def14a
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
þ
Filed by a Party other than the Registrant
o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§ 240.14a-12
The Chubb
Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No
fee required.
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o
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
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(3)
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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:
(5) Total fee paid:
o Fee
paid previously with preliminary materials.
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o
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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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(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NOTICE OF 2011 ANNUAL MEETING OF SHAREHOLDERS
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DATE AND TIME |
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Tuesday, April 26, 2011 at 8:00 a.m., local time |
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PLACE |
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Amphitheater
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059 |
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ITEMS OF BUSINESS |
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(1) To elect 11 directors to serve until the next
annual meeting of shareholders and until their respective
successors are elected and qualified. |
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(2) To vote on the adoption of The Chubb Corporation Annual
Incentive Compensation Plan (2011). |
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(3) To ratify the appointment of Ernst & Young
LLP as independent auditor. |
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(4) To hold an advisory vote on the compensation of our
named executive officers as disclosed pursuant to Item 402
of
Regulation S-K
in the enclosed annual meeting materials. |
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(5) To hold an advisory vote on the frequency of the
shareholder vote on executive compensation. |
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RECORD DATE |
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You are entitled to vote at the annual meeting and at any
adjournment or postponement thereof if you were a shareholder of
record at the close of business on March 4, 2011. |
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ADJOURNMENTS AND POSTPONEMENTS |
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Any action on the items of business described above may be
considered at the annual meeting at the time and on the date
specified above or at any time and date to which the annual
meeting may be properly adjourned or postponed. |
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VOTING BY PROXY |
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The notice you received providing instructions on accessing our
annual meeting materials through the internet includes
instructions for voting online or by telephone. Also, in the
event that you affirmatively request paper copies of our annual
meeting materials, you may complete, sign, date and return the
accompanying proxy card in the enclosed addressed envelope. The
giving of a proxy will not affect your right to revoke the proxy
by appropriate written notice or to vote in person should you
later decide to attend the annual meeting. |
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ADMISSION TO THE MEETING |
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You are entitled to attend the annual meeting if you were a
shareholder as of the close of business on March 4, 2011.
For admittance to the meeting, please be prepared to present a
valid, government-issued photo identification (federal, state or
local), such as a drivers license or passport, and proof
of beneficial ownership if you hold your shares through a
broker, bank or other nominee. The annual meeting will begin
promptly at 8:00 a.m., local time. Please allow yourself
ample time for the check-in procedures. Video and audio
recording devices and other electronic devices will not be
permitted at the meeting, and attendees may be subject to
security inspections. |
By order of the Board of Directors,
W. Andrew Macan
Vice President and Secretary
March 17, 2011
2011
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
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A-1
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B-1
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iv
PROXY
STATEMENT
PROXY AND
VOTING INFORMATION
Our Board of Directors (our Board) has provided you with these
proxy materials in connection with its solicitation of proxies
to be voted at the 2011 Annual Meeting of Shareholders of The
Chubb Corporation (the 2011 Annual Meeting). We will hold the
2011 Annual Meeting on Tuesday, April 26, 2011 in the
Amphitheater at The Chubb Corporation, 15 Mountain View
Road, Warren, New Jersey 07059, beginning at 8:00 a.m.,
local time. Please note that throughout these proxy materials we
may refer to The Chubb Corporation as Chubb,
we, us or our. We mailed the
instructions for accessing our annual meeting materials, which
include this proxy statement, the proxy card, voting
instructions and our Annual Report on
Form 10-K
for the year ended December 31, 2010 (the 2010
10-K), on or
before March 17, 2011.
Information
about the Delivery of our Annual Meeting Materials
As permitted by rules adopted by the Securities and Exchange
Commission (the SEC), we have made our annual meeting materials
available to our shareholders electronically via the internet.
On or before March 17, 2011, we mailed to our shareholders
a notice containing instructions on how to access our annual
meeting materials, how to request paper copies of these
materials and how to vote online or by telephone. Unless you
affirmatively request a paper copy of our annual meeting
materials by following the instructions set forth in the notice,
you will not receive a paper copy of our annual meeting
materials in the mail. However, due to an ambiguity in the
regulations promulgated under the Employee Retirement Income
Security Act of 1974, as amended (ERISA), unless we have
previously received a written consent to deliver materials
electronically, we have assumed that participants in the Capital
Accumulation Plan of The Chubb Corporation (the CCAP) have
affirmatively requested paper copies of our annual meeting
materials and, therefore, have mailed or will mail copies of the
annual meeting materials to each participant in the CCAP whose
account holds shares of our stock.
The SECs rules also permit us to deliver a single notice
or set of annual meeting materials to one address shared by two
or more of our shareholders. This delivery method is referred to
as householding and can result in significant cost
savings. To take advantage of this opportunity, we have
delivered only one notice or set of annual meeting materials to
multiple shareholders who share an address, unless we received
contrary instructions from such impacted shareholders prior to
our mailing date. We agree to deliver promptly, upon written or
oral request, a separate copy of the notice or set of annual
meeting materials, as requested, to any shareholder at the
shared address to which a single copy of those documents was
delivered. For future meetings, if you prefer to receive
separate copies of our annual meeting materials, please contact
Broadridge Financial Solutions, Inc. (Broadridge) at
800-542-1061
or in writing at Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. If you are currently a
shareholder sharing an address with another shareholder and wish
to receive only one copy of our future annual meeting materials
for your household, please contact Broadridge at the above phone
number or address.
Who Can
Vote
Our Board has set March 4, 2011 as the record date for the
2011 Annual Meeting. Shareholders of record of our common stock
at the close of business on March 4, 2011 may vote at
the 2011 Annual Meeting.
How Many
Shares Can Be Voted
Each shareholder has one vote for each share of our common stock
owned at the close of business on the record date. On the record
date, 293,588,553 shares of our common stock were outstanding.
How You
Can Vote
Record
Holders
If your shares are registered in your name with BNY Mellon
Shareowner Services, our dividend agent, transfer agent and
registrar, you are considered a shareholder of record, and the
notice containing instructions on accessing our annual meeting
materials online or requesting a paper copy thereof is being
sent directly to you by us. Shareholders of record can vote in
person at the 2011 Annual Meeting or give their proxy to be
voted at the 2011 Annual Meeting in any one of the following
ways:
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over the internet;
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by telephone; or
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for shareholders requesting a paper copy of our annual
meeting materials, by completing, signing, dating and returning
the proxy card accompanying the paper copy.
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CCAP
Participants
If you are a participant in the CCAP, your proxy will include
all shares allocated to you in the CCAP (Plan Shares), which you
may vote in person at the 2011 Annual Meeting or over the
internet, by telephone or, provided that you have not delivered
a written consent to receive our materials electronically, by
completing and mailing the proxy card accompanying your paper
copy of the annual meeting materials. Your proxy will serve as a
voting instruction for the trustee of the CCAP. If your voting
instructions are not received by April 21, 2011, any Plan
Shares you hold will not be voted by the trustee.
Brokerage
and Other Account Holders
You are considered to be the beneficial owner of shares you hold
in an account maintained by a broker, bank or other nominee,
which may be referred to as shares held in street
name. For shares held in street name, your broker, bank or
nominee, who is the shareholder of record, has forwarded to you
the instructions for accessing, or requesting paper copies of,
our annual meeting materials. You have the right to direct your
broker, bank or nominee on how to vote these shares, and you may
also attend the 2011 Annual Meeting. Your broker, bank or
nominee has enclosed a voting instruction card. Beneficial
owners of shares who wish to vote in person at the 2011 Annual
Meeting must obtain a legal proxy from their broker, bank or
nominee and present it at the 2011 Annual Meeting. The
availability of telephone and internet voting for beneficial
owners will depend on the voting processes of their broker, bank
or nominee. Please refer to the voting instructions of your
broker, bank or nominee for directions as to how to vote shares
that you beneficially own.
Voting
Whether you vote over the internet, by telephone or by mail, you
can specify whether you vote your shares for or against each of
the nominees for election as a director (Proposal 1 on the
proxy card). You can specify whether you vote for or against or
abstain from the adoption of The Chubb Corporation Annual
Incentive Compensation Plan (2011) (Proposal 2 on the proxy
card), ratification of Ernst & Young LLP as
independent auditor (Proposal 3 on the proxy card) and, on
an advisory basis, the compensation of our named executive
officers as disclosed pursuant to Item 402 of
Regulation S-K
in this proxy statement under the headings Compensation
Discussion and Analysis and Executive
Compensation (Proposal 4 on the proxy card). For the
frequency of the shareholder vote on executive compensation
(Proposal 5 on the proxy card), you can vote, on an
advisory basis, for a three-year, two-year or one-year interval
or you can abstain.
In the absence of voting instructions to the contrary, shares
represented by validly executed proxies will be voted in
accordance with our Boards recommendations, which is
FOR Proposals 1 through 4 and FOR
the
2
three-year interval specified in Proposal 5. If any other
matter is properly presented at the meeting, your proxy (one of
the individuals named on your proxy card) will vote your shares
using his best judgment.
Brokers are not permitted to vote your shares in the absence
of your voting instructions with respect to the election of
nominees for director, executive compensation matters or any
other matter that is not considered a routine matter by the New
York Stock Exchange (NYSE). Accordingly, if you do not return
your voting instruction card, your shares will not be voted for
Proposals 1, 2, 4 or 5. If you are a beneficial owner
of shares held in street name and return signed and dated voting
instructions without marking any voting selections for the
election of director nominees, your shares will be considered as
present and voted in accordance with the recommendations of our
Board as explained in this proxy statement.
Revocation
of Proxies
If you are a shareholder of record or a holder of Plan Shares,
you may revoke your proxy at any time before it is exercised in
any of four ways:
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by notifying our Corporate Secretary of the revocation in
writing;
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by delivering a duly executed proxy card bearing a later
date;
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by properly submitting a new, timely and valid proxy via
the internet or by telephone after the date of the revoked
proxy; or
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by voting in person at the 2011 Annual Meeting.
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You will not revoke a proxy merely by attending the 2011 Annual
Meeting. To revoke a proxy, you must take one of the actions
described above.
If you hold your shares in a brokerage or other account, you may
submit new voting instructions by contacting your broker, bank
or nominee.
Required
Votes
The presence, in person or by proxy, of the holders of a
majority of all outstanding shares of our common stock entitled
to vote at the 2011 Annual Meeting is necessary to constitute a
quorum. Each of the proposals to be voted upon at the 2011
Annual Meeting requires the affirmative vote of a majority of
the votes cast on the proposal. Abstentions are counted as
shares present at the 2011 Annual Meeting for purposes of
determining a quorum. Similarly, shares which brokers do not
have the authority to vote in the absence of timely instructions
from beneficial owners (broker non-votes) also are counted as
shares present at the 2011 Annual Meeting for purposes of
determining a quorum. Abstentions and broker non-votes are not
considered votes cast and will not be counted either for or
against these proposals and, accordingly, will have no effect on
the voting results.
Adjournments
and Postponements
Any action on the items of business described above may be
considered at the 2011 Annual Meeting at the time and on the
date specified above or at any time and date to which the 2011
Annual Meeting may be properly adjourned or postponed.
2010
10-K
The 2010
10-K is not
a part of the proxy soliciting materials. However, the
instructions for accessing the 2010
10-K online
and for requesting a paper copy are included in the notice you
received regarding our annual meeting materials. The 2010
10-K is
available on our website at
www.chubb.com/investors, as well as on a website
maintained by Broadridge at www.proxyvote.com. It also is
available without charge by sending a written request to our
Corporate Secretary at 15 Mountain View Road, Warren, New Jersey
07059.
Important
Notice about Security
All 2011 Annual Meeting attendees may be asked to present a
valid, government-issued photo identification (federal, state or
local), such as a drivers license or passport, and proof
of beneficial ownership if you hold your shares through a
broker, bank or other nominee before entering the 2011 Annual
Meeting. Attendees may be subject to security inspections. Video
and audio recording devices and other electronic devices will
not be permitted at the 2011 Annual Meeting.
3
CORPORATE
GOVERNANCE
Commitment
to Corporate Governance
Our Board and management have a strong commitment to effective
corporate governance. We have in place a comprehensive corporate
governance framework for our operations. The key components of
this framework are set forth in the following documents:
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our Restated Certificate of Incorporation;
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our By-Laws;
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our Audit Committee Charter;
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our Corporate Governance & Nominating Committee
Charter;
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our Organization & Compensation Committee
Charter;
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our Corporate Governance Guidelines;
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our Code of Business Conduct; and
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our Code of Ethics for CEO and Senior Financial Officers.
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Copies of these documents are available on our website at
www.chubb.com/investors. Copies also are available
without charge by sending a written request to our Corporate
Secretary.
Corporate
Governance Guidelines
Our Corporate Governance Guidelines address a number of policies
and principles employed in the operation of our Board and our
business generally, including our policies with respect to:
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the size of our Board;
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director independence and minimum qualifications;
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factors to be considered in selecting candidates to serve
on our Board;
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director nominating procedures, including the procedures
by which shareholders may propose director candidates;
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incumbent directors who do not receive a majority of the
votes cast in uncontested elections;
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term limits, director retirement, director resignations
upon job change and Board vacancies;
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directors outside directorships and outside audit
committee service;
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the role and responsibilities of the independent Lead
Director;
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director responsibilities;
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director attendance at Board meetings, committee meetings
and the annual meeting of shareholders;
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executive sessions of our independent directors;
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director access to management and our Boards ability
to retain outside consultants;
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director compensation;
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stock ownership guidelines for directors and certain
employees;
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administration of our legal compliance and ethics program;
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director orientation and continuing education;
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management succession and evaluation of our Chief
Executive Officer;
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annual self-assessments of our Board and each of our Audit
Committee, Corporate Governance & Nominating Committee
(our Governance Committee) and Organization &
Compensation Committee (our Compensation Committee); and
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shareholder access to our Board and Audit Committee.
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Director
Qualifications and Director Nominee Considerations
Our Board has established our Governance Committee which is
comprised solely of directors satisfying the independence
requirements of the NYSE. A copy of the charter of our
Governance Committee is available on our website at
www.chubb.com/investors. Copies also are available by
sending a written request to our Corporate Secretary. Our Board
has delegated to our Governance Committee responsibility for,
among other things:
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recruiting qualified independent directors, consisting of
persons with diverse backgrounds and skills who have the time
and ability to exercise independent judgment and perform our
Boards function effectively and who meet the needs of our
Board; and
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identifying the respective qualifications needed for
directors serving on our Board committees and serving as
chairmen of such committees, recommending to our Board the
nomination of persons meeting such respective qualifications to
the appropriate committees of our Board and as chairmen of such
committees and taking a leadership role in shaping our corporate
governance policies.
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We require that a majority of the directors on our Board meet
the criteria for independence under applicable law and the
requirements of the NYSE. We believe that variety in the lengths
of service among the directors benefits us and our shareholders.
Accordingly, we do not have term limits for service on our
Board. As an alternative to term limits, all director
nominations are considered annually by our Governance Committee.
Individuals who would be age 72 or older at the time of
election are ineligible for nomination to serve on our Board.
While our Board does not require that in every instance
directors who retire or change from the position they held when
they were elected to our Board resign, it does require that our
Governance Committee consider the desirability of continued
Board membership under the circumstances.
Our Governance Committee takes a holistic approach in
identifying and considering director nominees. The Governance
Committee primarily focuses on the composition and competencies
of our Board as a whole and how the traits possessed by
individual director nominees will complement one another. While
evaluating individual director nominees within this framework,
the factors that our Governance Committee considers include:
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the personal and professional ethics, integrity and values
of the candidate;
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the independence of the candidate under legal, regulatory
and other applicable standards, including the ability of the
candidate to represent all of our shareholders without any
conflicting relationship with any particular constituency;
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the diversity of the existing Board, so that we maintain a
diverse body of directors, with diversity reflecting gender,
ethnic background and geographic and professional experience;
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the professional experience and industry expertise of the
candidate and whether it will add to or complement that of the
existing Board;
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the compatibility of the candidate with the existing Board;
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the length of tenure of the members of the existing Board;
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the number of other public company boards of directors on
which the candidate serves or intends to serve, with the general
expectation that the candidate would not serve on the boards of
directors of more than four other public companies;
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the number of public company audit committees on which the
candidate serves or intends to serve, with the general
expectation that, if the candidate is to be considered for
service on our Audit Committee, the candidate would not serve on
the audit committees of more than two other public companies;
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the candidates service on the boards of directors of
other for-profit companies,
not-for-profit
organizations, trade associations or industry associations;
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the ability and willingness of the candidate to devote
sufficient time to carrying out his or her Board duties and
responsibilities effectively;
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the commitment of the candidate to serve on our Board for
an extended period of time; and
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such other attributes of the candidate and external
factors as our Governance Committee deems appropriate.
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Our Governance Committee has the discretion to weight these
factors as it deems appropriate. The importance of these factors
may vary from candidate to candidate.
Nominating
Procedures
The primary purpose of our nominating procedures is to identify
and recruit outstanding individuals to serve on our Board. Our
Governance Committee meets periodically to consider the slate of
nominees for election at our next annual meeting of
shareholders. If appropriate, our Governance Committee schedules
follow-up
meetings and interviews with potential candidates. Our
Governance Committee submits its recommended nominee slate to
our Board for approval.
Our Governance Committee will consider candidates recommended by
directors, members of management and our shareholders. In
addition, our Governance Committee is authorized to engage one
or more search firms to assist in the recruitment of director
candidates.
The procedures for shareholders to propose director candidates
are set forth in Article I, Section 10 of our By-Laws.
Our Governance Committee may make such additional inquiries of
the candidate or the proposing shareholder as our Governance
Committee deems appropriate. This information is necessary to
allow our Governance Committee to evaluate the
shareholders proposed candidate on the same basis as those
candidates referred through directors, members of management or
by consultants retained by our Governance Committee.
Shareholders wishing to propose a candidate for consideration
should refer to Article I, Section 10 of our By-Laws,
the information set forth under the heading
2012 Shareholder Proposals and Nominations and
the SEC rules applicable to shareholder proposal submission
procedures.
Director
Election Procedures
In uncontested elections, our directors are elected by the
affirmative vote of a majority of the votes cast. In the event
that an incumbent director receives less than the affirmative
vote of a majority of the votes cast and the director would
otherwise remain in office by operation of New Jersey law, the
affected director is required to tender his or her resignation.
Our Governance Committee is required to promptly consider the
resignation and make a recommendation to our Board as to whether
or not to accept such resignation. Our Board is required to take
action with respect to our Governance Committees
recommendation within 90 days after the date of the
election. These procedures are described in full in our
Corporate Governance Guidelines.
Director
Independence
Our Governance Committee reviews each directors
independence annually in accordance with the standards set forth
in our Corporate Governance Guidelines and the requirements of
the NYSE. No member of our Board will be considered independent
unless our Governance Committee determines that the director has
no material relationship with us that would affect the
directors independence and that the director satisfies the
independence requirements of all applicable laws, rules and
regulations. To facilitate the analysis of whether a director
has a relationship with us that could affect his or her
independence, our Board has identified in our Corporate
Governance Guidelines the following categories of relationships
which should not affect a directors independence or are
6
deemed immaterial and, therefore, are not considered by our
Governance Committee in determining director independence:
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charitable contributions made by us to any organization:
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pursuant to our Matching Gifts Program on terms of general
applicability to employees and directors;
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in amounts that do not exceed $25,000 per year; or
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that have been approved by our Governance Committee;
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commercial relationships with any entity or organization
where the annual sales to, or purchases from, us are less than
two percent of our annual revenue and less than two percent of
the annual revenue of the other entity or organization; and
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insurance, reinsurance and other risk transfer
arrangements entered into on an arms length basis in the
ordinary course of business.
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Our Board reviewed director independence in 2010 based on the
assessment of our Governance Committee. As a result of this
review, our Board determined that each of our directors, other
than John D. Finnegan, who is our Chairman, President and Chief
Executive Officer, was independent as defined in the listing
standards of the NYSE and, in the case of the members of our
Audit Committee, Section 10A(m)(3) of the Securities
Exchange Act of 1934 (Exchange Act).
Related
Person Transactions
Our Governance Committee has adopted a written policy governing
the review and approval of transactions in which we are a
participant and in which any of our officers, our directors,
holders of five percent or more of our common stock or any of
their respective immediate family members (as defined by the
SEC) has a material direct or indirect interest. These
individuals collectively are referred to as related persons.
This policy prohibits us from participating in any transaction
in which a related person has a direct or indirect material
interest unless:
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the transaction is a permitted transaction (as defined
below);
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in the case of our executive officers and holders of five
percent or more of our common stock, the transaction is reported
to and approved by our Board, our Governance Committee or
another Board committee comprised of disinterested
directors; or
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in the case of our directors and nominees for director,
the transaction is reported to and approved by a majority of the
disinterested members of our Governance Committee or, if less
than a majority of our Governance Committee is disinterested, a
majority of the disinterested members of our Board.
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In the event that a related person inadvertently fails to obtain
the appropriate approvals prior to engaging in a transaction in
which the related person has a material direct or indirect
interest and in which we are a participant, the related person
is required to seek ratification of the transaction by the
appropriate decision maker referenced above as soon as
reasonably practicable after discovery of such failure.
Our Governance Committee has identified categories of
transactions that are appropriate and generally do not give rise
to conflicts of interest or the appearance of impropriety,
which, accordingly, do not require approval or ratification.
These categories of transactions, referred to as permitted
transactions under the policy, are:
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the purchase of insurance products or services from us on
an arms length basis in the ordinary course of business
and on terms and conditions generally available to other
insureds;
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claims activity relating to insurance policies
administered on an arms length basis in the ordinary
course of business and consistent with the administration of the
claims of other insureds;
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any transaction or series of transactions with an
aggregate dollar amount involved of $100,000 or less;
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transactions within the scope of a related persons
ordinary business duties to us, where the benefits inuring to
the related person relate solely to our performance review
process (and resulting compensation and advancement decisions);
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our payment or reimbursement of a related persons
expenses incurred in performing his or her Chubb-related
responsibilities;
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the receipt of compensation and benefits from us, provided
that such arrangements are approved in accordance with the
policies and procedures established by our Board or a committee
thereof;
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the purchase or sale of our securities in the open market
or pursuant to any equity compensation plan approved by our
Board and our shareholders;
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any transaction with an entity or organization with whom
the related person is serving or affiliated solely at our
request;
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any transaction in which the related persons
interest arises only: (i) from the related persons
position as a director of another corporation or organization
that is a party to the transaction; (ii) from the direct or
indirect ownership by the related person and all other related
persons, in the aggregate, of less than a ten percent equity
interest in another person (other than a partnership) which is a
party to the transaction; or (iii) from both such position
and ownership; and
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any transaction in which the related persons
interest arises only from the related persons position as
a limited partner in a partnership in which the related person
and all other related persons have an interest of less than ten
percent and the person is not a general partner of and does not
have another position in the partnership.
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Related person transactions since January 1, 2010 are
discussed under the heading Certain Transactions and Other
Matters.
Board
Leadership Structure and Risk Oversight
Board
Structure
As noted in our Corporate Governance Guidelines, the
determination of our Boards leadership structure is an
integral part of our succession planning process. Based on our
Boards current composition as well as
Mr. Finnegans business experience and
day-to-day
involvement in our operations, our Board has determined that the
most effective leadership structure for our Board is for the
roles of Chief Executive Officer and Chairman of the Board to be
combined. To ensure our Boards independence and proper
functioning, our Board has also elected a Lead Director with
substantial authority over our Boards operations. Our
Board has determined that this structure currently is beneficial
because it fosters the development and implementation of
business strategies, while also providing the balance of an
empowered independent Board.
The Lead Director has the following authority:
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to act as a liaison between the Chairman and the
independent directors;
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to call special meetings of our Board;
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to call special meetings of any committee of our Board;
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with the consent of a majority of the members of our
Executive Committee, to call special meetings of our
shareholders;
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in the absence of the Chairman of the Board, to preside at
meetings of our Board;
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to preside at all executive sessions of the non-employee
directors and the independent directors;
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in the absence of the Chairman of the Board, to preside at
meetings of our shareholders;
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to provide direction regarding the meeting schedule,
information to be sent to our Board and the agenda for our Board
meetings to assure that there is sufficient time for discussion
of all agenda items;
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at the Lead Directors discretion, to attend meetings
of any committee on which he or she is not otherwise a member;
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to hire independent legal, financial or other advisors as
he or she deems desirable or appropriate, without consulting or
obtaining the approval of any member of management in
advance; and
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to exercise such additional powers as may be conferred
upon the office of Lead Director by resolution of our Board or
our Governance Committee from time to time.
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The Lead Director serves on our Executive Committee and is
eligible to serve on any or all other committees of our Board.
The Lead Director is elected annually and is not subject to term
limits. James M. Zimmerman currently serves as our Lead Director.
Risk
Oversight
Our Board recognizes that one of its key responsibilities is to
understand and evaluate how the material risks to which we are
subject interrelate, how they affect our business and how
management addresses those risks. Annually, our Board and
management review and discuss the risks that have been
identified as providing the greatest exposure to our business.
Our Board allocates oversight responsibility for these risk
areas among itself and its committees. Our Chief Risk Officer
and/or other
members of senior management regularly report to our Board or
the designated committee on these subjects. For many risk areas,
reports are provided quarterly and, for others, reports are
provided annually or more frequently if warranted. Where a Board
committee has primary oversight responsibility for one or more
risk areas, the chairman of that committee regularly reports on
these matters to our Board.
Contacting
our Board
Parties interested in contacting our Board, any committee of the
Board, the Chairman of the Board, the Lead Director, the
independent directors as a group or any individual director are
invited to do so by writing to them in care of our Corporate
Secretary at:
Corporate Secretary
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
Complaints and concerns relating to our accounting, internal
controls over financial reporting or auditing matters should be
communicated to our Audit Committee using the special procedures
described below. Communications addressed to a particular
director will be referred to that director. All other
communications addressed to our Board will be referred to our
Lead Director and tracked by our Corporate Secretary.
Special
Procedures for Contacting our Audit Committee
Complaints and concerns relating to our accounting, internal
controls over financial reporting or auditing matters should be
communicated to our Audit Committee, which consists solely of
independent directors. Any such communication may be anonymous
and may be reported to our Audit Committee through our General
Counsel by writing to:
Executive Vice President and General Counsel
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
GeneralCounsel@chubb.com
9
All such concerns will be reviewed under our Audit
Committees direction and oversight by the General Counsel,
our Internal Audit Department or such other persons as our Audit
Committee determines to be appropriate. Confidentiality will be
maintained to the fullest extent possible, consistent with the
need to conduct an adequate review. Prompt and appropriate
corrective action will be taken when and as warranted in the
judgment of our Audit Committee. The General Counsel will
prepare a periodic summary report of all such communications for
our Audit Committee.
Our Code of Business Conduct provides that we will not
discharge, demote, suspend, threaten, harass or in any manner
discriminate against any employee in the terms and conditions of
employment based upon any lawful actions of such employee with
respect to good faith reporting of complaints regarding
accounting matters or otherwise as specified in Section 806
of the Sarbanes-Oxley Act of 2002.
Meeting
Attendance and Related Matters
Our directors are expected to attend all Board meetings,
meetings of committees on which they serve and the annual
meeting of shareholders. Nine of our directors attended the 2010
Annual Meeting of Shareholders. Directors also are expected to
spend the time needed and to meet as frequently as necessary to
properly discharge their responsibilities. In 2010, our Board
met seven times. All of our incumbent directors attended at
least 75% of the meetings of our Board and the committees on
which they serve.
Audit
Committee
Our Audit Committee is directly responsible for the appointment,
compensation and retention (or termination) of our independent
auditor. Our Audit Committee also is responsible for the
oversight of the integrity of our financial statements, risk
management, compliance with legal and regulatory requirements,
the independence and qualifications of our independent auditor,
the performance of our internal audit function and independent
auditor and other significant financial matters. For 2010, our
Board designated Martin G. McGuinn and Daniel E. Somers as our
audit committee financial experts (as defined by SEC rules). In
2010, our Audit Committee met eight times. The Audit Committee
Report for 2010 is set forth under the heading Audit
Committee Report.
Compensation
Committee
Composition;
Scope of Authority
Each member of our Compensation Committee satisfies the
independence requirements of the NYSE and the independence
standards set forth in our Corporate Governance Guidelines. Our
Compensation Committees primary responsibilities include
establishing our general compensation philosophy and overseeing
the development, implementation and administration of our
compensation, benefit and perquisite programs. It also evaluates
the performance and sets all aspects of the compensation paid to
our Chief Executive Officer and reviews and approves the
compensation paid to our other executive officers. In addition,
our Compensation Committee is responsible for recommending the
form and amount of compensation for our non-employee directors
to our Governance Committee. The principal duties and
responsibilities of our Compensation Committee are set forth in
its charter, which is available on our website at
www.chubb.com/investors.
Processes
and Procedures
In 2010, our Compensation Committee met six times.
During the first quarter of each year, our Compensation
Committee evaluates our performance relative to the
pre-established goals under The Chubb Corporation Annual
Incentive Compensation Plan (2006) (the 2006 Annual Incentive
Plan), in the case of annual incentive compensation, The Chubb
Corporation Long-Term Incentive Plan (2009) (the 2009 LTIP), in
the case of long-term incentive awards, and for certain other
plans in which our named executive officers identified under the
heading Executive CompensationSummary Compensation
Table (our NEOs) do not participate. In addition, our
Compensation Committee evaluates our Chief Executive
Officers overall individual performance and contributions
over the prior year. Our Chief Executive Officer presents our
10
Compensation Committee with his evaluation of each of the other
NEOs, which includes a review of contributions and performance
during the prior year, strengths, weaknesses, development plans,
succession potential and compensation recommendations. Our
Compensation Committee then makes a final determination of
compensation amounts for each NEO with respect to each of the
elements of the executive compensation program for both
compensation based on prior year performance and target
compensation for the current year.
