement) (the "Director Deferred Compensation Plan"), our non-employee directors may choose to defer all or a part of their cash fees. The minimum amount that can be deferred in any calendar year is $1,000. Cash fees that are deferred are deemed to be invested in one of several investment funds, including a U.S. Bancorp common stock fund, as selected by the participant.
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Director compensation
|
These investment alternatives are the same as those available under the Executive Deferred Compensation Plan. See "Executive Compensation Nonqualified Deferred Compensation" above for the rates of return for 2018 for each of these investment options (also known as measurement funds). The terms of the Director Deferred Compensation Plan are substantially the same as the terms of the Executive Deferred Compensation Plan described in that section.
Director compensation for fiscal 2018
The following table shows the compensation of the individuals who served as members of our Board of Directors during any part of fiscal year 2018.
Name1 |
|
Fees earned or paid in cash ($)2 |
|
Stock awards ($)3 |
|
All other compensation ($) |
|
Total ($) |
|||||
Douglas M. Baker, Jr.4 |
40,667 |
49,974 |
|
90,641 |
|||||||||
| | | | | | | | | | | | | |
Warner L. Baxter |
158,167 | 199,995 | | 358,162 | |||||||||
| | | | | | | | | | | | | |
Dorothy J. Bridges |
65,000 | 99,985 | | 164,985 | |||||||||
| | | | | | | | | | | | | |
Elizabeth L. Buse |
97,500 | 150,023 | | 247,523 | |||||||||
| | | | | | | | | | | | | |
Marc N. Casper |
120,000 | (5) | 199,995 | 3,000 | (6) | 322,995 | |||||||
| | | | | | | | | | | | | |
Arthur D. Collins, Jr. |
146,667 | (5) | 199,995 | 1,000 | (6) | 347,662 | |||||||
| | | | | | | | | | | | | |
Richard K. Davis |
326,949 | | 32,218 | (7) | 359,167 | ||||||||
| | | | | | | | | | | | | |
Kimberly J. Harris |
148,167 | 199,995 | | 348,162 | |||||||||
| | | | | | | | | | | | | |
Roland A. Hernandez |
164,833 | (5) | 199,995 | 1,000 | (6) | 365,828 | |||||||
| | | | | | | | | | | | | |
Doreen Woo Ho |
152,500 | 199,995 | | 352,495 | |||||||||
| | | | | | | | | | | | | |
Olivia F. Kirtley |
164,833 | (5) | 199,995 | | 364,828 | ||||||||
| | | | | | | | | | | | | |
Karen S. Lynch |
140,500 | (5) | 199,995 | 2,000 | (6) | 342,495 | |||||||
| | | | | | | | | | | | | |
Richard P. McKenney |
137,500 | (5) | 199,995 | 1,500 | (6) | 338,995 | |||||||
| | | | | | | | | | | | | |
Yusuf I. Mehdi |
97,500 | 150,023 | | 247,523 | |||||||||
| | | | | | | | | | | | | |
David B. O'Maley |
188,167 | 199,995 | 3,000 | (6) | 391,162 | ||||||||
| | | | | | | | | | | | | |
O'dell M. Owens, M.D., M.P.H. |
142,500 | 199,995 | | 342,495 | |||||||||
| | | | | | | | | | | | | |
Craig D. Schnuck |
131,500 | 199,995 | 3,000 | (6) | 334,495 | ||||||||
| | | | | | | | | | | | | |
Scott W. Wine |
153,000 | (5) | 199,995 | | 352,995 | ||||||||
| | | | | | | | | | | | | |
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U.S. Bancorp 2019 Proxy Statement |
| 68 |
Director compensation
|
No non-employee director held any stock options as of December 31, 2018. The non-employee directors held restricted stock units as of December 31, 2018, as follows:
Name |
|
Restricted stock units |
Name |
|
Restricted stock units |
||||||
Mr. Baker |
67,473 |
Ms. Kirtley |
80,576 |
||||||||
| | | | | | | | | | | |
Mr. Baxter | 11,121 | Ms. Lynch | 11,121 | ||||||||
| | | | | | | | | | | |
Ms. Bridges | 1,918 | Mr. McKenney | 4,621 | ||||||||
| | | | | | | | | | | |
Ms. Buse | 2,942 | Mr. Mehdi | 2,942 | ||||||||
| | | | | | | | | | | |
Mr. Casper | 10,474 | Mr. O'Maley | 79,479 | ||||||||
| | | | | | | | | | | |
Mr. Collins | 75,579 | Dr. Owens | 71,387 | ||||||||
| | | | | | | | | | | |
Ms. Harris | 18,394 | Mr. Schnuck | 87,374 | ||||||||
| | | | | | | | | | | |
Mr. Hernandez | 28,061 | Mr. Wine | 16,189 | ||||||||
| | | | | | | | | | | |
Ms. Woo Ho | 28,058 | ||||||||||
| | | | | | | | | | | |
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U.S. Bancorp 2019 Proxy Statement |
Audit committee report and payment of fees to auditor
|
Audit committee report and payment of fees to auditor
The consolidated financial statements of U.S. Bancorp for the year ended December 31, 2018, were audited by Ernst & Young LLP, independent auditor for U.S. Bancorp.
As part of its activities, the Audit Committee has:
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of U.S. Bancorp for the year ended December 31, 2018, be included in U.S. Bancorp's Annual Report on Form 10-K filed with the SEC.
Audit Committee of the Board of Directors of U.S. Bancorp
Roland A. Hernandez, Chair | Karen S. Lynch | |||
Warner L. Baxter | Scott W. Wine | |||
Elizabeth L. Buse |
The following aggregate fees were billed to us for professional services by Ernst & Young LLP for fiscal years 2018 and 2017:
($ in millions) |
|
2018 | | 2017 | |||
Audit fees |
$ | 11.4 | $ | 10.9 | |||
Audit-related fees |
5.8 | 5.2 | |||||
Tax fees |
6.4 | 6.1 | |||||
All other fees |
0.4 | 0.9 | |||||
| | | | | | | |
Total |
$ | 24.0 | $ | 23.1 | |||
| | | | | | | |
Audit fees: Audit fees consist of fees billed to us by Ernst & Young LLP for the audit of our consolidated financial statements included in our Annual Reports on Form 10-K, reviews of our financial statements included in each of our Quarterly Reports on Form 10-Q, and audits of financial statements of our subsidiaries required by regulation, as well as procedures required by regulators, comfort letters, consents and assistance provided with our regulatory filings.
Audit-related fees: Audit-related fees consist of fees billed to us by Ernst & Young LLP for audits of pension and other employee benefit plan financial statements, audits of the financial statements of certain of our subsidiaries and affiliated entities, reviews of internal controls not related to the audit of our consolidated financial statements, and internal control reports for various lines of business to support their customers' business requirements.
Tax fees: Tax fees consist of fees billed to us by Ernst & Young LLP for tax compliance and review, tax planning and other tax services. The aggregate fees billed for tax compliance and review services, including the preparation of and assistance with federal, state and local income tax returns, sales and use filings, and foreign and other tax compliance, provided to us by Ernst & Young LLP was $4.4 million in 2018 and $4.1 million in 2017. In addition to fees being paid
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Audit committee report and payment of fees to auditor
|
for tax compliance services, we paid $2.0 million for tax planning and other tax services provided to us by Ernst & Young LLP during each of 2018 and 2017.
All other fees: Other fees billed to us by Ernst & Young LLP in 2018 and 2017 primarily related to advisory services for internal control programs.
Administration of engagement of independent auditor
The Audit Committee is responsible for appointing, compensating, retaining and overseeing the work of our independent auditor, including approving the services provided by the independent auditor and the associated fees. The Audit Committee has established a policy for pre-approving the services provided by our independent auditor in accordance with the auditor independence rules of the SEC. This policy requires the review and pre-approval by the Audit Committee of all audit and permissible non-audit services provided by our independent auditor and an annual review of the financial plan for audit fees. To ensure that auditor independence is maintained, the Audit Committee annually pre-approves the audit services to be provided by our independent auditor and the related estimated fees for such services, as well as the nature and extent of specific types of audit-related, tax and other non-audit services to be provided by the independent auditor during the year.
As the need arises, other specific permitted services are pre-approved on a case-by-case basis during the year. A request for pre-approval of services on a case-by-case basis must be submitted by our Controller or Chief Risk Officer. These requests are required to include information on the nature of the particular service to be provided, estimated related fees and management's assessment of the impact of the service on the auditor's independence. The Audit Committee has delegated to its chair pre-approval authority between meetings of the Audit Committee. Any pre-approvals made by the chair must be reported to the Audit Committee. The Audit Committee will not delegate to management the pre-approval of services to be performed by our independent auditor.
All of the services provided by our independent auditor in 2018 and 2017, including services related to the Audit-Related Fees, Tax Fees and All Other Fees described above, were approved by the Audit Committee under its pre-approval policies after consideration of any impact of these services on the auditor's independence.
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Proposal 2 Ratification of selection of independent auditor
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Proposal 2 Ratification of selection of independent auditor
The Audit Committee has selected Ernst & Young LLP as our independent auditor for the 2019 fiscal year. Ernst & Young LLP began serving as our independent auditor for the fiscal year ended December 31, 2003. Our Audit Committee has carefully considered the selection of Ernst & Young LLP as our independent auditor, and has also considered whether there should be regular rotation of the independent external audit firm.
The Audit Committee annually reviews Ernst & Young LLP's independence and performance in connection with the committee's determination of whether to retain Ernst & Young LLP or engage another firm as our independent auditor. In determining whether to reappoint Ernst & Young LLP as U.S. Bancorp's independent auditor, the Audit Committee took into consideration a number of factors, including
In accordance with SEC rules and company policies, lead and concurring audit partners are subject to a maximum of five years of service in that capacity. The process for selecting the audit firm's lead engagement partner involves meetings with the candidates for the role by management; review and discussion with the chair of the Audit Committee, who meets with selected candidates; and further discussion with the full committee.
The members of the Audit Committee believe the continued retention of Ernst & Young LLP to serve as our independent auditor is in the best interests of our company and its shareholders. While we are not required to do so, we are submitting the selection of Ernst & Young LLP to serve as our independent auditor for the 2019 fiscal year for ratification in order to ascertain the views of our shareholders on this appointment. If the selection is not ratified, the Audit Committee will reconsider its selection. Representatives of Ernst & Young LLP are expected to be present at the annual meeting, will be available to answer shareholder questions, and will have the opportunity to make a statement if they desire to do so.
|
FOR |
The Board of Directors recommends that you vote "FOR" ratification of the selection of Ernst & Young LLP as the independent auditor of U.S. Bancorp for the 2019 fiscal year.
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Proposal 3 Advisory vote on executive compensation
Executive compensation is an important matter to us. We are asking our shareholders to provide advisory approval of the compensation of our executive officers named in the Summary Compensation Table, as we have described it in the "Compensation Discussion and Analysis" and "Executive Compensation" sections of this proxy statement. We have been conducting annual advisory votes on executive compensation since 2009 and expect to conduct the next advisory vote at our 2020 annual meeting of shareholders.