Mid-year, typically in June, our Compensation Committee
considers each NEOs total compensation as compared with
that of the named executive officers of a peer group of
companies. Information regarding this peer group analysis is set
forth under the heading Compensation Discussion and
AnalysisSetting of Executive Compensation. This peer
group review provides our Compensation Committee with an
external basis to evaluate our overall compensation program,
including an assessment of its pay to performance relationship.
Following this presentation of competitive market data, our
Compensation Committee makes decisions, in consultation with our
Chief Executive Officer, regarding the other NEOs, assessing the
need for any modifications to executive compensation
opportunities and overall program design for implementation in
the following year. Final approval of any program or individual
changes typically occurs in the first quarter of the following
year, at or around the same time that our Compensation Committee
is evaluating overall performance for the just-completed year to
determine actual award amounts payable under our incentive-based
plans.
Role
of Executive Officers
Our Compensation Committee, and through it our Board, retains
final authority with respect to our compensation, benefit and
perquisite programs and all actions taken thereunder. However,
as noted above, our Chief Executive Officer recommends to our
Compensation Committee compensation actions for each of the
other NEOs. Our other NEOs evaluate the performance of and
recommend compensation actions for other members of our senior
management team to our Chief Executive Officer. Our Chief
Executive Officer, after making any adjustments he deems
appropriate, presents these recommendations to our Compensation
Committee for consideration and compensation action.
Compensation actions for the rest of our employees are
determined by management, with our Compensation Committee
receiving and approving aggregated information (e.g., aggregate
incentive compensation and equity awards) by employee level with
respect to such actions. None of our employees has a role in
determining or recommending the amount or form of non-employee
director compensation.
Delegation
of Authority
Subject to an aggregate limit of 400,000 shares of our
common stock, our Compensation Committee has delegated authority
to our Chief Executive Officer to make equity grants to
employees at or below the level of Senior Vice President. In
accordance with the terms of this delegation of authority, our
Compensation Committee periodically reviews all such awards. If
our Compensation Committee ratifies the awards, the number of
shares so ratified is restored to our Chief Executive
Officers pool of awardable shares. Our Chief Executive
Officer uses this authority to grant performance, promotion,
retention and new hire awards. Our Compensation Committee has
retained exclusive authority for granting equity awards to
employees above the level of Senior Vice President, as well as
for certain of our Senior Vice Presidents, including those
subject to the reporting requirements of Section 16 of the
Exchange Act.
Role
of Executive Compensation Consultant
Pursuant to its charter, our Compensation Committee has the sole
authority to retain any compensation consultant to be used to
assist in the evaluation of executive compensation and to
approve the fees and terms of such retention. In accordance with
this authority, our Compensation Committee directly engaged a
compensation consulting firm, Compensation Advisory Partners LLC
(CAP or the Compensation Consultant). CAP was engaged by our
Compensation Committee to assist in reviewing our overall
compensation strategy and total compensation package and to
provide input on the competitive market for executive talent,
evolving executive compensation market practices, program design
and regulatory compliance. CAP does not provide any other
services to us.
11
Executive
Committee
Our Executive Committee, which consists of the Chairman of the
Board, our Lead Director and the Chairmen of our Audit,
Compensation and Governance Committees, is responsible for
overseeing our business, property and affairs during the
intervals between the meetings of our Board, if necessary. Our
Executive Committee did not meet during 2010.
Finance
Committee
Our Finance Committee oversees and regularly reviews the
purchase and sale of securities in our investment portfolio. In
2010, our Finance Committee met three times.
Governance
Committee
As noted above, our Governance Committee assists our Board in
identifying individuals qualified to become members of our Board
and oversees the annual evaluation of our Board and each
committee. As provided in its charter, our Governance Committee
also makes recommendations to our Board on a variety of
corporate governance and nominating matters, including
recommending standards of independence, director nominees,
appointments to committees of our Board, designees for chairmen
of each of our Board committees, non-employee director
compensation and corporate governance guidelines. In 2010, our
Governance Committee met four times.
Compensation
Committee Interlocks and Insider Participation
During our 2010 fiscal year, each of Sheila P. Burke, Martin G.
McGuinn, Daniel E. Somers, Karen Hastie Williams, James M.
Zimmerman and Alfred W. Zollar served on our Compensation
Committee. None of these individuals has at any time been an
officer or employee of Chubb. During our 2010 fiscal year, none
of our executive officers served as a member of the board of
directors or compensation committee of any entity for which a
member of our Board or Compensation Committee served as an
executive officer.
Directors
Compensation
Our Governance Committee, with the assistance of our
Compensation Committee, is responsible for establishing and
overseeing non-employee director compensation. Our Compensation
and Governance Committees consult periodically with the
Compensation Consultant to evaluate and, if appropriate, adjust
non-employee director compensation. To benchmark the
competitiveness of our non-employee director compensation, the
Compensation and Governance Committees utilize the same peer
group of companies described below under the heading
Compensation Discussion and AnalysisSetting of
Executive Compensation. Consistent with our compensation
philosophy for our NEOs, our non-employee director compensation
program is designed to target total non-employee director
compensation in the second quartile of the compensation paid to
non-employee directors in this peer group.
12
Director
Compensation Table
The following table sets forth the compensation we paid to our
non-employee directors in 2010:
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Change
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in Pension
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Value and
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Fees
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Non-Equity
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Nonqualified
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Earned
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Incentive
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Deferred
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or Paid
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Stock
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Option
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Plan
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Compensation
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name(1)
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($)
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($)(2)
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($)(3)
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($)
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($)
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($)(4)
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($)
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Zoë Baird
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$
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111,000
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$
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99,977
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$
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107
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$
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211,084
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Sheila P. Burke
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107,000
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99,977
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206,977
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James I. Cash, Jr.
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95,000
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99,977
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194,977
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Joel J.
Cohen(5)
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35,000
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35,000
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Klaus J.
Mangold(5)
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24,500
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24,500
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Martin G. McGuinn
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132,000
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99,977
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26,234
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258,211
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Lawrence M. Small
|
|
|
89,500
|
|
|
|
99,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,166
|
|
|
|
190,643
|
|
Jess Søderberg
|
|
|
98,500
|
|
|
|
99,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,219
|
|
|
|
226,696
|
|
Daniel E. Somers
|
|
|
137,000
|
|
|
|
99,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,399
|
|
|
|
263,376
|
|
Karen Hastie
Williams(5)
|
|
|
101,333
|
|
|
|
99,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
531
|
|
|
|
201,841
|
|
James M.
Zimmerman(6)
|
|
|
151,000
|
|
|
|
99,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,977
|
|
Alfred W. Zollar
|
|
|
115,000
|
|
|
|
99,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178
|
|
|
|
215,155
|
|
|
|
|
(1) |
|
Compensation for Mr. Finnegan is not included in this table
because he does not receive compensation for services that he
renders as a member of our Board. Information regarding
Mr. Finnegans compensation is set forth under the
headings Compensation Discussion and Analysis and
Executive Compensation. |
|
(2) |
|
Pursuant to the 2009 LTIP, on April 27, 2010, each
non-employee director received deferred stock units representing
the right to receive 1,916 shares of our common stock
valued at $52.18 per share. These awards vested immediately upon
grant, but the issuance of the shares underlying such awards was
mandatorily deferred until following the recipients
separation from service on our Board. Accordingly, the aggregate
grant date fair value of each of these awards, calculated in
accordance with FASB ASC Topic 718, is $99,977 per non-employee
director. |
|
|
|
As of December 31, 2010, each of our non-employee directors
other than Mr. Zimmerman had the following outstanding
equity awards: |
|
|
|
|
|
|
|
Grant Date
|
|
Type of Award
|
|
Number of
Units(a)
|
|
|
April 29, 2008
|
|
Stock Unit
|
|
|
469
|
(b)
|
April 28, 2009
|
|
Deferred Stock Unit
|
|
|
2,481
|
(c)
|
April 27, 2010
|
|
Deferred Stock Unit
|
|
|
1,916
|
(c)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
4,866
|
(d)
|
|
|
|
(a) |
|
Each stock unit and each deferred stock unit has the equivalent
value of one share of our common stock. The grant date fair
value of each of these awards is estimated based on the fair
market value of our common stock on the date of grant. |
|
(b) |
|
Settles on the third anniversary of grant date. |
|
(c) |
|
Settles following separation from service on our Board. |
|
(d) |
|
Excludes the April 29, 2008 performance unit awards that
were earned as of December 31, 2010. The actual payment of
these awards was made on February 23, 2011, pursuant to
which each non-employee director other than Mr. Zimmerman
received, or was entitled to receive, 2,130 shares of our
common stock (151.4% of the original performance unit award). |
13
|
|
|
(3) |
|
The following table sets forth the option awards outstanding for
each non-employee director at December 31, 2010, all of
which are fully vested: |
|
|
|
|
|
|
|
Aggregate Number of
|
|
|
Shares Subject to
|
Name
|
|
Option Awards
|
|
Zoë Baird
|
|
|
20,000
|
|
Sheila P. Burke
|
|
|
56,000
|
|
James I. Cash, Jr.
|
|
|
8,000
|
|
Martin G. McGuinn
|
|
|
|
|
Lawrence M. Small
|
|
|
41,943
|
|
Jess Søderberg
|
|
|
|
|
Daniel E. Somers
|
|
|
2,000
|
|
James M. Zimmerman
|
|
|
|
|
Alfred W. Zollar
|
|
|
|
|
|
|
|
(4) |
|
Represents (i) imputed income for premiums paid to purchase
life insurance under the Directors Group Term Life
Insurance Program; (ii) premiums paid for life insurance
policies through which we will fund our non-employee
directors charitable contributions under the
Directors Charitable Award Program; and/or
(iii) imputed income for premiums paid to purchase life
insurance under The Chubb Corporation Estate Enhancement Program
for Non-Employee Directors. Additional information regarding
these programs is set forth under the heading
Directors CompensationAll Other
Compensation. |
|
(5) |
|
Mr. Cohen and Dr. Mangold each retired from our Board
effective as of April 27, 2010. Ms. Williams retired
from our Board effective as of November 1, 2010. |
|
(6) |
|
Mr. Zimmerman was elected to our Board on June 11,
2008. As of December 31, 2010, Mr. Zimmerman had the
following outstanding equity awards, which have the same general
terms as those described in footnote (2) above: |
|
|
|
|
|
|
|
Grant Date
|
|
Type of Award
|
|
Number of
Units(a)
|
|
|
June 11, 2008
|
|
Stock Unit
|
|
|
433
|
(b)
|
April 28, 2009
|
|
Deferred Stock Unit
|
|
|
2,481
|
(c)
|
April 27, 2010
|
|
Deferred Stock Unit
|
|
|
1,916
|
(c)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
4,830
|
(d)
|
|
|
|
(a) |
|
Each stock unit and each deferred stock unit has the equivalent
value of one share of our common stock. The grant date fair
value of each of these awards is estimated based on the fair
market value of our common stock on the date of grant. |
|
(b) |
|
Settles on the third anniversary of grant date. |
|
(c) |
|
Settles following separation from service on our Board. |
|
(d) |
|
Excludes the June 11, 2008 performance unit awards that
were earned as of December 31, 2010. The actual payment of
these awards was made on February 23, 2011, pursuant to
which Mr. Zimmerman received, or was entitled to receive,
1,970 shares of our common stock (151.4% of the original
performance unit award). |
14
Fees
Earned or Paid in Cash
The following table summarizes the cash components of our 2010
non-employee director compensation program:
|
|
|
|
|
Item
|
|
Amount
|
|
|
Annual Director Retainer
|
|
$
|
60,000
|
|
Lead Director Annual Supplemental Retainer
|
|
|
50,000
|
|
Audit Committee Chairman Retainer
|
|
|
20,000
|
|
Audit Committee Member Retainer
|
|
|
7,500
|
|
Compensation Committee Chairman Retainer
|
|
|
15,000
|
|
Compensation Committee Member Retainer
|
|
|
7,500
|
|
Executive Committee Retainer
|
|
|
7,500
|
|
Finance Committee Member Retainer
|
|
|
7,500
|
|
Governance Committee Chairman Retainer
|
|
|
12,500
|
|
Governance Committee Member Retainer
|
|
|
7,500
|
|
Board Meeting Fee
|
|
|
2,000
|
|
Committee Meeting Fee
|
|
|
2,000
|
|
Stock
Awards
With respect to non-employee directors, the 2009 LTIP is
administered by our Governance Committee with the assistance of
our Compensation Committee. Subject to adjustment upon the
occurrence of certain events described below, as of
March 4, 2011, a maximum of 467,808 shares of our
common stock were issuable to non-employee directors under the
2009 LTIP.
Based upon its market analysis, a peer group comparison and the
recommendation of the Compensation Consultant and Compensation
Committee, our Governance Committee approved deferred stock unit
awards to each of our non-employee directors in the amount of
approximately $100,000 on April 27, 2010. The deferred
stock units vested immediately upon grant, but the issuance of
the shares underlying such awards was mandatorily deferred until
following the recipients separation from service on our
Board.
Option
Awards
Since the adoption of The Chubb Corporation Long-Term Stock
Incentive Plan for Non-Employee Directors (2004)
(2004 Director Plan) in April 2004, our Boards
practice has been to refrain from granting stock options to
non-employee directors.
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
Cash Compensation. Under the
Deferred Compensation Plan for Directors, non-employee directors
may defer receipt of all or a portion of their cash
compensation. Amounts of deferred compensation are payable at
the option of the non-employee director either upon the
non-employee directors separation from service on our
Board or at a specified date chosen by the non-employee director
at the time the deferral election is made. The Deferred
Compensation Plan for Directors provides that amounts deferred
may be invested in:
|
|
|
|
|
an interest bearing account;
|
|
|
|
a market value account; or
|
|
|
|
a shareholders equity account.
|
A non-employee director participating in the Deferred
Compensation Plan for Directors may elect to receive the
compensation deferred in either a lump sum or in annual
installments. All amounts are paid in cash, except for
15
the market value accounts which we pay in shares of our common
stock. Deferred compensation represents an unsecured obligation
payable out of our general corporate assets.
Cash Accounts. Interest
bearing accounts (cash accounts) bear interest at the lesser of
120% of the applicable long-term federal interest rate and
Citibank, N.A.s prime rate in effect on the first day of
each January, April, July and October during the deferral
period. At December 31, 2010, we did not maintain cash
accounts for any of our non-employee directors.
Market Value
Accounts. Market value accounts, which are
denominated in units with one unit having the equivalent value
of one share of our common stock, track the value of shares of
our common stock. On each date compensation otherwise would have
been paid in accordance with our normal practice (the credit
date), non-employee directors deferring cash compensation into
market value accounts are credited with the number of market
value units equal to the quotient of:
|
|
|
|
|
the amount of compensation deferred by the non-employee
director, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
credit date or on the trading day preceding the credit date if
the credit date is not a trading day.
|
When we pay cash dividends on our common stock, the market value
account of each participating non-employee director is credited
with the number of market value units equal to:
|
|
|
|
|
the product of (i) the amount of the dividend per share,
multiplied by (ii) the number of units in the non-employee
directors market value account on the dividend payment
date, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
dividend payment date or on the trading day preceding the
dividend payment date if the dividend payment date is not a
trading day.
|
At December 31, 2010, we maintained market value accounts
for four non-employee directors.
Shareholders Equity
Accounts. Shareholders equity accounts,
which are denominated in units, track the book value per share
of our common stock. On each date compensation otherwise would
have been paid in accordance with our normal practice,
non-employee directors deferring cash compensation into
shareholders equity accounts are credited with the number
of shareholders equity units equal to the quotient of:
|
|
|
|
|
the amount of compensation deferred by the non-employee
director, divided by
|
|
|
|
the shareholders equity per share as reported in our
annual report to shareholders for the immediately preceding year.
|
When we pay cash dividends on our common stock, the
shareholders equity account of each participating
non-employee director is credited with the number of
shareholders equity units equal to:
|
|
|
|
|
the product of (i) the amount of the dividend per share,
multiplied by (ii) the number of units in the non-employee
directors shareholders equity account on the
dividend payment date, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
dividend payment date or on the trading day preceding the
dividend payment date if the dividend payment date is not a
trading day.
|
At December 31, 2010, we did not maintain
shareholders equity accounts for any of our non-employee
directors.
Equity Compensation. Prior
to 2009, we offered non-employee directors the option of
deferring receipt of all or a portion of their equity
compensation. At December 31, 2010, we maintained deferred
equity accounts for six non-employee directors who had elected
to defer receipt of all or a portion of the shares they would
have been entitled to receive upon settlement of pre-2009 equity
grants. Amounts of voluntarily deferred equity are payable at
the option of the non-employee director either upon the
non-employee directors separation from service on our
Board or at a specified date chosen by the non-employee director
at the time the deferral election is made. Non-employee
directors receive current payment of dividend equivalents on
their deferred equity, whether such deferral
16
is voluntary or mandatory. We declare and pay dividend
equivalents on equity held in director deferral accounts at the
same rate and at the same time as we declare and pay dividends
on our common stock generally.
In 2009, our Governance Committee determined that deferred stock
units would be the primary equity award structure under the 2009
LTIP for our non-employee directors. Accordingly, in April 2010,
our non-employee directors were awarded deferred stock units
which vested immediately upon grant but the issuance of the
shares underlying such awards was mandatorily deferred until
following each recipients separation from service on our
Board.
All
Other Compensation
Directors Group Term Life Insurance
Program. Our non-employee directors have the
option of purchasing $50,000 in group term life insurance
coverage for themselves. Directors pay the full cost of the
coverage, which is based on coverage rates for our active
employees. Mmes. Baird and Williams and Messrs. Small,
Somers and Zollar have elected to purchase life insurance
coverage under this program. In connection with the premiums
they paid to purchase life insurance policies under the
Directors Group Term Life Insurance Program, income was
imputed in 2010 to Mmes. Baird and Williams in the respective
amounts of $107 and $531 and to Messrs. Small, Somers and
Zollar in the respective amounts of $318, $165 and $178. The
imputed income represented the difference between the group
rates on these policies and the IRS prescribed coverage values.
Directors Charitable Award
Program. Effective January 1, 1992, we
established the Directors Charitable Award Program. Under
this program, each non-employee director, following his or her
first election to our Board by our shareholders, was entitled to
request that we direct one or more charitable contributions
totaling up to $500,000 to eligible tax exempt organizations. We
have elected to fund the Directors Charitable Award
Program through the proceeds of
second-to-die
life insurance policies that we have purchased on the lives of
the participating non-employee directors. We are the owner and
beneficiary of these policies. Non-employee directors have no
rights in these policies or the benefits thereunder.
Under the terms of these policies, participating non-employee
directors are paired and, upon the death of the second paired
non-employee director, we use the proceeds of these policies to
fund the contributions to the organizations selected by the
non-employee directors. At December 31, 2010, eight
non-employee directors were participating in the program. For
five of these non-employee directors, we paid the full premium
on the life insurance policies through which we fund the program
prior to 2010. For Messrs. McGuinn, Søderberg and
Somers, the premiums paid in 2010 in connection with their
participation in this program, which also are reflected in the
All Other Compensation column of the Director
Compensation Table set forth under the heading Corporate
GovernanceDirectors Compensation, were
$26,234, $28,219 and $26,234, respectively.
In March 2008, our Board voted to close the Directors
Charitable Award Program to future participants (with currently
eligible participants under the Directors Charitable Award
Program being grandfathered). In addition, we may further amend
or terminate the Directors Charitable Award Program at our
election at any time. Participating non-employee directors are
entitled to change their designated charities at any time.
Estate Enhancement
Program. Prior to 2002, we maintained The
Chubb Corporation Estate Enhancement Program for Non-Employee
Directors. This program was offered to non-employee directors as
an estate enhancement benefit pursuant to which a participant
could exchange deferred compensation for a split-dollar
whole-life insurance benefit. The program was designed so that
it would be cost neutral to us, with the after-tax cost of the
program (including amounts we will receive upon payout of the
life insurance benefit) to us being intended to approximate the
participants foregone deferred compensation. During 2010,
Mr. Small recognized imputed income of $848 in connection
with the premiums paid on the insurance policies purchased in
connection with his participation in the program.
17
OUR BOARD
OF DIRECTORS
Our Board oversees our business operations, assets, affairs and
performance. In accordance with our long-standing practice, each
of the director nominees other than our Chief Executive Officer
is independent. Set forth below are the name, age, length of
service on our Board and principal occupation of each director
nominee, together with certain other biographical information
and factors considered by our Governance Committee and the Board
in nominating each director nominee for election to our Board.
Unless otherwise indicated, each nominee has served for at least
ten years in the business position currently or most recently
held. The age of each director is as of April 26, 2011, the
date of the 2011 Annual Meeting.
|
|
|
|
|
ZOË BAIRD (Age 58)
Director since 1998
Zoë Baird is President of the Markle Foundation, a
private philanthropy that focuses on using information and
communications technologies to address critical public needs,
particularly in the areas of health care and national security.
Ms. Bairds career spans business, government and academia.
She has been Senior Vice President and General Counsel of Aetna,
Inc., a senior visiting scholar at Yale Law School, counselor
and staff executive at General Electric Co., and a partner in
the law firm of OMelveny and Myers. She was Associate
General Counsel to President Jimmy Carter and an attorney in the
Office of Legal Counsel of the Department of Justice. She served
on President Clintons Foreign Intelligence Advisory Board
from 1993 - 2001 and on the International Competition Policy
Advisory Committee to the Attorney General. Ms. Baird served on
the Technology & Privacy Advisory Committee to the
Secretary of Defense in 2003 - 2004, which advised on the use of
technology to counter terrorism. She is on a number of
non-profit and corporate boards, including Boston Properties,
and Brookings Institution, among others.
|
|
|
In selecting Ms. Baird as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Ms. Bairds outside
board service and business activities, including her knowledge
of the insurance industry, legal matters, public policy matters,
governmental affairs and information technology.
|
|
|
|
|
|
SHEILA P. BURKE (Age 60)
Director since 1997
Faculty Research Fellow, Malcolm Wiener Center for Social
Policy, Member of Faculty, J.F. Kennedy School of Government,
Harvard University since 2007. Senior Public Policy Advisor,
Baker, Donelson, Bearman, Caldwell & Berkowitz from 2009 to
present. From 2004 - 2007 Deputy Secretary and Chief Operating
Officer, Smithsonian Institution. Ms. Burke previously was
Under Secretary for American Museums and National Programs,
Smithsonian Institution, from June 2000 to December 2003 and
Executive Dean and Lecturer in Public Policy of the John F.
Kennedy School of Government, Harvard University, from November
1996 until June 2000. Ms. Burke served as Chief of Staff to the
Majority Leader of the U.S. Senate from 1985 - 1996. Ms. Burke
also serves on a number of non-profit and corporate boards,
including Wellpoint Inc., the Kaiser Commission on the Future of
Medicaid and Uninsured, the Georgetown University School of
Nursing and Health Sciences, the Partnership for Public Service
and the Association of American Medical Colleges.
|
|
|
In selecting Ms. Burke as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Ms. Burkes outside
board service and business activities, including her knowledge
of public policy matters and governmental affairs.
|
18
|
|
|
|
|
JAMES I. CASH, JR. (Age 63)
Director since 1996
The James E. Robison Emeritus Professor of Business
Administration, Harvard University. Dr. Cash was a member
of the Harvard Business School faculty from July 1976 to October
2003. He also serves on the boards of General Electric Company
and Wal-Mart. He owns a private company - The Cash Catalyst, LLC
- and serves as a Special Advisor or Director of several private
companies including General Catalyst Partners, Verne Global,
Deutsche Bank of the Americas, The Green Exchange, Grain
Communications and Veracode. Dr. Cash also serves on the
non-profit boards of the National Association of Basketball
Coaches Foundation, The Smithsonian Museum of African-American
History and Culture and the Bert King Foundation.
|
|
|
In selecting Dr. Cash as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Dr. Cashs outside
board service and business experience, including his knowledge
of information technology, strategic planning and international
business operations.
|
|
|
|
|
|
JOHN D. FINNEGAN (Age 62)
Director since 2002
President and Chief Executive Officer of The Chubb
Corporation since December 2002 and Chairman since December
2003. Mr. Finnegan previously had been Executive Vice President
of General Motors Corporation, which is primarily engaged in the
development, manufacture and sale of automotive vehicles, and
Chairman and President of General Motors Acceptance Corporation,
a finance company and subsidiary of General Motors Corporation,
from May 1999 to December 2002. He was Vice President and Group
Executive of General Motors and also President of General Motors
Acceptance Corporation from November 1997 to April 1999. Mr.
Finnegan was associated with General Motors Corporation from
1976 to December 2002. Mr. Finnegan also serves on the Board of
Directors of the National Association of Basketball Coaches
Foundation.
|
|
|
In selecting Mr. Finnegan as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Finnegans role as
our Chief Executive Officer and his extensive experience in the
financial services industry as well as the perspective he has
gained through his outside board service and business activities.
|
|
|
|
|
|
LAWRENCE W. KELLNER (Age 52)
Nominee for Director
Mr. Kellner is President of Emerald Creek Group, LLC, a
private equity firm. He served as Chairman and Chief Executive
Officer of Continental Airlines, Inc. from December 2004 through
December 2009. He served as President and Chief Operating
Officer of Continental Airlines from March 2003 to December
2004, as President from May 2001 to March 2003 and was a member
of Continental Airlines board of directors from May 2001
to December 2009. He currently serves as a Director on the board
of Marriott International, Inc. On the civic front, he is on a
number of boards including serving as Chairman of the Greater
Houston Partnership and as a trustee for Rice University.
|
|
|
In selecting Mr. Kellner as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Kellners outside
board service and business activities, including his roles as
Chairman and Chief Executive Officer and Chief Financial Officer
of a major public company.
|
19
|
|
|
|
|
MARTIN G. McGUINN (Age 68)
Director since 2007
Chairman and Chief Executive Officer of Mellon Financial
Corporation from January 1999 until February 2006. Mr. McGuinn
held a number of positions during his 25 years at Mellon.
He served as the 2005 President of the Federal Reserve
Boards Advisory Council. Mr. McGuinn serves on the Boards
of Celanese Corporation and iGate Corporation, and is a member
of the Advisory Board of CapGen Financial. Mr. McGuinn also
serves on several nonprofit boards, including the Carnegie
Museums of Pittsburgh and the University of Pittsburgh Medical
Center.
|
|
|
In selecting Mr. McGuinn as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. McGuinns outside
board service and business activities, including his role as
Chairman and Chief Executive Officer of a major public financial
services company.
|
|
|
|
|
|
LAWRENCE M. SMALL (Age 69)
Director since 1989
Former Secretary of the Smithsonian Institution, the
worlds largest museum and research complex, a position he
held from 2000 to 2007. Mr. Small previously had been President
and Chief Operating Officer of Fannie Mae from 1991 to 2000.
Before joining Fannie Mae, he served as Vice Chairman and
Chairman of the executive committee of the boards of directors
of Citicorp and Citibank, where he worked for 27 years. He
currently also serves as a director on the boards of Marriott
International and New York Citys Spanish Repertory Theatre.
|
|
|
In selecting Mr. Small as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Smalls outside
board service and business activities, including his senior
leadership roles at major public financial services companies
and a government institution.
|
|
|
|
|
|
JESS SØDERBERG (Age 66)
Director since 2007
Retired from A.P. Moller-Maersk in November 2007. Mr.
Søderberg was Partner and Group CEO of A.P. Moller-Maersk
since 1994. He joined the company after graduating with an MBA
from the Copenhagen Business School in 1969, and has since held
a number of senior financial positions in both the USA and
Denmark. Mr. Søderberg was a member of JP Morgan
Chases International Council until 2007, is a member of
Danske Banks Advisory Board, is the Vice Chairman of the
board of Carlsberg A/S, is Chairman of Carlsberg A/Ss
audit committee, and an adviser to Permira (a major
international equity fund). Mr. Søderberg is honored as a
Knight 1st Degree of the Order of Dannebrog and the Chilean
Order of Bernardo OHiggins.
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In selecting Mr. Søderberg as a director nominee, our
Nominating Committee and Board considered the factors set forth
under the heading Corporate Governance - Director
Qualifications and Candidate Considerations. In addition,
the Nominating Committee and the Board considered Mr.
Søderbergs outside board service and business
activities, including his role as Chief Executive Officer of a
major public company and his expertise in international business
operations.
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DANIEL E. SOMERS (Age 63)
Director since 2003
Vice Chairman of Blaylock and Partners LP, an investment
banking firm, from January 2002 until September 2007. Mr. Somers
previously had been President and Chief Executive Officer of
AT&T Broadband, a provider of cable and broadband services,
from December 1999 to October 2001, and Senior Executive Vice
President and Chief Financial Officer at AT&T Corp., a
telecommunications company, from May 1997 to December 1999. Mr.
Somers served on the board of The Lubrizol Corporation until
February 2007. He is also a member of the Board of Trustees of
Stonehill College.
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In selecting Mr. Somers as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Somers outside
board service and business activities, including his role as
Chief Financial Officer of a major public company.
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JAMES M. ZIMMERMAN (Age 67)
Director since 2008
Retired Chairman and Chief Executive Officer of Federated
Department Stores, Inc. Mr. Zimmerman was Chairman of the
Board from February 2003 until January 2004, Chairman and Chief
Executive Officer from May 1997 to February 2003, and President
and Chief Operating Officer from March 1988 to May 1997. He
began his career with Federated in 1965 after graduating from
Rice University in Houston, Texas. Mr. Zimmerman is also a
director of Fossil, Inc., Furniture Brands International and
serves on the boards of several private for profit companies and
not for profit community organizations.
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In selecting Mr. Zimmerman as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Zimmermans outside
board service and business activities, including his role as
Chairman and Chief Executive Officer of a major public company.