We have designed our executive compensation program to create long-term shareholder value by attracting and retaining talented leaders and rewarding them for top performance. Our company is presenting this proposal, which gives you as a shareholder the opportunity to endorse or not endorse our executive pay program by voting "FOR" or "AGAINST" the following resolution:
"RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the named executive officers, as described in the Compensation Discussion and Analysis, the compensation tables and the related disclosure contained in this proxy statement."
As discussed in the "Compensation Discussion and Analysis" section earlier in this proxy statement, the Compensation and Human Resources Committee of the Board of Directors believes that the compensation of our NEOs in 2018 was reasonable and appropriate, reflected the performance of our company, and aligned our executives' interests with those of our shareholders to support long-term value creation.
This vote, which is required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is not intended to address any specific item of compensation, but rather our overall compensation policies and procedures relating to our NEOs described in this proxy statement. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our NEOs.
Because your vote is advisory, it will not be binding upon the Board of Directors. However, the Board values our shareholders' opinions, and the Compensation and Human Resources Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
|
FOR |
The Board of Directors recommends that you vote "FOR" approval of the compensation of our named executive officers, as disclosed in this proxy statement.
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Security ownership of certain beneficial owners and management
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Security ownership of certain beneficial owners and management
The following tables show how many shares of our common stock were beneficially owned as of February 5, 2019, by each current director and director nominee, each of the NEOs, all of our directors and executive officers as a group, and each person who is known by us to beneficially own more than 5% of our voting securities.
Unless otherwise noted, the shareholders listed in the tables have sole voting and investment power with respect to the shares of common stock owned by them. None of the shares beneficially owned by our directors or executive officers is subject to any pledge, in accordance with our company policy prohibiting them from pledging or hedging our common stock.
Directors and executive officers
Name of beneficial owner |
|
Outstanding shares of common stock1 |
|
Options exercisable within 60 days of February 5, 2019 |
|
Restricted stock units2 |
|
Deferred compensation3 |
|
Total |
|
Percent of common stock |
|||||||
Warner L. Baxter |
|
|
11,207 |
|
11,207 |
* |
|||||||||||||
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Dorothy J. Bridges |
| | 1,933 | | 1,933 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Elizabeth J. Buse |
| | 2,965 | | 2,965 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Marc N. Casper |
| | 10,555 | | 10,555 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Andrew Cecere |
518,578 | 786,567 | 91,671 | | 1,396,816 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Arthur D. Collins, Jr. |
| | 76,162 | 31,678 | 107,840 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Terrance R. Dolan |
39,143 | 134,285 | 33,705 | | 207,133 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Kimberly J. Harris |
| | 18,536 | | 18,536 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Roland A. Hernandez |
| | 28,278 | 4,103 | 32,381 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Doreen Woo Ho |
| | 28,275 | 2,357 | 30,632 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Gunjan Kedia |
12,416 | 13,633 | 10,957 | | 37,006 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Olivia F. Kirtley |
10,649 | | 81,198 | 29,069 | 120,916 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Shailesh M. Kotwal |
24,687 | 71,951 | 25,090 | | 121,728 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Karen S. Lynch |
| | 11,207 | 2,759 | 13,966 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Richard P. McKenney |
| | 4,657 | 3,157 | 7,814 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Yusuf I. Mehdi |
| | 2,965 | | 2,965 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
David B. O'Maley |
201,887 | | 80,092 | 12,672 | 294,651 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
O'dell M. Owens, M.D., M.P.H. |
| | 71,938 | 75,290 | 147,228 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
P.W. (Bill) Parker |
161,622 | 46,221 | 36,642 | | 244,485 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Craig D. Schnuck |
| | 88,048 | | 88,048 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Jeffry H. von Gillern |
52,100 | 138,497 | 29,861 | | 220,458 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Scott W. Wine |
400 | | 16,314 | 11,945 | 28,659 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
All directors and executive officers as a group (31 persons) |
1,209,615 | 1,530,459 | 892,159 | 173,030 | 3,805,263 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
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Security ownership of certain beneficial owners and management
|
Includes the following shares beneficially owned by the indicated director or executive officer:
Restricted stock units (including performance-based restricted stock units held by our executive officers) are distributable in an equivalent number of shares of our common stock upon settlement. Restricted stock units granted to our officers are settled as they vest, and restricted stock units granted to our directors are immediately vested but do not settle until the director ceases to serve on the Board. The number of restricted stock units that are currently vested, or that vest within 60 days of February 5, 2019, is included in this column.
Certain of our directors and executive officers have deferred cash compensation under our deferred compensation plans. Some of these deferred amounts will be paid out in shares of our common stock upon the director's or officer's retirement or other termination of employment or service with U.S. Bancorp. The directors and officers have no voting or investment power as to these shares. The number of shares to which the directors and officers would have been entitled had their employment or service with U.S. Bancorp been terminated as of February 5, 2019, is included in this column.
Name of beneficial owner |
|
Shares of common stock |
|
Percent of common stock |
|||
BlackRock, Inc.1 |
102,706,440 |
6.40 |
% |
||||
| | | | | | | |
Warren E. Buffett |
147,821,504 | 9.22 | % | ||||
National Indemnity Company2 |
|||||||
| | | | | | | |
The Vanguard Group3 |
114,234,510 | 7.12 | % | ||||
| | | | | | | |
Based on Amendment No. 9 to Schedule 13G filed with the SEC on February 7, 2019, by BlackRock, Inc., on behalf of itself and certain of its subsidiaries. BlackRock, Inc. has sole voting power over 89,362,149 shares and sole dispositive power over 102,706,440 shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.