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ALFRED W. ZOLLAR (Age 56)
Director since 2001
Founder and Managing Partner, AWZ Tech, LLC since January
2011. Former General Manager, Tivoli Software, IBM Corporation,
which manufactures and sells computer services, hardware and
software, from July 2004 until retirement in January 2011.
Mr. Zollar previously had been General Manager, eServer
iSeries, IBM Corporation, from January 2003 to July 2004;
General Manager, Lotus Software, which designs and develops
business software and was a subsidiary of IBM Corporation, from
January 2000 to January 2003; General Manager, Network Computing
Software Division, IBM Corporation from 1998 to 2000 and General
Manager, Network Software, IBM Corporation, from 1996 to 1998.
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In selecting Mr. Zollar as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Zollars outside
board service and business activities, including his experience
with product management and information technology matters.
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21
COMMITTEE
ASSIGNMENTS
Our Board has established the five committees described above
under the headings Corporate GovernanceAudit
Committee, Compensation Committee,
Executive Committee, Finance
Committee, and Governance Committee to
assist our Board in fulfilling its responsibilities. The charter
for each of our Audit, Compensation and Governance Committees,
which are available on our website at
www.chubb.com/investors, requires that all members
satisfy the independence requirements of the NYSE. Our
Governance Committee annually considers committee assignments,
with appointments being effective as of the date of the annual
meeting of shareholders. Current members of our committees are
identified below:
Audit
Committee
Daniel
E. Somers (Chair)
Zoë Baird
Martin G. McGuinn
Jess Søderberg
Alfred W. Zollar
Compensation
Committee
Martin
G. McGuinn (Chair)
Sheila P. Burke
Daniel E. Somers
James M. Zimmerman
Alfred W. Zollar
Executive
Committee
John
D. Finnegan (Chair)
James I. Cash, Jr.
Martin G. McGuinn
Daniel E. Somers
James M. Zimmerman
Finance
Committee
John
D. Finnegan (Chair)
Sheila P. Burke
Jess Søderberg
Governance
Committee
James
I. Cash, Jr. (Chair)
Zoë Baird
Lawrence M. Small
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AUDIT
COMMITTEE REPORT
Purpose
Our Board has formed our Audit Committee to assist our Board in
monitoring:
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the integrity of our financial statements;
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our compliance with legal and regulatory requirements;
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the independence and qualifications of our independent auditor;
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the performance of our internal auditors and independent
auditor; and
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other significant financial matters.
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Composition
and Meetings
At December 31, 2010, our Audit Committee was comprised of
five directors, each of whom our Board determined to be
independent and each of whom satisfied the applicable legal and
regulatory independence requirements. Mr. Somers served as
the Chairman of our Audit Committee during 2010 and our Board
designated him, together with Mr. McGuinn, as our audit
committee financial experts. Prior to his retirement from our
Board in April 2010, Mr. Cohen was also designated as an
audit committee financial expert. Information regarding the
respective experience of Messrs. McGuinn and Somers is set
forth under the heading Our Board of Directors.
Our Governance Committee and the full Board consider Audit
Committee membership annually. Committee appointments are
effective as of the date of the annual meeting of shareholders.
In addition to Messrs. McGuinn and Somers, Ms. Baird
and Messrs. Søderberg and Zollar currently serve on
our Audit Committee. Our Audit Committee met eight times during
2010.
Charter
and Self-Assessment
Our Audit Committee operates pursuant to its written charter,
which is available on our website at
www.chubb.com/investors. The Audit Committee Charter has
been approved by our Audit Committee and our Board and it is
subject to review at least annually. It was last revised in
February 2011.
Pursuant to its charter, our Audit Committee performs an annual
self-assessment. For 2010, our Audit Committee concluded that,
in all material respects, it had fulfilled its responsibilities
and satisfied the requirements of its charter and applicable
laws and regulations.
Appointment
of Independent Auditor
Under its charter, our Audit Committee, among other things, is
directly responsible for the appointment, compensation,
retention and oversight of the work of the independent auditor
engaged for the purpose of preparing or issuing an audit report
or related work or performing other audit, review or attest
services for us. Our Audit Committee has appointed
Ernst & Young LLP to serve as independent auditor. Our
Audit Committee has recommended to our Board that
Ernst & Youngs appointment as independent
auditor be submitted for ratification by our shareholders. This
matter is described under the heading
Proposal 3Ratification of Appointment of
Independent Auditor.
Review of
Financial Information
Management is responsible for our internal controls over the
financial reporting process and the independent auditor is
responsible for performing an independent audit of our
consolidated financial statements in accordance with generally
accepted auditing standards and for issuing a report on its
audit. Our Audit Committee is charged with overseeing and
monitoring these activities on behalf of our Board. During 2010
and the first quarter of 2011, our Audit Committee reviewed and
discussed with management and the independent auditor our
quarterly financial statements and our audited consolidated
financial statements for the year ended December 31, 2010.
Our Audit
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Committee discussed with the independent auditor the matters
required to be discussed by the statement on Auditing Standards
No. 114, as amended (AICPA, Professional Standards, Vol. 1.
AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T.
Auditor
Independence
Our Audit Committee has received the written disclosures and the
letter from the independent accountant required by the
applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountants
communications with the audit committee concerning independence,
and has discussed with the independent accountant the
independent accountants independence.
Inclusion
of Consolidated Financial Statements in the 2010
10-K
Based on the foregoing, our Audit Committee recommended to our
Board that the audited consolidated financial statements be
included in the 2010
10-K filed
with the SEC.
The foregoing report has been furnished by the following members
of our Board who comprise our Audit Committee:
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Daniel E. Somers (Chair)
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Jess Søderberg
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Zoë Baird
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Alfred W. Zollar
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Martin G. McGuinn
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This Audit Committee Report shall not be deemed to be
soliciting material, to be filed with
the SEC, subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that we specifically request that the information be
treated as soliciting material, nor shall it be incorporated by
reference into any document filed under the Securities Act of
1933, as amended (Securities Act), or the Exchange Act unless we
specifically incorporate it by reference.
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COMPENSATION
COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis included
under the heading Compensation Discussion and
Analysis pursuant to Item 402(b) of SEC
Regulation S-K.
Based upon the review and discussion described in the preceding
paragraph, our Compensation Committee recommended to our Board
that the Compensation Discussion and Analysis be
included in our proxy statement on Schedule 14A prepared in
connection with the 2011 Annual Meeting and that the
Compensation Discussion and Analysis be incorporated
by reference into the 2010
10-K for the
year ended December 31, 2010.
The foregoing report has been furnished by the following members
of our Board who comprise our Compensation Committee:
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Martin G. McGuinn (Chair)
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James M. Zimmerman
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Sheila P. Burke
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Alfred W. Zollar
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Daniel E. Somers
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This Compensation Committee Report shall not be deemed to be
soliciting material, to be filed with
the SEC, subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that we specifically request that the information be
treated as soliciting material, nor shall it be incorporated by
reference into any document filed under the Securities Act or
the Exchange Act unless we specifically incorporate it by
reference.
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COMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the 2010
compensation program for our NEOs. During 2010, our executive
management team consisted of the following NEOs:
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John D. Finnegan, Chief Executive Officer;
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Richard G. Spiro, Chief Financial Officer;
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John J. Degnan, Chief Operating Officer;
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Paul J. Krump, Chief Underwriting Officer;
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Harold L. Morrison, Jr., Chief Global Field
Officer; and
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Dino E. Robusto, Chief Administrative Officer.
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Mr. Degnan retired from his position of Vice Chairman and
Chief Operating Officer effective as of December 31, 2010.
As of January 1, 2011, Mr. Krump was promoted to the
position of President of Commercial and Specialty Lines,
Mr. Robusto was promoted to the position of President of
Personal Lines and Claims and Mr. Morrison was promoted to
the position of Chief Administrative Officer, while also
retaining the position of Chief Global Field Officer.
2010
Highlights
We had excellent results in 2010. It was the second-best year in
our history in terms of net income per share and our third-best
year for operating income per share. Our underwriting results in
2010 were highly profitable. Our combined loss and expense ratio
(combined ratio), the key measure of underwriting profitability
in the property and casualty insurance industry, was below 90%.
In 2010, we also produced an attractive return on equity,
increased our book value per share by approximately 11% and
returned over $2.5 billion of capital to shareholders
through our share repurchase program and regular dividends.
Our relative performance compared to other U.S. property
and casualty insurers was also very strong. For example, based
upon a February 2011 estimate published by a worldwide
insurance-rating and information agency, our 2010 combined ratio
was 13% better than the industry average. We achieved this
result through disciplined underwriting and a focus on bottom
line profitability while maintaining our commitment to superior
customer service as demonstrated by the continued high marks we
received in industry claims handling surveys. With respect to
stock performance, our 2010 total shareholder return (stock
price appreciation plus dividends) was 25.6% compared to the
Standard & Poor 500 Indexs (S&P
500) total shareholder return of 18.5%.
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The key components of our executive compensation program have
remained substantially the same for several years. We believe
that the structure and mix of this program, as summarized in the
following table, have been instrumental to our ability to
attract and retain key talent while also ensuring that our
executive pay is directly correlated to our performance.
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(1)
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Annual cash incentive compensation awards under the 2006 Annual
Incentive Plan (i) are tied to the achievement of business
and individual performance goals; and (ii) can be reduced
to zero.
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(2)
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Performance unit awards (i) are tied to the relative
performance of our stock versus the S&P 500 (price change
and dividends); and (ii) closely align the interests of
senior management and our other long-term shareholders. The
value of RSU awards is tied to the absolute change in our stock
price and the three-year cliff vesting structure of these awards
closely aligns the interests of management and our other
long-term shareholders.
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Notable compensation actions in 2010 were:
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Salary Adjustments. In April 2010,
Mr. Finnegans annual salary was increased by 4% to
$1,325,000 and Mr. Spiros annual salary was increased
by 5% to $787,500. Although Messrs. Degnan, Krump, Morrison
and Robusto delivered excellent performance throughout 2010, our
Compensation Committee noted that each of them had received a
significant annual salary increase in September 2009.
Accordingly, our Compensation Committee did not increase their
respective salaries for 2010. In recognition of the senior
management appointments announced in October 2010 and effective
in January 2011, our Compensation Committee increased annual
salaries for Mr. Krump by 21% to $700,000, for
Mr. Morrison by 18% to $600,000 and for Mr. Robusto by
37% to $700,000. These annual salary increases took effect on
January 1, 2011.
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Annual Cash Incentive Compensation. While we
produced an attractive operating income result in 2010 (the
basis upon which the 2010 annual cash incentive compensation
pool was calculated under our 2006 Annual Incentive Plan as
described in more detail below), our adjusted operating income
was approximately 9.4% lower than in 2009. Consequently, the
overall 2010 annual cash incentive compensation pool was also
9.4% lower than in 2009.
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Performance Units. For performance units
granted to our NEOs and other senior executives in March 2008,
the three-year performance cycle ended December 31, 2010.
Our total shareholder return (the
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performance metric applicable to performance unit awards as
described in more detail below) was 19.8% during this
performance cycle. During this same period, the average total
shareholder return for the companies in the S&P 500 against
whom our performance was benchmarked was -1%. This placed our
performance in the 75.7 percentile of companies within the
S&P 500 during the performance cycle, translating into a
payout on the 2008 performance unit awards of 151.4% of target
for recipients of these performance unit awards, including each
of our NEOs other than Mr. Spiro (who joined our company in
October 2008).
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Overall
Executive Compensation Philosophy and Objectives
The property and casualty insurance industry is comprised of
hundreds of companies vying for part of the multibillion-dollar
market for personal, commercial and specialty lines of insurance
coverage. Within this competitive environment, we are considered
to be one of the worlds preeminent insurers, offering
extensive business and personal insurance solutions globally. We
distinguish ourselves with an approach that focuses on providing
premier customer service, quality underwriting and highly
disciplined cost management. It is imperative to our success and
long-term viability that our business continues to be managed by
highly experienced, focused and capable executives who possess
the dedication to oversee our global organization on a
day-to-day
basis and have the vision to anticipate and respond to market
developments. It is also important that we concentrate on
retaining and developing the capabilities of our emerging
leaders to ensure that we continue to have an appropriate depth
of executive talent.
Our executive compensation program is intended to attract,
reward and retain a management team with the individual and
collective abilities that fit our profile described above. With
this philosophy in mind, our executive compensation program is
intended to motivate our employees to achieve the following
objectives:
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enhance our market reputation as a provider of the highest
quality customer service;
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attain superior financial performance, in both the short- and
long-term;
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take accountability for the performance of the business units
and functions for which they are responsible; and
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make decisions about our business that will maximize long-term
shareholder value.
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As discussed more fully below, the components of our executive
compensation program support and reward achievement of our
annual operating plan and long-term business goals.
Specifically, compensation decisions for our NEOs are linked to
corporate goals based on financial results (merit-based salary
increases and 2006 Annual Incentive Plan awards), absolute stock
price appreciation (restricted stock unit (RSU)) and a
combination of total shareholder return relative to companies in
the S&P 500 Index and stock price appreciation (performance
unit awards).
Setting
of Executive Compensation
Our Compensation Committee is responsible for establishing the
philosophy and objectives that underlie our executive
compensation program and guiding its design and administration.
Additional information on the structure, scope of authority and
operation of our Compensation Committee, as well as the roles of
the Compensation Consultant and management in determining
compensation, is set forth under the heading Corporate
GovernanceCompensation Committee.
Market
Data
Our Compensation Committee, with the assistance of the
Compensation Consultant, reviews the compensation of similarly
situated officers of a representative peer group of companies on
an annual basis to ensure that our executive compensation
program is competitive with the companies with which we believe
we compete for executive talent. The overall peer group is
comprised of companies similar in size and scope to us within
the property and casualty and broader insurance industries as
well as the financial services industry. In 2010, the
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19 companies comprising our peer group, of which seven were
in the property and casualty insurance industry, were:
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ACE Ltd.*
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CNA Financial Corp.*
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Prudential Financial, Inc.
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Aetna, Inc.
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Genworth Financial, Inc.
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Principal Financial Group, Inc.
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Aflac, Inc.
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Hartford Financial Services Group Inc.*
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State Street Corp.
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Allstate Corp.*
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Lincoln National Corp.
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The Travelers Companies, Inc.*
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Bank of New York Mellon Corp.
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MetLife, Inc.
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XL Capital Ltd.*
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BB&T Corp.
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PNC Financial Svcs Grp, Inc.
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Cigna Corp.
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Progressive Corp.*
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Denotes a company in the property and casualty insurance
industry. |
Our Compensation Committee has established what it believes to
be challenging performance goalsboth on an absolute basis
and relative to our peers, with an emphasis on our property and
casualty insurance industry peers. Our emphasis on long-term
performance-based compensation supports our need for executives
to maintain a longer-term focus on our business, while
merit-based salary increases and annual incentive compensation
reward the delivery of strong annual results. Total compensation
for our NEOs is targeted between the
50th and
75th
percentiles of our peer group of companies, combined salary and
annual cash incentive compensation is generally targeted at the
median of our peer group of companies and long-term incentive
awards are targeted between the
50th and
75th
percentiles.
Total actual compensation is a function of our actual
performance measured against the performance goals established
by our Compensation Committee. For 2010, the total actual
compensation for Messrs. Finnegan and Degnan slightly
exceeded the
75th percentile
as a result of their individual performance as well as our
strong absolute and relative performance. Mr. Spiros
total actual compensation for 2010 slightly exceeded the
75th percentile
goal, reflective of the external market for attracting the
superior talent that he provides, his excellent performance and
our strong financial results. While our Compensation Committee
recognizes the outstanding contributions to our financial
results attributable to Messrs. Krump, Morrison and
Robusto, each of them was promoted in 2008, and received
significant annual salary increases in 2008 and 2009, which
brought their respective total actual compensation packages
close to the
25th percentile
of the named executive officers of other companies within our
peer group.
Individual
Performance
Our executive compensation program provides our Compensation
Committee with the flexibility to make annual compensation
decisions based on individual performance. Specifically, our
program is designed to provide our Compensation Committee with
the ability to adjust individual compensation, significantly in
some cases, to the extent the executive achieves, or fails to
achieve, individual annual performance goals and strengthens his
or her competencies, performance and potential over a longer
period. Our Compensation Committee believes that this
flexibility is imperative to reward and recognize the key
skills, talents and contributions to annual performance and
overall long-term company success.
Each year, our Compensation Committee evaluates
Mr. Finnegans performance. Mr. Finnegan, in
turn, presents our Compensation Committee with his evaluation of
each of the other NEOs, which includes a review of contributions
and performance over the prior year, strengths, weaknesses,
development plans, succession potential and compensation
recommendations. Our Compensation Committee then makes a final
determination of compensation amounts for each NEO with respect
to each of the elements of the executive compensation program
for actual compensation relative to the preceding year and
target compensation for the current year.
Tally
Sheets
Our Compensation Committee reviews tally sheets prepared by
management on an annual basis. The tally sheets set forth all
components of our NEOs compensation, including annual
salary, annual incentive compensation, equity incentive awards,
benefits and perquisites, retirement plan accruals and total
payments upon various
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termination scenarios. Our Compensation Committee uses these
tally sheets to confirm that it has a full understanding of our
NEOs comprehensive compensation packages.
Assessment
of Compensation Programs
During 2010, with the assistance of the Compensation Consultant,
our Compensation Committee performed an assessment of the
primary components of our executive compensation
programannual salary, annual incentive compensation and
long-term equity incentive awards. Our Compensation Committee
reviewed each component from an internal perspective, including
the alignment of our overall executive compensation philosophy
and objectives to our business strategy, and from an external
perspective, which considered our peer group and evolving market
trends. The assessment revealed that our overall executive
compensation program is aligned with our business strategy of
emphasizing operating income and shareholder return and reflects
market practices in terms of incentive mix, metrics and equity
use. Based on the assessment, our Compensation Committee
determined that these components of our executive compensation
program did not encourage inappropriate risk-taking by our NEOs.
In reaching this conclusion, our Compensation Committee noted
that:
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The financial performance objectives of our annual cash
incentive program are the budgeted objectives that are reviewed
and approved by our Compensation Committee.
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We generally use the same financial performance measures under
our 2006 Annual Incentive Plan for our NEOs that we use for all
other plan participants.
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Our variable compensation awards (annual cash incentives and
long-term incentives in the form of performance units and RSUs)
are based on formulaic allocations and are granted at the
discretion of our Compensation Committee.
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We have a recoupment policy that requires the repayment of any
bonus or other incentive-based or equity-based compensation in
certain circumstances.
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A substantial component of our NEOs annual compensation is
in the form of performance units that are subject to a
three-year performance cycle, which mitigates excessive
short-term risk taking.
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Our NEOs hold a significant amount of their personal wealth in
the form of our stock. Accordingly, they would be personally
impacted by the potential consequences of inappropriate or
unnecessary risk-taking.
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We balance short- and long-term decision making with the annual
cash incentive program and equity awards that vest over three
years.
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In addition to the risk assessment of the compensation programs
in which our NEOs participate, in December 2010, our
Compensation Committee undertook a risk analysis of our other
compensation programs and determined that these compensation
programs do not create any risk that is reasonably likely to
have a material adverse effect on us.
Tax
Policies
Section 162(m) of the Internal Revenue Code limits to
$1 million per year the federal income tax deduction to
public corporations for compensation paid for any fiscal year to
the CEO and the three most highly compensated executive officers
(other than the CFO) as of the end of the fiscal year as
determined in accordance with the Exchange Act. This limitation
does not apply to qualifying performance-based
compensation. Our Compensation Committee has designed our
annual incentive compensation awards and performance unit awards
to qualify for the performance-based compensation exception to
the $1 million limit. In establishing targets for meeting
the performance-based compensation exception, our Compensation
Committee anticipated using negative discretion in calculating
final incentive payouts. In addition, our NEOs (other than
Mr. Spiro) generally are required to defer compensation
that would not otherwise be deductible. Due to guidance issued
in 2007 by the Internal Revenue
30
Service (IRS), the compensation of Mr. Spiro, our principal
financial officer for 2010, was not subject to the
Section 162(m) limitation on deductibility.
Our Compensation Committee believes that our shareholders are
best served by not restricting our Compensation Committees
discretion and flexibility in crafting compensation plans and
arrangements, such as annual salaries and RSU awards, even
though they may result in certain non-deductible compensation
expenses. Accordingly, our Compensation Committee may from time
to time approve elements of compensation for one or more of our
NEOs that are not fully deductible and reserves the right to do
so in the future.
Components
of Executive Compensation
Our executive compensation program consists of annual and
long-term compensation and company-sponsored benefit plans. Each
component is designed for a specific purpose and contributes to
an overall total compensation package that is competitive,
predominantly performance-based and valued by our executives.
Annual
Salary
Annual salary is designed to provide a fixed level of
compensation to our NEOs based on their roles, skills,
background, and market data, as well as to retain their
services. Annual salaries are generally targeted at the median
of our peer group because we want to provide attractive and
competitive levels of compensation to ensure our ability to
attract and retain superior talent. In addition to considering
peer group data, individual performance and contributions, our
Compensation Committee determines annual salaries based upon the
skills, knowledge and competencies of each NEO, as reviewed and
recommended annually by Mr. Finnegan (for all NEOs other
than himself). Setting of annual salaries is important because
each NEOs target annual incentive compensation is then
developed based on annual salary levels.
In February 2010, our Compensation Committee reviewed annual
salaries for each of our NEOs based upon the above factors.
Reflective of our excellent performance, our Compensation
Committee decided to increase Mr. Finnegans annual
salary by 4% and to increase Mr. Spiros annual salary
by 5%.
During the third quarter of 2009, our Compensation Committee
undertook a comprehensive review of the compensation of
Messrs. Degnan, Krump, Morrison and Robusto in connection
with the decision to defer Mr. Degnans retirement
until December 31, 2010. As a result of that analysis, our
Compensation Committee approved annual salary increases
effective September 1, 2009 for Messrs. Degnan, Krump,
Morrison and Robusto of 6.0%, 5.5%, 6.3% and 13.3%,
respectively. Given these September 2009 increases, our
Compensation Committee decided to maintain the 2009 annual
salaries in 2010 for each of Messrs. Degnan, Krump,
Morrison and Robusto. Accordingly, the 2010 annual salaries for
Messrs. Finnegan, Spiro, Degnan, Krump, Morrison and
Robusto were set at $1,325,000, $787,500, $874,500, $580,000,
$510,000, and $510,000, respectively.
As noted above, in connection with their respective promotions
and their excellent overall performance, the annual salaries of
Messrs. Krump, Morrison and Robusto were increased
effective January 1, 2011 to $700,000, $600,000 and
$700,000, respectively. In February 2011, our Compensation
Committee approved a 3% increase to Mr. Spiros annual
salary in recognition of his strong performance during 2010
effective as of April 1, 2011. As of April 1, 2011,
Mr. Spiros annual salary will be $811,125.
Annual
Incentive Compensation
Our 2006 Annual Incentive Plan is designed to support our
compensation strategy by linking a significant portion of total
annual cash compensation to the achievement of critical business
goals on an annual basis. All of our salaried employees,
including our NEOs, are eligible to participate in the 2006
Annual Incentive Plan.
Incentive Opportunity. As
discussed under the heading Compensation Discussion and
AnalysisSetting of Executive Compensation, baseline
opportunities for annual incentive compensation awards (combined
with annual salary) are generally set at the median for
executives with commensurate positions at our peers. Our
Compensation Committee establishes the range of potential
payments for Mr. Finnegans annual incentive
compensation based upon its analysis of market data from our
peer group of companies, advice from the
31
Compensation Consultant and subject to the minimum annual
incentive compensation award target of approximately
$1.7 million as provided for in his employment agreement.
For the other NEOs, our Compensation Committee establishes the
annual incentive compensation payment range after taking into
consideration Mr. Finnegans recommendations, advice
from the Compensation Consultant and market data from our peer
group of companies. For information regarding the potential
ranges of awards under the 2006 Annual Incentive Plan for our
NEOs in 2010, see the information set forth under the heading
Executive CompensationGrants of Plan-Based
Awards. For 2010, the respective target awards for
Messrs. Finnegan, Spiro, Degnan, Krump, Morrison and
Robusto were $2,120,000, $945,000, $1,136,900, $464,000,
$408,000 and $408,000.
Performance Goal. Since
2007, annual incentive compensation awards have been earned
based on our adjusted operating income. We define adjusted
operating income as net income excluding after-tax realized
investment gains and losses and adjusted to account for the loss
of investment income attributable to our repurchase of shares of
our common stock. Our Compensation Committee believes that
adjusted operating income provides an effective means of
directly linking executive compensation to our
shareholders interests. We adjust for investment income so
that the calculation is not distorted by the impact of our
continuing commitment to return capital to shareholders through
our share repurchase program.
Pool Funding. Each year we
fund an aggregate award pool for all 2006 Annual Incentive Plan
participants in an amount equal to 8.8% of adjusted operating
income subject to a minimum funding condition that requires us
to achieve operating income greater than 50% of the prior
years operating income. This means that each percentage
increase or decrease in 2010 operating income relative to 2009
operating income will result in a proportional increase or
decrease in the 2010 annual incentive compensation award pool,
thus providing a direct link between incentive payouts and year
over year performance.
Performance
Multiplier. Actual incentive compensation
awards for our NEOs are calculated by applying a performance
multiplier to each NEOs baseline opportunity. The
performance multiplier is derived by dividing the total annual
incentive compensation award pool by the total baseline
opportunities for all participants covered by the 2006 Annual
Incentive Plan.
Incentive Payouts. Adjusted
operating income in 2010 was $2.1 billion, which was
approximately 9.4% lower than 2009 adjusted operating income of
$2.3 billion. This created a 2010 award pool of
approximately $184 million, 9.4% lower than the 2009 award
pool. Consequently, the respective non-equity incentive
compensation awards to Messrs. Finnegan, Spiro and Degnan
were lower than the awards they received relative to their 2009
performance. For 2010, Messrs. Finnegan, Spiro and Degnan
were awarded $3,600,000, $1,487,400 and $1,789,400,
respectively. In light of their assumption of transition
responsibilities during 2010 in connection with
Mr. Degnans retirement and their excellent individual
performance, 2010 non-equity incentive compensation awards for
Messrs. Krump, Morrison and Robusto were set at $850,000,
$725,000 and $750,000, respectively.
The incentive payouts for our NEOs who are subject to the
$1 million compensation limit under Section 162(m) of
the Internal Revenue Code are below their respective targets
established by our Compensation Committee to meet the
performance-based compensation exception.
Long-Term
Equity Incentive Awards
Equity Incentive Awards. In
April 2009, our shareholders approved the adoption of the 2009
LTIP. As disclosed in our 2009 proxy statement, our Compensation
Committee approved 2009 annual equity awards for eligible
employees in February 2009 under The Chubb Corporation Long-Term
Stock Incentive Plan (2004) (2004 LTIP). Accordingly, 2010 was
the first year in which eligible employees, including each of
our NEOs, received equity awards under the 2009 LTIP. The
structure, mix and terms of awards made under the 2009 LTIP were
substantially similar to those made under the 2004 LTIP.
Long-term equity incentive awards made pursuant to the 2009 LTIP
are designed to support several of our compensation objectives,
including:
|
|
|
|
|
placing a significant portion of total compensation at risk;
|
32
|
|
|
|
|
linking long-term performance-based awards with shareholder
value; and
|
|
|
|
retaining our highly-skilled and valued senior management.
|
All employees at or above the level of Assistant Vice President,
including our NEOs, participate in our long-term equity
incentive award program. Target long-term equity incentive
awards are designed to achieve our desired competitive market
position of being between the
50th and
75th
percentiles of our peer group of companies and are commensurate
with the individuals level within our organization. For
2010, the target long-term equity incentive awards for
Messrs. Finnegan, Spiro and Degnan were $7,600,000,
$2,650,000 and $3,000,000, respectively. The target long-term
equity incentive award for each of Messrs. Krump, Morrison,
and Robusto was $700,000. These target levels were determined
based on analysis of data from our peer group of companies. In
connection with their respective promotions and their excellent
overall performance, for 2011, the respective target long-term
equity incentive awards for Messrs. Krump, Morrison and
Robusto were increased to $1,200,000, $900,000 and $1,200,000,
respectively.
Annual equity incentive awards to our NEOs are in the form of
performance units and RSUs. Consistent with our emphasis on
performance-based compensation, for officers at or above the
level of Senior Vice President, including our NEOs, performance
units generally constitute 75% of the annual equity award, while
RSUs generally constitute the remaining 25%. We believe our
emphasis on performance-based long-term equity incentive awards
is consistent with the practice of our peer group of companies.
Our Compensation Committee manages the potential dilutive effect
of equity incentive awards by monitoring our run
ratethe number of shares granted as a percentage of
our fully diluted common shares outstandingrelative to our
peer group of companies. Our Compensation Committee also
evaluates guidelines used by certain institutional advisory
services and considers advice from the Compensation Consultant.
Our annual run rate was approximately 0.6% in 2010, which we
believe is conservative relative to the practices of our peer
group of companies. Our conservative run rate is primarily
attributable to the fact that fewer full-value shares are needed
to provide a target award value in the form of performance units
and RSUs than would be required for an award of stock options as
well as our limited participation levels.
Performance
Units. Performance units are intended to
motivate our senior officers to achieve superior total
shareholder returnshare price appreciation plus reinvested
dividends (TSR)versus companies in the S&P 500 over a
three-year performance period. We view the other companies in
the S&P 500 as the competition for our shareholders
investment dollars. The value of performance units is directly
linked to the total return delivered to our shareholders, thus
motivating our senior officers to deliver superior returns over
an extended performance period. Performance units also support
retention because they are subject to forfeiture if the
recipients employment terminates before the shares are
settled for any reason other than death, disability, retirement
or with the consent of our Compensation Committee.