Based on Amendment No. 4 to Schedule 13G filed with the SEC on February 14, 2019, by Warren E. Buffett, Berkshire Hathaway Inc., a holding company which Mr. Buffett may be deemed to control, National Indemnity Company, an insurance company which Mr. Buffett may be deemed to control, and other members of the filing group of which none beneficially owns more than 5% of the outstanding shares of U.S. Bancorp common stock. Mr. Buffett has sole voting power over 884,230 shares, sole dispositive power over 146,937,274 shares, and shared voting and dispositive powers over 146,937,274 shares. Berkshire Hathaway Inc. has sole voting and dispositive powers over no shares, and shared voting and dispositive powers over 146,937,274 shares. National Indemnity Company has sole voting and dispositive powers over no shares, and shared voting and dispositive powers over 89,323,656 shares. The address for each of Mr. Buffett and Berkshire Hathaway is 3555 Farnam Street, Omaha, NE 68131. The address for National Indemnity Company is 1314 Douglas Street, Omaha, NE 68102.
Based on Amendment No. 4 to Schedule 13G filed with the SEC on February 11, 2019, by The Vanguard Group, on behalf of itself and certain of its subsidiaries. The Vanguard Group has sole voting power over 1,769,749 shares, shared voting power over 409,586 shares, sole dispositive power over 112,076,201 shares and shared dispositive power over 2,158,309 shares. Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., wholly-owned subsidiaries of The Vanguard Group, beneficially own 1,291,083 and 1,327,595 shares, respectively. The address for The Vanguard Group is 100 Vanguard Boulevard, Malvern, PA 19355.
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Questions and answers about the annual meeting and voting
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Questions and answers about the annual meeting and voting
Why did I receive the proxy materials?
We have furnished the proxy materials to you over the Internet or mailed you a printed copy of these materials because the Board of Directors of U.S. Bancorp is soliciting your proxy to vote your shares of our common stock at the annual meeting of shareholders to be held on April 16, 2019, or at any adjournments or postponements of the meeting.
It is your designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. When you designate a proxy, you also may direct the proxy how to vote your shares. We refer to this as your "proxy vote." Andrew Cecere, our Chairman, President and Chief Executive Officer, and Laura F. Bednarski, our Corporate Secretary, have been designated as the proxies to cast the votes of our shareholders at our 2019 annual meeting of shareholders.
What is the purpose of the meeting?
At our annual meeting, shareholders will act upon the matters outlined in the notice of annual meeting of shareholders and described in this proxy statement. Management will also report on our 2018 performance and, once the business of the annual meeting is concluded, respond to questions submitted in writing during or before the meeting.
How can I access the proxy materials and vote my shares?
The instructions for accessing the proxy materials and voting can be found in the information you received either by mail or e-mail. Depending on how you received the proxy materials, you may vote by Internet, telephone or mail. We encourage you to vote by Internet.
How do I vote if my shares are held in the U.S. Bank 401(k) Savings Plan?
If you hold any shares in the U.S. Bank 401(k) Savings Plan, you are receiving, or being provided access to, the same proxy materials as any other shareholder. However, your proxy vote will serve as voting instructions to the plan trustee. Your voting instructions must be received at least five days prior to the annual meeting in order to count. In accordance with the terms of the plan, the trustee will vote all of the shares held in the plan in the same proportion as the actual proxy votes submitted by plan participants at least five days prior to the annual meeting.
Why did I receive a notice regarding the Internet availability of proxy materials instead of a printed copy of the proxy materials?
In accordance with rules adopted by the SEC, we are furnishing our proxy materials to our shareholders primarily over the Internet instead of mailing printed copies of those materials to each shareholder. By doing so, we reduce costs and lessen the environmental impact of our proxy solicitation. On or about March 5, 2019, we mailed a notice of Internet availability of the proxy materials to most of our shareholders. The notice contains instructions about how to access our
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Questions and answers about the annual meeting and voting
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proxy materials and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received a notice but would like to receive a paper copy of our proxy materials, please follow the instructions on the notice.
Our other shareholders, including shareholders who have previously requested to receive paper copies of the proxy materials and persons holding shares through our benefit plans, received paper copies of the proxy materials instead of a notice. If you received paper copies of the notice or proxy materials, we encourage you to sign up to receive all of your future proxy materials electronically, as described under "How can I receive my proxy materials by e-mail in the future?" below.
Who is entitled to vote at the meeting?
The Board has set February 19, 2019, as the record date for the annual meeting. If you were a shareholder at the close of business on February 19, 2019, you are entitled to vote at the meeting. As of the record date, 1,600,259,416 shares of our common stock were issued and outstanding and, therefore, eligible to vote at the meeting.
Holders of our common stock are entitled to one vote per share. Therefore, a total of 1,600,259,416 votes are entitled to be cast at the meeting. There is no cumulative voting.
How many shares must be present to hold the meeting?
In accordance with our bylaws, shares equal to at least one-third of the voting power of our outstanding shares of common stock as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum. Your shares are counted as present at the meeting if:
What is the difference between a shareholder of record and a "street name" holder?
If your shares are registered directly in your name with our transfer agent, Computershare Investor Services, you are considered the shareholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a bank, trust company or other nominee, then the broker, bank, trust company or other nominee is considered to be the shareholder of record with respect to those shares. However, you still are considered the beneficial owner of those shares and your shares are said to be held in "street name." Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust company or other nominee how to vote their shares using the voting instruction form provided by it.
The 2019 Annual Meeting of Shareholders will be held at 11:00 a.m., local time, on Tuesday, April 16, 2019, at the following location:
The
Hilton Columbus at Easton
Easton Grand Ballroom
3900 Chagrin Drive
Columbus, OH 43219
Admission to the meeting is limited to our registered shareholders and street name holders as of the record date and persons holding valid written legal proxies naming them as the representative of such a shareholder (only one representative for each shareholder appointed by proxy will be admitted to the meeting).