The number of performance units earned for each three-year
performance period can vary from 0% to 200% of the original
target award based on our relative TSR versus S&P
500 companies as follows:
|
|
|
|
|
TSR
|
|
|
Percentile
|
|
Percent of Target
|
Ranking
|
|
Shares Earned
|
|
85th
& higher
|
|
|
200
|
%
|
50th
|
|
|
100
|
%
|
25th
|
|
|
50
|
%
|
Below 25th
|
|
|
0
|
%
|
For relative performance between the 25th and 85th percentiles,
the number of shares earned is determined by multiplying the
relative percentile of comparative performance achieved by two.
The final dollar value of each recipients performance unit
award is also dependent on the price of our common stock at the
awards settlement date, thus providing an additional link
to shareholders interests and providing our senior
officers with significant value potential based on our results.
We do not accrue or pay dividend equivalents on outstanding
performance units during the performance period.
33
The performance period for the performance units granted in 2008
ended on December 31, 2010. Our TSR over the performance
period was 19.8%, which positioned us at the
75.7 percentile of companies in the S&P 500. Based on
the performance scale above, each of our NEOs (other than
Mr. Spiro), like all recipients of 2008 performance units
who did not forfeit such awards due to termination of their
employment, received in February 2011 the number of shares of
common stock equal to 151.4% of the respective target number of
performance units granted in 2008. Information regarding the
vesting of each NEOs respective 2008 performance unit
award is set forth under the heading Executive
CompensationOption Exercises and Stock Vested.
The number and grant date fair value of performance units
granted to our NEOs in 2010 for the performance period running
from January 1, 2010 to December 31, 2012 is set forth
under the heading Executive CompensationGrants of
Plan-Based Awards.
RSUs. RSUs are intended to
align managements interests with those of our shareholders
and serve as a strong retention tool for key employees. Like
performance units, RSUs support retention because they are
subject to forfeiture if the recipients employment
terminates before the shares are settled for any reason other
than death, disability, retirement or with the consent of our
Compensation Committee. RSU award recipients receive dividend
equivalents at the same time and in the same amount as dividends
are paid on our common stock. The number and grant date value of
RSUs granted to NEOs in 2010 is set forth under the heading
Executive CompensationGrants of Plan-Based
Awards.
Stock Options. We
discontinued the use of stock options as part of our core
long-term equity incentive award program in 2004. However, we
still utilize stock option grants as a means of providing
tax-efficient equity awards to certain internationally-based
employees.
Equity Grant Practices. Our
Compensation Committee approves and grants annual equity awards
at a regularly scheduled meeting in the first quarter of each
year based on market data from our peer group of companies,
advice from the Compensation Consultant and recommendations from
Mr. Finnegan for the other NEOs. There is no relationship
between the timing of equity incentive award grants and our
release of material, non-public information. Although our
Compensation Committee has the discretion to do so, our
Compensation Committee generally does not make interim equity
award grants to employees at or above the level of Executive
Vice President, including our NEOs.
As discussed under the heading Corporate
GovernanceCompensation Committee, our Compensation
Committee has delegated authority to Mr. Finnegan to grant
equity awards to employees up to and including the level of
Senior Vice President pursuant to guidelines that specify the
range of award values an employee could receive based on his or
her level within our organization. These guidelines are adjusted
on a periodic basis as warranted by competitive market
conditions. Grants made by Mr. Finnegan pursuant to this
authority are effective on the last business day of the month
(or on the date of hire in the case of newly hired employees),
with the number of shares awarded determined by dividing the
award value by the average of the high and low prices of our
common stock on the grant date. These grants are reported to our
Compensation Committee at its next regularly scheduled meeting
following the date of grant.
Perquisites
We provide certain executives, including each of our NEOs, with
a limited range of perquisites. The incremental cost and
valuation of these perquisites for the NEOs is set forth under
the heading Executive CompensationSummary
Compensation Table.
Corporate Aircraft. During
2010, we owned one corporate aircraft and leased a second.
Senior executives use these aircraft to minimize and more
efficiently utilize their travel time, protect the
confidentiality of their travel and our business and enhance
their personal security. Our Board also permits
Mr. Finnegan limited use of the corporate aircraft for
personal travel. The annual personal use of the corporate
aircraft for Mr. Finnegan is limited to 35 hours.
Prior to his retirement on December 31, 2010, our Board
also permitted Mr. Degnan 20 hours per year of
personal use of our corporate aircraft.
34
Automobile Use/Allowance. As
required pursuant to his employment agreement, we provide
Mr. Finnegan with a car and driver for all of his business
travel needs to minimize and more efficiently utilize his travel
time and enhance his personal security. Mr. Finnegans
personal use of the car and driver is primarily for his commute
to and from the office. Mr. Finnegan bears the applicable
taxes with respect to his personal usage. We provide all
domestic employees at or above the level of Vice President,
including our NEOs other than Mr. Finnegan, a monthly
automobile allowance of $500. Recipients of this benefit bear
the applicable income taxes with respect thereto.
Financial Counseling. We
offer all of our domestic employees at or above the level of
Senior Vice President, including our NEOs, financial counseling
services. These services include income tax preparation,
portfolio management and estate planning. Recipients of this
benefit bear the applicable income taxes with respect thereto.
Company-Sponsored
Benefit Plans
We maintain company-sponsored retirement and deferred
compensation plans for the benefit of all of our salaried
employees, including our NEOs. These benefits are designed to
assist employees, including our NEOs, in providing for their
financial security and personal needs in a manner that
recognizes individual goals and preferences.
Retirement Plans. We
maintain the Pension Plan of The Chubb Corporation (the Pension
Plan), which is our tax-qualified defined benefit plan, and the
Pension Excess Benefit Plan of The Chubb Corporation (the
Pension Excess Benefit Plan), which is our nonqualified excess
defined benefit plan, to help us attract and retain our
employees. Our NEOs participate in the Pension Plan on the same
terms and conditions as other employees. Our NEOs participate in
the Pension Excess Benefit Plan on the same terms and conditions
as other highly compensated employees, except that
Mr. Finnegan is entitled to a supplemental pension benefit
under his employment agreement (the Pension SERP). Information
about our retirement plans is set forth under the heading
Executive CompensationPension Benefits.
We also maintain the CCAP, which is a qualified 401(k) savings
plan, for all eligible employees. The CCAP provides employees
with an opportunity to voluntarily defer pre-tax or after-tax
dollars into a 401(k) account. Chubb provides matching
contributions on an annual basis equal to the lesser of 4% or
the actual percentage deferred by the participant.
Nonqualified Defined Contribution and Deferred
Compensation Plans. We maintain The Chubb
Corporation Key Employee Deferred Compensation Plan (2005) (the
2005 Deferred Compensation Plan) and The Chubb Corporation
Executive Deferred Compensation Plan (collectively, the Deferred
Compensation Plans), which are our nonqualified deferred
compensation plans for our employees at or above the level of
Vice President, including our NEOs, to provide them with
additional tools to enhance their retirement planning and wealth
management. These plans allow participants to defer receipt, and
thus the income tax liability, of income (annual salary, annual
incentive compensation and equity compensation) to a later date.
We also maintain the Defined Contribution Excess Benefit Plan of
The Chubb Corporation (the CCAP Excess Benefit Plan), which is
our nonqualified excess defined contribution plan, and the
CCAP-related supplemental executive retirement plan for
Mr. Finnegan pursuant to his employment agreement (the CCAP
SERP). None of these plans provide for above-market returns.
Information about our nonqualified defined contribution and
deferred compensation plans is set forth under the heading
Executive CompensationNonqualified Defined
Contribution and Deferred Compensation Plans.
Restrictive
Covenants and Recoupment Provisions
To protect our competitive position, since 2005, individual
equity award agreements for each of our employees, including our
NEOs, have contained non-disclosure, non-solicitation and
invention assignment covenants. In addition, the NEO equity
award agreements and those of certain other senior officers
contain non-competition provisions. Failure to comply with these
provisions, among other potential consequences, results in the
forfeiture of unsettled awards. Our Compensation Committee also
may require repayment of any awards that are settled within one
year prior to the breach of the applicable covenant and within
one year after termination of employment. Additionally, we may
seek an injunction, restraining order or such other equitable
relief restraining the officer from committing any violation of
the covenants.
35
In 2009, we adopted a policy on the recoupment of
performance-based compensation in restatement situations. The
policy provides that if we are required to restate our financial
statements due to material noncompliance with any financial
reporting requirement under the securities laws, as a result of
misconduct of a senior executive, the independent members of the
Board, in their sole discretion, have the right to cause such
senior executive to reimburse us for (1) any bonus or other
incentive-based or equity-based compensation received by that
senior executive during the
12-month
period following the first public issuance or filing with the
SEC (whichever first occurs) of the document containing such
financial statements; and (2) any profits realized from the
sale of our stock during that
12-month
period. A senior executive means any of our officers who are
subject to Section 16 of the Exchange Act and any of our
other officers who the Board designates.
Employment
and Severance Agreements
In general, it is our Boards policy not to enter into
employment agreements with, or provide executive severance
benefits to, our executive officers beyond those generally
available to our salaried employees, other than the change in
control agreements discussed below. As a result, our NEOs serve
at the will of our Board. The only exception to this policy is
the employment agreement with Mr. Finnegan that we entered
into when he was hired in 2002. Our Compensation Committee
believed, and continues to believe, that it is in our best
interest and the best interests of our shareholders to have a
specific compensation package with incentives and guarantees in
order to retain Mr. Finnegans services. A description
of, and the amount of the estimated payments and benefits
payable to Mr. Finnegan upon a termination of employment
under, his employment agreement is set forth under the heading
Executive CompensationPotential Payments upon
Termination or a Change in Control.
Change in
Control Agreements
Our Board has determined that it is in our best interest and the
best interests of our shareholders to assure that we will have
the continued dedication of Messrs. Finnegan and Spiro in
the event of a threat or occurrence of a change in control. Our
Board continues to believe that change in control agreements
diminish the inevitable distraction of these individuals by
virtue of the personal uncertainties and risks created by a
pending or threatened change in control and encourage their full
attention and dedication to our business in the event of any
pending or threatened change in control. As such, we have
individual change in control agreements with
Messrs. Finnegan and Spiro. Each of these agreements
contains a double trigger mechanism, requiring both a change in
control as well as a termination event to trigger benefits. A
description of, and the amount of the estimated payments and
benefits payable upon a change in control under, these
agreements is set forth under the heading Executive
CompensationPotential Payments upon Termination or a
Change in Control. Mr. Finnegans change in
control agreement provides for a
gross-up
payment in connection with the determination that a payment
would be subject to the excise tax under Section 280G of
the Internal Revenue Code.
Share
Ownership Guidelines
Our Board, based upon our Compensation Committees
recommendation, adopted executive share ownership guidelines in
2004. Our Compensation Committee believes that these guidelines
promote our objective of increasing shareholder value by
encouraging senior officers to acquire and maintain a meaningful
equity stake in Chubb.
The guidelines were designed to maintain share ownership at
levels high enough to assure our shareholders of our senior
officers commitment to value creation, while taking into
account each individual officers need for portfolio
diversification. Under these guidelines, senior officers,
including each of our NEOs, are expected, over time, to acquire
and hold shares of our common stock equal in value to a multiple
of their annual salaries. Owned shares, unvested RSUs, shares
allocated in our retirement plans and shares deferred until
termination of employment count toward satisfying the
guidelines. Unexercised stock options and unearned performance
units do not
36
count toward satisfaction of the guidelines. There is a
five-year phase-in period beginning on the date of becoming an
officer subject to the share ownership guidelines. Our current
share ownership guidelines are as follows:
|
|
|
|
|
|
|
Pay Band
|
|
Officer Titles Included
|
|
Ownership Level
|
|
|
15
|
|
Chief Executive Officer
|
|
|
5x Annual Salary
|
|
14
|
|
Chief Operating Officer/Chief Financial Officer
|
|
|
3x Annual Salary
|
|
13
|
|
Executive Vice President/Senior Vice President
|
|
|
2x Annual Salary
|
|
12
|
|
Senior Vice President
|
|
|
1x Annual Salary
|
|
Our Compensation Committee reviews the guidelines on a periodic
basis and monitors the officers progress toward meeting
their target ownerships levels. The share ownership of our NEOs
as of December 31, 2010 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
Target Number
|
|
|
Number of Shares
|
|
Name
|
|
Ownership Level
|
|
|
of
Shares(1)
|
|
|
Deemed Owned
|
|
|
John D. Finnegan
|
|
|
5x Annual Salary
|
|
|
|
111,083
|
|
|
|
765,233
|
|
Richard G. Spiro
|
|
|
3x Annual Salary
|
|
|
|
39,613
|
|
|
|
84,158
|
|
John J. Degnan
|
|
|
3x Annual Salary
|
|
|
|
43,989
|
|
|
|
193,601
|
|
Paul J. Krump
|
|
|
2x Annual Salary
|
|
|
|
19,450
|
|
|
|
85,983
|
|
Harold L. Morrison, Jr.
|
|
|
2x Annual Salary
|
|
|
|
17,103
|
|
|
|
37,253
|
|
Dino E. Robusto
|
|
|
2x Annual Salary
|
|
|
|
17,103
|
|
|
|
40,011
|
|
|
|
|
|
(1)
|
Based on a per share price of $59.64, which was the closing
price of our common stock on December 31, 2010, and the
respective salaries of our NEOs as of that date.
|
As shown in the above table, each of our NEOs has met his
required ownership threshold.
Anti-Hedging
Policy
Under our insider trading policy, we prohibit all of our
directors and employees from engaging in transactions in our
securities while in possession of material nonpublic
information. We also prohibit speculation in our securities. For
example, directors and employees may not engage in short sales
in our securities, purchase put or call options on our
securities or engage in similar transactions intended to
capitalize on short-term movements in the prices of our
securities. In addition to the foregoing, we discourage
directors and employees from engaging in other transactions
intended to allow an investor to continue to own our securities
without the full risks and rewards of ownership.
37
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth information regarding NEO
compensation during 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
($)(4)
|
|
($)(5)
|
|
($)(6)
|
|
($)
|
|
John D. Finnegan
|
|
|
2010
|
|
|
$
|
1,312,500
|
|
|
|
|
|
|
$
|
8,613,856
|
|
|
|
|
|
|
$
|
3,600,000
|
|
|
$
|
6,428,352
|
|
|
$
|
305,053
|
|
|
$
|
20,259,761
|
|
Chairman, President and Chief
|
|
|
2009
|
|
|
|
1,275,000
|
|
|
|
|
|
|
|
8,339,203
|
|
|
|
|
|
|
|
3,750,000
|
|
|
|
5,514,009
|
|
|
|
283,019
|
|
|
|
19,161,231
|
|
Executive Officer
|
|
|
2008
|
|
|
|
1,275,000
|
|
|
|
|
|
|
|
7,718,690
|
|
|
|
|
|
|
|
3,357,800
|
|
|
|
4,412,367
|
|
|
|
205,615
|
|
|
|
16,969,472
|
|
Richard G. Spiro
|
|
|
2010
|
|
|
|
778,125
|
|
|
|
|
|
|
|
3,003,481
|
|
|
|
|
|
|
|
1,487,400
|
|
|
|
95,341
|
|
|
|
13,150
|
|
|
|
5,377,497
|
|
Executive Vice President and
|
|
|
2009
|
|
|
|
750,000
|
|
|
|
|
|
|
|
2,907,723
|
|
|
|
|
|
|
|
1,563,300
|
|
|
|
|
|
|
|
6,000
|
|
|
|
5,227,023
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
|
187,500
|
|
|
$
|
1,735,000
|
|
|
|
3,716,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
5,640,951
|
|
John J.
Degnan(7)
|
|
|
2010
|
|
|
|
874,500
|
|
|
|
|
|
|
|
3,400,229
|
|
|
|
|
|
|
|
1,789,400
|
|
|
|
1,300,963
|
|
|
|
164,186
|
|
|
|
7,529,278
|
|
Vice Chairman and Chief Operating
|
|
|
2009
|
|
|
|
841,500
|
|
|
|
|
|
|
|
3,291,772
|
|
|
|
|
|
|
|
1,974,700
|
|
|
|
1,487,700
|
|
|
|
134,991
|
|
|
|
7,730,663
|
|
Officer
|
|
|
2008
|
|
|
|
759,588
|
|
|
|
|
|
|
|
2,467,924
|
|
|
|
|
|
|
|
1,765,300
|
|
|
|
1,424,657
|
|
|
|
144,819
|
|
|
|
6,562,288
|
|
Paul J. Krump
|
|
|
2010
|
|
|
|
580,000
|
|
|
|
|
|
|
|
793,376
|
|
|
|
|
|
|
|
850,000
|
|
|
|
722,992
|
|
|
|
67,615
|
|
|
|
3,013,983
|
|
Executive Vice President and Chief
|
|
|
2009
|
|
|
|
560,000
|
|
|
|
|
|
|
|
603,469
|
|
|
|
|
|
|
|
806,000
|
|
|
|
519,244
|
|
|
|
63,191
|
|
|
|
2,551,904
|
|
Underwriting Officer
|
|
|
2008
|
|
|
|
505,285
|
|
|
|
|
|
|
|
482,384
|
|
|
|
|
|
|
|
775,000
|
|
|
|
522,480
|
|
|
|
58,056
|
|
|
|
2,343,205
|
|
Harold L. Morrison, Jr.
|
|
|
2010
|
|
|
|
510,000
|
|
|
|
|
|
|
|
793,376
|
|
|
|
|
|
|
|
725,000
|
|
|
|
742,413
|
|
|
|
61,095
|
|
|
|
2,831,884
|
|
Executive Vice President and Chief
|
|
|
2009
|
|
|
|
490,000
|
|
|
|
|
|
|
|
603,469
|
|
|
|
|
|
|
|
708,700
|
|
|
|
601,945
|
|
|
|
55,330
|
|
|
|
2,459,444
|
|
Global Field Officer
|
|
|
2008
|
|
|
|
433,744
|
|
|
|
|
|
|
|
456,990
|
|
|
|
|
|
|
|
682,000
|
|
|
|
563,237
|
|
|
|
48,239
|
|
|
|
2,184,210
|
|
Dino E. Robusto
|
|
|
2010
|
|
|
|
510,000
|
|
|
|
|
|
|
|
793,376
|
|
|
|
|
|
|
|
750,000
|
|
|
|
712,218
|
|
|
|
60,015
|
|
|
|
2,825,609
|
|
Executive Vice President and Chief
|
|
|
2009
|
|
|
|
470,000
|
|
|
|
|
|
|
|
603,469
|
|
|
|
|
|
|
|
708,700
|
|
|
|
536,190
|
|
|
|
53,939
|
|
|
|
2,372,298
|
|
Administrative Officer
|
|
|
2008
|
|
|
|
398,975
|
|
|
|
|
|
|
|
456,990
|
|
|
|
|
|
|
|
675,000
|
|
|
|
432,120
|
|
|
|
47,071
|
|
|
|
2,010,156
|
|
|
|
|
(1) |
|
A total of $312,500 of Mr. Finnegans salary for 2010
and $275,000 for 2009 and 2008 was deferred under the 2005
Deferred Compensation Plan. Additional information regarding the
2005 Deferred Compensation Plan is set forth under the heading
Executive CompensationNonqualified Defined
Contribution and Deferred Compensation Plans. For 2010,
salaries earned by our NEOs accounted for the following
percentages of their total compensation: Mr. Finnegan
(6.5%), Mr. Spiro (14.5%), Mr. Degnan (11.6%),
Mr. Krump (19.2%), Mr. Morrison (18.0%) and
Mr. Robusto (18.0%). |
|
(2) |
|
Pursuant to his offer letter, Mr. Spiro received a
guaranteed cash bonus in the amount of $1,420,000 paid in March
2009 (which would have been reduced to the extent he had
received any 2008 bonus from his previous employer) and a cash
payment in the amount of $315,000 paid on his start date of
October 1, 2008. |
|
(3) |
|
The grant date fair value for each of the RSU awards represents
the average of our highest and lowest stock prices on the date
of grant. The grant date fair value for each of the performance
unit awards is estimated using a Monte-Carlo simulation model.
For our performance unit awards, a range of 0% to 200% of the
original award can be achieved under the program. A breakdown of
the 2010 stock awards is set forth under the heading
Executive CompensationGrants of Plan-Based
Awards. |
|
(4) |
|
Reflects 2010, 2009 and 2008 incentive compensation paid in
March 2011, March 2010 and March 2009, respectively, under our
2006 Annual Incentive Plan. Additional information regarding
annual incentive compensation is set forth under the headings
Compensation Discussion and AnalysisComponents of
Executive Compensation and Executive
CompensationGrants of Plan-Based Awards. |
|
(5) |
|
Reflects solely the aggregate change in pension value for 2010
under our defined benefit plans as follows:
Mr. Finnegans benefits under the Pension Plan,
Pension Excess Benefit Plan and Pension SERP, $16,280, $309,249
and $6,102,823, respectively; Mr. Spiros benefits
under the Pension Plan and Pension Excess Benefit Plan, $10,012
and $85,329, respectively; Mr. Degnans benefits under
the Pension Plan and Pension Excess Benefit Plan, $66,640 and
$1,234,323, respectively; Mr. Krumps benefits under
the Pension Plan and Pension Excess Benefit Plan, $109,218 and
$613,774, respectively; Mr. Morrisons benefits under
the Pension Plan and Pension Excess Benefit Plan, $115,951 and
$626,462, respectively; and Mr. Robustos benefits
under the |
38
|
|
|
|
|
Pension Plan and Pension Excess Benefit Plan, $104,307 and
$607,911, respectively. Information regarding our calculations
of pension values is set forth in footnote 11 to the financial
statements included in the 2010
10-K. |
|
(6) |
|
The following table reflects the components for the All
Other Compensation column for 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
to Defined
|
|
|
|
|
|
|
Personal Use
|
|
Financial
|
|
Automobile
|
|
Contribution
|
|
|
|
|
|
|
of Aircraft
|
|
Planning
|
|
Expense
|
|
Plans
|
|
Life Insurance
|
|
Total
|
Name
|
|
($)(a)
|
|
($)(b)
|
|
($)(c)
|
|
($)(d)
|
|
($)(e)
|
|
($)
|
|
John D.
Finnegan(f)
|
|
$
|
37,946
|
|
|
$
|
13,385
|
|
|
$
|
11,222
|
|
|
$
|
185,312
|
|
|
$
|
57,188
|
|
|
$
|
305,053
|
|
Richard G. Spiro
|
|
|
|
|
|
|
7,150
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
13,150
|
|
John J. Degnan
|
|
|
42,034
|
|
|
|
11,880
|
|
|
|
6,000
|
|
|
|
104,272
|
|
|
|
|
|
|
|
164,186
|
|
Paul J. Krump
|
|
|
|
|
|
|
8,215
|
|
|
|
6,000
|
|
|
|
53,400
|
|
|
|
|
|
|
|
67,615
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
8,215
|
|
|
|
6,000
|
|
|
|
46,880
|
|
|
|
|
|
|
|
61,095
|
|
Dino E. Robusto
|
|
|
|
|
|
|
8,215
|
|
|
|
6,000
|
|
|
|
45,800
|
|
|
|
|
|
|
|
60,015
|
|
|
|
|
(a) |
|
The incremental cost of the personal use of corporate aircraft
expense for Messrs. Finnegan and Degnan is calculated by
multiplying the direct operating cost per hour by the NEOs
personal use hours. Direct operating cost of the aircraft is
comprised of fuel, landing/parking fees, crew fees and expenses,
custom fees, flight services/charts, variable maintenance costs,
catering, aircraft supplies and other miscellaneous expenses. |
|
(b) |
|
The incremental cost of financial planning represents the actual
cost incurred by us. |
|
(c) |
|
The incremental cost to us relating to automobile expense
represents the actual amount of the automobile allowance we
provided to our NEOs (other than Mr. Finnegan). The
incremental cost of providing Mr. Finnegan with an
automobile and driver was calculated by multiplying the variable
expenses of owning and operating the car that Mr. Finnegan
uses by the quotient of the number of miles the car was driven
for Mr. Finnegans personal use in 2010 by the total
number of miles the vehicle was driven in 2010. The variable
expenses are comprised of gas, maintenance, driver overtime and
miscellaneous driving expenses. Mr. Finnegans
personal use percentage for 2010 was approximately 21.2% of the
total vehicle miles. |
|
(d) |
|
Reflects 2010 matching contributions under the CCAP and the CCAP
Excess Benefit Plan. |
|
(e) |
|
Represents the actual premiums paid by us to provide life
insurance coverage for Mr. Finnegan equal to five times his
annual salary (as required under his employment agreement). |
|
(f) |
|
As stipulated in Mr. Finnegans employment agreement,
we pay the club dues and membership fees associated with his
country club membership, but we do not recognize any incremental
cost due to his personal use because club dues and membership
fees are generally fixed. For 2010, the club dues and membership
fees were $11,476. Mr. Finnegan is responsible for paying
income tax on his personal use of the country club and any
additional costs resulting from such personal use. |
|
|
|
(7) |
|
Mr. Degnan retired effective December 31, 2010. |
39
Grants of
Plan-Based Awards
The following table sets forth information regarding 2010 grants
to our NEOs under our 2006 Annual Incentive Plan and 2009 LTIP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
Number
|
|
Number of
|
|
Exercise or
|
|
Fair Value
|
|
|
|
|
|
|
Under Non-Equity
|
|
Under Equity Incentive
|
|
of Shares
|
|
Securities
|
|
Base Price
|
|
of Stock
|
|
|
|
|
|
|
Incentive Plan
Awards(1)
|
|
Plan
Awards(3)
|
|
of Stock
|
|
Underlying
|
|
of Option
|
|
and Option
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Options
|
|
Awards
|
|
Awards
|
|
|
Name
|
|
Grant Date
|
|
($)(2)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(4)
|
|
(#)
|
|
($/Sh)
|
|
($)(5)
|
|
|
|
John D. Finnegan
|
|
|
02/24/2010
|
|
|
$
|
1,732,000
|
|
|
$
|
2,120,000
|
|
|
$
|
5,167,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,893
|
|
|
|
111,786
|
|
|
|
223,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,713,867
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,262
|
|
|
|
|
|
|
|
|
|
|
|
1,899,989
|
|
|
|
|
|
Richard G. Spiro
|
|
|
02/24/2010
|
|
|
|
772,100
|
|
|
|
945,000
|
|
|
|
2,441,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,489
|
|
|
|
38,978
|
|
|
|
77,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,341,019
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,992
|
|
|
|
|
|
|
|
|
|
|
|
662,462
|
|
|
|
|
|
John J. Degnan
|
|
|
02/24/2010
|
|
|
|
928,800
|
|
|
|
1,136,900
|
|
|
|
2,885,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,064
|
|
|
|
44,127
|
|
|
|
88,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,650,268
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,708
|
|
|
|
|
|
|
|
|
|
|
|
749,961
|
|
|
|
|
|
Paul J. Krump
|
|
|
02/24/2010
|
|
|
|
379,100
|
|
|
|
464,000
|
|
|
|
1,334,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,148
|
|
|
|
10,296
|
|
|
|
20,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
618,378
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,432
|
|
|
|
|
|
|
|
|
|
|
|
174,998
|
|
|
|
|
|
Harold L. Morrison, Jr.
|
|
|
02/24/2010
|
|
|
|
333,300
|
|
|
|
408,000
|
|
|
|
1,173,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,148
|
|
|
|
10,296
|
|
|
|
20,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
618,378
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,432
|
|
|
|
|
|
|
|
|
|
|
|
174,998
|
|
|
|
|
|
Dino E. Robusto
|
|
|
02/24/2010
|
|
|
|
333,300
|
|
|
|
408,000
|
|
|
|
1,173,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,148
|
|
|
|
10,296
|
|
|
|
20,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
618,378
|
|
|
|
|
|
|
|
|
02/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,432
|
|
|
|
|
|
|
|
|
|
|
|
174,998
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the range of potential awards to each NEO under our
2006 Annual Incentive Plan. The plan is designed so that our
Compensation Committee can apply negative discretion to annual
awards of each NEO. Maximum awards reflect the maximum annual
incentive compensation awards established by our Compensation
Committee pursuant to Section 162(m) of the Internal
Revenue Code. Accordingly, the target amounts represented above
reflect the Section 162(m) target awards after application
of negative discretion by our Compensation Committee.
Information regarding the actual payouts under the 2006 Annual
Incentive Plan is set forth in the Non-Equity Incentive
Plan Compensation column of the table included under the
heading Executive CompensationSummary Compensation
Table. Information regarding the structure of the 2006
Annual Incentive Plan is set forth under the heading
Compensation Discussion and AnalysisComponents of
Executive Compensation. |
|
(2) |
|
Represents payouts under the 2006 Annual Incentive Plan assuming
that 2010 operating income was 50% of 2009 operating income. No
payouts would have been awarded if 2010 operating income had
been less than 50% of 2009 operating income. |
|
(3) |
|
Represents grants to each NEO during 2010 of performance units
under our 2009 LTIP. Performance units are earned, if at all,
based on our TSR over a three-year performance period relative
to the TSR over the same period for the companies in the
S&P 500 Index. No dividend equivalents are paid on
performance unit awards during the performance period.
Information regarding performance targets, vesting and
additional performance unit award details are set forth under
the heading Compensation Discussion and
AnalysisComponents of Executive Compensation. |
|
(4) |
|
Represents RSU grants to each NEO during 2010. The RSUs will
vest, subject to continued employment, on the third anniversary
of the grant date. RSUs pay dividend equivalents at the same
time and in the same amount as dividends are paid on our common
stock. Additional information regarding RSUs is set forth under
the heading Compensation Discussion and
AnalysisComponents of Executive Compensation. |
|
(5) |
|
Represents full grant date fair value of stock awards granted to
each NEO in 2010. The grant date fair value for each of the RSU
awards represents the average of our highest and lowest stock
prices on the date of grant. The grant date fair value for each
of the performance unit awards is estimated using a Monte-Carlo
simulation model. For our performance unit awards, a range of 0%
to 200% of the original award can be achieved under the program. |
40
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth information regarding our
NEOs equity holdings as of December 31, 2010. The
market value of unvested and unearned stock awards is based on
the closing price of our common stock on December 31, 2010
of $59.64 per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan Awards:
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market or
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Payout
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
Number
|
|
Market
|
|
Number of
|
|
Value of
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
of Shares
|
|
Value
|
|
Unearned
|
|
Unearned
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
or Units
|
|
of Shares
|
|
Shares,
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
of Stock
|
|
or Units
|
|
Units or
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
that
|
|
of Stock
|
|
Other Rights
|
|
Rights that
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
that Have
|
|
that Have
|
|
Have Not
|
|
|
Exercisable
|
|
Unexercisable
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Not Vested
|
|
Not Vested
|
|
Vested
|
Name
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)(1)
|
|
($)
|
|
(#)(2)
|
|
($)
|
|
John D. Finnegan
|
|
|
40,650
|
|
|
|
|
|
|
|
|
|
|
$
|
39.7125
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,554
|
|
|
|
|
|
|
|
|
|
|
|
45.8750
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,750
|
|
|
|
|
|
|
|
|
|
|
|
51.4550
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,826
|
|
|
|
|
|
|
|
|
|
|
|
53.5100
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,022
|
|
|
$
|
7,277,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294,178
|
|
|
$
|
17,544,776
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,548
|
|
|
|
3,193,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,575
|
|
|
|
6,117,573
|
|
John J. Degnan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,125
|
|
|
|
6,925,695
|
|
Paul J. Krump
|
|
|
15,682
|
|
|
|
|
|
|
|
|
|
|
|
36.8400
|
|
|
|
03/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,840
|
|
|
|
|
|
|
|
|
|
|
|
41.5975
|
|
|
|
03/06/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,193
|
|
|
|
548,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,702
|
|
|
|
1,532,867
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,069
|
|
|
|
540,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,702
|
|
|
|
1,532,867
|
|
Dino E. Robusto
|
|
|
10,396
|
|
|
|
|
|
|
|
|
|
|
|
36.8400
|
|
|
|
03/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,069
|
|
|
|
540,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,702
|
|
|
|
1,532,867
|
|
|
|
|
(1) |
|
Represents unvested RSUs for Mr. Finnegan, of which 37,690
RSUs vested on March 12, 2011, 47,070 RSUs will vest on
February 25, 2012 and 37,262 RSUs will vest on
February 24, 2013. Represents unvested RSUs for
Mr. Spiro, of which 24,144 RSUs vested on January 31,
2011, 16,412 RSUs will vest on February 25, 2012 and 12,992
RSUs will vest on February 24, 2013. Represents unvested
RSUs for Mr. Krump, of which 2,355 RSUs vested on
March 12, 2011, 3,406 RSUs will vest on February 25,
2012 and 3,432 RSUs will vest on February 24, 2013.
Represents unvested RSUs for Mr. Morrison, of which 2,231
RSUs vested on March 12, 2011, 3,406 RSUs will vest on
February 25, 2012 and 3,432 RSUs will vest on
February 24, 2013. Represents unvested RSUs for
Mr. Robusto, of which 2,231 RSUs vested on March 12,
2011, 3,406 RSUs will vest on February 25, 2012 and 3,432
RSUs will vest on February 24, 2013. Dividend equivalents
are paid on RSUs during the restricted period. |
|
(2) |
|
Represents outstanding performance unit awards for the
2010-2012
performance period assuming maximum performance, which would
produce a 200% payout (performance was above target as of
December 31, 2010) for Messrs. Finnegan, Spiro,
Degnan, Krump, Morrison and Robusto in the amounts of 223,572,
77,956, 88,254, 20,592, 20,592 and 20,592 shares,
respectively. Such awards will vest, if at all, on
December 31, 2012. Also represents outstanding performance
unit awards for the
2009-2011
performance period assuming threshold performance, which would
produce a 50% payout (performance was below threshold as of
December 31, 2010) for Messrs. Finnegan, Spiro,
Degnan, Krump, Morrison and Robusto in the amounts of 70,606,
24,619, 27,871, 5,110, 5,110 and 5,110 shares,
respectively. Such awards will vest, if at all, on
December 31, 2011. Mr. Degnan vested in both the
2010-2012
and 2009-2011 performance unit awards as of his |
41
|
|
|
|
|
retirement on December 31, 2010. However, the actual number
of performance units that he will earn, if any, will be based on
our actual performance at the end of the applicable performance
period. Performance units awarded in 2008 vested on
December 31, 2010. Information regarding the vesting of the
NEOs respective 2008 performance units is set forth under
the heading Executive CompensationOption Exercises
and Stock Vested. The actual value of awards at the end of
the applicable performance period may vary from the valuations
indicated above. No dividend equivalents are paid on performance
unit awards during the applicable performance period. |
Option
Exercises and Stock Vested
The following table sets forth the value realized by our NEOs
with respect to stock option exercises and stock awards that
vested in 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized
|
|
|
|
on Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)(1)
|
|
|
($)(2)
|
|
|
(#)(3)
|
|
|
($)(4)
|
|
|
John D. Finnegan
|
|
|
|
|
|
|
|
|
|
|
208,966
|
|
|
$
|
11,988,328
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
24,145
|
|
|
|
1,200,610
|
|
John J. Degnan
|
|
|
|
|
|
|
|
|
|
|
93,300
|
|
|
|
5,412,732
|
|
Paul J. Krump
|
|
|
13,295
|
|
|
$
|
69,622
|
|
|
|
12,811
|
|
|
|
736,582
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
|
|
|
|
12,124
|
|
|
|
697,167
|
|
Dino E. Robusto
|
|
|
21,392
|
|
|
|
653,250
|
|
|
|
12,124
|
|
|
|
697,167
|
|
|
|
|
(1) |
|
Represents the exercise of the following stock options by
Mr. Krump: (a) 11,399 shares at an exercise price
of $57.9617, and (b) 1,896 shares at an exercise price
of $57.9617. Represents the exercise of the following stock
options by Mr. Robusto: (a) 11,932 shares at an
exercise price of $58.5506, (b) 2,822 shares at an
exercise price of $59.6701, and (c) 6,638 shares at an
exercise price of $59.6701. |
|
(2) |
|
For stock options exercised through a cashless-sell-all
transaction, value realized is based on the market price at the
time of the exercise. |
|
(3) |
|
For Mr. Finnegan, represents the vesting of 37,773 RSUs
granted in 2007 and the vesting of 171,193 shares in
respect of the performance unit award granted in 2008. For
Mr. Spiro, represents the vesting of 24,145 RSUs granted in
2008. For Mr. Degnan, represents the vesting of 12,077 RSUs
granted in 2007, 11,047 RSUs granted in 2008, 11,354 RSUs
granted in 2009, 4,086 RSUs granted in 2010 and
54,736 shares in respect of the performance unit award
granted in 2008. Receipt of 26,487 RSUs for Mr. Degnan that
vested on December 31, 2010 due to his retirement (11,047
RSUs granted in 2008, 11,354 RSUs granted in 2009, 4,086 RSUs
granted in 2010) has been deferred until six months after
his retirement date. As a result of his retirement,
Mr. Degnan forfeited 18,852 previously outstanding RSUs.
For Mr. Krump, represents the vesting of 2,112 RSUs granted
in 2007 and 10,699 shares in respect of the performance
unit award granted in 2008. For Mr. Morrison, represents
the vesting of 1,988 RSUs granted in 2007 and 10,136 shares
in respect of the performance unit award granted in 2008. For
Mr. Robusto, represents the vesting of 1,988 RSUs granted
in 2007 and 10,136 shares in respect of the performance
unit award granted in 2008. Receipt of the 37,773 RSUs for
Mr. Finnegan, 12,077 RSUs for Mr. Degnan, and 2,112
RSUs for Mr. Krump granted in 2007 has been deferred until
their respective retirements. Information regarding performance
unit awards is set forth under the heading Compensation
Discussion and AnalysisComponents of Executive
Compensation. |
|
(4) |
|
For RSU awards, the value realized is based on the average of
the high and low prices of our common stock on the applicable
settlement date. For Mr. Degnans RSUs, which vested
as a result of his retirement on December 31, 2010, the
year-end closing price of $59.64 was used to value these shares.
The value of these RSUs is also reflected in the information
regarding Mr. Degnan set forth under the heading
Potential Payments upon Termination or a Change in
Control. The price on the distribution date, six months
after his retirement, will determine his actual value realized.
Performance unit awards are valued at their settlement price of
$58.805 which was the average of the high and low prices of our
common stock on the settlement date. |
42
Pension
Benefits
Pension
Plan
Our eligible employees, and certain eligible employees of our
subsidiaries, participate in the Pension Plan. Our NEOs
participate on the same terms and conditions as other eligible
employees, except as noted below. The Pension Plan, as in effect
during 2010, provides each eligible employee with annual
retirement income beginning at age 65 equal to the product
of:
|
|
|
|
|
the total number of years of participation in the Pension
Plan; and
|
|
|
|
13/4%
of average compensation for the highest five years in the last
ten years of participation prior to retirement during which the
employee was most highly paid or, if higher, the last 60
consecutive months (final average earnings).
|
Average compensation under the Pension Plan includes salary and
annual incentive compensation. A social security offset is
subtracted from this benefit. The social security offset is
equal to the product of:
|
|
|
|
|
the total number of years of participation in the Pension Plan
(for years prior to February 1, 2008, this number was
capped at 35 years); and
|
|
|
|
an amount related to the participants primary social
security benefit.
|
Benefits can commence as early as age 55. However, if
pension benefits commence prior to age 65, they may be
actuarially reduced. The reduction in the gross benefit (prior
to offset for social security benefits) is based on the
participants age at retirement and years of Pension Plan
participation as follows:
|
|
|
|
|
If the participant has at least 25 years of Pension Plan
participation, benefits are unreduced at age 62. They are
reduced 2.5% per year from 62 to 60 (5% reduction at
60) and 5% per year from 60 to 55 (30% reduction at 55).
|
|
|
|
If the participant has at least 15 but less than 25 years
of Pension Plan participation, benefits are unreduced at
age 65. They are reduced 2% per year from 65 to 62 (6%
reduction at 62) and 4% per year from 62 to 61 (10%
reduction at 61) and 5% per year from 61 to 55 (40%
reduction at 55).
|
|
|
|
If the participant has less than 15 years of Pension Plan
participation, or if the participant terminates employment with
us before age 55, benefits are unreduced at age 65.
They are reduced 6.67% per year from 65 to 60 (33.3% reduction
at 60) and 3.33% per year from 60 to 55 (50% reduction at
55).
|
The participants social security benefit is reduced based
on factors relating to the participants year of birth and
age at retirement.
Benefits are generally paid in the form of an annuity. If a
participant retires and elects a joint and survivor annuity, the
Pension Plan provides a 10% subsidy. The portion of the
benefit attributable to the cash balance account, as described
in the following paragraph, may be paid in the form of a lump
sum upon termination of employment.
Effective January 1, 2001, we amended the Pension Plan to
provide a cash balance benefit, in lieu of the benefit described
above, to reduce the rate of increase in the Pension Plan costs.
This benefit provides for a participant to receive a credit to
his or her cash balance account every six months. The amount of
the cash balance credit increases as the sum of a
participants age and years of service credit increases
from 2.5% to 5% of compensation. The maximum credit of 5% of
compensation (subject to the maximum limitation on compensation
permitted by the Internal Revenue Code) earned over the
preceding six months is made when the sum of a
participants age and years of service credit equals or
exceeds 55 (which is the case for each NEO). Amounts credited to
a participants cash balance account earn interest at a
rate based on the
30-year
U.S. treasury bond rate. Participants who were hired by us
prior to January 1, 2001 (including Messrs. Degnan,
Krump, Morrison and Robusto) will receive a benefit under the
Pension Plan equal to the greater of the pension benefit
described in the preceding paragraphs or the amount calculated
under the cash balance formula.
43
ERISA and the Internal Revenue Code impose maximum limitations
on the recognized compensation and the amount of a pension which
may be paid under a funded defined benefit plan such as the
Pension Plan. The Pension Plan complies with these limitations.
Pension
Excess Benefit Plan
We also maintain the Pension Excess Benefit Plan, which is a
supplemental, nonqualified, unfunded plan. The Pension Excess
Benefit Plan uses essentially the same benefit formula, early
retirement reduction factors and other features as the Pension
Plan, except that the Pension Excess Benefit Plan recognizes
compensation (salary and annual incentive plan compensation)
above IRS compensation limits. The Pension Excess Benefit Plan
also recognizes deferred compensation for purposes of
determining applicable retirement benefits. Benefits under both
the Pension Plan and the Pension Excess Benefit Plan are
provided by us on a noncontributory basis.
Benefits payable under the Pension Excess Benefit Plan are
generally paid in the form of a lump sum, calculated using an
interest discount rate of 5%. However, the portion of the
benefit that was earned and vested as of December 31,
2004 may be payable in certain other forms, including
installment payments and life annuities, if properly elected by
the participant and if the participant satisfies the
requirements of the Pension Excess Benefit Plan.
Pension
SERPMr. Finnegan
Under the terms of Mr. Finnegans employment
agreement, he is entitled to a Pension SERP, which provides a
nonqualified and unfunded benefit in addition to those provided
under the Pension Plan and the Pension Excess Benefit Plan. The
benefit will equal 6% of his final average compensation for each
full year of service up to a maximum of 60% of final average
compensation offset by benefits under the Pension Plan and
Pension Excess Benefit Plan, previous employer pension benefits
and social security benefits. The Pension Plan provisions
described above with respect to the early retirement discount
and joint and survivor benefits apply to the Pension SERP. Under
the Pension SERP, Mr. Finnegans compensation means
the sum of his annual salary plus annual incentive compensation
earned for the relevant year (whether or not any such
compensation is deferred).
44
Pension
Benefits Table
The following table sets forth information regarding
participation by our NEOs in our pension plans as of
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present Value
|
|
|
|
|
|
|
|
|
Years
|
|
|
of
|
|
|
Payments During
|
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
|
Last
|
|
|
|
|
|
Service
|
|
|
Benefit
|
|
|
Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)(1)(2)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
Pension Plan
|
|
|
7
|
|
|
$
|
92,019
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
7
|
|
|
|
1,594,487
|
|
|
|
|
|
|
|
Pension SERP
|
|
|
8
|
|
|
|
26,408,297
|
|
|
|
|
|
Richard G. Spiro
|
|
Pension Plan
|
|
|
1
|
|
|
|
10,012
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
1
|
|
|
|
85,329
|
|
|
|
|
|
John J. Degnan
|
|
Pension Plan
|
|
|
19
|
|
|
|
777,199
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
19
|
|
|
|
7,459,666
|
|
|
|
|
|
Paul J. Krump
|
|
Pension Plan
|
|
|
28
|
|
|
|
638,866
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
28
|
|
|
|
3,150,900
|
|
|
|
|
|
Harold L. Morrison, Jr.
|
|
Pension Plan
|
|
|
26
|
|
|
|
688,890
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
26
|
|
|
|
2,680,398
|
|
|
|
|
|
Dino E.
Robusto(3)
|
|
Pension Plan
|
|
|
24
|
|
|
|
604,473
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
24
|
|
|
|
2,206,857
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the present value of the NEOs accumulated
pension benefit computed as of the same Pension Plan measurement
date we used for 2010 financial statement reporting. The
following actuarial assumptions were used: |
(a) Interest discount rate: 5.75%;
(b) Future interest crediting rate on
cash balance accounts: 5.00%;
(c) Mortality table: RP 2000 projected to
2015 white collar combined mortality table; and
(i) Pension Plan50% take cash
balance account as a lump sum;
(ii) Pension Excess Benefit Plan100% take
benefit as a lump sum; and
(iii) Pension SERPlump sum.
|
|
|
(2) |
|
The figures shown in the table above assume retirement benefits
commence at the earliest unreduced retirement age, reflecting
the assumptions described in the preceding footnote. However, if
the NEOs employment terminated or he retired on
December 31, 2010 (which is the assumption underlying the
figures set forth in the Voluntary
Resignation/Retirement column in the tables under the
heading Executive CompensationPotential Payments
upon Termination), and plan benefits were immediately
payable as lump sums (calculated using the 5% discount rate
specified in the plans), the Pension Excess Benefit Plan and
Pension SERP benefits, as applicable, would have been as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum
|
|
Name
|
|
Plan Name
|
|
Amount ($)
|
|
|
John D. Finnegan
|
|
|
Pension Excess Benefit Plan
|
|
|
$
|
1,595,429
|
|
|
|
|
Pension SERP
|
|
|
|
26,658,931
|
|
Richard G. Spiro
|
|
|
Pension Excess Benefit Plan
|
|
|
|
|
|
John J. Degnan
|
|
|
Pension Excess Benefit Plan
|
|
|
|
7,459,666
|
|
Paul J. Krump
|
|
|
Pension Excess Benefit Plan
|
|
|
|
2,731,536
|
|
Harold L. Morrison, Jr.
|
|
|
Pension Excess Benefit Plan
|
|
|
|
2,294,738
|
|
Dino E. Robusto
|
|
|
Pension Excess Benefit Plan
|
|
|
|
1,896,772
|
|
|
|
|
(3) |
|
The amount payable from the Pension Plan will be offset by the
benefit payable from the Pension Plan for the Employees of Chubb
Insurance Company of Canada (Canadian Pension Plan), under which
Mr. Robusto is no longer accruing additional service. The
amount payable to Mr. Robusto under the Canadian Pension
Plan is estimated to be C$14,407 per year commencing at
age 65. In addition to the amounts shown above,
Mr. Robusto |
45
|
|
|
|
|
is also entitled to a benefit from the Supplementary Income Plan
for Employees of Chubb Insurance Company of Canada in the amount
of C$1,800 per year commencing at age 65. |
Nonqualified
Defined Contribution and Deferred Compensation Plans
Deferred
Compensation Plans
Pursuant to the Deferred Compensation Plans, we provide certain
of our employees, including our NEOs, with the opportunity to
electively defer the payment of certain components of
compensation (annual salary, annual incentive compensation, RSUs
and performance unit awards) that would otherwise be payable to
them. Deferred RSUs and performance unit awards are deemed to be
invested in our common stock. Deferred annual salary and annual
incentive compensation are credited with earnings based on the
deemed returns that would have been received had such amounts
been invested in one of the investment options available under
the Deferred Compensation Plans that are generally available for
investment in the marketplace and as selected by the
participant. Dividends on deferred RSUs and performance unit
awards are treated the same as an annual salary or annual
incentive compensation deferral. The investment options
available under the Deferred Compensation Plans are the same as
those investment alternatives that are available under the CCAP
Plan except for the Chubb Stock Fund. Investment elections may
be changed by the participant at any time, at his or her
discretion.
CCAP
Excess Benefit Plan
We also maintain the CCAP Excess Benefit Plan which is a
supplemental, nonqualified, unfunded excess defined contribution
plan. The CCAP Excess Benefit Plan recognizes compensation in
excess of IRS limits for the CCAP and provides the participants
with the applicable company match on eligible compensation.
Matching contributions for each of the NEOs equal 4% of plan
compensation. Messrs. Finnegan, Degnan, Krump, and Morrison
have elected to defer receipt of matching contribution amounts
attributable to the CCAP Excess Benefit Plan. Deferred balances
are notionally invested in the Fidelity Stable Value Fund, which
is one of the investment funds available under the CCAP. For
2010, the Fidelity Stable Value Fund had a 2.33% investment
return. Mr. Robusto elected to take a cash distribution of
his matching contribution amounts attributable to the CCAP
Excess Benefit Plan, paid in March 2010. Mr. Spiro did not
receive a matching contribution under the CCAP Excess Benefit
Plan during 2010.
CCAP
SERPMr. Finnegan
Mr. Finnegans employment agreement also provides that
he is entitled to the CCAP SERP. The CCAP Excess Benefit Plan,
like the CCAP, requires a one-year waiting period before a
participant becomes eligible for our company matching
contributions and has a six-year graded vesting schedule.
Mr. Finnegans employment agreement, however, provides
that he is entitled to the matching contributions for eligible
deferrals from his employment date and provides that the CCAP
SERP will pay any otherwise unvested company match dollars
forfeited under the CCAP and CCAP Excess Benefit Plan if his
employment with us terminates prior to his becoming being 100%
vested. Amounts credited to the CCAP SERP account earn 5%
interest per annum.
ESOP
Excess Benefit Plan
In 2004, we merged the Employee Stock Ownership Plan (the ESOP)
and the ESOP Excess Benefit Plan into the respective CCAP and
CCAP Excess Plans. No new shares or contributions are credited
to balances under the ESOP and the ESOP Excess Benefit Plan.
Annual earnings for the ESOP Excess Benefit Plan include only
the change in account balance attributable to changes in our
stock price and any dividends we pay.
ESOP
SERPMr. Finnegan
Mr. Finnegans employment agreement also provides that
he is entitled to a supplemental benefit tied to the ESOP and
ESOP Excess Benefit Plan (ESOP SERP). The ESOP and ESOP Excess
Benefit Plan included a one-year waiting period prior to entry
as well as five years of vesting service. In accordance with his
employment agreement, however, Mr. Finnegan was credited with an
amount equal to the stock to the number of shares he would have
46
received under the ESOP and ESOP Excess Benefit Plan from his
date of employment if not for the one-year service requirement
and provides that the ESOP SERP account is immediately vested
and the balance credited thereunder earns 5% interest per annum.
Nonqualified
Defined Contribution and Deferred Compensation
Table
The following table sets forth information regarding
participation by our NEOs in our nonqualified defined
contribution and deferred compensation plans as of
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
Earnings in
|
|
Aggregate
|
|
Balance at
|
|
|
in Last
|
|
in Last
|
|
Last
|
|
Withdrawals/
|
|
Last Fiscal
|
|
|
Fiscal Year
|
|
Fiscal Year
|
|
Fiscal Year
|
|
Distributions
|
|
Year-End
|
Name
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
($)(5)
|
|
John D. Finnegan
|
|
$
|
2,233,824
|
|
|
$
|
175,512
|
|
|
$
|
2,938,672
|
|
|
$
|
339,602
|
|
|
$
|
18,814,693
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
614,297
|
|
|
|
94,472
|
|
|
|
837,204
|
|
|
|
75,635
|
|
|
|
4,908,588
|
|
Paul J. Krump
|
|
|
107,427
|
|
|
|
43,600
|
|
|
|
124,564
|
|
|
|
|
|
|
|
1,223,716
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
37,080
|
|
|
|
15,677
|
|
|
|
|
|
|
|
138,039
|
|
Dino E. Robusto
|
|
|
|
|
|
|
36,000
|
|
|
|
22,809
|
|
|
|
|
|
|
|
121,330
|
|
|
|
|
(1) |
|
Represents RSU deferrals for Messrs. Finnegan, Degnan, and
Krump in the amounts of $1,921,324, $614,297, and $107,427,
respectively. Mr. Finnegans amount also includes the
deferral of $312,500 of his 2010 annual salary. This amount is
included in the Salary column of the table set forth
under the heading Executive CompensationSummary
Compensation Table. All of these deferrals were made under
the 2005 Deferred Compensation Plan. |
|
(2) |
|
Represents the company match for the CCAP Excess Benefit Plan. |
|
(3) |
|
The following table reflects the components for the
Aggregate Earnings in Last Fiscal Year column: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCAP Excess
|
|
|
|
|
|
ESOP Excess
|
|
|
|
|
Benefit Plan and
|
|
Deferred
|
|
Appreciation and
|
|
Benefit Plan and
|
|
|
|
|
CCAP SERP
|
|
Compensation
|
|
Dividends on
|
|
ESOP SERP
|
|
|
|
|
Earnings
|
|
Earnings
|
|
Deferred RSUs
|
|
Earnings
|
|
Total
|
Name
|
|
($)(a)
|
|
($)
|
|
($)
|
|
($)(b)
|
|
($)
|
|
John D. Finnegan
|
|
$
|
26,375
|
|
|
$
|
64,686
|
|
|
$
|
2,803,707
|
|
|
$
|
43,904
|
|
|
$
|
2,938,672
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
13,506
|
|
|
|
5,567
|
|
|
|
627,447
|
|
|
|
190,683
|
|
|
|
837,204
|
|
Paul J. Krump
|
|
|
6,680
|
|
|
|
43,142
|
|
|
|
20,935
|
|
|
|
53,806
|
|
|
|
124,564
|
|
Harold L. Morrison, Jr.
|
|
|
1,320
|
|
|
|
|
|
|
|
|
|
|
|
14,357
|
|
|
|
15,677
|
|
Dino E. Robusto
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
22,652
|
|
|
|
22,809
|
|
|
|
|
|
(a)
|
For Mr. Finnegan, represents CCAP Excess earnings of
$22,350 and CCAP SERP earnings of $4,025. For all other
participants, represents CCAP Excess benefit only.
|
|
|
|
|
(b)
|
For Mr. Finnegan, represents ESOP Excess earnings of
$39,613 and ESOP SERP earnings of $4,291. For all other
participants, represents ESOP Excess benefits only.
|
|
|
|
(4) |
|
Represents dividends paid on deferred vested RSUs for
Messrs. Finnegan and Degnan. |
|
(5) |
|
Mr. Robusto made a cash election under the CCAP
Excess Benefit Plan in 2010, resulting in a lower account
balance. |
47
Potential
Payments upon Termination or a Change in Control
Accrued
Compensation and Benefits
As of December 31, 2010, each of our NEOs other than
Mr. Spiro was fully vested in the amounts set forth under
the heading Executive CompensationPension
Benefits and the amounts set forth under the heading
Executive CompensationNonqualified Defined
Contribution and Deferred Compensation Plans. In addition,
at that date, each NEO was entitled to receive all earned but
unpaid salary, other vested long-term equity awards (as set
forth under the heading Executive
CompensationOutstanding Equity Awards at Fiscal
Year-End and the other applicable tables set forth under
the heading Executive Compensation), amounts held in
his account under the CCAP and employee welfare plans.
Termination
Events
Disability or Death. With
the exception of Mr. Finnegan, a termination of employment
due to disability or death does not entitle our NEOs to payments
or benefits that are not generally available to our salaried
employees.
Equity Awards. With respect to equity
awards, under the terms of the 2004 LTIP and 2009 LTIP, upon the
disability or death of a participant, including each of our
NEOs, the participant or the participants estate, as
applicable, would receive pro-rata vesting of the unvested
portion of outstanding RSUs and continuation of the exercise
period within which the participant or the participants
estate may exercise outstanding options through the stated
expiration date of such options. With respect to performance
unit awards, if a participants employment terminates due
to disability or death on or after the completion of the first
calendar year of any performance period, the participant or the
participants estate, as applicable, would receive all of
the performance units for the performance period that would have
been earned had the participant continued employment for the
full period (with payments contingent on our relative TSR over
the performance period).
Mr. Finnegan. In addition to the
equity vesting provisions described in the preceding paragraph,
Mr. Finnegans employment agreement calls for us to
provide him with a death benefit equal to fives times his annual
salary as of the time of his death. We provide this benefit on
an insured basis. In the event of Mr. Finnegans
disability, his employment agreement provides that he is
entitled to receive a disability benefit equal to 60% of his
annual salary as of the date of disability until he reaches
age 65. We provide this coverage in the form of an
unsecured, uninsured disability benefit.
Mr. Finnegans employment agreement also provides that
he or his estate, as applicable, would be entitled to a pro-rata
portion of the annual incentive compensation award he would have
received for the year of his disability or death. For purposes
of Mr. Finnegans employment agreement, disability
means Mr. Finnegans inability to perform his duties
on a full-time basis for six consecutive months as a result of
incapacity due to mental or physical illness.
Retirement. Mr. Degnans
retirement on December 31, 2010 was treated in the same
manner as retirements of our other retirement-eligible salaried
employees under our compensation and benefit plans and
arrangements. None of our other NEOs were retirement-eligible in
2010.
For Cause Termination. Under
Mr. Finnegans employment agreement, in the event of
his termination for cause, he is entitled to receive retiree
health benefits pursuant to our retiree health plans that would
be available to an employee with 34 years of service with
us. None of our other NEOs are entitled to any additional
payments or benefits, and each of our NEOs would forfeit his
unvested equity awards, in the event we terminate his employment
for cause. Under the 2004 LTIP and 2009 LTIP, cause means:
|
|
|
|
|
the willful failure of a participant to perform his or her
employment-related duties or gross negligence in the performance
of such duties;
|
|
|
|
a participants willful or serious misconduct that has
caused or could reasonably be expected to result in material
injury to our business or reputation;
|
|
|
|
a participants indictment for a crime constituting a
felony; or
|
48
|
|
|
|
|
a material breach by a participant of any written covenant or
agreement with us or any of our written policies.
|
The 2004 LTIP and the 2009 LTIP provide that the definition of
cause in an employment or severance agreement will govern in
lieu of the foregoing definition. Accordingly, the definition of
cause in Mr. Finnegans employment agreement applies
to Mr. Finnegan for purposes of the 2004 LTIP and 2009
LTIP. Therefore, in his case, cause means:
|
|
|
|
|
Mr. Finnegans willful and continued failure to
perform his duties under the terms of his employment agreement;
|
|
|
|
Mr. Finnegans willful engagement in any malfeasance,
fraud, dishonesty or gross misconduct in connection with his
position as our President and Chief Executive Officer or as a
member of our Board that causes us material damage;
|
|
|
|
Mr. Finnegans conviction of, or plea of guilty or
nolo contendere to, a felony; or
|
|
|
|
Mr. Finnegans breach of certain representations,
warranties and covenants contained in his employment agreement
that materially damage or could reasonably be expected to
materially damage us.
|
Voluntary
Resignation. Messrs. Spiro, Krump,
Morrison and Robusto are not entitled to any payments or
benefits that are not generally available to our salaried
employees upon voluntary resignation. Under
Mr. Finnegans employment agreement, in the event of
his voluntary resignation, he is entitled to receive retiree
health benefits pursuant to our retiree health plans that would
be available to an employee with 34 years of service with
us.
Involuntary Termination without
Cause. Except for Mr. Finnegan and as
discussed below for Mr. Spiro in connection with a change
in control, neither a termination of employment by us without
cause nor a demotion or other constructive termination would
entitle our NEOs to any payments or benefits that are not
generally available to our salaried employees. The severance
policy applicable to all of our salaried employees generally
provides two weeks of severance pay for each year of service up
to a maximum of 52 weeks.
Mr. Finnegans employment agreement provides that,
upon the termination of his employment without cause, his
constructive termination or in the event we elect not to renew
his employment agreement in accordance with its terms, he would
be entitled to receive the following benefits beyond those
generally available to our salaried employees:
|
|
|
|
|
current annual salary (without proration);
|
|
|
|
pro-rated annual incentive compensation for the year of his
termination;
|
|
|
|
a severance payment equal to the sum of up to 2.5 times (with
the multiplier no longer being applicable with respect to a
non-renewal of his employment agreement as described below) the
sum of his then-current annual salary and the average amount of
his annual incentive compensation paid in the preceding three
years;
|
|
|
|
up to 2.5 years of additional age and service credit for
purposes of his supplemental retirement benefits (with the
multiplier no longer being applicable with respect to a
non-renewal of his employment agreement as described below);
|
|
|
|
up to 2.5 years of continued health and welfare benefits
(with the multiplier no longer being applicable with respect to
a non-renewal of his employment agreement as described below)
under our employee welfare plans and thereafter retiree
benefits; and
|
|
|
|
if any payments or benefits that Mr. Finnegan receives are
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code on golden parachute payments, an
additional payment to him to restore him to the after-tax
position that he would have been in if the excise tax had not
been imposed.
|
In addition, any outstanding equity awards would accelerate and
vest in full (subject to the achievement of the performance
goals in the case of performance units) and his stock options
would continue to be exercisable until the earlier of the fifth
anniversary of the date of termination of his employment or the
expiration of the option term.
49
In the event of our non-renewal of his employment agreement, the
2.5 times severance multiplier was subject to a ratable
step down which resulted in 0.5 being subtracted from the
multiplier upon Mr. Finnegans attainment of
age 58 and each year thereafter until reduced to zero at
age 62, Mr. Finnegans current age. In addition,
our obligation to continue to provide health and welfare
benefits would cease if Mr. Finnegan were to receive such
benefits from a new employer.
Under Mr. Finnegans employment agreement,
constructive termination means his voluntary termination of
employment following:
|
|
|
|
|
a reduction in Mr. Finnegans annual salary or target
annual incentive compensation;
|
|
|
|
our failure to appoint Mr. Finnegan as our President and
Chief Executive Officer and as a member of our Board or his
removal from any of these positions;
|
|
|
|
a material diminution in Mr. Finnegans duties or
responsibilities or the assignment to him of duties or
responsibilities materially inconsistent with his position and
status as our President and Chief Executive Officer;
|
|
|
|
a material change in Mr. Finnegans reporting
relationship so that he no longer reports solely to our Board in
his positions as President and Chief Executive Officer;
|
|
|
|
our breach of any material obligations to Mr. Finnegan
under the terms of his employment agreement;
|
|
|
|
our breach of certain representations, warranties and covenants
set forth in Mr. Finnegans employment
agreement; or
|
|
|
|
our requiring that Mr. Finnegans principal location
of employment to be at any office or location more than
50 miles from our corporate headquarters in Warren, New
Jersey.
|
Mr. Finnegans employment agreement requires
Mr. Finnegan to comply with confidentiality,
non-competition and non-solicitation covenants. The
non-competition and non-solicitation provisions run during the
term of Mr. Finnegans employment through the second
anniversary of the termination thereof.
Change in
Control
Equity Awards. Under the 2004 LTIP and
the 2009 LTIP, if outstanding equity awards are assumed by an
acquirer in accordance with their respective terms, the awards
would remain outstanding and vesting would not accelerate unless
the participants employment was terminated without cause
or the participant experienced a constructive termination. In
the event of a change in control in which the acquirer did not
assume outstanding equity awards in accordance with their
respective terms, RSUs would immediately vest in full (but would
be paid out in accordance with the terms of the awards) and
performance unit awards would become earned and payable at 100%
of the applicable target award. These provisions would apply to
the outstanding RSUs and performance unit awards held by
Messrs. Spiro, Degnan, Krump, Morrison and Robusto as of
December 31, 2010. The impact of a change in control on
Mr. Finnegans equity awards is discussed below. For
purposes of both the 2004 LTIP and the 2009 LTIP, change in
control is defined as:
|
|
|
|
|
the acquisition of 20% or more of our shares by any person;
|
|
|
|
a change in a majority of the members of our Board due to a
proxy contest or tender or exchange offer; or
|
|
|
|
a merger, reorganization or similar transaction (including a
sale of substantially all assets), where our shareholders
immediately prior to such transaction do not control more than
50% of the surviving entity immediately after the transaction.
|
Mr. Finnegan. Upon the occurrence
of a change in control (as defined below),
Mr. Finnegans employment agreement would be
superseded by his change in control employment agreement with
us. Mr. Finnegans change in control employment
agreement provides generally that the terms and conditions of
his employment (including position, location and benefits) may
not be adversely changed during the three-year period after a
change in control. The change in control employment agreement
contains a double trigger mechanism such that (i) if a
change in
50
control occurs, and (ii) if Mr. Finnegans
employment is terminated (other than for cause, death or
disability), or constructively terminated, during the three-year
period following a change in control, Mr. Finnegan would be
entitled to receive:
|
|
|
|
|
pro-rated annual incentive compensation through the date of
termination for the year in which the termination of employment
occurs;
|
|
|
|
three times the sum of his then-current annual salary and
highest annual bonus over the past three years, including any
bonus payable for the current year;
|
|
|
|
three years of additional age and service credit for purposes of
his supplemental retirement benefits;
|
|
|
|
three years of continued health and welfare benefits (or, if
shorter, until a new employer provides these benefits) under our
employee welfare plans and thereafter retiree benefits;
|
|
|
|
up to $100,000 of outplacement services; and
|
|
|
|
if any payments or benefits that Mr. Finnegan receives are
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code on golden parachute payments, an
additional payment to him to restore him to the after-tax
position that he would have been in if the excise tax had not
been imposed.
|
In addition, any outstanding equity awards would vest and his
stock options would continue to be exercisable until the earlier
of the fifth anniversary of the date of termination of his
employment or the expiration of the option term.
Mr. Finnegan also is entitled to reimbursement for legal
fees he incurs as a result of the termination of his employment.
For purposes of Mr. Finnegans change in control
employment agreement, change in control means:
|
|
|
|
|
the acquisition of 20% or more of our outstanding common stock
by any person;
|
|
|
|
continuing directors (or their approved successors) ceasing to
constitute a majority of our Board;
|
|
|
|
a merger, reorganization or similar transaction (including a
sale of substantially all assets), where our shareholders
immediately prior to such transaction do not control more than
50% of the surviving entity immediately after the
transaction; or
|
|
|
|
shareholder approval of any plan or proposal for our liquidation
or dissolution.
|
Mr. Finnegans change in control employment agreement
requires Mr. Finnegan to comply with confidentiality,
non-competition and non-solicitation covenants. The
non-competition and non-solicitation provisions run during the
term of Mr. Finnegans employment through the second
anniversary of the termination thereof.
Mr. Spiro. In addition to the
above terms with respect to equity awards, we have entered into
a change in control agreement with Mr. Spiro. The agreement
with Mr. Spiro comes into effect in the event that his
employment is terminated (other than as a result of his death,
disability, retirement, voluntary termination or by us for
cause) or is constructively terminated within two years after
the effective date of the change in control (as defined below).
Upon actual or constructive termination following a change in
control, Mr. Spiro is entitled to receive a severance
payment equal to two times the sum of:
|
|
|
|
|
his then-current annual salary; and
|
|
|
|
the average amount of his annual incentive compensation for the
last three years;
|
provided that the amount of the severance payment cannot exceed
the amount that Mr. Spiro would have received had he remained in
our employment until his normal retirement age under the Pension
Plan. In addition to severance, Mr. Spiro also is entitled
to reimbursement for legal fees incurred by him as a result of
the termination and continuation of health and other welfare
benefits for a period of two years after the date of
termination. Mr. Spiros agreement does not provide
for a
gross-up of
any excise taxes that might be triggered by these payments.
For purposes of Mr. Spiros agreement, the definition
of a change in control is the same definition of a change in
control used in the 2004 LTIP and the 2009 LTIP.
51
For purposes of Mr. Spiros agreement, cause means:
|
|
|
|
|
his willful and continued failure to perform his duties; or
|
|
|
|
his willful engagement in misconduct which is materially
injurious to us.
|
For purposes of Mr. Spiros agreement, the definition
of a constructive termination means his voluntary termination of
employment following the occurrence of certain events, including:
|
|
|
|
|
the assignment to Mr. Spiro, without his express written
consent, of any duties inconsistent with his positions, duties,
responsibilities, authority and status immediately prior to the
change in control;
|
|
|
|
a change in reporting responsibilities, titles or offices as in
effect immediately prior to the change in control or any removal
of, or any failure to re-elect, Mr. Spiro to any of such
positions, except in limited circumstances;
|
|
|
|
a reduction in Mr. Spiros annual salary as in effect
at the time of the change in control;
|
|
|
|
our failure to continue Mr. Spiros participation in
certain compensation plans in effect at the time of the change
in control; or
|
|
|
|
our requiring Mr. Spiro to maintain his principal office or
conduct his principal activities anywhere other than our
corporate headquarters located within the New York Metropolitan
area (including Warren, New Jersey).
|
Mr. Degnan. Mr. Degnan turned
65 in 2009. Consequently, his change in control agreement did
not provide him with any benefits in 2010 beyond those generally
available to our salaried employees upon a change in control.
Messrs. Krump, Morrison and
Robusto. Messrs. Krump, Morrison and
Robusto are not entitled to any payments or benefits beyond
those generally available to our salaried employees upon a
change in control.
52
Estimate
of Incremental Potential Payment
The following tables quantify the additional payments and
benefits under the compensation and benefit plans and
arrangements to which our NEOs would be entitled upon
termination of employment under the termination scenarios
described above that are beyond those generally available to our
salaried employees. Because the payments to be made to an NEO
depend on several factors, the actual amounts to be paid out
upon a triggering event can only be determined at the time of
the triggering event.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Finnegan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change in
|
|
|
Change in
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
Control
|
|
|
Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(1)(2)
|
|
$
|
6,625,000
|
|
|
$
|
2,280,049
|
|
|
|
|
|
|
|
$12,210,583
|
|
|
|
$15,225,000
|
|
|
|
|
|
RSUs(3)
|
|
|
4,393,364
|
|
|
|
4,393,364
|
|
|
|
|
|
|
|
7,277,392
|
|
|
|
7,277,392
|
|
|
$
|
7,277,392
|
|
Performance
Units(4)
|
|
|
17,544,776
|
|
|
|
17,544,776
|
|
|
|
|
|
|
|
17,544,776
|
|
|
|
15,088,741
|
|
|
|
15,088,741
|
|
Retirement
Benefits(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,051,943
|
|
|
|
7,280,611
|
|
|
|
|
|
Retiree Medical
Benefits(6)
|
|
|
140,634
|
|
|
|
236,795
|
|
|
|
$241,147
|
|
|
|
241,147
|
|
|
|
241,147
|
|
|
|
|
|
Other
Benefits(7)
|
|
|
26,770
|
|
|
|
26,770
|
|
|
|
|
|
|
|
176,506
|
|
|
|
322,515
|
|
|
|
|
|
Gross-up on
Excise
Tax(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
28,730,544
|
|
|
$
|
24,481,754
|
|
|
|
$241,147
|
|
|
|
$44,502,347
|
|
|
|
$45,435,406
|
|
|
$
|
22,366,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the event of death, reflects a death benefit of five times
Mr. Finnegans annual salary as of December 31,
2010 ($1,325,000). In the event of disability, reflects the
present value of payments equal to 60% of
Mr. Finnegans annual salary until age 65. In the
event of a termination without cause, reflects a multiple of
annual salary as of December 31, 2010 and the average of
Mr. Finnegans last three annual incentive
compensation awards ($3,559,233). In the event of an
Involuntary Termination or Constructive Termination after
Change in Control, reflects a multiple of annual salary
and the highest of his last three annual or current incentive
compensation awards ($3,750,000). |
|
(2) |
|
Except for the amount listed under the Involuntary
Termination or Constructive Termination after Change in
Control column, these amounts do not include any amounts
attributable to Mr. Finnegans 2010 annual incentive
compensation award to be paid in March 2011 and disclosed under
the heading Executive CompensationSummary
Compensation Table. |
|
(3) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $59.64 per share on December 31,
2010. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(4) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $59.64 per share on
December 31, 2010. In the case of a termination of
Mr. Finnegans employment without cause or due to
death or disability, the number of performance units that vest
would be based on our actual performance at the end of the
performance period and, for purposes of this calculation,
reflects the same performance assumptions used for
Mr. Finnegans outstanding performance unit awards set
forth under the heading Executive
CompensationOutstanding Equity Awards at Fiscal
Year-End. In the event of an Involuntary Termination
or Constructive Termination after Change in Control or
upon a Change in Control, the number of performance
units that vest would be based on target performance. Figure
reflected in the Change in Control column assumes
that performance units are not assumed by the acquirer. |
|
(5) |
|
Reflects the value attributable to additional age and service
credit under Mr. Finnegans Pension SERP. |
|
(6) |
|
Mr. Finnegans employment agreement provides for
retiree medical benefits assuming that Mr. Finnegan had
35 years of service at retirement. None of our other
employees hired on or after January 1, 1999 receives
company-subsidized retiree medical benefits. The present value
of these benefits is calculated based on the |
53
|
|
|
|
|
assumptions used for financial reporting purposes at year-end
2010, including a discount rate of 5.75%, medical trend rate of
8.7% in 2010 and grading down gradually to a trend rate of 4.5%
in 2028 and thereafter. |
|
(7) |
|
For death and disability, represents the value attributable to
continuation of two years of executive financial counseling
($26,770). In the case of a termination in connection with a
change in control, represents outplacement benefits ($100,000),
three years of continued life insurance ($171,565), three years
of continued medical and dental benefits ($24,180) and two years
of executive financial counseling ($26,770). In the event of an
involuntary termination without cause, represents 2.5 years
of continued medical and dental benefits ($20,150),
2.5 years of continued life insurance benefits ($142,971)
and one year of executive financial counseling ($13,385). |
|
(8) |
|
This calculation is an estimate for proxy disclosure purposes
only. Payments upon a change in control may differ based on
factors such as transaction price, timing of employment
termination and payments, changes in compensation and reasonable
compensation analyses. For purposes of this calculation, no
portion of the performance units that would accelerate upon a
change in control has been treated as reasonable compensation
for services rendered prior to the change in control and no
value has been attributed to non-competition covenants. The
increase in Mr. Finnegans prior taxable wages negates
any excise tax liabilities under Section 280G of the
Internal Revenue Code. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,558,300
|
|
|
|
|
|
RSUs(4)
|
|
$
|
2,201,918
|
|
|
$
|
2,201,918
|
|
|
|
|
|
|
|
|
|
|
|
3,193,603
|
|
|
$
|
3,193,603
|
|
Performance
Units(5)
|
|
|
6,117,573
|
|
|
|
6,117,573
|
|
|
|
|
|
|
|
|
|
|
|
5,261,202
|
|
|
|
5,261,202
|
|
Other
Benefits(6)
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
|
|
|
$
|
6,000
|
|
|
|
35,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,331,491
|
|
|
$
|
8,331,491
|
|
|
|
|
|
|
$
|
6,000
|
|
|
$
|
13,048,708
|
|
|
$
|
8,454,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Spiro was not eligible for retirement as of
December 31, 2010. |
(2) |
|
The figure reflected in the Involuntary Termination or
Constructive Termination after Change in Control column
represents two years of compensation based on
Mr. Spiros annual salary as of December 31, 2010
($787,500) and the average of the last two annual incentive
compensation awards ($1,491,650). |
(3) |
|
Does not include any amounts attributable to
Mr. Spiros 2010 annual incentive compensation award
to be paid in March 2011 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
(4) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $59.64 per share on December 31,
2010. The figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
(5) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $59.64 per share on
December 31, 2010. In the case of a termination of
Mr. Spiros employment due to death or disability, the
number of performance units that vest would be based on our
actual performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. Spiros outstanding
performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
(6) |
|
Represents the value attributable to continuation of two years
of executive financial counseling ($12,000) in the case of death
and disability or one year in the case of a termination without
cause ($6,000). In the case of a termination in connection with
a change in control, represents the value attributable to
continuation of two years of (i) life insurance premiums
($1,386), (ii) executive financial counseling ($12,000) and
(iii) medical and dental coverage ($22,217). |
54
|
|
|
|
|
John J. Degnan
|
|
|
|
Retirement
|
|
Payment Type
|
|
($)(1)
|
|
|
Cash Payment
|
|
|
|
|
RSUs(2)
|
|
$
|
1,579,670
|
|
Performance
Units(3)
|
|
|
6,925,695
|
|
Other
Benefits(4)
|
|
|
23,760
|
|
|
|
|
|
|
Total
|
|
$
|
8,529,125
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Degnan retired as of December 31, 2010. |
(2) |
|
Reflects fair market value of accelerated vested but unpaid RSUs
based on our closing stock price of $59.64 per share on
December 31, 2010. The value of these RSUs is also
reflected in the information regarding Mr. Degnan set forth
under the heading Option Exercises and Stock Vested. |
(3) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $59.64 per share on
December 31, 2010. The number of performance units that
vest will be based on our actual performance at the end of the
performance period and, for purposes of this calculation,
reflects the same performance assumptions used for
Mr. Degnans outstanding performance unit awards set
forth under the heading Executive Compensation-Outstanding
Equity Awards at Fiscal Year-End. |
(4) |
|
Represents the value attributable to continuation of two years
of executive financial counseling. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Krump
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(2)
|
|
$
|
309,742
|
|
|
$
|
309,742
|
|
|
|
|
|
|
|
|
|
|
$
|
548,271
|
|
|
$
|
548,271
|
|
Performance
Units(3)
|
|
|
1,532,867
|
|
|
|
1,532,867
|
|
|
|
|
|
|
|
|
|
|
|
1,223,515
|
|
|
|
1,223,515
|
|
Retirement
Benefits(4)
|
|
|
2,236,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Benefits(5)
|
|
|
16,430
|
|
|
|
16,430
|
|
|
|
|
|
|
$
|
8,215
|
|
|
|
16,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,095,127
|
|
|
$
|
1,859,039
|
|
|
|
|
|
|
$
|
8,215
|
|
|
$
|
1,788,216
|
|
|
$
|
1,771,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Krump was not eligible for retirement as of
December 31, 2010. |
(2) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $59.64 per share on December 31,
2010. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
(3) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $59.64 per share on
December 31, 2010. In the case of a termination of
Mr. Krumps employment due to death or disability, the
number of performance units that vest would be based on our
actual performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. Krumps outstanding
performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
(4) |
|
In the event of death, the Pension Plan and Pension Excess
Benefit Plan provide for a pre-retirement survivors
benefit with an incremental value of $2,236,088. Due to Mr.
Krumps commencement of employment prior to January 1,
2001, the pre-retirement survivors benefit is more
valuable than the benefits that he would have received in the
event of a voluntary termination. |
(5) |
|
Represents the value attributable to continuation of two years
of executive financial counseling ($16,430) or one year in the
case of an involuntary termination without cause ($8,215). |
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(2)
|
|
$
|
302,963
|
|
|
$
|
302,963
|
|
|
|
|
|
|
|
|
|
|
$
|
540,875
|
|
|
$
|
540,875
|
|
Performance
Units(3)
|
|
|
1,532,867
|
|
|
|
1,532,867
|
|
|
|
|
|
|
|
|
|
|
|
1,223,515
|
|
|
|
1,223,515
|
|
Retirement
Benefits(4)
|
|
|
1,123,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Benefits(5)
|
|
|
16,430
|
|
|
|
16,430
|
|
|
|
|
|
|
$
|
8,215
|
|
|
|
16,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,975,504
|
|
|
$
|
1,852,260
|
|
|
|
|
|
|
$
|
8,215
|
|
|
$
|
1,780,820
|
|
|
$
|
1,764,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Morrison was not eligible for retirement as of
December 31, 2010. |
|
(2) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $59.64 per share on December 31,
2010. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(3) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $59.64 per share on
December 31, 2010. In the case of a termination of
Mr. Morrisons employment due to death or disability,
the number of performance units that vest would be based on our
actual performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. Morrisons outstanding
performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(4) |
|
In the event of death, the Pension Plan and Pension Excess
Benefit Plan provide for a pre-retirement survivors
benefit with an incremental value of $1,123,244. Due to Mr.
Morrisons commencement of employment prior to
January 1, 2001, the pre-retirement survivors benefit
is more valuable than the benefits that he would have received
in the event of a voluntary termination. |
|
(5) |
|
Represents the value attributable to continuation of two years
of executive financial counseling ($16,430) or one year in the
case of an involuntary termination without cause ($8,215). |
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dino E. Robusto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(2)
|
|
$
|
302,963
|
|
|
$
|
302,963
|
|
|
|
|
|
|
|
|
|
|
$
|
540,875
|
|
|
$
|
540,875
|
|
Performance
Units(3)
|
|
|
1,532,867
|
|
|
|
1,532,867
|
|
|
|
|
|
|
|
|
|
|
|
1,223,515
|
|
|
|
1,223,515
|
|
Retirement
Benefits(4)
|
|
|
1,547,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Benefits(5)
|
|
|
16,430
|
|
|
|
16,430
|
|
|
|
|
|
|
$
|
8,215
|
|
|
|
16,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,399,811
|
|
|
$
|
1,852,260
|
|
|
|
|
|
|
$
|
8,215
|
|
|
$
|
1,780,820
|
|
|
$
|
1,764,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Robusto was not eligible for retirement as of
December 31, 2010. |
|
(2) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $59.64 per share on December 31,
2010. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(3) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $59.64 per share on
December 31, 2010. In the case of a termination of
Mr. Robustos employment due to death or disability,
the number of performance units that vest would be based on our
actual performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. Robustos outstanding
performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(4) |
|
In the event of death, the Pension Plan and Pension Excess
Benefit Plan provide for a pre-retirement survivors
benefit with an incremental value of $1,547,551. Due to Mr.
Robustos commencement of employment prior to
January 1, 2001, the pre-retirement survivors benefit
is more valuable than the benefits that he would have received
in the event of a voluntary termination. |
|
(5) |
|
Represents the value attributable to continuation of two years
of executive financial counseling ($16,430) or one year in the
case of an involuntary termination without cause ($8,215). |
57
EQUITY
COMPENSATION PLAN INFORMATION
The following table shows certain information with respect to
our equity compensation plans as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
|
Securities Remaining
|
|
|
|
Securities
|
|
|
|
|
|
Available for Future
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
Issuance under
|
|
|
|
upon Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Plans (excluding
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
securities reflected
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
in column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
10,171,515
|
(2)
|
|
$
|
37.33
|
(4)
|
|
|
22,853,710
|
(6)
|
Equity compensation plans not approved by security
holders(1)
|
|
|
189,015
|
(3)
|
|
$
|
52.02
|
(5)
|
|
|
342,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,360,530
|
|
|
$
|
37.40
|
(4)(5)
|
|
|
23,196,310
|
|
|
|
|
(1) |
|
These plans are the CCAP Excess Benefit Plan and the Deferred
Compensation Plan for Directors, under which 138,387 shares
of common stock and 204,213 shares of common stock,
respectively, are available for future issuance. |
|
|
|
The CCAP Excess Benefit Plan is a nonqualified, defined
contribution plan and covers those participants in the CCAP and
the ESOP whose total benefits under those plans are limited by
certain provisions of the Internal Revenue Code. A participant
in the CCAP Excess Benefit Plan is entitled to a benefit
equaling the difference between the participants benefits
under the CCAP and the ESOP, without considering the applicable
limitations of the Internal Revenue Code, and the
participants actual benefits under such plans. A
participants excess ESOP benefit is expressed as shares of
our common stock. Payments under the CCAP Excess Benefit Plan
are generally made: (i) for excess benefits related to the
CCAP in cash annually as soon as practical after the amount of
excess benefit can be determined; and (ii) for excess
benefits related to the ESOP, in common stock as soon as
practicable after the earlier of the participants 65th
birthday or termination of employment. Allocations under the
ESOP ceased in 2004. Accordingly, other than dividends, no new
contributions are made to the ESOP or the CCAP Excess Benefit
Plan with respect to excess ESOP benefits. Additional
information regarding the CCAP and the CCAP Excess Benefit Plan
is set forth under the heading Compensation Discussion and
AnalysisCompany-Sponsored Benefit Plans. |
|
|
|
The material terms of the Deferred Compensation Plan for
Directors are described under the heading Corporate
Governance Directors Compensation. |
|
(2) |
|
Includes 3,666,257 shares, representing 200% of the
aggregate target for the performance unit awards for the
three-year performance periods ending December 31, 2011 and
December 31, 2012, which is the maximum number of shares
issuable under these awards and 893,561 shares for the
performance period ended December 31, 2010. The
December 31, 2010 performance units are shown at the actual
payout percentage of 151.4% of target. Shortly after the end of
each performance period, our Compensation Committee will
determine the actual number of shares to be received by
participants in these plans for the awards that are earned on
December 31, 2011 and December 31, 2012. |
|
(3) |
|
Includes an aggregate of 16,681 shares issuable upon
exercise of the special option grants awarded to two independent
directors in 2002 as individual compensation for their service
on our CEO search committee. |
|
(4) |
|
Weighted average exercise price excludes shares issuable under
outstanding performance unit awards, RSU awards and director
stock unit awards. |
|
(5) |
|
Weighted average exercise price consists of exercise price of
special option grants described in note (3) above, and
excludes shares issuable in connection with the CCAP Excess
Benefit Plan and the Deferred Compensation Plan for Directors. |
|
(6) |
|
Includes 14,139,932 shares available for issuance under the
Global Employee Stock Purchase Plan (2001),
8,713,778 shares available for issuance under the 2009 LTIP
(which includes 286,841 shares previously reserved for
issuance in connection with the 2008 performance unit awards).
After December 31, 2010, the number of shares available for
issuance under the 2009 LTIP was reduced by approximately
1.3 million net shares due to grants made to participants
in the 2009 LTIP during the first quarter of 2011 (partially
offset by shares returned to the status of available for
issuance due to forfeitures and shares cancelled in connection
with tax withholdings). |
58
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning
the only persons or entities known to us to be beneficial owners
of more than 5% of our outstanding common stock. The information
below is as reported by that entity in statements filed with the
SEC.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
of Beneficial
|
|
|
|
|
Ownership of
|
|
|
Name and Address
|
|
Common Stock
|
|
Percent of
Class(2)
|
|
BlackRock, Inc.
|
|
|
18,494,717
|
(1)
|
|
|
6.1
|
%
|
|
|
|
(1) |
|
Reflects ownership as of December 31, 2010 as reported on
an amendment to Schedule 13G filed with the SEC by
BlackRock, Inc., located at 40 East 52nd Street, New York, NY
10022. BlackRock, Inc. reports sole voting and dispositive power
over all of the reported shares. BlackRock, Inc. has certified
that these shares of our common stock were acquired in the
ordinary course of business and were not acquired for the
purpose of, and do not have the effect of, changing or
influencing the control of Chubb and were not acquired in
connection with or as a participant in any transaction having
such purpose or effect. |
|
(2) |
|
As reported in the applicable statement filed with the SEC. |
59
The following table sets forth certain information regarding the
beneficial ownership of our common stock and common stock-based
holdings by each of our directors and nominees for director, by
each of our NEOs and by our directors and executive officers as
a group as of March 4, 2011.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
|
|
|
|
Ownership of
|
|
|
|
|
Name and
Address(1)
|
|
Common
Stock(2)
|
|
|
Percent of
Class(3)
|
|
|
Zoë
Baird(4)(5)
|
|
|
42,476
|
|
|
|
*
|
|
Sheila P.
Burke(4)(6)
|
|
|
82,015
|
|
|
|
*
|
|
James I. Cash,
Jr.(4)(7)
|
|
|
19,906
|
|
|
|
*
|
|
John D.
Finnegan(8)
|
|
|
1,158,208
|
|
|
|
*
|
|
Lawrence W.
Kellner(9)
|
|
|
|
|
|
|
|
|
Martin G.
McGuinn(4)
|
|
|
18,910
|
|
|
|
*
|
|
Lawrence M.
Small(4)(10)
|
|
|
101,176
|
|
|
|
*
|
|
Jess
Søderberg(4)
|
|
|
9,512
|
|
|
|
*
|
|
Daniel E.
Somers(4)(11)
|
|
|
24,645
|
|
|
|
*
|
|
James M.
Zimmerman(12)
|
|
|
12,560
|
|
|
|
*
|
|
Alfred W.
Zollar(4)(13)
|
|
|
16,952
|
|
|
|
*
|
|
Paul J.
Krump(14)
|
|
|
126,813
|
|
|
|
*
|
|
Harold L. Morrison,
Jr.(15)
|
|
|
46,258
|
|
|
|
*
|
|
Dino E.
Robusto(16)
|
|
|
59,951
|
|
|
|
*
|
|
Richard G.
Spiro(17)
|
|
|
85,578
|
|
|
|
*
|
|
All directors and executive officers as a
group(18)
|
|
|
2,026,191
|
|
|
|
*
|
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
The business address of each director and executive officer
named in this table is The Chubb Corporation, 15 Mountain View
Road, Warren, New Jersey 07059. |
|
(2) |
|
Unless otherwise indicated, share amounts are as of
March 4, 2011 and each person has sole voting and
investment power with respect to the shares listed. |
|
(3) |
|
Based upon 293,588,553 shares of our common stock outstanding as
of March 4, 2011. |
|
(4) |
|
Includes (i) 469 fully vested stock units; and
(ii) 4,397 fully vested mandatorily deferred stock units
until separation from service. |
|
(5) |
|
Includes (i) 20,000 shares that Ms. Baird may
purchase within 60 days. |
|
(6) |
|
Includes (i) 56,000 shares that may be purchased
within 60 days; (ii) 7,416 market value units; and
(iii) 11,985 vested stock units of which Ms. Burke has
elected to defer her receipt. |
|
(7) |
|
Includes (i) 8,000 shares that may be purchased within
60 days; (ii) 2,353 market value units; and
(iii) 1,057 vested stock units of which Dr. Cash has
elected to defer his receipt. |
|
(8) |
|
Includes (i) 80,000 shares held by a family-owned
limited liability company; (ii) 18,910 shares held in
a grantor retained annuity trust; (iii) 3,182 shares
in a family-owned trust; (iv) 271,576 shares that may
be purchased within 60 days; (v) 37,690 RSUs that will
vest on March 12, 2011; (vi) 47,070 RSUs that will
vest on February 25, 2012; (vii) 37,262 RSUs that will
vest on February 24, 2013; (viii) 31,368 RSUs that
will vest on February 23, 2014; (ix) 202 shares
that were allocated to Mr. Finnegan pursuant to the ESOP;
and (x) 241,659 RSUs that are fully vested of which
Mr. Finnegan has elected to defer receipt until retirement.
This amount does not include (i) performance units
representing a target of 141,211 shares for the performance
period ending December 31, 2011;
(ii) 111,786 shares for the performance period ending
December 31, 2012; and (iii) 94,106 shares for
the performance period ending December 31, 2013. Payment |
60
|
|
|
|
|
of such shares will range from 0% to 200% depending on actual
performance measured against the stated performance goals for
the applicable performance period. |
|
(9) |
|
The 2011 Annual Meeting will be the first time that
Mr. Kellner is standing for election to our Board. |
|
(10) |
|
Includes (i) 37,925 shares that Mr. Small may
purchase within 60 days; and (ii) 4,018 shares
that may be purchased within 60 days pursuant to a
restoration stock option awarded pursuant to exercising a
special stock option grant. |
|
(11) |
|
Includes (i) 2,000 shares that may be purchased within
60 days; (ii) 2,528 market value units; and
(iii) 13,203 vested stock units of which Mr. Somers
has elected to defer his receipt. |
|
(12) |
|
Includes (i) 433 fully vested stock units; (ii) 4,397
fully vested mandatorily deferred stock units until separation
from service; and (iii) 1,970 vested stock units of which
Mr. Zimmerman has elected to defer his receipt. |
|
(13) |
|
Includes 322 vested stock units of which Mr. Zollar has
elected to defer his receipt. |
|
(14) |
|
Includes (i) 33,522 shares that may be purchased
within 60 days; (ii) 2,355 RSUs that will vest on
March 12, 2011; (iii) 3,406 RSUs that will vest on
February 25, 2012; (iv) 3,432 RSUs that will vest on
February 24, 2013; (v) 4,952 RSUs that will vest on
February 23, 2014; and (vi) 6,636 shares that
were allocated to Mr. Krump pursuant to the ESOP. This
amount does not include (i) performance units representing
a target of 10,219 shares for the performance period ending
December 31, 2011; (ii) 10,296 shares for the
performance period ending December 31, 2012; and
(iii) 14,859 shares for the performance period ending
December 31, 2013. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(15) |
|
Includes (i) 2,231 RSUs that will vest on March 12,
2011; (ii) 3,406 RSUs that will vest on February 25,
2012; (iii) 3,432 RSUs that will vest on February 24,
2013; (iv) 3,714 RSUs that will vest on February 23,
2014; (v) 355 shares in the Chubb Stock Fund of the
CCAP; and (vi) 132 shares that were allocated to
Mr. Morrison pursuant to the ESOP. This amount does not
include (i) performance units representing a target of
10,219 shares for the performance period ending
December 31, 2011; (ii) 10,296 shares for the
performance period ending December 31, 2012; and
(iii) 11,144 shares for the performance period ending
December 31, 2013. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(16) |
|
Includes (i) 10,396 shares that Mr. Robusto may
purchase within 60 days; (ii) 2,231 RSUs that will
vest on March 12, 2011; (iii) 3,406 RSUs that will
vest on February 25, 2012; (iv) 3,432 RSUs that will
vest on February 24, 2013; and (v) 4,952 RSUs that
will vest on February 23, 2014. This amount does not
include (i) performance units representing a target of
10,219 shares for the performance period ending
December 31, 2011; (ii) 10,296 shares for the
performance period ending December 31, 2012; and
(iii) 14,859 shares for the performance period ending
December 31, 2013. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(17) |
|
Includes (i) 16,412 RSUs that will vest on
February 25, 2012; (ii) 12,992 RSUs that will vest on
February 24, 2013; and (iii) 10,937 RSUs that will
vest on February 23, 2014. This amount does not include
(i) performance units representing a target of
49,238 shares for the performance period ending
December 31, 2011; (ii) 38,978 shares for the
performance period ending December 31, 2012; and
(iii) 32,814 shares for the performance period ending
December 31, 2013. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(18) |
|
Includes (i) 1,162 shares which executive officers
other than those listed in the table above disclaim beneficial
ownership; (ii) 623 shares which were allocated to
executive officers other than those listed in the table above
pursuant to the Chubb Stock Fund of the CCAP;
(iii) 4,805 shares which were allocated to executive
officers other than those listed in the table above pursuant to
the ESOP; (iv) 27,828 shares which executive officers
other than those listed in the table above have the right to
purchase within 60 days; (v) 10,014 RSUs which were
allocated to executive officers other than those listed in the
table above that will |
61
|
|
|
|
|
vest on March 12, 2011; (vi) 16,032 RSUs which were
allocated to executive officers other than those listed in the
table above that will vest on February 25, 2012;
(vii) 13,098 RSUs which were allocated to executive
officers other than those listed in the table above that will
vest on February 24, 2013; and (viii) 12,625 RSUs
which were allocated to executive officers other than those
listed in the table above that will vest on February 23,
2014. This amount does not include (i) performance units
awarded to executive officers other than those listed in the
table above representing a target of 48,104 shares for the
performance period ending December 31, 2011;
(ii) 39,303 shares for the performance period ending
December 31, 2012; and (iii) 37,893 shares for
the performance period ending December 31, 2013. Payment of
such shares will range from 0% to 200% depending on actual
performance measured against the stated performance goals for
the applicable performance period. |
CERTAIN
TRANSACTIONS AND OTHER MATTERS
At December 31, 2010, BlackRock, Inc. was the beneficial
owner of more than 5% of our outstanding common stock. In 2010,
BlackRock, Inc. purchased insurance policies from our property
and casualty insurance subsidiaries with an aggregate net
written premium of approximately $2,800,000. At
December 31, 2010, we owned approximately $39,300,000
million of BlackRock, Inc. fixed income securities.
As disclosed in our 2010 proxy statement, during the first
quarter of 2010, one of our property and casualty insurance
subsidiaries agreed to pay 650,000 on behalf of an insured
of the subsidiary to resolve all claims of a third party against
the insureds directors, officers and employees. The
company that purchased the insurance policy from our subsidiary
was an early stage venture capital backed software company that,
like many information technology companies, filed for bankruptcy
in 2002 when its backers declined to make further investments in
it. Dr. Cash was a director of the insured. The settlement
was negotiated at arms length between counsel for the
claimant and the insureds. Our subsidiary administered the
insureds claim for insurance coverage in the ordinary
course of business and consistent with our administration of
claims of other insureds. The insured, together with its
directors, officers and employees, have denied, and continue to
deny, liability for the claims. No portion of the settlement
payment was attributed to Dr. Cash.
Effective December 1, 2002, we entered into an employment
agreement with Mr. Finnegan. This employment agreement
covers Mr. Finnegans roles and responsibilities, his
compensation and benefits and the results of the termination of
his employment under various circumstances. The employment
agreement contains an automatic renewal clause, providing that
the employment agreement will have a perpetual two-year term
unless Mr. Finnegan or we deliver a notice of non-renewal.
Additional information regarding Mr. Finnegans
employment agreement is set forth under the headings
Compensation Discussion and AnalysisEmployment and
Severance Agreements, Compensation Discussion and
AnalysisChange in Control Agreements and
Executive CompensationPotential Payments upon
Termination.
We have entered into a change in control agreement with
Mr. Spiro. Information regarding this change in control
agreement is set forth under the headings Compensation
Discussion and AnalysisChange in Control Agreements
and Executive CompensationPotential Payments upon
Termination.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors
and executive officers and persons who beneficially own more
than 10% of our common stock to file reports of securities
ownership and changes in such ownership with the SEC. Based
solely upon a review of copies of such reports or written
representations that all such reports were timely filed, we
believe that each of our directors, executive officers and
greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them during
2010.
62
PROPOSAL 1
ELECTION
OF DIRECTORS
Upon the recommendation of our Governance Committee, our Board
has nominated the following individuals for election to our
Board this year:
|
|
|
Zoë Baird
|
|
Lawrence M. Small
|
Sheila P. Burke
|
|
Jess Søderberg
|
James I. Cash, Jr.
|
|
Daniel E. Somers
|
John D. Finnegan
|
|
James M. Zimmerman
|
Lawrence W. Kellner
|
|
Alfred W. Zollar
|
Martin G. McGuinn
|
|
|
Information regarding the business experience of each nominee
and the factors considered by our Governance Committee and the
Board in selecting each nominee for election to our Board is
provided under the heading Our Board of Directors.
Each of our directors is elected annually to serve until the
next annual meeting of shareholders and until his or her
successor is elected and qualified. There are no family
relationships among our executive officers and directors. Each
director nominee other than Mr. Finnegan satisfies the
independence requirements set forth in the NYSE listing
standards and, with respect to the nominees expected to serve on
our Audit Committee, Section 10A(m)(3) of the Exchange Act.
Our Board expects that each of the nominees named in this proxy
statement will be available for election and, if elected, will
be willing to serve as a director. If any nominee is not
available, then the proxies may vote for a substitute as may be
designated by our Board, unless our Board reduces the number of
directors. Our Board has, in accordance with our By-Laws, fixed
the number of directors to be elected at 11. If elected, each
director will serve until the next annual meeting of
shareholders and until his or her successor is elected and
qualified.
Director nominees will be elected by a majority of the votes
cast by our shareholders entitled to vote at the 2011 Annual
Meeting. If you wish to give specific instructions with respect
to the voting of directors, you may do so by indicating your
instructions on your proxy card.
Our Board recommends that you vote FOR each of
the foregoing nominees for director. If you are a shareholder of
record and return a signed and dated proxy card without marking
any voting selections, your shares will be voted FOR
the election of each of the director nominees. If you are a
beneficial owner of shares held in street name and return a
signed and dated voting instruction card without marking any
voting selections for the election of directors, your shares
will be voted FOR the election of each of the
director nominees. If you do not return your proxy card or your
voting instruction card, your shares will not be voted with
respect to this proposal.
63
PROPOSAL 2
ADOPTION
OF THE CHUBB CORPORATION ANNUAL INCENTIVE COMPENSATION PLAN
(2011)
Introduction
To enable us to continue to attract, reward and retain employees
whose efforts are largely responsible for our overall success
and to ensure that annual cash incentive compensation payments
to Messrs. Finnegan, Krump, Morrison and Robusto (referred
to in this proposal as covered employees) could be
deductible by us under Section 162(m) of the Internal
Revenue Code as performance-based compensation, our
Board adopted, and in April 2006 our shareholders approved, our
2006 Annual Incentive Plan. Under the 2006 Annual Incentive
Plan, our employees and those of our subsidiaries and affiliates
are eligible to receive annual cash incentive compensation
payments based on the achievement of certain performance goals
and managements assessment of their performance during the
fiscal year. Section 162(m) requires that shareholders
re-approve performance goals under a plan intended to qualify
for the performance-based compensation exception
every five years and also approve any increase to the maximum
compensation that may be paid to a participant under such a plan.
To continue to allow us to attract, reward and retain employees
and to allow us to fully deduct annual cash incentive
compensation payments under Section 162(m), our
Compensation Committee has adopted The Chubb Corporation Annual
Incentive Compensation Plan (2011) (the 2011 Annual Incentive
Plan), subject to shareholder approval. If the 2011 Annual
Incentive Plan is not approved by our shareholders, annual cash
incentive compensation payable to our covered employees will not
be fully deductible under Section 162(m) as
performance-based compensation.
Summary
of the 2011 Annual Incentive Plan
The following summary of the 2011 Annual Incentive Plan is
qualified in its entirety by reference to its complete text,
which is attached to this proxy statement as Annex A.
Except as noted below, the 2011 Annual Incentive Plan is
substantially similar to the 2006 Annual Incentive Plan.
Our Compensation Committee will be responsible for administering
the 2011 Annual Incentive Plan and for selecting eligible
participants for the 2011 Annual Incentive Plan from our
officers and employees and those of our subsidiaries and
affiliates. For annual incentive compensation awards relative to
our 2011 performance, approximately 10,100 employees will
be considered for participation under the 2011 Annual Incentive
Plan.
Our Compensation Committee establishes awards for each fiscal
year for participants, the payment of which generally are
dependent upon the achievement of one or more of the following
corporate, subsidiary, affiliate, operating unit or division
performance goals:
|
|
|
combined loss and expense ratio;
|
|
return on average assets;
|
earnings or net income or operating income per share;
|
|
cash flow(s);
|
net income;
|
|
stock price;
|
operating income;
|
|
cash return on average equity;
|
earnings before interest and taxes;
|
|
strategic business objectives consisting of one or
more objectives based on meeting specified cost targets,
business expansion goals, and goals relating to acquisitions or
divestitures;
|
after tax operating income;
|
|
except in the case of a covered employee, any other
performance criteria established by our Compensation Committee;
and
|
return on average equity;
|
|
any combination of the foregoing.
|
The performance goals may include a threshold level of
performance below which no payment will be made, levels of
performance at which specified payments will be made, and a
maximum level of performance above which
64
no additional payment will be made. Each of the performance
goals may be expressed on an absolute
and/or
relative basis, may be based on or otherwise employ comparisons
based on internal targets, past performance
and/or the
past or current performance of other companies, and in the case
of earnings-based goals, may use or employ comparisons relating
to capital, shareholders equity
and/or
shares outstanding, or to assets or net assets. Our Compensation
Committee may make adjustments to the performance goals as it
deems equitable in recognition of unusual or non-recurring
events, changes in applicable tax laws or accounting principles
or other factors as our Compensation Committee may determine,
including any other event or circumstance that renders the
performance measure to be unsuitable or to result in undue
enlargement or reduction of an award under the 2011 Annual
Incentive Plan. However, no modifications to performance goals
will be made if the effect of such change would be to cause an
award intended to qualify as performance-based
compensation under Section 162(m) to fail to so
qualify.
As soon as administratively practicable after the close of each
fiscal year (but not later than March 31st of the
calendar year following the fiscal year), our Compensation
Committee will determine the extent to which the performance
goals were achieved for the fiscal year and the annual cash
incentive compensation payable to participants based upon the
achievement of the performance goals and, for participants other
than covered employees, managements assessment of the
participants individual performance.
Like the 2006 Annual Incentive Plan, the 2011 Annual Incentive
Plan provides our Compensation Committee with the flexibility to
use different methods to allocate annual cash incentive
compensation and does not mandate a bonus pool approach.
Providing our Compensation Committee with this flexibility
allows our Compensation Committee to structure annual cash
incentive compensation as it deems most effective to attract,
reward and retain employees who are responsible for our success.
As with the 2006 Annual Incentive Plan, the 2011 Annual
Incentive Plan also permits our Compensation Committee to
increase the annual cash incentive compensation payable to
participants other than covered employees. Nevertheless, the
maximum annual incentive compensation payable to a participant
under the 2011 Annual Incentive Plan for any fiscal year is
$7.5 million.
All payments under the 2011 Annual Incentive Plan will be made
in cash as soon as practicable after the close of the applicable
fiscal year, except that participants may be given the
opportunity to defer such payments. Generally, participants must
be employed on the payment date to be eligible for an award
under the 2011 Annual Incentive Plan. Our Compensation Committee
may, however, provide for award payments to participants who
terminate employment prior to payment in the event of death,
disability, retirement or for any other reason it may approve.
Under the 2011 Annual Incentive Plan, in the event of a change
in control, participants would be entitled to an accelerated
payment of a pro-rata award in respect of the year in which the
change in control occurs. The proration would reflect the
portion of the year completed prior to the change in control and
the amount of the award would be calculated based upon each
participants target award for the year in which the change
in control occurs. If a change in control occurs after the close
of the fiscal year but prior to the date participants have
received award payments in respect of such year, participants
will also be entitled to accelerated payment of those awards.
These change in control provisions are similar to those
contained in the 2006 Annual Incentive Plan, except that the
proration calculation under the 2006 Annual Incentive Plan was
based upon the higher of the participants target award for
the year or the actual award our Compensation Committee
forecasts would have been paid based upon the achievement of the
performance goals during the year prior to the date of the
change in control.
Awards made under the 2011 Annual Incentive Plan will be subject
to any recoupment or similar policy that our Compensation
Committee may approve from time to time.
The 2011 Annual Incentive Plan may be amended, suspended or
terminated at any time, provided that no such action may
adversely affect a participants outstanding awards without
the consent of such participant and provided further that,
unless otherwise determined by the Compensation Committee, no
amendment shall cause the 2011 Annual Incentive Plan or any
award thereunder to fail to satisfy the requirements of the
performance-based compensation exception under
Section 162(m).
65
Annual cash incentive compensation payable under the 2011 Annual
Incentive Plan cannot yet be determined by our Compensation
Committee because the awards are dependent upon our future
performance. Accordingly, the following table shows the amounts
to be paid with respect to our 2010 performance under the 2006
Annual Incentive Plan to the individuals and groups set forth
below:
|
|
|
|
|
Name and Position
|
|
Amount Paid ($)
|
|
|
John D. Finnegan
Chairman, President and Chief Executive Officer
|
|
|
$3,600,000
|
|
Richard G. Spiro
Executive Vice President and Chief Financial Officer
|
|
|
1,487,400
|
|
Paul J. Krump
President of Commercial and Specialty Lines
|
|
|
850,000
|
|
Dino E. Robusto
President of Personal Lines and Claims
|
|
|
750,000
|
|
Harold L. Morrison, Jr.
Executive Vice President and Chief Global Field Officer and
Chief Administrative Officer
|
|
|
725,000
|
|
All current executive officers as a group (12 persons
including those named above)
|
|
|
10,325,200
|
|
All employees as a group (other than executive officers)
|
|
|
173,374,000
|
*
|
The affirmative vote of a majority of the votes cast by
shareholders entitled to vote at the annual meeting is required
for the adoption of the proposal to adopt the 2011 Annual
Incentive Plan.
Our Board recommends that you vote FOR the
adoption of the 2011 Annual Incentive Plan. If you are a
shareholder of record and return a signed and dated proxy card
without marking any voting selections, your shares will be voted
FOR the adoption of the 2011 Annual Incentive Plan.
If you are a beneficial owner of shares held in street name and
return a signed and dated voting instruction card without
marking any voting selections for this proposal, your shares
will be voted FOR the adoption of the 2011 Annual
Incentive Plan. If you do not return your proxy card or your
voting instruction card, your shares will not be voted with
respect to this proposal.
66
PROPOSAL 3
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITOR
Our Audit Committee, acting pursuant to the authority granted to
it in its charter, has retained Ernst & Young LLP
(Ernst & Young) as our independent auditor. The
appointment of Ernst & Young is being submitted to our
shareholders for ratification. Ernst & Young has acted
as our independent auditor for many years. The following
summarizes the fees billed to us by Ernst & Young for
professional services rendered in 2010 and 2009:
|
|
|
|
|
|
|
|
|
Fee Category
|
|
2010
|
|
|
2009
|
|
|
Audit
Fees(1)
|
|
$
|
7,340,000
|
|
|
$
|
6,840,000
|
|
Audit-Related
Fees(2)
|
|
|
1,240,000
|
|
|
|
1,190,000
|
|
Tax
Fees(3)
|
|
|
|
|
|
|
|
|
All Other
Fees(4)
|
|
|
210,000
|
|
|
|
33,000
|
|
|
|
|
(1) |
|
Audit Fees primarily relate to the audit of our annual financial
statements, review of our financial statements included in our
quarterly reports on
Form 10-Q,
statutory audits for our insurance subsidiaries and review of
SEC registration statements. |
|
(2) |
|
Audit-Related Fees primarily relate to an International
Financial Reporting Standards impact assessment, a SAS 70
internal control report, employee benefit plan audits and
certain non-insurance related statutory audits. |
|
(3) |
|
Tax Fees primarily relate to tax compliance, tax advice and tax
planning. |
|
(4) |
|
All Other Fees relate to other services not described in notes
(1), (2), and (3) above, including special actuarial
reports filed with regulators, technical training and an online
information service. |
Our Audit Committee determined that the provision of these
services is compatible with maintaining Ernst &
Youngs independence.
In 2010, our Audit Committee pre-approved all services performed
for us by Ernst & Young.
Representatives of Ernst & Young are expected to be
present at the 2011 Annual Meeting and to have the opportunity
to make a statement should they desire to do so and to be
available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast by
shareholders entitled to vote at the 2011 Annual Meeting is
required to ratify the appointment of Ernst & Young as
our independent auditor. If our shareholders do not ratify the
appointment of Ernst & Young, our Audit Committee will
reconsider the appointment.
Our Board recommends that you vote FOR
ratification of the appointment of Ernst & Young LLP
as our independent auditor. Proxies solicited by our Board will
be voted FOR this proposal unless a shareholder has
indicated otherwise on the proxy card. If you are a shareholder
of record and return a signed and dated proxy card without
marking any voting selections with respect to ratification of
Ernst & Young LLP as independent auditor, or if you
are a beneficial owner of shares held in street name and return
a signed and dated voting instruction card without marking any
voting selection with respect to ratification of
Ernst & Young LLP as independent auditor, your shares
will be considered as present and entitled to vote with respect
to that proposal and your shares will be voted FOR
Proposal 3.
67
PROPOSAL 4
ADVISORY
VOTE ON EXECUTIVE COMPENSATION
In accordance with the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-Frank Act) and rules adopted
by the SEC required thereunder, at the 2011 Annual Meeting, we
are providing shareholders with an advisory vote on our
compensation program for our NEOs. This vote is colloquially
referred to as say on pay.
Accordingly, at the 2011 Annual Meeting, shareholders will have
the opportunity to vote on the following resolution:
RESOLVED, that the shareholders of The Chubb Corporation
(the Company), in an advisory vote, hereby approve the
compensation paid to the Companys named executive officers
as disclosed pursuant to Item 402 of
Regulation S-K
in the Companys 2011 proxy statement under the headings
Compensation Discussion and Analysis and
Executive Compensation.
This vote is non-binding. Our Compensation Committee, however,
expects to take into account the outcome of the vote when
considering future executive compensation decisions to the
extent its members (with the assistance of the Compensation
Consultant) can determine the cause or causes leading to the
results of this vote.
As described in detail under Compensation Discussion and
Analysis, our executive compensation program is designed
to motivate and retain our NEOs, thereby helping us to maintain
our position as one of the worlds preeminent insurers. Our
Compensation Committee, with the assistance of the Compensation
Consultant, engages in rigorous benchmarking and analysis of our
NEO target compensation levels to ensure that our executive
compensation program is competitive with the companies with
which we believe we compete for executive talent. At the same
time, our Compensation Committee has designed our executive
compensation program to ensure that NEO actual compensation
levels are reflective of the results we achieve for our
shareholders on both an annual and longer-term basis.
Shareholders are encouraged to carefully read the information
set forth under the headings Compensation Discussion and
Analysis and Executive Compensation.
Our Board recommends that you vote FOR the
approval, on an advisory basis, of the compensation of our NEOs
as disclosed pursuant to Item 402 of
Regulation S-K
in this proxy statement under the headings Compensation
Discussion and Analysis and Executive
Compensation. If you are a shareholder of record and
return a signed and dated proxy card without marking any voting
selections, your shares will be voted FOR the
compensation of our NEOs as disclosed pursuant to Item 402
of
Regulation S-K
in this proxy statement under the headings Compensation
Discussion and Analysis and Executive
Compensation. If you are a beneficial owner of shares held
in street name and return a signed and dated voting instruction
card without marking any voting selections for this proposal,
your shares will be voted FOR the compensation of
our NEOs as disclosed pursuant to Item 402 of
Regulation S-K
in this proxy statement under the headings Compensation
Discussion and Analysis and Executive
Compensation. If you do not return your proxy card or your
voting instruction card, your shares will not be voted with
respect to this proposal.
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PROPOSAL 5
ADVISORY VOTE ON THE FREQUENCY OF THE SHAREHOLDER VOTE ON
EXECUTIVE COMPENSATION
In accordance with the Dodd-Frank Act and rules adopted by the
SEC required thereunder, at the 2011 Annual Meeting, we are
providing our shareholders with an advisory vote on whether the
shareholder advisory vote on executive compensation should be
held every one, two or three years. This vote is colloquially
referred to as say on frequency.
Accordingly, at the 2011 Annual Meeting, shareholders will have
the opportunity to vote on the following resolution:
RESOLVED that the shareholders recommend, in an advisory
vote, whether a non-binding shareholder vote to approve the
compensation of the Companys named executive officers
should occur every [[one], [two] or [three]] years.
The actual interval reflected in the resolution passed at the
2011 Annual Meeting will be determined by a plurality of the
votes cast.
Our Board believes that a triennial say on frequency vote is the
optimal interval for conducting and responding to a say on pay
vote for a number of reasons, including:
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For awards under our long-term equity incentive compensation
plans, which comprise the majority of our NEOs pay, our
Compensation Committee generally utilizes a three-year
performance or vesting cycle. Accordingly, it generally takes a
full three years to assess the pay for performance relationship
of our executive compensation. Therefore, it is both logical and
appropriate to align the say on pay vote with this same
three-year interval.
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For many years, we have utilized a multi-year interval for
seeking shareholder approval for our performance-based
compensation plans. For example, our practice has been to seek
shareholder approval for our annual cash incentive compensation
plans and our long-term equity incentive compensation plans
every five years. We believe utilizing this multi-year interval
has served the interests of our company and our shareholders
well.
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A triennial say on pay vote provides an effective timeframe for
our Compensation Committee to analyze and, as appropriate,
respond to shareholder feedback that can be gleaned from the say
on pay vote.
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Shareholders who have concerns about our executive compensation
during the interval between say on pay votes have the
opportunity to bring their specific concerns to the attention of
the Board by following the procedures set forth under the
heading Corporate GovernanceContacting our
Board.
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The proxy card provides shareholders with the opportunity to
choose among four options (holding the vote every one, two or
three years, or abstaining) and, therefore, shareholders will
not be voting to approve or disapprove the Boards
recommendation.
Although this advisory vote on the frequency of the say on pay
vote is non-binding, the Board and our Compensation Committee
will take into account the outcome of the vote when considering
the frequency of future say on pay votes.
Our Board recommends that you vote FOR the option
of every three years, on an advisory basis, as the
interval between future advisory say on pay votes. If you are a
shareholder of record and return a signed and dated proxy card
without marking any voting selections, your shares will be voted
for a THREE year interval for the advisory say on
pay vote. If you are a beneficial owner of shares held in street
name and return a signed and dated voting instruction card
without marking any voting selections for this proposal, your
shares will be voted for a THREE year interval for
the advisory say on pay vote. If you do not return your proxy
card or your voting instruction card, your shares will not be
voted with respect to this proposal.
69
SOLICITATION
OF PROXIES
We will pay the cost of this solicitation of proxies. In
addition to the solicitation of proxies by use of the internet
and mail, we may use the services of one or more of our
directors, officers or other regular employees (who will receive
no additional compensation for their services in such
solicitation) to solicit proxies personally, by telephone or by
other electronic means. In addition, we may enter into an
agreement with a professional proxy solicitor, pursuant to which
it may assist us in the solicitation of proxies by mail, in
person and by telephone for a fee, which is estimated not to
exceed $17,500 plus
out-of-pocket
expenses. Arrangements will be made with brokerage firms and
other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held
on the record date by such persons and we will reimburse them
for reasonable expenses actually incurred by them in so doing.
2012
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any proposal that a shareholder intends to be included in our
proxy statement and form of proxy card for our 2012 Annual
Meeting of Shareholders must be in writing and be received by
our Corporate Secretary at The Chubb Corporation, 15 Mountain
View Road, Warren, New Jersey 07059 no later than
November 18, 2011 and must otherwise comply with the rules
promulgated by the SEC in order to be eligible for inclusion in
our proxy materials for the 2012 Annual Meeting of Shareholders.
Under our By-Laws, if a shareholder desires to bring a matter
before the annual meeting of shareholders or if a shareholder
wants to nominate a person for election to our Board, the
shareholder must follow the procedures set forth in our By-Laws.
A copy of Article I, Section 10, of our By-Laws, which
covers those matters, is available without charge upon written
request to our Corporate Secretary. Our By-Laws also are
available on our website at www.chubb.com/investors. Our
By-Law procedures are separate from the SECs requirements
that a shareholder must meet in order to have a shareholder
proposal included in our proxy statement.
One of the procedural requirements in our By-Laws is timely
notice in writing of any business the shareholder proposes to
bring before the annual meeting of shareholders
and/or the
nomination any shareholder proposes to make at the annual
meeting of shareholders. Notice of business proposed to be
brought before the 2012 Annual Meeting of Shareholders
and/or
director nominations proposed to be made at the 2012 Annual
Meeting of Shareholders must be received by our Corporate
Secretary no earlier than December 28, 2011 and no later
than January 27, 2012.
The notice for business that a shareholder proposes to bring
before the annual meeting of shareholders must be a proper
matter for shareholder action and must set forth:
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the name and address of such shareholder, as they appear on our
books, and the name and address of any certain parties related
to the shareholder (each a Shareholder Associated Person);
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the class and number of shares of our stock that are, directly
or indirectly, owned beneficially and of record by such
shareholder or Shareholder Associated Person;
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the date such shares of our stock were acquired;
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a representation that the shareholder is a holder of record of
shares of our stock entitled to vote at the meeting and intends
to appear in person or by proxy at the meeting to bring or
propose such business or make such nomination, as the case may
be;
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a description of any agreement, understanding or arrangement,
direct or indirect, with respect to such business, proposal or
nomination between or among such shareholder, any Shareholder
Associated Person or any others (including their names) acting
in concert with any of the foregoing;
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a description of any agreement, understanding or arrangement
(including any derivative or short positions, profit interests,
options, hedging transactions and borrowed or loaned shares)
that has been entered into, directly or indirectly, as of the
date of such shareholders notice by, or on behalf of, the
shareholder or any Shareholder Associated Person, the effect or
intent of which is to mitigate loss to, manage risk or benefit
of
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share price changes for, or increase or decrease the voting
power of such shareholder or any Shareholder Associated Person
with respect to shares of our stock;
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if such shareholders notice relates to the nomination of a
person for election to the Board of Directors, (i) a
description of all direct and indirect compensation and other
material monetary agreements, arrangements and understandings
during the past three years, and any other material
relationships, between or among such nominating shareholder, any
Shareholder Associated Person or others acting in concert with
any of the foregoing, including all information that would be
required to be disclosed pursuant to Rule 404 promulgated
by the SEC under
Regulation S-K,
as amended from time to time, if such nominating shareholder,
Shareholder Associated Person or any person acting in concert
therewith, were the registrant for the purposes of
such rule and the person being nominated for election as
director were a director or executive of such
registrant and (ii) as to each person whom the
shareholder proposes to nominate for election as a director, all
information relating to such person that would be required to be
disclosed in a solicitation of proxies for the election of such
person as a director pursuant to Regulation 14A under the
Exchange Act (including such persons written consent to
being named in the proxy statement as a nominee and to serving
as a director if so elected);
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a description of any proxy (including revocable proxies),
contract, arrangement, understanding or other relationship
pursuant to which such shareholder or Shareholder Associated
Person has a right to vote any shares of our stock;
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with respect to any and all of the agreements, contracts,
understandings, arrangements, proxies or other relationships
referred to in the foregoing bullets, a representation that such
shareholder will notify us in writing of any such agreement,
contract, understanding, arrangement, proxy
and/or other
relationship that are or will be in effect as of the date of the
applicable annual meeting of shareholders no later than five
business days before the date of such meeting;
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all other information that would be required to be filed with
the SEC if such shareholder or Shareholder Associated Person
were participants in a solicitation subject to Section 14
of the Exchange Act;
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as to any business that the shareholder proposes to bring before
the meeting, (i) a brief description of such business,
(ii) if such business includes a proposal, the text of the
proposal (including the text of any resolutions proposed for
consideration), (iii) if the proposal includes an amendment
to our By-Laws, the language of the proposed amendment,
(iv) the reasons for conducting such business at the
meeting and (v) any material interest of such shareholder
and any Shareholder Associated Person in such business; and
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a representation as to whether the shareholder intends
(i) to deliver a proxy statement and form of proxy to
holders of at least the percentage of our outstanding capital
stock required to approve or adopt the proposal or elect the
nominee or (ii) otherwise to solicit proxies from
shareholders in support of such proposal or nomination. In
addition, a shareholder seeking to submit a shareholder proposal
or other business or make a director nomination shall promptly
provide any other information reasonably requested by us, and
any proposed nominee for election to our Board must furnish such
other information as we may reasonably require to determine the
eligibility of such proposed nominee to serve as a member of our
Board.
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By Order of the Board of Directors,,
W. Andrew Macan
Vice President and Secretary
March 17, 2011
71
ANNEX A
THE CHUBB
CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN (2011)
1. PURPOSE. The purpose of The Chubb
Corporation Annual Incentive Compensation Plan (2011) (the
Plan) is to provide the Corporation and the
Subsidiaries with an effective means of attracting, retaining
and motivating officers and other employees and to provide them
with incentives to enhance the growth and profitability of the
Corporation and the Subsidiaries.
2. DEFINITIONS.
(a) Capitalized terms used herein without definition shall
have the respective meanings set forth below:
Act means the Securities Exchange Act of
1934, as amended.
Affiliate means, with respect to any person,
any other person controlled by, controlling or under common
control with such person.
Award means an incentive compensation award
made pursuant to the terms of the Plan.
Board of Directors means the Board of
Directors of the Corporation.
Cause means (i) the willful failure of a
Participant to perform substantially his or her
employment-related duties or gross negligence in the performance
of such duties; (ii) a Participants willful or
serious misconduct that has caused or could reasonably be
expected to result in material injury to the business or
reputation of an Employer; (iii) a Participants
indictment for a crime constituting a felony (other than a
traffic-related felony); or (iv) a material breach by a
Participant of any written covenant or agreement with an
Employer or of any material written policy of any Employer,
provided that if a Participant is a party to an employment or
individual severance agreement with an Employer that defines the
term Cause then, with respect to any Award made to
such Participant, Cause shall have the meaning set
forth in such agreement.
Change in Control means the first occurrence
of any of the following events after the effective date of the
Plan:
(i) the acquisition by any person, entity or
group (as defined in Section 13(d) of the Act),
other than the Corporation, the Subsidiaries, and any employee
benefit plan of the Corporation or the Subsidiaries, of 20% or
more of the combined voting power of the Corporations then
outstanding voting securities;
(ii) the persons who were serving as the members of the
Board of Directors immediately prior to the commencement of a
proxy contest relating to the election of directors or a tender
or exchange offer for voting securities of the Corporation (the
Incumbent Directors) shall cease to
constitute at least a majority of the Board of Directors (or the
Board of Directors of any successor to the Corporation) at any
time within one year of the election of directors as a result of
such contest or the purchase or exchange of voting securities of
the Corporation pursuant to such offer, provided that any
director elected to the Board of Directors, or nominated for
election, by a majority of the Incumbent Directors then still in
office and whose nomination or election was not made at the
request or direction of the person(s) initiating such contest or
making such offer shall be deemed to be an Incumbent Director
for purposes of this clause (ii);
(iii) the shareholders of the Corporation approve a merger,
reorganization or consolidation of the Corporation, which is
consummated and as a result of which persons who were
shareholders of the Corporation immediately prior to such
merger, reorganization or consolidation, do not, immediately
thereafter, own, directly or indirectly and in substantially the
same proportions as their ownership of the stock of the
Corporation immediately prior to the merger, reorganization or
consolidation, more than 50% of the combined voting power
entitled to vote generally in the election of directors of
(A) the merged, reorganized or consolidated company or
(B) an entity that, directly or indirectly, owns more than
50% of the combined voting power entitled to vote generally in
the election of directors of the company described in subclause
(A); and
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(iv) the shareholders of the Corporation approve a sale,
transfer or other disposition of all or substantially all of the
assets of the Corporation, which is consummated and immediately
following which the persons who were shareholders of the
Corporation immediately prior to such sale, transfer or
disposition, do not own, directly or indirectly and in
substantially the same proportions as their ownership of the
stock of the Corporation immediately prior to the sale, transfer
or disposition, more than 50% of the combined voting power
entitled to vote generally in the election of directors of
(A) the entity or entities to which such assets are sold or
transferred or (B) an entity that, directly or indirectly,
owns more than 50% of the combined voting power entitled to vote
generally in the election of directors of the entities described
in subclause (A).
Code means the Internal Revenue Code of 1986,
as amended from time to time, and the rules and regulations
promulgated thereunder.
Committee means the Organization &
Compensation Committee of the Board of Directors or such other
committee of the Board of Directors as the Board of Directors
shall from time to time designate to administer the Plan.
Corporation means The Chubb Corporation.
Covered Employee means an Employee who is or
is designated by the Committee as likely to be a covered
employee as defined in Section 162(m) of the Code.
Designated Beneficiary means the beneficiary
designated by the Participant, in a manner determined by the
Committee, to receive amounts due the Participant in the event
of the Participants death. In the absence of an effective
designation by the Participant, Designated Beneficiary shall
mean the Participants estate.
Disability means, unless another definition
is incorporated into the applicable Award agreement, Disability
as specified under the Corporations Pension Plan and any
other termination of a Participants employment under such
circumstances that the Committee determines to qualify as a
Disability for purposes of this Plan, provided that if a
Participant is a party to an employment or individual severance
agreement with an Employer that defines the term
Disability then, with respect to any Award made to
such Participant, Disability shall have the meaning
set forth in such agreement.
Effective Date means January 1, 2011,
subject to the approval of this Plan by a majority of the votes
cast at a duly constituted meeting of the shareholders of the
Corporation.
Employee means any employee (including
officers who are directors) of any Employer.
Employer means the Corporation and any
Subsidiary or Affiliate of the Corporation.
Fiscal Year means any fiscal year of the
Corporation.
Participant means an Employee who is selected
by the Committee to receive an Award under the Plan in
accordance with Section 4.
Pension Plan means the Pension Plan of Chubb
Corporation, Chubb & Son Inc. and Participating
Affiliates.
Performance Goals means performance goals
based on one or more of the following Corporation, Subsidiary,
Affiliate, operating unit or division financial performance
measures: (i) combined loss and expense ratio;
(ii) earnings or net income per share or operating income
per share; (iii) net income; (iv) operating
efficiency; (v) return on average equity; (vi) cash
return on average equity; (vii) return on average assets;
(viii) earnings before interest and taxes;
(ix) operating income; (x) after tax operating income;
(xi) cash flow(s); (xii) stock price;
(xiii) strategic business objectives consisting of one or
more objectives based on meeting specified cost targets,
business expansion goals, and goals relating to acquisitions or
divestitures; (xiv) except in the case of a Covered
Employee, any other performance criteria established by the
Committee; or (xv) any combination of (i) through
(xiv). Each Performance Goal may be expressed on an absolute
and/or
relative basis, may be based on or otherwise employ comparisons
based on internal targets, past performance
and/or the
past or current performance of other companies, and in the case
of earnings-based measures, may use or employ comparisons
relating to capital, shareholders equity
and/or
shares outstanding, or to assets or net assets, as the Committee
shall determine.
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Performance Goals may include a threshold level of performance
below which no payment will be made, levels of performance at
which specified payments will be made, and a maximum level of
performance above which no additional payment will be made.
Retirement means, unless another definition
is incorporated into the applicable Award agreement, a
termination of the Participants employment other than for
Cause at or after the Participants normal retirement age
or earliest retirement date, in each case as specified in the
Corporations Pension Plan, or any other termination of a
Participants employment under such circumstances that the
Committee determines as qualifying as Retirement for purposes of
this Plan, provided that if a Participant is a party to an
employment or individual severance agreement with an Employer
that defines the terms Retirement then, with respect
to any Award made to such Participant, Retirement
shall have the meaning set forth in such agreement.
Subsidiary means any business entity in which
the Corporation possesses directly or indirectly 50% or more of
the total combined voting power.
(b) Except when otherwise indicated by the context, words
in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the
plural shall include the singular.
3. ADMINISTRATION. The Plan shall be
administered by the Committee. The Committee shall have sole and
complete authority and discretion to adopt, alter and repeal
such administrative rules, guidelines and practices governing
the operation of the Plan as it shall from time to time deem
advisable, and to interpret the terms and provisions of the
Plan. The Committees decisions (including any failure to
make decisions) shall be binding upon all persons, including the
Corporation, the Corporations shareholders, Employers,
each Employee, each Participant and each Designated Beneficiary,
and shall be given deference in any proceeding with respect
thereto. The Committee shall have the authority, at any time, to
make adjustments to the Performance Goals or the relative
weighting assigned to the achievement of the Performance Goals
as it deems equitable in recognition of unusual or non-recurring
events, changes in applicable tax laws or accounting principles,
or such other factors as the Committee may determine, including,
without limitation, (i) a change in the Corporations
or a Subsidiarys or an Affiliates (A) business,
including, without limitation, the manner in which such entity
conducts its business, (B) operations, (C) corporate
structure or (D) capital structure, including, without
limitation, any recapitalization, reorganization, merger,
consolidation, combination, exchange, other relevant change in
capitalization, extraordinary non-recurring event, acquisition
or other corporate change, or (ii) any other event or
circumstance that renders the Performance Goals to be unsuitable
or to result in undue enlargement or reduction of an Award;
provided, however, that, unless the Committee
determines otherwise, no such modification shall be made if the
effect would be to cause an Award intended to qualify for the
performance-based compensation exception to
Section 162(m) of the Code to fail to so qualify.
4. ELIGIBILITY. Awards under the Plan for
any Fiscal Year may be granted to those Employees who shall be
selected by the Committee after consideration of
managements recommendations.
5. TERMS OF AWARDS. The Committee shall
specify with respect to a Fiscal Year the Performance Goals
applicable to each Award. Award levels may be expressed as a
dollar amount or as a percentage of a Participants base
salary or as a percentage of a bonus pool. Notwithstanding
anything to the contrary herein, in no event shall the maximum
Award payable with respect to a Fiscal Year to any Participant
exceed $7,500,000. The Committee may reduce or eliminate any
Award under the Plan, but in no event may the Committee increase
the amount of an Award payable to a Covered Employee upon
attainment of the applicable Performance Goals and no reduction
of any Award shall operate to increase an Award payable to a
Covered Employee. The Committee may grant Awards to Employees
who become new Participants during a Fiscal Year and such Awards
may be contingent upon the achievement of Performance Goals over
a period of less than a Fiscal Year. In the case of any Employee
who becomes a Participant during a Fiscal Year, the maximum
Award payable of $7,500,000 for the Fiscal Year shall be
prorated based upon the portion of the Fiscal Year remaining
after the Employee becomes a Participant.
6. AWARD DETERMINATION. As soon as
administratively practicable after the completion of a Fiscal
Year (but in no case later than March
31st of
the calendar year immediately following the completion of the
Fiscal Year), the Committee shall certify the achievement of the
Performance Goals with respect to the Covered Employees and
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approve Award payments to a Participants based upon the
achievement of the Performance Goals and upon managements
assessment of the Participants individual performance
during the Fiscal Year. The Committee shall have the authority
to increase the Awards payable to Participants other than
Covered Employees in excess of the amounts that would be payable
based upon the achievement of the Performance Goals, but in no
case may the Committee increase a Covered Employees Award
over the amount payable to such Covered Employee based on the
achievement of the Performance Goals. Except as provided in
Section 8 with respect to deferred Awards, Participants
must be employed by an Employer as of the Award payment date or
will forfeit the Award, provided, that if the Participants
employment is terminated prior to the payment date by reason of
death, Retirement, Disability, or any other reason with the
consent of the Committee, the Committee, in its sole discretion,
may provide for an Award payment to that Participant or the
Participants Designated Beneficiary, if applicable, based
on the Corporations performance at the end of the
performance period and paid at the same time as awards are paid
to active Participants.
7. FORM OF PAYMENT. All Awards
approved by the Committee for payment, unless deferred under
Section 8, shall be paid in cash.
8. DEFERRALS.
(a) From time to time, Participants may be offered the
opportunity to defer, in a manner intended to comply with
Section 409A of the Code, receipt of all or a portion of
their Award, if any, into a deferred compensation plan.
(b) Any Award (or portion thereof) deferred shall be
governed by the terms of the deferred compensation plan once
deferred.
(c) Any Award which is deferred shall not be funded, but
shall constitute a general, unsecured obligation of the
Corporation.
9. EFFECT OF A CHANGE IN CONTROL. Upon or
immediately preceding the occurrence of a Change in Control,
notwithstanding anything to the contrary, the following
provisions shall apply:
(a) If the Change in Control occurs after the end of a
Fiscal Year but prior to the determination
and/or
payment of Awards pursuant to Section 6 for such Fiscal
Year, each Participant employed by an Employer as of the date of
the Change in Control shall be entitled to a payment, or shall
be credited with a payment under the applicable deferred
compensation plan if the Participant elected to defer payment of
his or her Award, in respect of his or her Award for such Fiscal
Year within 10 days following the Change in Control, and
shall be notified immediately prior to the Change in Control of
the payment or credit to be made, if any, in respect of his or
her Award for such Fiscal Year.
(b) In respect of the Fiscal Year in which the Change in
Control occurs, each Participant employed by an Employer as of
the date of the Change in Control shall be entitled to a
pro-rated payment, or shall be credited with a payment under the
applicable deferred compensation plan if the Participant elected
to defer payment of his or her Award, in respect of his or her
Award for such Fiscal Year equal to the product of the actual
Award projected by the Committee to be earned by the Participant
in respect of such Fiscal Year, based on the results achieved
for the portion of such Fiscal Year through the date of the
Change in Control, in either case, multiplied by (ii) a
fraction, the numerator of which is the number of days the
Participant has been employed during such Fiscal Year prior to
the Change in Control, and the denominator of which is 365. If a
Participants target Award for the Fiscal Year has not been
established by the Committee prior to the occurrence of the
Change in Control, then for purposes of this Section 9(b),
the Participants target Award in respect of the Fiscal
Year in which the Change in Control occurs shall be deemed to be
equal to the Participants target Award for the preceding
Fiscal Year. Payments of Awards made pursuant to this
Section 9(b), or credits under a deferred compensation plan
if the Participant elected to defer payment of his or her Award,
shall be made within 10 days following the Change in
Control.
(c) Notwithstanding the foregoing, if the Committee has
provided for an Award payment to be made to Participant who has
terminated employment prior to the occurrence of the Change in
Control, such payment shall not be made on an accelerated basis
as a result of the Change in Control if such payment would
result in taxation to the Participant under Section 409A of
the Code. In such case, the payment shall be made at the time
previously
A-4
determined by the Committee or at such earlier time that would
not result in taxation to the Participant under
Section 409A of the Code.
10. MISCELLANEOUS PROVISIONS. The
following miscellaneous provisions are applicable to this Plan:
(a) The rights and interests of a Participant under the
Plan may not be assigned, encumbered or transferred, except to
the Participants Designated Beneficiary in the event of
the death of a Participant.
(b) No employee or other person shall have any claim or
right to be granted an Award under the Plan, and there is no
obligation for uniformity of treatment for Participants. Neither
the Plan nor any action taken thereunder shall be construed as
giving any employee or other person any right to be retained in
the employ of the Corporation or any of its Subsidiaries or
Affiliates.
(c) The Corporation shall have the right to deduct from all
payments made under the Plan any taxes or other amounts required
by law to be withheld with respect to such payments.
(d) The validity, construction, interpretation,
administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of
New Jersey (without reference to the principles of conflicts of
law).
11. COMPLIANCE WITH 162(m). With regard
to all Covered Employees, the Plan shall for all purposes be
interpreted and construed in accordance with Section 162(m)
of the Code. Unless otherwise specifically determined by the
Committee, if any provision of the Plan would cause the Awards
granted to a Covered Employee to fail to qualify for the
performance-based compensation exception under
Section 162(m) of the Code, that provision, insofar as it
pertains to the Covered Employee, shall be severed from, and
shall be deemed not to be a part of this Plan, but the other
provisions hereof shall remain in full force and effect.
12. AMENDMENT AND TERMINATION. The
Committee may amend, suspend, or terminate any or all provisions
of the Plan at any time, provided that no such amendment,
suspension or termination shall adversely affect, without a
Participants consent, any Award previously granted to such
Participant. Unless specifically determined otherwise by the
Committee, no amendment to the Plan shall be made that would
cause the compensation payable under the Plan to fail to satisfy
the requirements of the performance-based
compensation exception of Section 162(m) of the Code
and no amendment to the Plan or any Award shall be made without
shareholder approval to the extent shareholder approval is
necessary to satisfy the performance-based
compensation exception of Section 162(m) of the Code.
13. OTHER PLANS OR PAYMENTS. Nothing in
the Plan shall be construed as limiting the authority of the
Committee, the Board of Directors, the Corporation or any
Subsidiary or Affiliate, to establish any other deferred
compensation plan or as in any way limiting their authority to
pay bonuses or other supplemental compensation to any persons
employed by the Corporation or a Subsidiary or Affiliate,
whether or not such person is a Participant in this Plan and
regardless of how the amount of such compensation or bonus is
determined.
14. RECOUPMENT POLICY. Awards shall be
subject to any recoupment (or similar) policy required by law
and/or as may be adopted from time to time by the Committee.
A-5
ANNEX B
THE CHUBB
CORPORATION
POLICY ON PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES
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I.
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Statement
of Principles
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The Audit Committee of the Board of Directors is responsible for
the appointment, compensation, retention, and oversight of the
work of the independent auditor. The Chubb Corporation and the
Audit Committee are committed to ensuring the independence of
the auditor, both in appearance and in fact. Accordingly,
significant attention is directed toward ensuring that services
provided by the auditor are consistent with the SECs rules
on auditor independence.
The Audit Committee is required to pre-approve the audit and
non-audit services performed by the independent auditor or its
affiliates on behalf of The Chubb Corporation or any of its
subsidiaries (collectively, the Corporation) in
order to assure that the provision of such services does not
impair the auditors independence from the Corporation. In
the case of audit services, pre-approval by the Audit Committee
is required for such services provided to all consolidated
subsidiaries of the Corporation, whether provided by the
principal independent auditor or other firms.
The Audit Committee has delegated to the Chairman of the Audit
Committee authority to pre-approve specific services not to
exceed $25,000 per engagement. Any services pre-approved by the
Chairman shall be reported to the Audit Committee at its next
scheduled meeting.
The Audit Committee may consult with management but does not
delegate its responsibilities to pre-approve services performed
by the independent auditor to management.
III.
Audit Services
Audit services include all services to be performed to comply
with generally accepted auditing standards and those services
that generally only the Corporations independent auditor
can provide, such as comfort letters, statutory audits, attest
services, consents and assistance with and review of documents
filed with the SEC.
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IV.
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Audit-Related
Services
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Audit-related services are assurance and related services that
are reasonably related to the performance of the audit or review
of the Corporations financial statements and that are
traditionally performed by the independent auditor. The Audit
Committee believes that the provision of audit-related services
does not impair the independence of the auditor and is
consistent with the SECs rules on auditor independence.
Audit-related services include, among other services, audits of
employee benefit plans; due diligence related to mergers and
acquisitions; internal control reviews; attest services that are
not required by statute or regulation; and consultations related
to financial accounting or reporting standards.
The Audit Committee believes that the provision of tax services
to the Corporation including tax planning, compliance, and
advice does not impair the independence of the auditor and is
consistent with the SECs rules on auditor independence.
Tax services include tax planning, compliance, and advice;
preparation and review of original and amended tax returns;
assistance with claims for refund and tax payment-planning
services, tax audits and appeals before the IRS and similar
state, local and foreign agencies; and advice related to mergers
and acquisitions, employee benefit plans and requests for
rulings or technical advice for taxing authorities. The
Corporation shall not record a transaction or transactions, the
primary business purpose of which may be tax avoidance and the
tax treatment of which may not be supported in the Internal
Revenue Code and related
B-1
regulations; the rendering of services to the Corporation, its
executive officers and its directors by the independent auditor
in connection with the auditors recommendation of such
transaction or transactions is prohibited.
The Audit Committee believes that certain specific non-audit
services do not impair the auditors independence.
Accordingly, the Audit Committee may grant pre-approval to
specific, permissible non-audit services classified as All
Other Services that it believes are routine and recurring
services that would not impair the independence of the auditor.
All Other Services may include preparation of
actuarial reports in accordance with regulatory requirements
provided that the Audit Committee reasonably concludes that the
results of these services will not be subject to audit
procedures during an audit of the Corporations financial
statements.
Requests for services to be rendered by the independent auditor
will be provided annually to the Audit Committee for specific
pre-approval. The requests will include a description of the
particular services to be rendered and the expected fee range.
On a periodic basis at subsequent Audit Committee meetings, an
update on independent auditor services and all other audit
services will be provided to the Audit Committee and any
proposed new services, increases in engagement scope, and
increases in engagement fees will be provided for specific
pre-approval by the Audit Committee. Requests for pre-approval
will be submitted to the Audit Committee by both the independent
auditor and management and must include a written statement by
the independent auditor as to whether, in its view, the request
is consistent with the SECs rules on auditor independence.
The Audit Committee will consider whether such service requests
are consistent with the SEC rules on auditor independence. The
Audit Committee will also consider whether the independent
auditor is best positioned to provide the most effective and
efficient service, for reasons such as its familiarity with the
Corporations business, people, culture, accounting
systems, risk profile and other factors.
The term of any pre-approval is the period beginning on the date
of pre-approval and ending on the last day of the first full
calendar year after the date of pre-approval, unless the
Corporation specifically provides for a different period.
The Audit Committee is also mindful of the overall relationship
of fees for audit and non-audit services in determining whether
to pre-approve any such services. For each fiscal year, the
Audit Committee may determine the appropriate ratio between the
total amount of fees for Audit, Audit-related, Tax, and All
Other Services.
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VIII.
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Prohibited
Non-Audit Services
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Provision of the following non-audit services by the independent
auditor is prohibited in accordance with the SECs rules.
The SECs rules and relevant guidance should be consulted
to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
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Bookkeeping or other services related to the accounting records
or financial statements of the Corporation;
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Financial information systems design and implementation;
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Appraisal or valuation services, fairness opinions or
contribution-in-kind
reports;
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Actuarial services;
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Internal audit outsourcing services;
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Management functions or human resources;
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Broker-dealer, investment adviser, or investment banking
services;
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Legal services and expert services unrelated to the
audit; and
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Any other service that the Public Company Accounting Oversight
Board determines, by regulation, is impermissible.
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B-2
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THE CHUBB CORPORATION15 MOUNTAIN VIEW ROAD
WARREN, NJ 07059
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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 25, 2011. Have your proxy card in hand when you access the website and then follow the instructions to obtain your records and to create an electronic voting instruction form.
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 25, 2011. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS: |
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M29840-TBD |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH
AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
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THE CHUBB CORPORATION |
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The Board of
Directors recommends you vote FOR the following proposals:
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1. |
Election of Directors |
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For |
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Against |
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Nominees:
1a) Zoë Baird
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1b) Sheila P. Burke |
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1c) James I. Cash, Jr.
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1d) John D. Finnegan
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1e) Lawrence W. Kellner
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1f) Martin G. McGuinn
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1g) Lawrence M. Small
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1h) Jess Søderberg
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1i) Daniel E. Somers
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For address changes and/or comments, please check this box and
write them on the back where indicated. |
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Please sign exactly as your name(s) appear(s) hereon. When signing
as attorney, executor, administrator, or other fiduciary, please give
full title as such. Joint owners should each sign personally. All holders
must sign. If a corporation or partnership, please sign in full
corporate or partnership name, by authorized officer |
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For |
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Against |
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1j) James M. Zimmerman
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1k) Alfred W. Zollar
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For |
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Abstain |
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2. |
To vote on the adoption of The Chubb Corporation Annual Incentive Compensation Plan (2011).
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3. |
To ratify the appointment of Ernst & Young LLP as independent auditor.
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To hold an advisory vote on the compensation of our named executive officers as disclosed pursuant to Item 402 of Regulation S-K in the
enclosed annual meeting materials.
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The Board of Directors recommends you vote for 3 years on the following proposal: |
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3 Years |
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2 Years
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1 Years
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Abstain |
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5. |
To hold an advisory vote on the frequency of the shareholder vote on executive compensation. |
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Signature [PLEASE SIGN WITHIN
BOX] |
Date |
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Signature (Joint Owners) |
Date |
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Proxies submitted by Internet or telephone must be received by 11:59 P.M.
Eastern Time on April 25, 2011.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 2011 Notice and Proxy Statement, 2010 Annual Report on Form 10-K and 2010 Annual Review
are available at www.proxyvote.com.
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
M29841-TBD
Proxy - The Chubb Corporation
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CHUBB CORPORATION FOR THE 2011 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26, 2011.
The undersigned shareholder of THE CHUBB CORPORATION (the Corporation) acknowledges receipt of the Notice of 2011 Annual Meeting of Shareholders
and Proxy Statement each dated March 17, 2011, and the undersigned revokes all prior proxies and appoints JOHN D. FINNEGAN, W. ANDREW MACAN and DOUGLAS A. NORDSTROM, and each of them, with full power of substitution, as proxies for the undersigned to vote all shares of Common Stock of the Corporation, which the undersigned would be entitled to vote at the 2011 Annual Meeting of Shareholders to be held at 15 Mountain View Road, Warren, New Jersey 07059 at 8:00 A.M., Eastern Time, on April 26, 2011 and any adjournment or postponement thereof, on all matters coming properly before said meeting.
This card also provides voting instructions for any shares of Common Stock of the Corporation allocated to and held on
the undersigneds behalf in The Chubb Corporation Capital Accumulation Plan (the Plan).
When properly executed, this proxy will be voted in the manner directed herein by the undersigned shareholder. If this proxy is validly
executed and dated, but no direction is made, this proxy will be voted FOR Proposals 1, 2, 3 and 4 and FOR a frequency of every three years for the advisory vote on executive compensation. If the undersigned has voting rights with respect to shares of Common Stock under the Plan, the trustee of the Plan will vote those shares as directed. If you do not direct the trustee with respect to shares you hold in the Plan, the shares will not be voted.
In their discretion, the proxies are authorized to vote upon such other business as may properly come
before the 2011 Annual Meeting of Shareholders.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)