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Questions and answers about the annual meeting and voting
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Admission requires government-issued photo identification and documentary evidence of eligibility to attend the meeting as described below.
| | | | | | | | | | | | | | | | |
Shareholder of record | | Street name holder | |
Representative of a shareholder of record |
|
Representative of a street name holder |
| |||||||||
|
▶ Admission ticket printed from www.proxyvote.com OR ▶ Notice of Internet Availability of Proxy Materials OR ▶ Proxy card OR ▶ Verification at the registration desk that your name is included on the list of U.S. Bancorp shareholders of record on February 19, 2019 |
▶ Admission ticket printed from www.proxyvote.com OR ▶ Notice of Internet Availability of Proxy Materials OR ▶ Voting instruction form from your broker, bank, trust company or other nominee OR ▶ A letter from your broker, bank, trust company or other nominee confirming you owned U.S. Bancorp shares on February 19, 2019 |
▶ A valid written legal proxy naming you as representative, signed by the shareholder of record AND one of the following: ▶ Printed admission ticket belonging to the shareholder of record OR ▶ Notice of Internet Availability of Proxy Materials sent to the shareholder of record OR ▶ Proxy card sent to the shareholder of record OR ▶ Verification at the registration desk that the shareholder's name is included on the list of U.S. Bancorp shareholders of record on February 19, 2019 |
▶ A valid written legal proxy naming you as representative, signed by the street name holder's broker, bank, trust company or other nominee AND one of the following: ▶ Printed admission ticket belonging to the street name holder OR ▶ Notice of Internet Availability of Proxy Materials sent to the street name holder OR ▶ Voting instruction form from the street name holder's broker, bank, trust company or other nominee OR ▶ A letter from the street name holder's broker, bank, trust company or other nominee confirming the street name holder owned U.S. Bancorp shares on February 19, 2019 |
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To promote an efficient admission process, we encourage all of our shareholders attending the meeting to pre-register and bring an admission ticket with them. To print an admission ticket in advance, visit www.proxyvote.com and follow the instructions provided at this website. You will need the control number provided on your proxy card, voting instruction form, Notice of Internet Availability of Proxy Materials, or e-mail that directed you to the proxy materials.
At the entrance to the meeting, we will inspect the documentation you present for admission and decide in our sole discretion whether it meets the requirements stated above. Security measures may include bag searches and other screening procedures. The use of cameras or recording devices will not be permitted at the meeting.
Please allow ample time for the admission procedures described above. Anyone needing special assistance should call our company's Investor Relations team at 866.775.9668. If you are not able to attend the meeting, you will still be able to access an audio replay of the management presentation given at the meeting from our website. You can find
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Questions and answers about the annual meeting and voting
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instructions on how to access the replay and the presentation materials on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Webcasts & Presentations."
How can I ask a question at the meeting?
We value questions from our shareholders. To ensure an orderly and efficient response to questions, you will have an opportunity at the meeting to submit questions in writing to the CEO. In addition, you can submit a written question in advance when you pre-register for the meeting and access your admission ticket at www.proxyvote.com.
Can I vote my shares in person at the meeting?
If you are a shareholder of record, you may vote your shares in person by completing a ballot at the meeting. Even if you currently plan to attend the meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the meeting.
If you are a street name holder, you may vote your shares in person at the meeting only if you obtain a signed letter or other document from your broker, bank, trust company or other nominee giving you the right to vote the shares at the meeting.
If you are a participant in the U.S. Bank 401(k) Savings Plan, you may submit a proxy vote as described above, but you may not vote your 401(k) Savings Plan shares in person at the meeting.
What if I am a shareholder of record and do not specify how I want my shares voted?
If you submit your proxy by Internet or submit a signed proxy card and do not specify how you want to vote your shares, we will vote your shares in accordance with the recommendations of the Board. Our telephone voting procedures do not permit you to submit your proxy vote by telephone without specifying how you want your shares voted.
What if I hold my shares in street name and do not provide voting instructions?
If you hold your shares in street name and do not provide voting instructions, your broker, bank, trust company or other nominee has discretionary authority to vote your shares on the ratification of the selection of Ernst & Young LLP as our independent auditor. However, in the absence of your specific instructions as to how to vote, your broker, bank, trust company or other nominee does not have discretionary authority to vote on any other proposal. Such a situation results in a "broker non-vote," which does not have an effect on the outcome of the proposal. It is important, therefore, that you provide instructions to your broker, bank, trust company or other nominee so that your vote with respect to the other proposals is counted.
What is the voting standard and what is the effect of abstentions?
You may vote "FOR," "AGAINST" or "ABSTAIN" with respect to each nominee for the Board of Directors (Proposal 1), the ratification of the selection of independent auditor (Proposal 2), and the advisory vote on executive compensation (Proposal 3).
The following table summarizes the voting standard applicable to each proposal and the effect of an "ABSTAIN" vote in each instance.
Proposal | Voting standard | Effect of "ABSTAIN" vote | ||
Election of directors |
The nominee is elected if the number of votes cast "FOR" him or her exceeds the number of votes cast "AGAINST" him or her |
No effect |
||
| | | | |
Other proposals |
The proposal is approved if "FOR" votes are cast by the majority of shares present and entitled to vote on the matter |
Same effect as "AGAINST" vote |
||
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Questions and answers about the annual meeting and voting
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What does it mean if I receive more than one notice of Internet availability of proxy materials, proxy card, voting instruction form, or e-mail with instructions on how to access the proxy materials?
If you receive more than one notice of Internet availability of proxy materials, proxy card, voting instruction form, or e-mail with instructions on how to access the proxy materials, it means that you hold shares in more than one account. To ensure that all of your shares are voted, vote separately for each notice of Internet availability of proxy materials, proxy card, voting instruction form, and e-mail you receive.
Can I change my vote after submitting my proxy?
Yes. You may revoke your proxy and change your vote at any time before your proxy is voted at the annual meeting. If you are a shareholder of record, you may revoke your proxy and change your vote by:
Attending the meeting will not revoke your proxy unless you specifically request to revoke it or submit a ballot at the meeting. To request an additional proxy card, or if you have any questions about the annual meeting or how to vote or revoke your proxy, you should write to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, MN 55402 or call 866.775.9668.
If you hold your shares in street name, contact your broker, bank, trust company or other nominee regarding how to revoke your proxy and change your vote. If you are a participant in the U.S. Bank 401(k) Savings Plan, you may revoke your proxy and change your vote as described above, but only until 11:59 p.m., Eastern Time, on April 11, 2019.
Will my vote be kept confidential?
Yes. We have procedures to ensure that all proxies, ballots and voting tabulations that identify shareholders are kept permanently confidential, except as follows: to meet legal requirements, to assert claims for or defend claims against our company, to allow authorized individuals to count and certify the results of the shareholder vote if a proxy solicitation in opposition to the Board takes place, or to respond to shareholders who have written comments on proxy cards or who have requested disclosure. We also have the voting tabulations performed by an independent third party.
Representatives of Broadridge Financial Solutions, Inc., our tabulation agent, will tabulate the votes and act as independent inspectors of election.
Who pays for the cost of proxy preparation and solicitation?
We pay for the cost of proxy preparation and solicitation, including the reasonable charges and expenses of brokerage firms, banks, trust companies or other nominees for forwarding proxy materials to street name holders. We have retained Alliance Advisors, LLC, to assist in the solicitation of proxies for the annual meeting for a fee of $20,000, plus associated costs and expenses.
We are soliciting proxies primarily by mail. In addition, our directors, officers and employees may solicit proxies by telephone, facsimile, e-mail or in person. They will not receive any additional compensation for these activities.
Do we "household" annual meeting materials?
The SEC rules allow a single copy of the notice of Internet availability of proxy materials or proxy statement and annual report to be delivered to multiple shareholders sharing the same address and last name, or who we reasonably believe are members of the same family, and who consent to receive a single copy of these materials in a manner provided by these rules. This practice is referred to as "householding." Although we do not household for our registered shareholders, we understand that some brokers, banks, trust companies and other nominees household U.S. Bancorp notices of Internet availability of proxy materials or proxy statements and annual reports, delivering a single copy of each to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker, bank, trust company or other nominee that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent.
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If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of our notice of Internet availability of proxy materials or proxy statement or annual report, or if you are receiving multiple copies of any of these documents and wish to receive only one, please notify your broker, bank, trust company or other nominee. We will deliver promptly upon written or oral request a separate copy of our notice of Internet availability of proxy materials, proxy statement and/or our annual report to a shareholder at a shared address to which a single copy was delivered. For copies of any of these documents, shareholders should write to Investor Relations, U.S. Bancorp, BC-MN-H23K, 800 Nicollet Mall, Minneapolis, Minnesota 55402, or call 866.775.9668.
How can I receive my proxy materials by e-mail in the future?
Instead of receiving future paper copies of the notice of Internet availability of proxy materials or our proxy materials by mail, you can elect to receive an e-mail with links to these documents, your control number and instructions for voting over the Internet. Opting to receive your proxy materials by e-mail will save the cost of producing and mailing documents to you and will also help conserve environmental resources. Your e-mail address will be kept separate from any other company operations and will be used for no other purpose.
If we mailed you a notice of Internet availability of proxy materials or a printed copy of our proxy statement and annual report and you would like to sign up to receive these materials by e-mail in the future, you can choose this option by:
You may revoke this request at any time by following the instructions at http://enroll.icsdelivery.com/usb. Your election will remain in effect unless you revoke it later.
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81 |
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U.S. Bancorp 2019 Proxy Statement |
Other matters
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If you received a paper copy of the proxy materials, our 2018 Annual Report to Shareholders, including financial statements for the year ended December 31, 2018, accompanied this proxy statement. The 2018 Annual Report to Shareholders is also available on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations." Copies of our 2018 Annual Report on Form 10-K, which is on file with the SEC, are available to any shareholder who submits a request in writing to Investor Relations, U.S. Bancorp, BC-MN-H23K, 800 Nicollet Mall, Minneapolis, Minnesota 55402. Copies of any exhibits to the Form 10-K are also available upon written request and payment of a fee covering our reasonable expenses in furnishing the exhibits.
Section 16(a) of the Exchange Act requires our executive officers, controller and directors to file initial reports of ownership and reports of changes in ownership of our securities with the SEC. Our executive officers, controller and directors are required to furnish us with copies of these reports. Based solely on a review of the Section 16(a) reports furnished to us with respect to 2018 and written representations from our executive officers, controller and directors, we believe that all Section 16(a) filing requirements applicable to those persons during 2018 were satisfied, except that Richard P. McKenney and Jeffry H. von Gillern were each late in filing one Form 4. Mr. McKenney's transaction was executed in January 2018 and reported in February 2018, and Mr. von Gillern's transaction was executed in July 2018 and reported in August 2018.
Shareholders or any other interested party may communicate with our Board of Directors by sending a letter addressed to our Board of Directors, non-employee directors, Chairman, Lead Director or specified individual directors to:
The Office of the Corporate Secretary U.S. Bancorp BC-MN-H21O 800 Nicollet Mall Minneapolis, MN 55402 |
Any such letters will be delivered to the Lead Director, or to a specified director if so addressed. Letters relating to accounting matters will also be delivered to our Chief Risk Officer for handling in accordance with the Audit Committee's policy on investigation of complaints relating to accounting matters.
The Lead Director (or, in the Lead Director's discretion, the chair of the relevant Board committee) may be available to meet with shareholders as appropriate. Requests for such a meeting are considered on a case-by-case basis.
Please see below for the specific information and deadline requirements applicable to shareholders who want to nominate directors or submit proposals for next year's annual meeting. Note that any director nomination or shareholder proposal for which notice is received by us after the relevant deadline set forth below may not be presented at the 2020 annual meeting.
Nominating a director for inclusion in our proxy statement (proxy access nominees)
A shareholder or group of up to 20 shareholders that has held at least 3% of the outstanding shares of our company's common stock for at least three years is able to nominate directors to fill up to 20% of the Board seats (but at least two directors) for inclusion in our proxy statement if the shareholder(s) and nominee(s) satisfy the requirements specified in
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U.S. Bancorp 2019 Proxy Statement |
| 82 |
Other matters
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our bylaws and notice is received between 150 and 120 days before the anniversary of the date the proxy statement for the prior year's annual meeting was released to shareholders.
In order for a nominee to be considered for inclusion in our proxy statement for the 2020 annual meeting of shareholders, we must receive written notice of the nomination at our principal executive offices at U.S. Bancorp, BC-MN-H21O, 800 Nicollet Mall, Minneapolis, Minnesota, Attention: Corporate Secretary, no earlier than October 7, 2019, and no later than November 6, 2019. The notice must contain the specific information required by our bylaws. You can find a copy of our bylaws on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Governance Documents" and then "Restated Bylaws."
Other shareholder proposals and director nominations
Proper proposals or nominations must be submitted to the Corporate Secretary of U.S. Bancorp at our principal executive offices in Minneapolis, Minnesota, at the address provided above. Shareholder proposals to be considered for inclusion in the proxy statement must comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials. Notices of director nominations and shareholder proposals to be made from the floor must contain the specific information required by our bylaws (available on our website as described above).
The submission deadlines for these proposals and nominations are as follows:
Proposal | How presented | Deadline | ||
Nomination of directors |
To nominate a director from the floor at the annual meeting |
December 18, 2019 |
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All other proposals |
To have a shareholder proposal be considered for inclusion in the proxy statement or to present the proposal from the floor at the annual meeting |
November 6, 2019 |
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We do not know of any other matters that may be presented for consideration at the 2019 annual meeting. If any other business does properly come before the annual meeting, the persons named as proxies above under the heading "Questions and Answers About the Annual Meeting and Voting What is a proxy?" will vote as they deem in the best interests of U.S. Bancorp.
Laura
F. Bednarski
Corporate Secretary
Dated: March 5, 2019
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83 |
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U.S. Bancorp 2019 Proxy Statement |
Non-GAAP financial measures
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This proxy statement contains the following non-GAAP financial measures: return on tangible common equity (ROTCE); efficiency ratio, using net interest income on a taxable-equivalent basis and excluding notable items; return on average assets (ROA), excluding notable items; and return on average common equity (ROE), excluding notable items.
ROTCE is calculated by dividing net earnings applicable to common shareholders, excluding the impact of intangibles amortization, by tangible common shareholders' equity. We believe that ROTCE is a meaningful way for holders of U.S. Bancorp common stock to assess our use of equity.
We use net interest income on a taxable-equivalent basis to calculate our efficiency ratio. We believe that this presentation is the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. We excluded notable items from the presentation of efficiency ratio, ROA and ROE for 2018 for our company and peers because we believe that core results provide a more reliable means of comparison.
The calculations of these measures for U.S. Bancorp follow:
Years Ended December 31 |
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2018 |
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2017 |
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2016 |
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2015 |
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2014 |
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2013 |
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2012 |
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2011 |
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2010 | | 2009 | |||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ |
6,784 |
$ |
5,913 |
$ |
5,589 |
$ |
5,608 |
$ |
5,583 |
$ |
5,552 |
$ |
5,383 |
$ |
4,721 |
$ |
3,332 |
$ |
1,803 |
|||||||||||
Intangibles amortization (net-of-tax) |
127 | 114 | 116 | 113 | 129 | 145 | 178 | 194 | 239 | 252 | |||||||||||||||||||||
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Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization (a) |
6,911 | 6,027 | 5,705 | 5,721 | 5,712 | 5,697 | 5,561 | 4,915 | 3,571 | 2,055 | |||||||||||||||||||||
Average total equity |
50,391 | 49,097 | 47,988 | 45,502 | 43,524 | 41,287 | 38,736 | 33,116 | 28,799 | 27,021 | |||||||||||||||||||||
Less: Average preferred stock |
5,636 | 5,490 | 5,501 | 4,836 | 4,756 | 4,804 | 4,381 | 2,414 | 1,742 | 4,445 | |||||||||||||||||||||
Less: Average noncontrolling interests |
628 | 631 | 649 | 689 | 687 | 1,370 | 1,125 | 916 | 750 | 714 | |||||||||||||||||||||
Less: Average goodwill (net of deferred tax liability)1 |
8,606 | 8,160 | 8,242 | 8,347 | 8,435 | 8,564 | 8,295 | 8,288 | 8,410 | 8,318 | |||||||||||||||||||||
Less: Average intangible assets, other than mortgage servicing rights |
595 | 637 | 783 | 764 | 848 | 920 | 1,112 | 1,297 | 1,517 | 1,649 | |||||||||||||||||||||
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Average U.S. Bancorp common shareholders' equity, excluding intangible assets (b) |
34,926 | 34,179 | 32,813 | 30,866 | 28,798 | 25,629 | 23,823 | 20,201 | 16,380 | 11,895 | |||||||||||||||||||||
Return on tangible common equity (a)/(b) |
19.8 | % | 17.6 | % | 17.4 | % | 18.5 | % | 19.8 | % | 22.2 | % | 23.3 | % | 24.3 | % | 21.8 | % | 17.3 | % | |||||||||||
Net interest income |
$ | 12,919 | |||||||||||||||||||||||||||||
Taxable-equivalent adjustment2 |
116 | ||||||||||||||||||||||||||||||
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Net interest income, on a taxable-equivalent basis |
13,035 | ||||||||||||||||||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated above) |
13,035 | ||||||||||||||||||||||||||||||
Noninterest income |
9,602 | ||||||||||||||||||||||||||||||
Less: Securities gains (losses), net |
30 | ||||||||||||||||||||||||||||||
Less: Notable items3 |
76 | ||||||||||||||||||||||||||||||
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Total net revenue, excluding net securities gains (losses) (c) |
22,531 | ||||||||||||||||||||||||||||||
Noninterest expense |
12,464 | ||||||||||||||||||||||||||||||
Less: Notable items4 |
174 | ||||||||||||||||||||||||||||||
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Noninterest expense, excluding notable items (d) |
12,290 | ||||||||||||||||||||||||||||||
Efficiency ratio, excluding notable items (d)/(c) |
54.5 | % | |||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | |||||||||||||||||||||||||||||
Less: Notable items5 |
45 | ||||||||||||||||||||||||||||||
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Net income attributable to U.S. Bancorp, excluding notable items (e) |
7,051 | ||||||||||||||||||||||||||||||
Average assets (f) |
$ | 457,014 | |||||||||||||||||||||||||||||
Return on average assets, excluding notable items (e)/(f) |
1.54 | % | |||||||||||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 6,784 | |||||||||||||||||||||||||||||
Less: Notable items5 |
45 | ||||||||||||||||||||||||||||||
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Net income applicable to U.S. Bancorp common shareholders, excluding notable items (g) |
6,739 | ||||||||||||||||||||||||||||||
Average common equity (h) |
$ | 44,127 | |||||||||||||||||||||||||||||
Return on average common equity, excluding notable items (g)/(h) |
15.3 | % | |||||||||||||||||||||||||||||
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U.S. Bancorp 2019 Proxy Statement |
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on April 15, 2019; or April 11, 2019, for shares held in the U.S. Bancorp 401(k) Savings Plan. Have this proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. U.S. BANCORP INVESTOR RELATIONS 800 NICOLLET MALL BC-MN-H23K MINNEAPOLIS, MN 55402-7014 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on April 15, 2019; or April 11, 2019, for shares held in the U.S. Bancorp 401(k) Savings Plan. Have this proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date this proxy card and return it in the postage-paid envelope we have provided, or return it to U.S. Bancorp, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received by April 16, 2019. SHAREHOLDER MEETING REGISTRATION To attend the meeting, go to the Register for Meeting link at www.proxyvote.com. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E60645-P14956-Z73499 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. U.S. BANCORP The Board of Directors recommends a vote "FOR" each of the following nominees: For ! ! ! ! ! ! ! ! ! ! ! ! ! ! Against ! ! ! ! ! ! ! ! ! ! ! ! ! ! Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1 - Election of Directors: 1a. Warner L. Baxter For Against Abstain 1b. Dorothy J. Bridges ! ! ! For ! ! ! Against ! ! ! Abstain 1c. Elizabeth L. Buse 1o. Odell M. Owens, M.D., M.P.H. 1d. Marc N. Casper 1p. Craig D. Schnuck 1e. Andrew Cecere 1q. Scott W. Wine The Board of Directors recommends a vote "FOR" the following proposals: 2 - The ratification of the selection of Ernst & Young LLP as our independent auditor for the 2019 fiscal year. 3 - An advisory vote to approve the compensation of our executives disclosed in the proxy statement. 1f. Arthur D. Collins, Jr. ! ! ! ! ! ! 1g. Kimberly J. Harris 1h. Roland A. Hernandez 1i. Doreen Woo Ho 1j. Olivia F. Kirtley 1k. Karen S. Lynch 1l. Richard P. McKenney For address changes and/or comments, please check this box and write them on the back where indicated. ! 1m. Yusuf I. Mehdi 1n. David B. OMaley Note: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on April 16, 2019: Our Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. FOLD AND DETACH HERE E60646-P14956-Z73499 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 2019 ANNUAL MEETING OF SHAREHOLDERS April 16, 2019 The undersigned, having received the Notice of Annual Meeting of Shareholders and proxy statement, revoking any proxy previously given, hereby appoint(s) Andrew Cecere and Laura F. Bednarski, and either of them, as proxies to vote as directed all shares the undersigned is (are) entitled to vote at the U.S. Bancorp 2019 Annual Meeting of Shareholders and authorize(s) each to vote in his or her discretion upon other business as may properly come before the meeting or any adjournment or postponement thereof. If this signed proxy card contains no specific voting instructions, these shares will be voted "FOR" all nominees for director, "FOR" Proposals 2 and 3, and in the discretion of the named proxies on all other matters. IF YOU DO NOT VOTE BY INTERNET OR PHONE, PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Address Changes/Comments: