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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.     )

 

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☐	Soliciting Material Pursuant to §240.14a-12

Prudential Financial, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

  

 

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PRUDENTIAL FINANCIAL, INC. PROXY STATEMENT

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 9, 2017

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“The justification of the company’s existence is its advancement of the efforts of its policyholders and their families for better economic and social condition which confront the [middle] class.”

John F. Dryden, founder of The Prudential Friendly Society (a predecessor of Prudent al Financial, Inc.)

Prudential was founded more than 140 years ago on the belief that everyone should have the opportunity to achieve financial security and the peace of mind that comes with it.

Today, as Prudential’s global footprint continues to grow, our commitment to shared success remains strong. The company’s approach to creating innovative financial solutions draws on our expertise, our strong stakeholder relationships and the breadth and depth of our business model. In 2016, we continued to build upon our efforts to advance the well-being of a broad array of stakeholders. Three examples are highlighted below:

Prudential’s global investment management business, PGIM, is five years into its journey to create employment pathways for opportunity youth, young people who are not in school nor formally employed. Through a partnership with YouthBuild, an international organization that trains opportunity youth in both job and life skills, PGIM Real Estate is leveraging its business relationships, along with associate expertise, to accelerate the job placement of YouthBuild graduates.

Prudential remains committed to closing the insurance protection gap, and in 2016, demonstrated this by building on its relationship with LeapFrog Investments. The partnership’s long-term objective is to partner with local life insurance providers in high-growth African markets such as Ghana, Kenya and Nigeria to provide appropriate and affordable insurance products while simultaneously spurring the growth of the African middle class.

In keeping our commitment to diversity in practice, Prudential was a proud founding donor and sponsor of the Smithsonian National Museum of African American History and Culture’s grand opening in Washington, D.C. The museum’s opening reignited a national dialogue around the rich and complex heritage of the African American community.

Every day, more than 49,000 Prudential employees serve millions of people around the globe, delivering on our founding belief. We know the value we create for our stakeholders, combined with the societal value we create as a company, helps build a shared and lasting prosperity.

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		Prudential Financial, Inc. 751 Broad Street, Newark, NJ 07102

 

 

March 21, 2017

Letter from the Board of Directors

to Our Shareholders

As directors, we strive to govern Prudential in a prudent and transparent manner that helps the Company achieve sustainable operating and financial performance, and deliver long-term value for our shareholders. We focus our attention on overseeing the Company’s business strategies, risk management, talent development, and succession planning. We are pleased to share with you our progress on specific actions undertaken in 2016.

BUSINESS STRATEGY

Our Board has and will continue to be vigilant in the oversight of our firm’s long-term strategy. By focusing on our long-term outlook, we are best able to support our common goal of creating enduring value in our firm and for our shareholders. At each Board meeting and during our annual strategy planning session, we contribute to management’s strategic plan by engaging Prudential’s senior leadership in robust discussions about the Company’s overall strategy, priorities for its businesses, and long-term growth opportunities.

BOARD RISK OVERSIGHT

Prudent risk-taking is an inherent part of Prudential’s business, and we approach our responsibility for oversight of Prudential’s risk profile—in its operations, product development and deployment of capital—very seriously. Fulfilling the Company’s long-term promises is only achievable by developing and maintaining an appropriate risk framework, transparency of risk reporting, and rigorous testing methodologies.

Through our oversight, we set standards for managing risks and monitoring how the Company manages those risks. The Risk Committee is comprised of the chairs of each of the other Board committees, enabling us to more closely coordinate the Board’s risk oversight function. The Risk Committee has metrics in place to monitor and review market, insurance, investment, and operational risk.

TALENT DEVELOPMENT AND DIVERSITY

We recognize that over the long-term, our talent and culture provide our biggest competitive advantage. That is why we consider leadership and talent a priority throughout the Company. This “talent mindset” means embracing collaboration and diversity. We work diligently to build on our success as an organization where top talent across a variety of disciplines, and from a diverse set of backgrounds, aspires to work.

The Board’s composition is indicative of our commitment to diversity and inclusion. Our Directors reflect diverse perspectives, including a complementary mix of skills, experience and backgrounds, which we believe are paramount to our ability to represent your interests as shareholders. In the last two years, four new directors have been elected. The average tenure of our directors is now six years, and two-thirds of the Board is diverse.

ENGAGEMENT AND OUTREACH

Accountability to shareholders is not only a mark of good governance, but an important component of Prudential’s success. We value our shareholders’ views and insights and believe that positive, two-way dialogue builds informed relationships that promote transparency and accountability.

 

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		Letter from the Board of Directors

 

 

In 2016, we spoke with representatives from mutual funds, public pension funds, labor unions and other institutional investors that represent the majority of our outstanding shares. Topics discussed included strategy and performance; corporate governance matters, such as Board composition and refreshment, succession planning and Board leadership structure; and our executive compensation program. This continuous and transparent communication with our shareholders serves as the foundation for our policy development and informs our business strategy.

CULTIVATING A STRONG ETHICAL CULTURE

For more than 140 years, our commitment to helping customers achieve financial security has never wavered. We know that only by doing business the right way, every day, do we continue to earn their trust.

Our corporate philosophy and practice of strong ethical values are reflected in the naming of Prudential as a 2016 World’s Most Ethical Company^® by the Ethisphere Institute. This recognition is bestowed only on organizations that demonstrate a culture of ethics and transparency at every level.

CORPORATE RESPONSIBILITY

Prudential was founded to address a social need—helping working families afford life insurance to achieve financial security and peace of mind. Since then, we have stayed true to our purpose of powering the ambitions of people, organizations and communities, and to driving social progress.

We believe everyone should have access to financial security. We recognize that equitable access to capital enhances prosperity and accelerates growth. We are committed to enabling economic prosperity through the work we do not only in our core businesses, but also through targeted efforts like our emerging manager program, which invests in women- and minority-owned firms. Through this and other initiatives, these core beliefs permeate our interaction with all of our stakeholders.

OUR INTERNATIONAL BUSINESSES ANCHORED BY JAPAN

Our international businesses present long-term opportunities for our Company. More than half of our employees work in our operations outside of the U.S. Today, Japan is central to our international strategy. Consequently, in November 2016, we held our Board meeting in Tokyo, Prudential’s headquarters in Japan. Over the course of several days, we met with the senior management of our Asian businesses to discuss their strategies, outlook, challenges and opportunities. We also met employees, whose observations and experiences reinforced the strength of Prudential’s culture, and our commitment to doing business the right way and maintaining a sharp focus on talent management.

YOUR VIEWPOINT IS IMPORTANT

We value your support, and we encourage you to share your opinions, suggestions, interests, and concerns with us. You can do so by writing to us at the address below. You can also send an email to the independent directors at independentdirectors@ prudential.com or provide feedback on executive compensation via our website at www.prudential.com/executivecomp.

If you would like to write to us, you may do so by addressing your correspondence to Prudential Financial, Inc., Board of Directors, c/o Margaret M. Foran, Chief Governance Officer, 751 Broad Street, Newark, New Jersey 07102.

We suggest you access the two short videos of our Lead Independent Director, Karl Krapek, and the Chair of our Corporate Governance and Business Ethics Committee, Gilbert Casellas, from the Corporate Governance section of our website at www.prudential.com/directorvideos.

The Board of Directors of Prudential Financial, Inc.

 

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Dear Fellow Shareholders:

You are invited to the Annual Meeting of Shareholders on May 9, 2017, at 751 Broad Street, Newark, NJ, at 2:30 p.m. We hope that you will attend the meeting, but whether or not you attend, please designate the proxies on the proxy card to vote your shares.

We are excited that shareholder voting has increased each year and are again offering a voting incentive to registered shareholders. Because of your active participation, we have planted more than 730,000 trees through the incentive initiative.

Every shareholder’s vote is important. Thank you for your commitment to the Company and please vote your shares.

Sincerely,

 

 

 

John R. Strangfeld

Chairman and Chief Executive Officer

Prudential Financial, Inc.

751 Broad Street

Newark, NJ 07102

 

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Notice of Annual Meeting of Shareholders of

Prudential Financial, Inc.

 

Place:       Prudential’s Corporate       Headquarters       751 Broad Street       Newark, NJ 07102         Date:       May 9, 2017         Time:       2:30 p.m.				AGENDA:   •    Election of 12 directors named in the Proxy Statement;   •    Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017;   •    Advisory vote to approve named executive officer compensation;   •    Advisory vote on the frequency of future advisory votes to approve named executive officer compensation;   •    Shareholder proposal regarding an independent Board Chairman, if properly presented at the meeting; and   •    Shareholders also will act on such other business as may properly come before the meeting or any adjournment or postponement thereof.
				Record date: You can vote if you were a shareholder of record on March 10, 2017.   If you are attending the meeting, you will be asked to present your admission ticket and valid, government-issued photo identification, such as a driver’s license, as described in the Proxy Statement.   By Order of the Board of Directors,     Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary   March 21, 2017   Prudential Financial, Inc. 751 Broad Street Newark, NJ 07102

 

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Summary Information

To assist you in reviewing the proposals to be acted upon at the Annual Meeting, we call your attention to the following information about the Company’s 2016 financial performance and key executive compensation actions and decisions, and corporate governance highlights. The following description is only a summary. For more complete information about these topics, please review the Company’s Annual Report on Form 10-K and this Proxy Statement.

Business

 

		We reported net income of $4.37 billion, or $9.71 per share of Common Stock in 2016, compared to $5.64 billion, or $12.17 per share, in 2015, based on U.S. generally accepted accounting principles (“GAAP”). Net income for 2015 included a greater benefit from gains driven by market impacts including interest rates than in 2016.
		We reported after-tax adjusted operating income of $4.11 billion, or $9.13 per share of Common Stock in 2016, compared to $4.65 billion or $10.04 per share, in 2015.(1) 2016 after-tax adjusted operating income was negatively affected by actuarial assumption updates, compared to a positive impact in 2015.
		We reported GAAP book value of $104.91 per share of Common Stock as of December 31, 2016, compared to $92.39 per share as of year-end 2015.   Adjusted book value amounted to $78.95 per share of Common Stock as of December 31, 2016, compared to $73.59 per share as of year-end 2015.(1)

 

We reported return on average equity based on income from continuing operations of 8.8% for 2016, compared to 13.3% for 2015.   We reported operating return on average equity of 12% for 2016, compared to 14.5% for 2015 and to the long term target of 13% to 14% we had set in 2011.(1) Our return on equity for 2016 reflects solid core performance from our businesses, partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review. Given the multi-year impact of very low interest rates in our two largest markets, the U.S. and Japan, and the short term impact of strategic investing in our businesses, we have moderated our expectations for operating return on average equity to 12% to 13% over the near to intermediate term.

 

(1)

Consolidated adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement.

 

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		Summary Information

 

 

 

The compensation of our NEOs reflects both our 2016 performance and the rigor of our executive compensation program.

 

Named Executive Officer		2016 Base Salary ($)				2016 Annual Incentive Award (as adjusted for mandatory deferrals)(1) ($)				2016 Long-Term Incentive Award Value(2) ($)				2016 Total Direct Compensation ($)
John R. Strangfeld		$	1,400,000			$	4,183,200			$	11,792,800			$	17,376,000
Robert M. Falzon		$	770,000			$	2,093,000			$	4,897,000			$	7,760,000
Mark B. Grier		$	1,190,000			$	3,556,000			$	9,524,000			$	14,270,000
Charles F. Lowrey		$	770,000			$	2,789,500			$	6,195,500			$	9,755,000
Stephen Pelletier		$	770,000			$	2,789,500			$	5,695,500			$	9,255,000

 

1

The following amounts are not included in the 2016 Annual Incentive Award column because they have been mandatorily deferred into our Book Value Performance Program: $1,792,800 for Mr. Strangfeld, $897,000 for Mr. Falzon, $1,524,000 for Mr. Grier, $1,195,500 for Mr. Lowrey, and $ 1,195,500 for Mr. Pelletier.

 

2	Represents long-term incentive awards granted in 2017 for 2016 performance. Amounts include portions of the 2016 Annual Incentive Awards mandatorily deferred into our Book Value Performance Program.

Response to advisory vote and shareholder feedback

Approximately 95% of the votes cast at the 2016 Annual Meeting of Shareholders on the non-binding advisory vote on the compensation of our named executive officers were voted in support of our executive compensation program. Consistent with its strong commitment to engagement, communication, and transparency, the Compensation Committee continues to regularly receive feedback from our shareholders and review our executive compensation program to ensure alignment between the interests of our senior executives and shareholders. In part based on feedback from our shareholders, we made several modifications to the compensation program for our NEOs as discussed above and in more detail in the CD&A.

 

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		Summary Information

 

Corporate Governance Highlights

In 2016, management and Board members engaged with shareholders who hold a majority of our shares. During these discussions, shareholders were encouraged to identify potential Board candidates and share feedback on the Company, its governance practices and policies, and its compensation framework and programs. Our 2016 corporate governance highlights include:

 

Boards of Directors Nominees and Committees

 

Name/Age		Independent		Director Since		Committee Membership				Other Public Boards
Thomas J. Baltimore, 53		Yes		Oct. 2008		•    Executive •    Compensation		•    Investment (Chair) •    Risk		2
Gilbert F. Casellas, 64		Yes		Jan. 2001		•    Corporate Governance & Business Ethics (Chair)		•    Executive •    Risk		0
Mark B. Grier, 64		No		Jan. 2008						0
Martina Hund-Mejean, 56		Yes		Oct. 2010		•    Audit				0
Karl J. Krapek, 68		Yes		Jan. 2004		•    Lead Independent Director (Since May 2014) •    Compensation (Chair)		•    Executive (Chair) •    Risk (Chair)		1
Peter R. Lighte, 68		Yes		Mar. 2016		•    Corporate Governance & Business Ethics		•    Investment		0
George Paz, 61		Yes		Mar. 2016		•    Audit				2
Sandra Pianalto, 62		Yes		Jul. 2015		•    Corporate Governance & Business Ethics		•    Finance		2
Christine A. Poon, 64		Yes		Sep. 2006		•    Executive •    Finance (Chair)		•    Investment •    Risk		3
Douglas A. Scovanner, 61		Yes		Nov. 2013		•    Audit (Chair) •    Executive		•    Risk		0
John R. Strangfeld, 63		No		Jan. 2008		•    Executive				0
Michael A. Todman, 59		Yes		Mar. 2016		•    Compensation		•    Finance		2

Annual Meeting Proposals

 

Proposal		Recommendation of Board
Election of Directors		FOR each of the nominees
Ratification of Auditors		FOR
Advisory vote to approve named executive officer compensation		FOR
Advisory vote on the frequency of future advisory votes to approve named executive officer compensation		For “EVERY YEAR”
Shareholder proposal regarding an independent Board Chairman		AGAINST

 

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Item 1–Election of Directors

Our Board of Directors has nominated 12 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each agreed to be named in this Proxy Statement and to serve if elected. All of the nominees are expected to attend the 2017 Annual Meeting. All 12 directors, then serving on the Board, attended the 2016 Annual Meeting.

James Cullen, a member of the Board, will have attained the age of 74 and will not stand for re-election. As a result, the Board will be reduced to 12 members immediately prior to the Annual Meeting.

We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.

Director Criteria, Qualifications, Experience and Tenure

Prudential Financial is a financial services company that offers a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. The Corporate Governance and Business Ethics Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Committee reviews both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function. The Committee then compares those skills to the skills of the current directors and potential director candidates. The Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process, keeping in mind its commitment to diversity.

BOARD HIGHLIGHTS

 

 

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		Item 1—Election of Directors: Director Nominees

 

 

 

It is of critical importance to the Company that the Committee recruit directors who help achieve the goal of a well-rounded, diverse Board that functions collegially as a unit.

The Committee expects each of the Company’s directors to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for nomination to the Board, the Committee considers each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include attendance, past performance on the Board and contributions to the Board and their respective committees.

 

Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that covers the assessment for the full Board.

Director Nominees

 

 

		Thomas J. Baltimore     Age: 53 Director Since: October 2008		Prudential Committees:   •  Executive   •  Compensation   •  Investment (Chair)   •  Risk   Former Directorships Held During the Past Five Years:   •  Integra Life Sciences Corporation (August 2012)   •  RLJ Lodging Trust (May 2016)		Public Directorships:   •  Duke Realty Corporation(1)   •  Park Hotels & Resorts, Inc.
				(1)  Mr. Baltimore will not be standing for re-election at the annual meeting in April 2017.

 

 

BOARD TENURE FOR 2017 NOMINEES Our directors’ expertise combines to provide a broad mix of skills, qualifications and proven leadership abilities. The Corporate Governance and Business Ethics Committee practices a long-term approach to board refreshment. With the assistance of an independent search firm, the Committee regularly identifies individuals who have expertise that would complement and enhance the current board’s skills and experience. In addition, as part of our shareholder engagement dialogue, we routinely ask our investors for input regarding director recommendations. Director Tenure (Average 6.25 years)

 

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		Gilbert F. Casellas   Age: 64 Director Since: January 2001 (Director of Prudential Insurance since April 1998)		Prudential Committees:   •  Corporate Governance and Business Ethics (Chair)   •  Executive   •  Risk

 

 

		Mark B. Grier   Age: 64 Director Since: January 2008		Prudential Committees:   •    None

 

 

		Martina Hund-Mejean   Age: 56 Director Since: October 2010		Prudential Committees:   •    Audit

 

 

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		Karl J. Krapek   Age: 68 Director Since: January 2004 Lead Independent Director since May 2014		Prudential Committees:   •    Compensation (Chair)   •    Executive (Chair)   •    Risk (Chair)     Former Directorships Held During the Past Five Years:   •    Visteon Corporation (June 2012) •    The Connecticut Bank & Trust Company (April 2012)		Public Directorships:   •    Northrop Grumman Corporation

 

 

		Peter R. Lighte   Age: 68 Director Since: March 2016		Prudential Committees:   •    Corporate Governance and Business Ethics •    Investment

 

 

		George Paz   Age: 61 Director Since: March 2016		Prudential Committees:   •    Audit		Public Directorships:   •    Express Scripts Holding Company   •    Honeywell International, Inc.

 

 

 

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		Sandra Pianalto   Age: 62 Director Since: July 2015		Prudential Committees:   •    Corporate Governance and Business Ethics   •    Finance		Public Directorships:   •    Eaton Corporation plc   •    The J.M. Smucker Company

 

 

		Christine A. Poon   Age: 64 Director Since: September 2006		Prudential Committees:   •    Executive   •    Finance (Chair)   •    Investment   •    Risk		Public Directorships:   •    Koninklijke Philips Electronics NV   •    Regeneron Pharmaceuticals   •    The Sherwin-Williams Company

 

 

		Douglas A. Scovanner   Age: 61 Director Since: November 2013		Prudential Committees:   •    Audit (Chair)   •    Executive   •    Risk

 

 

 

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		John R. Strangfeld   Age: 63 Director Since: January 2008 (Elected Chairman May 2008)		Prudential Committees:   •    Executive

 

 

		Michael A. Todman   Age: 59 Director Since: March 2016		Prudential Committees:   •  Compensation   •  Finance		Public Directorships:   •    Brown-Forman Corporation   •    Newell Rubbermaid, Inc.

 

 

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Corporate Governance

The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by a Board of Directors and committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and committee meetings and also through other communications with management.

The Board has adopted Corporate Governance Principles and Practices to provide a framework for the effective governance of the Company. The Corporate Governance Principles and Practices are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Principles and Practices, which includes the definition of independence adopted by the Board, the charters of the Corporate Governance and Business Ethics, Compensation and Audit Committees, the Lead Independent Director Charter, the Code of Business Conduct and Ethics and the Related Party Transaction Approval Policy can be found at www.prudential.com/governance. Copies of these documents also may be obtained from the Chief Governance Officer and Corporate Secretary.

Governance is a continuing focus at the Company, starting with the Board and extending to management and all employees. Therefore, the Board reviews the Company’s policies and business strategies and advises and counsels the CEO and the other executive officers who manage the Company’s businesses, including reviewing, on at least an annual basis, the Company’s strategic plans.

In addition, we solicit feedback from shareholders on governance and executive compensation practices and engage in discussions with various groups and individuals on governance issues and improvements.

Process for Selecting Directors

The Corporate Governance and Business Ethics Committee screens and recommends candidates for nomination by the full Board. The Company’s By-laws provide that the size of the Board may range from 10 to 24 members. The Board’s current view is that the optimal size is between 10 and 15 members. The Committee is assisted with its recruitment efforts by an independent third party search firm, which recommends candidates that satisfy the Board’s criteria. The search firm also provides research and pertinent information regarding candidates, as requested.

 

 

 

Source Candidate Pool from Independent Search Firms Shareholders Independent Directors Our People In-Depth Review by the Committee Consider Skills Matrix Screen qualifications Consider diversity Review independence and potential conflicts Meet with directors Recommend Selected Candidate for Appointment to our Board Review by full board Select Director(s) 4 new directors since May 2016

 

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		Corporate Governance

 

 

Board Leadership

Currently, our Board leadership structure consists of a Lead Independent Director, a Chairman (who is also our CEO) and strong committee chairs. The Board believes that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individual with primary responsibility for managing the Company’s day-to-day operations, chair regular Board meetings as key business and strategic issues are discussed. At this time, the Board believes that the Company is best served by having the same individual as both Chairman of the Board and CEO, but considers the continued appropriateness of this structure at least annually.

 

Under our Corporate Governance Principles and Practices, the independent directors annually elect an independent director to serve as Lead Independent Director for a term of at least one year, but for no more than three years. Mr. Krapek has served as our Lead Independent Director since May 2014. A new Lead Independent Director will be elected by the independent directors immediately after the 2017 Annual Meeting. The responsibilities and authority of the Lead Independent Director include:

 

•

presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;

 

•

authorization to call meetings of the independent directors;

 

•

serving as a liaison between the Chairman and the independent directors;

 

•

approving information sent to the Board, including the quality, quantity, appropriateness and timeliness of such information;

 

•

approving meeting agendas for the Board;

 

•

approving meeting schedules to assure there is sufficient time for discussion of all agenda items;

 

•

authorization to retain outside advisors and consultants who report directly to the Board of Directors on board-wide issues; and

 

•

ensuring that he/she be available, if requested by shareholders, when appropriate, for consultation and direct communication.

 

COMPREHENSIVE STEPS TO ACHIEVE BOARD EFFECTIVENESS The Board is committed to a rigorous self evaluation process. Through evaluation, directors review the Board’s performance, including areas where the Board feels it functions effectively, and importantly, areas where the Board believes it can improve.1. Process is Initiated Corporate Governance and Business Ethics Committee Chair Initiates annual board evaluation process with the help of an independent third party consultant and our chief governance officer. 2. Evaluation The evaluation solicits each director’s opinion regarding the board’s effectiveness in monitoring and reviewing topics such as: The strategic planning process The annual budget process and financial performance Management compensation, performance and ethics Risk strategy and management Succession planning 3. Feedback Analysis Directors are encouraged to speak to the independent third party with specific feedback on individual directors, committees or the Board in general. The independent third party synthesizes the results and comments and may have oral interviews with directors regarding the full Board or any committee on which the director serves. 4. Presentation of Findings At the January board meeting, the Corporate Governance and Business Ethics chair, in conjunction with the independent, third party consultant, presents the findings to each Committee, followed by review of the full Board 5. Follow Up Results requiring additional consideration are addressed at subsequent board and committee meetings and reported back to full Board, where appropriate. The Board followed-up on its most recent self-evaluation by reviewing materials about the competitive and regulatory environment as well as discussing talent at almost every scheduled Board meeting. For 2017, the Board has asked for more information in the following areas: Technology and Future Products Product Development Management Succession Planning Executive Compensation

 

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Letter from the Lead Independent Director

Under Prudential’s Corporate Governance Principles, the independent directors of the Board annually elect a Lead Independent Director for a term of at least one year, but for no more than three years. I am honored that my fellow independent directors elected me to serve for the last three years. My term ends in May 2017, effective at our Annual Meeting. Our directors share my commitment to strong, independent leadership, Board effectiveness and oversight. In this context, I would like to share insights into our philosophy and practices on several important issues.

Strategic Oversight

As part of the annual strategic planning process, our Board reviews the Company’s strategy, opportunities, challenges, capabilities and leadership to ensure the Company is well-positioned to continue creating value for shareholders. My fellow independent directors and I are committed to, and value, our dialogue with management regarding the Company’s disciplined risk assessment, capital allocation strategy and long-term plans for growth.

Board Governance

Effective governance means ongoing and thoughtful evaluation of our governance structure, and constructive shareholder engagement on emerging governance issues. In 2016, our engagement efforts, which included my personal involvement and that of other directors, reached investors holding the majority of our outstanding shares.

Our recent shareholder engagement dialogue about governance has focused on, among other things, Board composition, refreshment and our Board’s leadership structure. Understanding the importance of the Board’s responsibility to provide effective oversight, we strive to maintain an appropriate balance of tenure, diversity, skills, and experience on the Board. Since 2015, four new independent directors have joined our Board to replace long-tenured directors. In addition, directors from diverse backgrounds comprise two-thirds of our Board.

Board Evaluation

We are committed to provide transparency to our robust Board and committee evaluation process, which is led by an independent third-party consultant. Our proxy statement not only describes each step of the evaluation process, but also provides specific areas where our directors seek improvement.

Governance Policies and Practices

We continue to maintain our focus on strong governance practices that we believe are important to our shareholders and protect the long-term vitality of the Company. Our accountability to you is indicative in our policies such as: proxy access, a strong Lead Independent Director, the right of shareholders to call a special meeting, majority vote, annual election of directors, and a robust clawback policy.

My board colleague, Gilbert Casellas, chairman of our Corporate Governance and Business Ethics Committee, and I address these topics in two short videos. You can access the videos from the Corporate Governance section of our website at www.prudential.com/directorvideos. We see these videos as an important component of our ongoing efforts to share information with shareholders.

Prudential’s founder, John Dryden, stated that the “justification of the company’s existence is its advancement of the efforts of its policy holders and their families for better economic and social condition.” More than 140 years after Mr. Dryden’s proclamation, my fellow directors and I are proud to carry on this purpose on your behalf.

 

				Karl J. Krapek Lead Independent Director

 

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		Corporate Governance

 

 

Board Risk Oversight

The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. In general, the committees oversee the following risks:

 

•

Audit Committee: risks related to financial controls, legal, regulatory and compliance issues, and the overall risk management governance structure and risk management function;

 

•

Compensation Committee: the design and operation of the Company’s compensation programs so that they do not encourage unnecessary or excessive risk-taking;

 

•

Corporate Governance and Business Ethics Committee: the Company’s political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental, sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability;

 

•

Finance Committee: risks related to capital and liquidity management, incurrence and repayment of borrowings, the capital structure of the enterprise, funding of benefit plans, and the levels of insurance reserves and policyholder dividends;

 

•

Investment Committee: investment risk, and the strength of the investment function; and

 

•

Risk Committee: the governance of significant risks throughout the Company, the Company’s overall risk profile, and coordination of the risk oversight functions of the other Board committees.

In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, committees hold joint meetings when appropriate and address certain issues at the full Board level. During 2016, the full Board received a report from the Chief Risk Officer on the important strategic issues and risks facing the Company. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function.

The Risk Committee is comprised of the chairs of each of the other Board committees. The principal activities of the Risk Committee are to: oversee the Company’s assessment and reporting of material risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for risk assessment and risk management, including the related assumptions used across the Company’s businesses and material risk types; and receive reports from management on material and emerging risk topics that are reviewed by the Company’s internal management committees.

The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businesses to separate management and oversight. Employee appraisals evaluate employees with respect to risk and ethics.

We monitor the risks associated with our executive compensation program and individual compensation decisions on an ongoing basis. Each year management undertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking.

Moreover, senior management is subject to a share retention policy, and historically a large percentage of senior management compensation has been paid in the form of long-term equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk to earn the incentives provided under our compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage, and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

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		Corporate Governance

 

 

Succession Planning

The Board is actively engaged and involved in talent management. The Board reviews the Company’s “people strategy” in support of its business strategy at least annually and frequently discusses talent issues at its meetings. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer level.

In addition, the committees of the Board regularly discuss the talent pipeline for specific critical roles. High potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.

Communication with Directors

Shareholders and other interested parties may communicate with any of the independent directors, including Committee Chairs and the Lead Independent Director, by using the following address:

Prudential Financial, Inc.

Board of Directors

c/o Margaret M. Foran, Chief Governance Officer,

Senior Vice President and Corporate Secretary

751 Broad Street

Newark, NJ 07102

Email: independentdirectors@ prudential.com

Feedback on Executive Compensation: You can also provide feedback on executive compensation at the following website: www.prudential.com/ executivecomp.

The Chief Governance Officer and Corporate Secretary of the Company reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Corporate Chief Ethics Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or other job-related inquiries; spam and overly hostile, threatening, potentially illegal or similarly unsuitable communications.

 

 

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		Corporate Governance

 

 

Committees of the Board of Directors

The Board has established various committees to assist in discharging its duties, including: Audit, Compensation, Corporate Governance and Business Ethics, Executive, Finance, Investment and Risk. The primary responsibilities of each of the committees are set forth below, together with their current membership and the number of meetings held in 2016. Committee charters can be found on our website at www.prudential.com/governance. Each member of the Audit, Compensation, and Corporate Governance and Business Ethics Committees has been determined by the Board to be independent for purposes of the NYSE Corporate Governance listing standards. In addition, directors who serve on the Audit Committee and the Compensation Committee meet additional, heightened independence and qualification criteria applicable to directors serving on these committees under the NYSE listing standards.

 

Committees		Members & Meetings in 2016		Description
Audit Committee   Meetings in 2016: 10		Douglas Scovanner (Chair) Martina-Hund Mejean George Paz		The Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Company’s financial statements. The Audit Committee oversees risks related to financial controls and legal, regulatory and compliance matters, and oversees the overall risk management governance structure and risk management function.   Among other things, the Audit Committee:   (1) appoints the independent auditor and evaluates its independence and performance;   (2) reviews the audit plans for and results of the independent audit and internal audits; and   (3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements.   The Board of Directors has determined that all of our Audit Committee members are financially literate and are audit committee financial experts as defined by the SEC.
Compensation Committee   Meetings in 2016: 7		Karl J. Krapek (Chair) Thomas J. Baltimore Michael A. Todman		The Compensation Committee oversees the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the CD&A.
Corporate Governance & Business Ethics Committee   Meetings in 2016: 6		Gilbert F. Casellas (Chair) Peter R. Lighte Sandra Pianalto		The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding environmental stewardship and sustainability responsibility throughout the Company’s global businesses.
Executive Committee   Meetings in 2016: 0		Karl J. Krapek (Chair) Thomas J. Baltimore Gilbert F. Casellas Christine A. Poon Douglas A. Scovanner John R. Strangfeld		The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board by our By-laws or otherwise.
Finance Committee   Meetings in 2016: 7		Christine A. Poon (Chair) James G. Cullen Sandra Pianalto Michael A. Todman		The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, subsidiary structure and major capital expenditures.
Investment Committee   Meetings in 2016: 4		Thomas J. Baltimore (Chair) James G. Cullen Peter R. Lighte Christine A. Poon		The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties.
Risk Committee   Meetings in 2016: 7		Karl J. Krapek (Chair) Thomas J. Baltimore Gilbert F. Casellas Christine A. Poon Douglas A. Scovanner		The Risk Committee oversees the governance of significant risks throughout the enterprise, including by coordinating the risk oversight functions of each Board committee and seeing that matters are appropriately elevated to the Board.

In addition to the above Committee meetings, the Board held 11 meetings in 2016.

 

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		Corporate Governance

 

 

Certain Relationships and Related Party Transactions

The Company has adopted a written Related Party Transaction Approval Policy that applies:

 

•

to any transaction or series of transactions in which the Company or a subsidiary is a participant;

 

•

when the amount involved exceeds $120,000; and

 

•

when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest (other than solely as a result of being a director or trustee or in any similar position or a less than 10 percent beneficial owner of another entity).

The policy is administered by the Corporate Governance and Business Ethics Committee. The Committee will consider relevant facts and circumstances in determining whether or not to approve or ratify such a transaction, and will approve or ratify only those transactions that are, in the Committee’s judgment, appropriate or desirable under the circumstances.

In the ordinary course of business, we may from time to time engage in transactions with other corporations or financial institutions whose officers or directors are also directors of Prudential Financial. In all cases, these transactions are conducted on an arm’s-length basis. In addition, from time to time executive officers and directors of Prudential Financial may engage in transactions in the ordinary course of business involving services we offer, such as insurance and investment services, on terms similar to those extended to employees of Prudential Financial and its subsidiaries and affiliates generally. The Corporate Governance and Business Ethics Committee has determined that certain types of transactions do not create or involve a direct or indirect material interest, including (i) any sales of financial services or products to a related party in the ordinary course of business on terms and conditions generally available in the market place (or at ordinary employee discounts, if applicable) and in accordance with applicable law and (ii) all business relationships between the Company and a 5% shareholder or a business affiliated with a director, director nominee or immediate family member of a director or director nominee made in the ordinary course of business on terms and conditions generally available in the market place and in accordance with applicable law.

Pursuant to our policy, the Corporate Governance and Business Ethics Committee determined that there were two transactions that qualified as related party transactions since the beginning of 2016. The brother of Robert Falzon, our Executive Vice President and Chief Financial Officer, Michael Falzon, is a Vice President for Infrastructure Systems Development. In 2016, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was approximately $480,300. The son-in-law of Barbara Koster, our Senior Vice President and Chief Information Officer, Joshua D. Howard, is an associate in Quantitative Management Associates, a subsidiary of the Company. In 2016, the total compensation paid to Mr. Howard, including salary and bonus, was approximately $141,500. In both cases the compensation is similar to the compensation of other employees holding equivalent positions. Neither individual is in the reporting chain of the executive officer.

 

 

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		Corporate Governance

 

 

Policy on Shareholder Rights Plan

We do not have a shareholder rights plan. The Board will obtain shareholder approval prior to adopting a future shareholder rights plan unless the Board, in the exercise of its fiduciary duties, determines that under the circumstances then existing, it would be in the best interests of the Company and our shareholders to adopt a rights plan without prior shareholder approval. If a rights plan is adopted by the Board without prior shareholder approval, the plan must provide that it will expire within one year of adoption unless ratified by shareholders.

Political Contributions and Lobbying Expenditure Oversight and Disclosure

The Corporate Governance and Business Ethics Committee reviews and approves an annual report on political activities, contributions and lobbying expenses. It monitors and evaluates the Company’s ongoing political strategy as it relates to overall public policy objectives for the next year and provides guidance to the Board. We provide on our website a description of our oversight process for political contributions and a summary of PAC contributions. We also include information on annual dues, assessments and contributions of $25,000 or more to trade associations and tax-exempt advocacy groups and a summary of Company policies and procedures for political activity. This disclosure is available at www.prudential.com/governance under the heading “Political Activity & Contributions.”

 

Environmental, Sustainability and Corporate Social Responsibility

The Corporate Governance and Business Ethics Committee has oversight of environmental issues and policies. In addition, three of our Board members sit on the Corporate Social Responsibility Oversight Committee. These directors inform the Company’s social responsibility efforts in investing for financial and social returns, strategic philanthropy, employee engagement and corporate community involvement.

 

 

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		Corporate Governance: Good Governance Practices

 

 

 

 

GOOD GOVERNANCE PRACTICES Board Strong Lead Independent Director including charter to guide oversight and independent leadership Majority Independent Directors – 10 of the 12 director nominees are independent Annual Election of Directors by majority votes cast in an uncontested election Shareholder Rights Proactive Adoption of Proxy Access Special Meeting Threshold of 10% No Poison Pill Director Stock Ownership Guidelines – within six years of joining the Board, each director is expected to own common stock or deferred stock units with a value equivalent to six times their annual retainer Annual Board Evaluation – overseen by independent third party every year Board Continuing Education – new director orientation and continuing education on critical topics and issues Compensation Annual Say on Pay Shareholder Vote Clawback Policy Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities

 

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Item 2–Ratification of the Appointment of the

Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers” or “PwC”) as the Company’s independent registered public accounting firm (independent auditor) for 2017. We are not required to have the shareholders ratify the selection of PricewaterhouseCoopers as our independent auditor. We nonetheless are doing so because we believe it is a matter of good corporate practice.

If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers, but may nevertheless retain it as the Company’s independent auditor. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of Prudential Financial and its shareholders. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions by shareholders.

FEES PAID TO PRICEWATERHOUSECOOPERS LLP

The following is a summary and description of fees for services provided by PricewaterhouseCoopers in 2016 and 2015.

Worldwide Fees (In Millions)

 

Service		2016				2015
Audit(A)		$	51			$	50
Audit-Related(B)		$	4			$	4
Tax(C)		$	3			$	2
All Other			—				—
Total		$	58			$	56

 

(A)

The aggregate fees for professional services rendered for the integrated audit of the consolidated financial statements of Prudential Financial and, as required, audits of various domestic and international subsidiaries, the issuance of comfort letters, agreed-upon procedures required by regulation, consents and assistance with review of documents filed with the SEC.

 

(B)	The aggregate fees for assurance and related services including internal control and financial compliance reports, agreed-upon procedures not required by regulation, and accounting consultation on new accounting standards, acquisitions and potential financial reporting requirements.

 

(C)

The aggregate fees for services rendered by PricewaterhouseCoopers’ tax department for tax return preparation, tax advice related to mergers and acquisitions and other international, federal and state projects, and requests for rulings. In 2016, tax compliance and preparation fees totaled $1.4M and tax advisory fees totaled $1.1M, and in 2015, tax compliance and preparation fees totaled $1.6M and tax advisory fees totaled $0.5M.

PricewaterhouseCoopers also provides services to domestic and international mutual funds and limited partnerships not consolidated by Prudential Financial, but which are managed by Prudential Financial. PricewaterhouseCoopers identified fees related to audit, audit-related, and tax services paid by these entities of $14M in 2016 and $14M in 2015.

The Audit Committee has advised the Board of Directors that in its opinion the non-audit services rendered by PricewaterhouseCoopers during the most recent fiscal year are compatible with maintaining its independence.

PwC has been the Company’s independent auditor since 2001.

 

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		Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

 

 

 

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the independent auditor. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the independent auditor’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the general pre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis. The policy requires specific pre-approval of all other permitted services. The independent auditor is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its Chair the authority to address requests for pre-approval of services with fees up to a maximum of $250,000 between Audit Committee meetings if the Chief Auditor deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee, and the Chair must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the independent auditor.

All Audit, Audit-Related, Tax and All Other services described above were approved by the Audit Committee before services were rendered.

 

 

 

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		Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

 

REPORT OF THE AUDIT COMMITTEE

Three non-management directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board.

In addition, the Board of Directors has determined that all of our Audit Committee members, Messrs. Paz and Scovanner and Ms. Hund-Mejean, satisfy the financial expertise requirements of the NYSE and have the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC.

Management is responsible for the preparation, presentation and integrity of the financial statements of Prudential Financial and for maintaining appropriate accounting and financial reporting policies and practices, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Prudential Financial’s independent registered public accounting firm (independent auditor), PricewaterhouseCoopers, is responsible for auditing the consolidated financial statements of Prudential Financial and expressing an opinion as to their conformity with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (“PCAOB”).

In performing its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements of Prudential Financial as of and for the year ended December 31, 2016 and Management’s Annual Report on Internal Control Over Financial Reporting with management and Prudential Financial’s independent auditor. The Audit Committee also discussed with Prudential Financial’s independent auditor the matters required to be discussed by the independent auditor with the Audit Committee under the rules adopted by the PCAOB.

The Audit Committee received from the independent auditor the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence, and has discussed with the independent auditor its independence.

The Audit Committee has discussed with, and received regular status reports from, Prudential Financial’s Chief Auditor and independent auditor on the overall scope and plans for their audits of Prudential Financial, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. The Audit Committee meets with the Chief Auditor and the independent auditor, with and without management present, to discuss the results of their respective audits, in addition to private meetings with the Chief Financial Officer, Chief Risk Officer, General Counsel, Chief Actuary and Chief Compliance Officer. In determining whether to reappoint PricewaterhouseCoopers as Prudential Financial’s independent auditor, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the firm’s independence and objectivity, PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the Lead Audit Partner, historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, and the results of a management survey of PwC’s overall performance, data related to audit quality and performance, including recent PCAOB inspection reports on the firm, and the appropriateness of PwC’s fees, both on an absolute basis and as compared with its peers.

In addition, the Audit Committee reviewed and amended its Charter and received reports as required by its policy for the receipt, retention and treatment of financial reporting concerns received from external and internal sources.

Based on the reports and discussions described in this report and subject to the limitations on the roles and responsibilities of the Audit Committee referred to above and in its Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of Prudential Financial and Management’s Annual Report on Internal Control Over Financial Reporting be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for filing with the SEC.

THE AUDIT COMMITTEE

Douglas A. Scovanner (Chair)

Martina Hund-Mejean

George Paz

 

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Item 3–Advisory Vote to Approve

Named Executive Officer Compensation

The Board is committed to excellence in governance and recognizes the interest our shareholders have in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are being asked to approve a non-binding advisory resolution on the compensation of our named executive officers, as reported in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our 2016 executive compensation program and policies for our named executive officers through the following resolution:

RESOLVED, that the shareholders of Prudential approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement.

This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and practices relating to our named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our named executive officers. Because your vote is advisory, it will not be binding upon the Board. The Board will, however, as it has done in prior years, take into account the outcome of the “Say on Pay” vote when considering future compensation arrangements.

The Board has adopted a policy providing for annual “Say on Pay” votes. Accordingly, subject to the outcome of Item 4 and the decision of the Board, the next “Say on Pay” vote will occur in 2018.

 

Item 4–Advisory Vote on the Frequency of

Future Advisory Votes to Approve Named

Executive Officer Compensation

As described in Item 3, our shareholders are being asked to vote to approve the compensation of our named executive officers, as reported in this Proxy Statement. In accordance with SEC rules, Item 4 gives you the opportunity to cast a non-binding vote on how often the Company should include an advisory vote on named executive officer compensation in its proxy materials for future annual or other meetings for which the Company must include executive compensation information. Shareholders may vote to have the advisory vote on executive compensation every year, every two years, or every three years. Shareholders may also abstain from voting.

The Board believes that these votes should occur every year so shareholders may annually express their views on our executive compensation program. The Company has been providing an advisory vote on executive compensation on an annual basis. The Board values the opportunity to receive feedback and will continue to consider the outcome of these votes in making executive compensation decisions.

 

 

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Item 5–Shareholder Proposal Regarding an

Independent Board Chairman

In accordance with SEC rules, we have set forth below a shareholder proposal, along with the supporting statement of the shareholder proponent. The Company is not responsible for any inaccuracies it may contain. The shareholder proposal is required to be voted on at our Annual Meeting only if properly presented. As explained below, our Board unanimously recommends that you vote “AGAINST” the shareholder proposal.

John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California, 90278, beneficial owner of 100 shares of Common Stock, is the proponent of the following shareholder proposal. The proponent has advised us that a representative will present the proposal and related supporting statement at the Annual Meeting.

Independent Board Chairman

Shareholders request our Board of Directors to adopt as policy, and amend our governing documents as necessary, to require the Chair of the Board of Directors, whenever possible, to be an independent member of the Board. The Board would have the discretion to phase in this policy for the next CEO transition, implemented so it does not violate any existing agreement. If the Board determines that a Chair who was independent when selected is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chair. This proposal requests that all the necessary steps be taken to accomplish the above.

Caterpillar reversed itself by naming an independent board chairman in October 2016 after Caterpillar opposed a shareholder proposal for an independent board chairman at its June 2016 annual meeting. Wells Fargo also reversed itself and named an independent board chairman in October 2016.

According to Institutional Shareholder Services 53% of the Standard & Poors 1,500 firms separate these 2 positions—“2015 Board Practices,” April 12, 2015. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%-support at Netflix.

It is the responsibility of the Board of Directors to protect shareholders’ long-term interests by providing independent oversight of management. By setting agendas, priorities and procedures, the Chairman is critical in shaping the work of the Board.

A board of directors is less likely to provide rigorous independent oversight of management if the Chairman is also the CEO, as is the case with our Company. Having a board chairman who is independent of management is a practice that will promote greater management accountability to shareholders and lead to a more objective evaluation of management.

According to the Millstein Center for Corporate Governance and Performance (Yale School of Management), “The independent chair curbs conflicts of interest, promotes oversight of risk, manages the relationship between the board and CEO, serves as a conduit for regular communication with shareowners, and is a logical next step in the development of an independent board.”

A number of institutional investors said that a strong, objective board leader can best provide the necessary oversight of management. Thus, the California Public Employees’ Retirement System’s Global Principles of Accountable Corporate Governance recommends that a company’s board should be chaired by an independent director, as does the Council of Institutional Investors. An independent director serving as chairman can help ensure the functioning of an effective board.

Please vote to enhance shareholder value: Independent Board Chairman—Proposal 5

 

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		Item 5—Shareholder Proposal Regarding an Independent Board Chairman

 

 

Board of Directors’ Statement in Opposition to the Proposal

Your Board recommends a vote against this proposal because it believes that it is in the best interest of our shareholders for the Board to have the flexibility to determine the best person to serve as Board Chair, whether that person is an independent director or the CEO.

Every year, the Governance Committee reviews and makes a recommendation on the appropriate governance framework for Board leadership. The Committee takes into consideration governance best practices, the facts and circumstances of our Board and feedback that we receive from our shareholders. Specifically, our Board proactively asks for feedback from our shareholders and regularly meets with our shareholders in various settings. In 2016, independent directors, as well as the Company’s Chief Governance Officer, engaged with many investors on the issue of our Board leadership structure, among other things, and have presented their feedback to the Board as part of its decision-making process on the appropriate Board leadership structure going forward.

The Governance Committee has most recently determined that Board leadership is provided through the combination of a unified Chair and CEO, a clearly defined and significant Lead Independent Director role, active and strong committee chairs, and independent-minded, skilled, engaged, diverse and committed directors.

Our Board believes that its current structure and governance allows it to provide effective oversight of management. Specifically, we have a strong Lead Independent Director with significant responsibilities that are described in detail in this Proxy Statement, including approval of all Board agendas and information sent to the Board, shareholder engagement, oversight of the annual Board evaluation process by an independent third party, Board refreshment and succession planning, and guiding the Board’s overall governance processes. We also refer you to the Lead Independent Director’s letter which is contained in this Proxy Statement, as well as the Lead Independent Director’s video and Lead Independent Director Charter at www.prudential.com/governance. Mr. Krapek’s skills, experience, commitment and the time he devotes to serve his role all make him well qualified to serve as our Lead Independent Director.

Our independent directors meet regularly in executive sessions, at the beginning and end of each Board meeting. These are chaired by our Lead Independent Director with no member of management present. Independent directors use these executive sessions to discuss matters of concern, as well as evaluations of the CEO and senior management, management and Board successions, matters to be included on Board agendas, and additional information the Board would like management to provide to them, as well as other relevant matters.

The Chairs and all members of the Board committees are strong, independent directors. These Chairs shape the agenda and information presented to their committees. Oversight of critical issues within these committees is owned by the independent directors.

All directors have full access to all members of management and all employees on a confidential basis.

The proposed policy would unduly impair the Board’s flexibility to annually elect the individual it deems best suited to serve as Board Chair. Shareholders of Prudential are best served when the Board has the flexibility to elect the individual it deems best suited to serve as Board Chair at any particular time, depending on the circumstances. Our Board believes that a clearly defined and significant Lead Independent Director role, independent and strong committee chairs, experienced, diverse and committed directors, and frequent executive sessions provide a framework for effective direction and oversight by the Board.

 

 

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Voting Securities and Principal Holders

Beneficial Ownership

The following table shows all entities that are the beneficial owners of more than 5% of the Company’s Common Stock:

 

Name and Address of Beneficial Owner		Amount and Nature				Percent of Class
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055			31,440,194	(1)			7.3%
The Vanguard Group 100 Vanguard Boulevard, Malvern, PA 19355			29,303,986	(2)			6.81%

 

(1)

Based on information as of December 31, 2016 contained in a Schedule 13G/A filed with the SEC on January 25, 2017 by BlackRock, Inc. The Schedule 13G/A indicates that BlackRock, Inc. has sole dispositive power with respect to all of the shares, sole voting power with respect to 26,485,202 of the shares, and shared dispositive and voting power with respect to none of the shares.

 

(2)

Based on information as of December 31, 2016 contained in a Schedule 13G/A filed with the SEC on February 13, 2017 by The Vanguard Group. The Schedule 13G/A indicates that The Vanguard Group has sole dispositive power with respect to 28,546,218 of the shares, shared dispositive power with respect to 757,768 of the shares, sole voting power with respect to 686,194 of the shares, and shared voting power with respect to 78,890 of the shares.

To our knowledge, except as noted above, no person or entity is the beneficial owner of more than 5% of our Common Stock.

The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 10, 2017, by:

 

•

each director and NEO; and

 

•

all directors and executive officers of the Company as a group.

Voting Securities and Principal Holders

The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 10, 2017, by:

 

•

each Director and Named Executive Officer, and

 

•

all Directors and Executive officers of Prudential Financial as a group.

 

Name of Beneficial Owner		Common Stock				Number of shares Subject to Exercisable Options				Total Number of Shares Beneficially Owned1				Director Deferred Stock Units / Additional Underlying Units 2,3,4				Total Shares Beneficially Owned Plus Underlying Units
Thomas J. Baltimore, Jr.			250								250				37,710				37,960
Gilbert F. Casellas			500								500				29,744				30,244
James G. Cullen			2,033								2,033				43,896				45,929
Martina Hund-Mejean			128								128				15,505				15,633
Karl J. Krapek			1,007								1,007				44,599				45,606
Peter R. Lighte			80								80				4,180				4,260
George Paz			500								500				4,177				4,677
Sandra Pianalto			200								200				3,765				3,965
Christine A. Poon			11,583								11,583				13,411				24,994
Douglas A. Scovanner			12,000								12,000				11,559				23,559
Michael A. Todman			450								450				4,180				4,630
John R. Strangfeld			287,821				814,369				1,102,190				328,995				1,431,185
Mark B. Grier			364,887				334,973				699,860				231,322				931,182
Robert Falzon			44,987				34,434				79,421				112,154				191,575
Charles F. Lowrey			46,358				325,337				371,695				142,313				514,008
Stephen Pelletier			7,051				0				7,051				166,861				173,912
All directors and executive officers as a group (22 persons)			973,268				1,865,564				2,838,832				1,582,788				4,421,620

 

(1)	Individual directors and executive officers as well as all directors and executive officers as a group beneficially own less than 1% of the shares of Common Stock outstanding, as of March 10, 2017.

 

(2)

Includes the following number of shares or share equivalents in deferred units through the Deferred Compensation Plan for Non-Employee Directors and the Prudential Insurance Company of America Deferred Compensation Plan, as to which no voting or investment power exists: Mr. Baltimore, 37,710; Mr. Casellas, 29,744; Mr. Cullen, 43,896; Ms. Hund-Mejean 15,505; Mr. Krapek,44,599; Mr. Lighte, 4,180; Mr. Paz, 4,177; Ms. Pianalto, 3,765; Ms. Poon, 13,411; Mr. Scovanner, 11,559; Mr. Todman, 4,180; Mr. Strangfeld, 41,598; and Mr. Pelletier, 31,847.

 

(3)

Includes the following shares representing the target number of shares to be received upon the attainment of ROE goals under the performance share program described under “Compensation Discussion and Analysis”: Mr. Strangfeld, 101,030; Mr. Grier, 81,554; Mr. Falzon, 38,952; Mr. Lowrey, 50,389; and Mr. Pelletier, 46,103.

 

(4)	Includes the following unvested stock options: Mr. Strangfeld, 186,367; Mr. Grier,149,768; Mr. Falzon,73,202; Mr. Lowrey,91,924; and Mr. Pelletier, 88,911.

Compliance With Section 16(a) of the Exchange Act

Each director, executive officer of the Company and greater than 10% beneficial owner of Common Stock is required to report to the SEC, by a specified date, his or her transactions involving our Common Stock. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required to be filed, the Company believes that during 2016 all reports required by Section 16(a) were timely filed.

 

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Compensation of Directors

The Corporate Governance and Business Ethics Committee reviews the compensation of our non-employee directors periodically (generally every three years) and recommends changes to the Board, when it deems appropriate.

The following table describes the components of the non-employee directors’ compensation for 2016:

 

Compensation Element		Director Compensation Program
Annual Cash Retainer		$150,000, which may be deferred, at the director’s option
Annual Equity Retainer		$150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting)
Board and Committee Fees		None
Chair Fee		$35,000 for the Audit and Risk Committees $30,000 for the Compensation Committee $20,000 for all other committees*
Lead Independent Director Fee		$50,000
Meeting Fee for members of the Company’s Community Resources Oversight Committee**		$1,250 per meeting
New Director Equity Award (one-time grant)		$150,000 in restricted stock units that vest after one year
Stock Ownership Guideline		Ownership of Common Stock or deferred stock units that have a value equivalent to six times the annual cash retainer to be satisfied within six years of joining the Board***

 

*	Includes any non-standing committee of the Board that may be established from time to time, but excluding the Executive Committee.

 

**

This is a committee comprised of members of management and the Board. This Committee typically meets on a separate day following the Board and Board committee meetings. The non-employee directors on this Committee currently consist of Mr. Casellas, Ms. Pianalto and Ms. Poon. The Community Resources Oversight Committee met three times in 2016.

 

***

As of December 31, 2016, each of our non-employee directors satisfied this guideline, with the exception of Ms. Pianalto, who joined the Board in July 2015, and Messrs. Lighte, Paz and Todman, who joined the Board in March 2016, each of whom has six years to satisfy the guideline since he or she joined the Board. For purposes of the stock ownership guideline, once a non-employee director satisfies his or her stock ownership level, the director will be deemed to continue to satisfy the guideline without regard to fluctuation in the value of the Common Stock owned by the director.

The Company maintains a Deferred Compensation Plan for Non-Employee Directors (the “Plan”). Since 2011, 50% of the annual Board and committee retainer has been awarded in restricted stock units that vest after one year (or if earlier, on the date of the next Annual Meeting). A non-employee director can elect to invest the cash portion of his or her retainer, fees and equity retainer upon vesting in accounts under the Plan that replicate investments in either shares of our Common Stock or the Fixed Rate Fund, which accrues interest in the same manner as funds invested in the Fixed Rate Fund offered under the Prudential Employee Savings Plan (“PESP”). The Plan provides for distributions to commence upon termination of Board service or while a director remains on the Board.

Each director receives dividend equivalents on the restricted stock units contained in his or her deferral account under the Plan, which are equal in value to dividends paid on our Common Stock. The dividend equivalents credited to the account are then reinvested in the form of additional share units.

Under the director compensation program, if a non-employee director satisfies the stock ownership guideline, the restricted stock units granted as the annual equity retainer are payable upon vesting in cash or shares of our Common Stock (at the director’s option), and may be deferred beyond vesting at the director’s election. If a director does not satisfy the stock ownership guideline, the restricted stock units are automatically deferred until termination of Board service.

 

 

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		Compensation of Directors

 

 

2016 Director Compensation Table

 

		Fees Earned or Paid in
Name		Cash($)				Stock Awards($)(1)				All Other Compensation($)(2)				Total($)
Thomas J. Baltimore			170,000				150,000								320,000
Gordon M. Bethune			62,500				0								62,500
Gilbert F. Casellas			173,750				150,000								323,750
James G. Cullen			150,000				150,000				5,000				305,000
Constance J. Horner2			63,750				0				25,000				88,750
Martina Hund-Mejean			150,000				150,000				5,000				305,000
Karl J. Krapek			265,000				150,000				5,000				420,000
Peter R. Lighte3			125,000				300,000				5,000				430,000
George Paz3			125,000				300,000				5,000				430,000
Sandra Pianalto			152,500				150,000				5,000				307,500
Christine A. Poon			173,750				150,000								323,750
Douglas A. Scovanner			185,000				150,000								335,000
Michael A. Todman3			125,000				300,000				5,000				430,000

 

(1)

Represents amounts that are in units of our Common Stock. The amounts reported represent the aggregate grant date fair value of the restricted stock units granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. As of December 31, 2016, the aggregate balance in each of the non-employee directors’ accounts in the Deferred Compensation Plan denominated in units (which includes all deferrals from prior years) and the year-end values were as follows: Mr. Baltimore: 37,710 and $3,924,103; Mr. Casellas: 29,744 and $3,095,161; Mr. Cullen: 43,896 and $4,567,818; Ms. Hund-Mejean: 15,505 and $1,613,450; Mr. Krapek: 48,987 and $5,097,587; Mr. Lighte : 4,180 and $434,971; Mr. Paz: 4,177 and $434,659; Ms. Pianalto: 3,765 and $391,786; Ms. Poon: 13,411 and $1,395,549; Mr. Scovanner 11,559 and $1,202,830; and Mr. Todman: 4,180 and $434,971.

 

(2)	Represents amounts for 2016 matching charitable contributions; and with respect to Ms. Horner, includes a $25,000 donation in her honor for her service on the Company’s Community Resources Oversight Committee.

 

(3)	Messrs. Lighte, Paz, and Todman each received grants of restricted stock units valued at $150,000 upon joining the Board in March 2016.

 

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Compensation Discussion and Analysis

In this section, we describe the material components of our executive compensation program for our NEOs, whose compensation is set forth in the 2016 Summary Compensation Table and other compensation tables contained in this Proxy Statement:

 

Executive Summary

Business Highlights

OUR BUSINESS

We are a global financial services business with $1.264 trillion of assets under management as of December 31, 2016, and with operations in the United States, Asia, Europe, and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. For more information about our business, please see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on February 17, 2017.

2016 BUSINESS HIGHLIGHTS

In 2016, global market conditions and uncertainty continued to be factors in the markets in which we operate. Throughout this period, as a result of our steady leadership, we continued to seize opportunities and further differentiate ourselves from the competition. We view 2016 as a successful year for the Company. We continued our focus on capital deployment, disciplined risk management, a balanced business mix and effective execution of our individual business strategies. Consequently, we were able to deliver solid results in a challenging environment of continued low interest rates and far-reaching regulation of the financial services industry.

We achieved the following accomplishments in 2016:

 

		We reported net income of $4.37 billion, or $9.71 per share of Common Stock in 2016, compared to $5.64 billion, or $12.17 per share, in 2015, based on U.S. generally accepted accounting principles (“GAAP”). Net income for 2015 included a greater benefit from gains driven by market impacts including interest rates than in 2016.
		We reported after-tax adjusted operating income of $4.11 billion, or $9.13 per share of Common Stock in 2016, compared to $4.65 billion or $10.04 per share, in 2015.(1) 2016 after-tax adjusted operating income was negatively affected by actuarial assumption updates, compared to a positive impact in 2015.

 

(1)

Consolidated adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement.

 

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		Compensation Discussion and Analysis: Executive Summary

 

 

		We reported GAAP book value of $104.91 per share of Common Stock as of December 31, 2016, compared to $92.39 per share as of year-end 2015.   Adjusted book value amounted to $78.95 per share of Common Stock as of December 31, 2016, compared to $73.59 per share as of year-end 2015.(1)

 

We reported return on average equity based on income from continuing operations of 8.8% for 2016, compared to 13.3% for 2015.   We reported operating return on average equity of 12% for 2016, compared to 14.5% for 2015 and to the long term target of 13% to 14% we had set in 2011.(1) Our 2016 return on equity reflects solid core performance from our businesses, partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review. Given the multi-year impact of very low interest rates in our two largest markets, the U.S. and Japan, and the short term impact of strategic investing in our businesses, we have moderated our ROE expectations to 12% to 13% over the near to intermediate term.

 

 

(1)

Consolidated adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement.

Also, in 2016:

 

•

We took actions to restructure our Individual Annuities business to reduce capital volatility and improve earnings and cash flow prospects.

 

•

We expanded our leading position in the pension risk transfer market, including the completion of approximately $5 billion of new funded cases.

 

•

We completed the acquisition of a 40% stake in AFP Habitat, a leading provider of retirement services in Chile.

 

•

We reduced total outstanding debt by $1.6 billion.

We believe that maintaining robust capital and liquidity positions provides us with a protective cushion during difficult periods, as well as the ability to pursue new opportunities.

 

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		Compensation Discussion and Analysis: Executive Summary

 

Executive Compensation Highlights

The Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices, respond to feedback from our shareholders and strengthen the link to performance and rigor of our program. These changes have included:

 

 

As informed by our ongoing dialogue with our shareholders, and to more closely align with our value proposition to shareholders, this year, the Committee revised our Annual Incentive Program and Long-Term Incentive Program to further balance the financial metrics utilized by those programs between the Company’s absolute performance and its relative performance versus peer companies. Specifically, the Committee modified the Annual Incentive Program to eliminate the relative performance modifier and base the primary driver in determining the amount of the annual incentive awards for our NEOs, the initial annual performance factor, on three equally weighted performance metrics, including one relative metric:

 

•

EPS, on an AOI basis, compared to our EPS target range;

 

•

EPS growth, on an AOI basis, from the prior year period; and

 

•

Relative ROE as compared to the North American Life Insurance subset of our peer group.

The Committee also revised the Annual Incentive Program to reduce the volatility of outcomes under the plan, by modifying the performance scales and by limiting the contribution of earnings that may come from specified classes of non-coupon investments (e.g., private equity, hedge funds, real estate funds, equity securities, and other real estate investments). Based on our discussions with shareholders and feedback from our engagement efforts, the short-term fluctuations in earnings on these non-coupon investments were generally not viewed by our shareholders as being reflective of true operating performance. The performance of these non-coupon investments is fully reflected under the Book Value Performance Program, a key component of our Long-Term Incentive Program.

The use of a weighted relative ROE metric, in lieu of a relative performance modifier, provides simplicity and transparency of results under the Annual Incentive Program and more effectively balances absolute and relative performance (e.g., the weighting of the previous relative performance modifier was limited to 10%).

 

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		Compensation Discussion and Analysis: Executive Summary

 

Similarly, the Committee eliminated the relative performance modifier from the Performance Shares Program under our Long-Term Incentive Program for awards granted in 2017. Instead, the program now uses a relative ROE measure over a three-year performance period compared to the median ROE performance of the North American Life Insurance subset of our peer group, along with absolute performance versus our long-term ROE target.

Total Direct Compensation Summary

 

(1)

30% of the Annual Incentive Awards were mandatorily deferred into the Book Value Performance Program.

(2)

Represents long-term awards granted in 2017 and 2016 for 2016 and 2015 performance, respectively.

 

 

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		Compensation Discussion and Analysis: Executive Summary

 

 

Consideration of Most Recent “Say on Pay” Vote   Following our 2016 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executive compensation (the “Say on Pay” Vote) that was held at the meeting with respect to the 2015 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 95% of the votes cast on the proposal were voted in support of the compensation of our NEOs.

 

95% of the votes cast on the proposal were voted in support of the compensation of our NEOs.

 

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		Compensation Discussion and Analysis: Executive Summary

 

Based on the results of the “Say on Pay” vote, as well as our ongoing dialogue with our shareholders, the Committee and our Board concluded that, even though our overall executive compensation policies and practices enjoy favorable shareholder support, it was appropriate to make certain changes to our Annual Incentive Program and Long-Term Incentive Program to further balance the metrics utilized in those programs between the Company’s absolute performance and its performance relative to our peer companies. The Committee modified the Annual Incentive Program so that the primary driver in determining the amount of the annual incentive awards for our NEOs, the initial annual performance factor, is based on three equally weighted performance metrics:

 

•

EPS, on an AOI basis, assessed relative to our EPS target range;

 

•

EPS growth, on an AOI basis, from the prior year period; and

 

•

Relative ROE as compared to the North American Life Insurance subset of our peer group.

The Committee also made other changes to the design of the Annual Incentive and Long-Term Incentive Programs, including:

 

•

reducing the volatility of outcomes under the Annual Incentive Program and providing symmetry of outcomes with respect to EPS results above and below our publicly disclosed EPS target range;

 

•

excluding earnings from specified classes of non-coupon investments outside of a range of -10% to +10% of the earnings on these investments that are included in the Company’s EPS guidance range; and

 

•

strengthening the relative performance metric under our Performance Shares Program, by replacing the use of a relative performance modifier, which modified results by +/-10%, with the use of Relative ROE, weighted at 50%, which compares Prudential’s ROE performance to that of the North American Life Insurance subset of our peer group.

Opportunity for Shareholder Feedback

The Committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their views to the Committee as described under “Communication with Directors” in this Proxy Statement. In addition, the advisory vote on the compensation of the NEOs provides shareholders with an opportunity to communicate their views on our executive compensation program.

You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of the NEOs (see “Item 3—Advisory Vote to Approve Named Executive Officer Compensation”). This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision.

 

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		Compensation Discussion and Analysis

 

 

Philosophy and Objectives of Our Executive Compensation Program

The philosophy underlying our executive compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our shareholders, customers, and communities where we have a strong presence. Our executive compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements.

Overall, the same principles that govern the compensation of all our salaried employees apply to the compensation of our executive officers. Within this framework, we observe the following principles:

 

 

2016 Incentive Programs

To ensure a strong link between our incentive compensation opportunities and our short-term and longer term objectives, we use two specific programs: our Annual Incentive Program and our Long-Term Incentive Program.

 

•

Annual Incentive Program. The Annual Incentive Program is designed to reward strong financial and operational performance that furthers our short-term strategic objectives. Financial performance is primarily determined based on three equally-weighted performance metrics: (i) EPS achievement relative to our externally disclosed EPS targets; (ii) year-over-year growth in EPS; and (iii) relative ROE as compared to a peer group.

 

•

Long-Term Incentive Program. Our Long-Term Incentive Program consists of three parts that incent long-term value creation: performance shares and units that reward the achievement of our long-term ROE goals and increases in the market value of our Common Stock; book value units that reward increases in book value per share; and stock options that reward increases in the market value of our Common Stock.

 

 

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How We Make Compensation Decisions

Role of the Compensation Committee

The Committee is responsible to our Board for overseeing the development and administration of our compensation and benefits policies and programs. The Committee, which consists of three independent directors, is responsible for the review and approval of all aspects of our executive compensation program. Among its duties, the Committee is responsible for formulating the compensation recommendations for our CEO and approving all compensation recommendations for our officers at the senior vice president level and above, including:

 

•

annual review and approval of incentive program design, goals and objectives for alignment with compensation and business strategies;

 

•

evaluation of individual performance results in light of these goals and objectives;

 

•

evaluation of the competitiveness of each executive officer’s total compensation package; and

 

•

approval of any changes to the total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities, payouts, and retention programs.

Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the independent members of our Board for approval.

The Committee is supported in its work by the head of the Human Resources Department, her staff, and the Committee’s executive Compensation Consultant, as described below.

The Committee’s charter, which sets out its duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.

Role of the Chief Executive Officer

Within the framework of the compensation programs approved by the Committee and based on management’s review of market competitive positions, each year our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for our officers at the senior vice president level and above, including the other NEOs. These recommendations are based upon his assessment of each executive officer’s performance, the performance of the individual’s respective business or function, and retention considerations. The Committee reviews our CEO’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion.

Our CEO does not play any role with respect to any matter affecting his own compensation, and is not present when the Committee discusses and formulates his compensation recommendation.

Role of the Compensation Consultant

The Committee has retained Frederic W. Cook & Co., Inc. as its executive Compensation Consultant. The Compensation Consultant reports directly to the Committee and the Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested, and communicates with the Committee Chair between meetings.

The Compensation Consultant provides various executive compensation services to the Committee pursuant to a written consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to their performance.

During 2016, the Compensation Consultant performed the following specific services:

 

 

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The Compensation Consultant provided no services to management during 2016.

The Committee retains sole authority to hire the Compensation Consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.

The total amount of fees paid to the Compensation Consultant for services to the Committee in 2016 was $175,723. The Compensation Consultant received no other fees or compensation from us, except for $3,400 to participate in a general industry survey of long-term compensation. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to the listing standards of The New York Stock Exchange and SEC rules and concluded that no conflict of interest exists that would prevent the Compensation Consultant from serving as an independent consultant to the Compensation Committee.

Compensation Peer Group

The Committee uses compensation data compiled from a group of peer companies in the insurance, asset management, and other diversified financial services industries generally selected from the Standard & Poor’s 500 Financials Index (the “Peer Group”). The Committee periodically reviews and updates the Peer Group, as necessary, upon recommendation of the Compensation Consultant. We believe the Peer Group represents the industries with which we currently compete for executive talent, and also includes our principal business competitors.

 

Although included within the broad financial services sector, we exclude from the Peer Group companies such as property and casualty insurers and investment banking firms that predominantly offer different products, have substantially different business models and with whom we have less direct competition for executive talent.   For 2016, the Peer Group consisted of the following 20 companies:
North American Life Insurance Companies		Consumer Finance Companies		Asset Management and Custody Banks		Diversified Banks
•  AFLAC, Incorporated   •  Lincoln National   •  Manulife Financial Corporation   •  MetLife, Inc.   •  Principal Financial Group   •  Sun Life Financial Inc.		•  American Express Company   •  Capital One Financial Corporation		•  Ameriprise Financial, Inc.   •  The Bank of New York Mellon Corporation   •  BlackRock, Inc.   •  Franklin Resources, Inc.   •  Northern Trust Corporation   •  State Street Corporation		•  Bank of America Corporation   •  Citigroup Inc.   •  JPMorgan Chase & Co.   •  PNC Financial Services Group, Inc.   •  U.S. Bancorp   •  Wells Fargo & Company

Use of Competitive Data

We compete in several different businesses, most of which are involved in helping individuals and institutions grow and protect their assets. These businesses draw their key employees from different segments of the marketplace. Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for executive talent, while being subject to centralized design, approval, and control.

The Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the NEOs.

 

 

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To assess the competitiveness of our executive compensation program, we analyze Peer Group compensation data obtained from peer company proxy materials as well as compensation and benefits survey data provided by national compensation consulting firms, such as Willis Towers Watson, McLagan Partners, and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review the mix of our compensation components with respect to fixed versus variable, short term versus long term, and cash versus equity-based pay. This information is then presented to the Committee for its review and use.

The Committee generally compares the compensation of each NEO in relation to both the 50th and the 75th percentiles of the Peer Group for similar positions, as we are significantly above the median of the Peer Group in terms of size. In addition, the Committee takes into account various factors such as our performance within the Peer Group, the unique characteristics of the individual’s position, and any succession and retention considerations. In general, compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range.

Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by the scope of their responsibilities, market data for similar positions, and considerations of internal equity.

Components of Our Executive Compensation Program

The principal components of our executive compensation program, purpose, key characteristic and type of performance measured (if applicable) are presented in the following table. We measure the program’s competitiveness both by comparing relevant market data with the target and actual amounts paid at each executive officer position as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities.

Total Direct Compensation

 

Compensation Component		Purpose		Key Characteristic		Performance Measured
Base Salary		•    Compensate executive officers fairly for the responsibility of the position held		Fixed		Individual
Annual Incentive Awards		•    Motivate and reward executive officers for achieving our short-term business objectives   •    Provide balance by rewarding performance relative to our peer group		Variable		Corporate and Individual
Long-Term Incentive Awards		•    Motivate executive officers by linking incentives to the achievement of our multi-year financial goals, our relative performance, and the performance of our Common Stock and book value over the long term   •    Reinforce the link between the interests of our executive officers and shareholders		Variable		Corporate

Other Forms of Compensation

 

Compensation Component		Purpose		Key Characteristic
Health & Welfare, and Retirement Plans		•    Provide benefits that promote employee health and support employees in attaining financial security		Fixed
Perquisites and Other Personal Benefits		•    Provide a business-related benefit to our Company, and to assist in attracting and retaining executives		Fixed
Post-Employment Compensation		•    Provide temporary income following an executive’s involuntary termination of employment, and in the case of a change of control, to also provide continuity of management		Fixed

 

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The following discussion contains information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. Shareholders should not apply these performance measures and goals to other contexts.

 

 

 

 

 

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Annual Incentive Award Decisions for 2016

The principal driver of the actual annual incentive awards for the NEOs is the Final Performance Factor. The Committee also considers individual performance and contributions in determining final awards.

At the beginning of 2016, our CEO met with each of the other NEOs to outline and discuss with them the key financial factors for determining awards under our annual incentive program and their expected contributions to that performance.

 

		Mr. Strangfeld
						ANNUAL INCENTIVE AWARD DECISION   Based on the Final Performance Factor and the Committee’s evaluation of his performance, in February 2017, the Committee recommended, and the independent members of our Board approved, an annual incentive award of $5,976,000 for Mr. Strangfeld for 2016, or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $5,915,000 for 2015, representing an increase of 1.0%. Of the $5,976,000, $1,792,800 was mandatorily deferred into the Book Value Performance Program.
		KEY PERFORMANCE ACHIEVEMENTS   In assessing the individual performance of Mr. Strangfeld, our CEO, the Committee, and the independent members of our Board, considered the evaluation of his performance that was conducted by the Lead Independent Director of our Board and the Committee Chair. This evaluation identified and examined a broad range of corporate and individual performance factors, including:
		•    After-tax AOI of $4.11 billion, and EPS, based on after-tax AOI, of $9.13 in 2016;   •    Operating return on average equity of 12% for 2016, with solid core performance from our businesses partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review;   •    Growth in adjusted book value per share of our Common Stock, to $78.95 at December 31, 2016 versus $73.59 per share at December 31, 2015, an increase of $5.36, or 7%, after payment of four quarterly dividends totaling $2.80 per share;   •    International Division’s 8% increase in constant dollar sales(1) in 2016 versus 2015;   •    Retirement account values of $386 billion at December 31, 2016, up 5% from a year earlier;   •    Asset Management’s assets under management of $1.04 trillion at December 31, 2016, up 8% from a year earlier;   •    Individual Life’s 7% increase in sales in 2016 versus 2015;   •    Group Insurance pre-tax adjusted operating income of $220 million for 2016, up 25% from 2015;   •    Completed the acquisition of a 40% stake in AFP Habitat, a leading provider of retirement services in Chile;				•    Took actions to restructure the Individual Annuities business to reduce capital volatility and improve earnings and cash flow prospects;   •    Returned $3.2 billion of capital to shareholders, including $2.0 billion through our share repurchase program and $1.2 billion in the form of Common Stock dividends, compared to a total of $2.1 billion of shareholder distributions in 2015. The Company has one of the highest dividend yields among its peers and targets the allocation of 60% of earnings over time towards capital distributions and accretive actions;   •    Meaningful progress in our short-term and long-term leadership, talent, and succession planning priorities;   •    Introduction of new products and rebalancing of product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns;   •    The Company’s ongoing constructive engagement with the Federal Reserve, international regulators, and other supervisory bodies; and   •    Despite a challenging interest rate environment, the Company’s share price increased 28% and TSR is 33% over the last year versus a 10% increase in the Standard & Poor’s 500.   •   The Company’s one-year TSR placed it in the 84th percentile relative to the 20 companies in its compensation peer group.
		(1)     As used throughout, sales are based on annualized new business premiums.

 

 

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OTHER NEOS

In the case of the other NEOs, Mr. Strangfeld formulated recommendations for each individual based on the Final Performance Factor and his assessment of their performance, and presented these recommendations to the Committee for its consideration. Based on the Final Performance Factor, as well as these recommendations and its own evaluation of their performance, the Committee recommended, and the independent members of our Board approved, the following annual incentive awards for each of the other NEOs:

 

		Mr. Falzon
						ANNUAL INCENTIVE AWARD DECISION   Consistent with the Final Performance Factor, Mr. Falzon’s annual incentive award was $2,990,000 or approximately 0.997 times his target award amount. This award compares to an annual incentive award of $2,600,000 for 2015, representing an increase of 15.0%. Of the $2,990,000, $897,000 was mandatorily deferred into the Book Value Performance Program.
		KEY PERFORMANCE ACHIEVEMENTS   In assessing the individual performance of Mr. Falzon, the Committee identified and examined a broad range of corporate and individual performance factors, including:
		•   After-tax AOI of $4.11 billion and EPS, based on after-tax AOI, of $9.13 in 2016;   •   Operating return on average equity of 12% for 2016, with solid core performance from our businesses partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review;   •   His acumen in capital management and cash flow planning, including the return of $3.2 billion to shareholders during 2016, through our share repurchase program and Common Stock dividends, representing over a 50% increase from 2015;   •   His leadership on initiatives to reduce the Company’s use of financial leverage, resulting in a reduction of total debt outstanding by $1.6 billion in 2016;   •   His effective oversight of our liquidity position, including the maintenance of $4.5 billion* of cash and highly liquid assets at the parent company level at December 31, 2016;				•   His instrumental role in restructuring our Individual Annuities business, which resulted in the initial distribution of approximately $1 billion to the parent company from the restructuring and a further distribution of approximately $1 billion driven by earnings and is expected to reduce capital volatility and improve earnings and cash flow prospects;   •   His key role in management of the statutory capital position of our insurance companies, resulting in a risk-based capital ratio of approximately 457% for Prudential Insurance, 867% for PALAC, and a composite risk-based capital ratio for our major U.S. insurance subsidiaries of 527%, as of December 31, 2016 and strong solvency margins at our international insurance subsidiaries as of that date;   •   His effective supervision of internal financial and accounting functions; and   •   His leadership in the Company’s ongoing engagement with the Federal Reserve, international regulators and other supervisory bodies.
		*    Includes cash, short-term investments, and U.S. Treasury fixed maturities; excludes cash held in an intra-company liquidity account at Prudential Financial, Inc., and outstanding commercial paper.

 

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		Mr. Grier
						ANNUAL INCENTIVE AWARD DECISION   Consistent with the Final Performance Factor, Mr. Grier’s incentive award was $5,080,000 or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $5,100,000 for 2015, representing a decrease of 0.4%. Of the $5,080,000, $1,524,000 was mandatorily deferred into the Book Value Performance Program.
		KEY PERFORMANCE ACHIEVEMENTS   In assessing the individual performance of Mr. Grier, the Committee identified and examined a broad range of corporate and individual performance factors, including:
		•   After-tax AOI of $4.11 billion and EPS, based on after-tax AOI, of $9.13 in 2016;   •   Operating return on average equity of 12% for 2016, with solid core performance from our businesses partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review;   •   His leadership in enhanced capital management, including the return of $3.2 billion to shareholders during 2016, through our share repurchase program and Common Stock dividends, representing over a 50% increase from 2015. The Company has one of the highest dividend yields among its peers and targets the allocation of 60% of earnings towards capital distributions and accretive actions over time;   •   His oversight of risk management, including oversight of the restructuring of our Individual Annuities business, including enhancements to the risk management strategies to reduce capital volatility and improve earnings and cash flow prospects;				•   His acumen in capital deployment and business development, including a key role in the completion of our acquisition of a 40% stake in AFP Habitat, a leading provider of retirement services in Chile; and   •   His successful service as our Company’s and an industry spokesperson regarding the evolving regulatory initiatives affecting the insurance and financial services industries, and his leadership in the Company’s ongoing engagement with the Federal Reserve, international regulators and other supervisory bodies.

 

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		Mr. Lowrey
						ANNUAL INCENTIVE AWARD DECISION   Consistent with the Final Performance Factor, Mr. Lowrey’s incentive award was $3,985,000 or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $4,250,000 for 2015, representing a decrease of 6.2%. Of the $3,985,000, $1,195,500 was mandatorily deferred into the Book Value Performance Program.
		KEY PERFORMANCE ACHIEVEMENTS   In assessing the individual performance of Mr. Lowrey, the Committee identified and examined a broad range of corporate and individual performance factors, including:
		•    His efforts in leading our International Businesses to earn pre-tax AOI of $3.1 billion for 2016, a 3% increase from 2015 before the impact of changes in currency exchange rates;   •    His role in achieving an 8% increase in constant dollar sales in 2016 compared to 2015;   •    His oversight of our distribution through Life Planner operations, which achieved constant dollar sales of $1.3 billion in 2016, representing a 10% increase from 2015;   •    His leadership in the active management of proprietary and third party distribution at Gibraltar Life, which achieved constant dollar sales of $1.7 billion in 2016, representing a 7% increase from 2015;				•    His contributions to the successful adaptation to current market conditions of major product lines serving death protection and retirement needs in our key international markets through multiple distribution channels including a 53% increase in U.S. dollar product sales in Japan in 2016 compared to 2015;   •    His role in helping drive expansion into new markets outside of Japan, including a key role in our acquisition of a 40% stake in AFP Habitat, a leading provider of retirement services in Chile, and our step-up in ownership percentage from 26% to 49% in DHFL Pramerica, our joint venture in India; and   •    His overall leadership of the International Businesses including comprehensive succession planning.

 

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		Mr. Pelletier
						ANNUAL INCENTIVE AWARD DECISION   Consistent with the Final Performance Factor, Mr. Pelletier’s incentive award was $3,985,000 or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $3,200,000 for 2015, representing an increase of 24.5%. Of the $3,985,000, $1,195,500 was mandatorily deferred into the Book Value Performance Program.
		KEY PERFORMANCE ACHIEVEMENTS   In assessing the individual performance of Mr. Pelletier, the Committee identified and examined a broad range of corporate and individual performance factors, including:
		•   His efforts in leading our Retirement business to achieve account values of $386 billion at December 31, 2016, a 5% increase from a year earlier;   •   His instrumental role in the expansion of our leading position in the pension risk transfer market, including the completion of approximately $5 billion of new funded cases in 2016;   •   His contributions to the success of our Asset Management business, which had $1.04 trillion of assets under management as of December 31, 2016, up 8% from a year earlier, marking the 14th consecutive year of net positive institutional flows;   •   His oversight of our Individual Life Insurance business, which produced a 7% increase in sales in 2016, as compared to a year earlier;				•   His oversight of our Individual Annuities business which recorded a 3% increase in account values as of December 31, 2016 compared to a year earlier, while successfully executing product diversification strategies and a restructuring that is expected to reduce capital volatility and improve earnings and cash flow prospects;   •   His role in the improved results of our Group Insurance business, which recorded pre-tax adjusted operating income of $220 million for 2016, an increase of 25% from 2015; and   •   His overall leadership of the U.S. Businesses including cross-business initiatives and comprehensive succession planning.

Long-Term Incentive Program

We provide a long-term incentive opportunity to motivate and reward our executive officers for their contributions toward achieving our business objectives by tying these incentives to the performance of our Common Stock and book value over the long term, to further reinforce the link between the interests of our executive officers and our shareholders, and to motivate our executive officers to improve our multi-year financial performance. Our practice is to grant long-term incentive awards annually in the form of a balanced mix of performance shares and units, stock options, and book value units to our officers at the level of senior vice president and above, including the NEOs, in amounts that are consistent with competitive practice.

The mix of long-term incentives granted in 2016 to NEOs is shown in the table below:

 

Performance Shares and Units			60	%
Stock Options			20	%
Book Value Units			20	%

In determining the amount of individual long-term incentive awards, the Committee considers a senior executive’s individual performance during the immediately preceding year, potential future contributions, his or her prior year’s award value, and retention considerations, as well as market data for the executive officer’s position at the companies in the Peer Group.

 

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Long-term incentive awards may also be granted when an individual is promoted to a senior executive position to recognize the increase in the scope of his or her role and responsibilities. From time to time, we may make special awards in the form of restricted stock units, to recognize major milestones, or selective awards in situations involving a leadership transition.

In addition, for all long-term incentive awards granted in 2014 or earlier to any NEO who is subject to Section 162(m), the total payout amount for performance shares and units, restricted stock units, and book value units, as well as the 2016 annual incentive payment, may not exceed 0.6% of our pre-tax AOI for the prior year. For all such long-term awards granted in 2015 and subsequent years, the total payout amount to any NEO subject to Section 162(m) may not exceed 0.4% of the highest pre-tax AOI reported for any of the three fiscal years ended prior to the year of payment, provided that there is positive AOI in at least one fiscal year during which the award is outstanding for at least 276 days of that year. For annual incentive payments relating to 2017 and subsequent performance years, there is a separate limit for any NEO subject to Section 162(m) of 0.4% of our pre-tax AOI for the applicable performance year.

PERFORMANCE SHARES AND UNITS

Performance shares and units align the majority of our long-term incentive values to the achievement of our key ROE goals over a three-year performance period. Starting with the February 2014 awards with respect to the 2014 to 2016 performance period, award payouts generally range from 0% to 125% of the target number of shares and units. In past years, maximum awards ranged up to 150% of the target number of shares. Beginning with the February 2014 awards with respect to the 2014 to 2016 performance period and ending with the February 2016 awards with respect to the 2016 to 2018 performance period, the preliminary payout will be based on the average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee.

Also, for the February 2015 awards with respect to the 2015 to 2017 performance period and the February 2016 awards with respect to the 2016 to 2018 performance period, we used a relative performance modifier. The modifier provided a balance between absolute performance and performance relative to the North American Life Insurance subset of the Peer Group and is based on the Company’s three-year performance in ROE, book value per share growth and EPS growth. The modifier increases or decreases the award payment by up to 10% within the 0% to 125% range.

Beginning with the February 2017 awards with respect to the 2017 to 2019 performance period, the preliminary payout will be based on two equally-weighted financial metrics: (i) average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee and (ii) average ROE achievement over the three-year performance period relative to the median ROE results over this period of the North American Life Insurance subset of the Peer Group. This change to the performance shares and units program further solidifies the balance between absolute performance and performance relative to life insurer peers. Accordingly, the use of a relative performance modifier was eliminated starting with the February 2017 awards.

Performance unit awards are denominated in share equivalents and have the same value as the performance share awards on the award payment date. Dividend equivalents are paid retroactively on the final number of performance shares and units paid out, up to the target number of shares and units.

ROE is determined using after-tax AOI divided by adjusted book value. The ROE figures are also subject to standard adjustments as part of our pre-set established formulaic framework.

While the program allows the Committee to make a discretionary adjustment by up to 15% of the earned shares and units based on quantitative and qualitative factors, the Committee has rarely exercised discretion and did not exercise discretion for the 2014 awards that paid out in February 2017.

STOCK OPTIONS

Stock options provide value based solely on stock price appreciation. Stock options are granted with a maximum term of ten years. One-third of the option grants vest on each of the first three anniversaries of the date of grant. The exercise price is based on the closing market price of a share of our Common Stock on The New York Stock Exchange on the date of grant.

 

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BOOK VALUE PERFORMANCE PROGRAM

The Book Value Performance Program is intended to link the incentive payments to a measure of book value per share—a key metric in valuing insurance companies, banks, and investment firms that is closely followed by investors. We calculate adjusted book value per share by dividing our adjusted book value by the number of shares of our Common Stock outstanding. Our calculations of adjusted book value and adjusted book value per share, as described in Appendix A to this Proxy Statement, exclude certain balance sheet items that are not, and may never be, reflected in the income statement. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the adjusted book value per share metric takes into consideration realized gains and losses in our investment portfolio. The key features of the Book Value Performance Program for our NEOs are:

 

•

Awards are granted and denominated in book value units that are funded from two sources:

 

–

the allocation of 20% of a participant’s long-term incentive award value for the year as determined by the Committee; and

 

–

a mandatory deferral of 30% of their annual incentive award.

 

•

Once granted, the value of these book value units then tracks changes in book value per share for each participant.

 

•

These units track the value of book value per share of Common Stock, excluding total accumulated other comprehensive income and the non-economic effects of foreign currency exchange rate remeasurement of non-yen liabilities and assets included in net income or loss.

 

•

One-third of a participant’s annual award of book value units is distributed in cash in each of the three years following the year of grant.

 

 

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•

The NEOs’ awards, distributions and accumulated holdings under the Book Value Performance Program are as follows:

 

		Number of Book Value Units Held at January 1, 2016 (#)				Value of Book Value Units Held at January 1, 2016(1) ($)				Value of Book Value Units Distributed in 2016(2) ($)				Value of Book Value Units Awarded in 2016(3) ($)				Number of Book Value Units Held at December 31, 2016 (#)				Value of Book Value Units Held at December 31, 2016(4) ($)
John R. Strangfeld			126,729			$	9,325,987			$	4,612,768			$	3,774,578				115,339			$	9,106,014
Robert M. Falzon			39,789			$	2,928,073			$	1,266,410			$	1,580,124				44,052			$	3,477,905
Mark B. Grier			105,300			$	7,749,027			$	3,840,736			$	3,130,077				95,643			$	7,551,015
Charles F. Lowrey			79,723			$	5,866,816			$	2,902,390			$	2,225,067				70,519			$	5,567,475
Stephen Pelletier			44,059			$	3,242,302			$	1,356,705			$	1,860,061				50,899			$	4,018,476

 

1	Represents the aggregate market value of the number of book value units held at January 1, 2016 obtained by multiplying the book value per share of $73.59 as of December 31, 2015 by the number of book value units outstanding.

 

2	Represents the aggregate market value distributed on February 19, 2016 for all NEOs and also for Mr. Pelletier on April 12, 2016.

 

3	Represents the aggregate market value awarded on February 9, 2016 for all NEOs.

 

4	Represents the aggregate market value of the number of book value units held at December 31, 2016 obtained by multiplying the book value per share of $78.95 as of December 31, 2016 by the number of book value units outstanding.

LONG-TERM INCENTIVE AWARD DECISIONS FOR 2016

In February 2017, the Committee granted long-term incentive awards to the NEOs based on updated market data and its assessment of their individual performance during 2016. These awards were granted in the form of performance shares (30%), performance units (30%), stock options (20%), and book value units (20%) under the Book Value Performance Program (in addition to the mandatory deferral of 30% of each NEO’s annual incentive award). The Committee determined that this long-term incentive mix would appropriately reward the NEOs for their 2016 performance, motivate them to work towards achieving our long-term objectives, further reinforce the link between their interests and the interests of our shareholders, and provide a balanced portfolio composed of performance shares and units (which provide value based upon attainment of specific performance goals and performance relative to peers), stock options (which provide value based solely on stock price appreciation) and book value units (which provide value based on changes in our book value per share).

The following table presents the long-term incentive awards granted to each NEO in February 2017, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of their annual incentive award. Awards are expressed as dollar compensation values in the table. These awards generally will not be reported in the Summary Compensation Table until 2018. For discussion of the long-term incentive awards granted in February 2016 for 2015 performance and included in this year’s Summary Compensation Table, see the CD&A in our 2016 Proxy Statement.

 

Named Executive Officer			Compensation Value of Book Value Units(1)				Compensation Value of Stock Options				Compensation Value of Performance Shares				Compensation Value of Performance Units				Total
John R. Strangfeld		$	3,792,800			$	2,000,000			$	3,000,000			$	3,000,000			$	11,792,800
Robert M. Falzon		$	1,697,000			$	800,000			$	1,200,000			$	1,200,000			$	4,897,000
Mark B. Grier		$	3,124,000			$	1,600,000			$	2,400,000			$	2,400,000			$	9,524,000
Charles F. Lowrey		$	2,195,500			$	1,000,000			$	1,500,000			$	1,500,000			$	6,195,500
Stephen Pelletier		$	2,095,500			$	900,000			$	1,350,000			$	1,350,000			$	5,695,500

 

1	Includes amounts that were mandatorily deferred from the Annual Incentive Program (30%) that total $1,792,800 for Mr. Strangfeld; $897,000 for Mr. Falzon; $1,524,000 for Mr. Grier; $1,195,500 for Mr. Lowrey, and $1,195,500 for Mr. Pelletier.

 

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		Compensation Discussion and Analysis

 

 

PERFORMANCE SHARE AND PERFORMANCE UNIT AWARDS

The NEOs currently have three performance share and unit awards outstanding. In February 2017, the Committee granted the performance share and unit awards for the 2017 to 2019 performance period. The key features of these three awards are as follows:

 

Performance Period		Performance Measures		Performance Measure Target Levels		Target Number of Shares/ Units to be Awarded		Actual Number of Shares/Units
2015–2017		- ROE - Relative Performance:      ROE      Book value per share growth      EPS growth		Average ROE of 13.5% for the 2015 through 2017 performance period. Weighted average relative performance ranking of 4 on relative ROE, book value per share growth and EPS growth.		100% at target level and 125% if average ROE is 14% or more, in each case, assuming a relative performance modifier of zero.		To be determined between 0% and 125% of the target number by the Committee in February 2018 based on average ROE over the 2015-2017 performance period compared to the Company’s ROE targets, as modified by the relative performance modifier.
2016–2018		- ROE - Relative Performance:      ROE      Book value per share growth      EPS growth		Average ROE of 13% for the 2016 through 2018 performance period. Weighted average relative performance ranking of 4 on relative ROE, book value per share growth and EPS growth.		100% at target level and 125% if average ROE is 14% or more, in each case, assuming a relative performance modifier of zero.		To be determined between 0% and 125% of the target number by the Committee in February 2019 based on average ROE over the 2016-2018 performance period compared to the Company’s ROE targets, as modified by the relative performance modifier.
2017–2019		- ROE - Relative ROE versus life insurer peer group		Average ROE of 12% and ROE performance equal to the median performance of the North American Life Insurance subset of the Peer Group for the 2017 through 2019 performance period.		100% at target level and 125% if average ROE is 13.5% or more and ROE performance exceeds the median performance of the North American Life Insurance subset of the Peer Group by 3% or more.		To be determined between 0% and 125% of the target number by the Committee in February 2020 based on average ROE over the 2017-2019 performance period compared to the Company’s ROE targets and ROE performance as compared to the median performance of the North American Life Insurance subset of the Peer Group.

 

The final award payments to the NEOs in February 2017 for the 2014 to 2016 performance period were:

 

Named Executive Officers		Target Number of Shares/Units Awarded(1)				Actual Number of Shares/Units Awarded(1)
John R. Strangfeld			57,726				72,158
Robert M. Falzon			17,658				22,074
Mark B. Grier			47,540				59,426
Charles F. Lowrey			30,562				38,204
Stephen Pelletier			20,674				25,844

 

1	Target and actual number of awards are 50% shares and 50% units.

 

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Post-Employment Compensation

Retirement Plans

We view retirement benefits as a key component of our executive compensation program because they encourage long-term service. Accordingly, we offer our employees, including the NEOs, a comprehensive benefits program that provides the opportunity to accumulate adequate retirement income. This program includes both defined benefit and defined contribution plans, as well as two supplemental retirement plans which allow highly compensated employees (that is employees whose compensation exceeds the limits established by the Internal Revenue Code for covered compensation and benefit levels) to receive the same benefits they would have earned but for these limitations. Further, we sponsor three supplemental executive retirement plans (“SERPs”) for certain eligible executive officers, including the NEOs, to offset the potential loss or forfeiture of retirement benefits under certain limited circumstances or to provide additional benefits to certain key executives. For descriptions of these plans, including their titles, see “Pension Benefits.”

We also maintain the Prudential Insurance Company of America Deferred Compensation Plan (the “Deferred Compensation Plan”). We offer this plan to our executive officers, including the NEOs, as a competitive practice. For a description of this plan, see “Nonqualified Deferred Compensation.”

Periodically, we compare the competitiveness of our benefits programs for our employees, including retirement benefits, against other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median of the competitive market when compared to other employers.

Severance and Change in Control Arrangements

Our Board has adopted a policy prohibiting us from entering into any severance or change in control agreement with any of our executive officers, including the NEOs, that provides for payments and benefits that exceed 2.99 times the sum of the executive officer’s base salary and most recently earned cash bonus, without shareholder approval or ratification. We do not provide excise tax payments, reimbursements, or “gross-ups” to any of our executive officers.

While our other executive officers are eligible for severance payments in the event of an involuntary termination of employment without “cause,” our CEO is not a participant in the severance program providing this benefit.

To enable us to offer competitive total compensation packages to our executive officers, as well as to ensure the ongoing retention of these individuals when considering potential transactions that may create uncertainty as to their future employment with us, we offer certain post-employment payments and benefits to our executive officers, including the NEOs, upon the occurrence of several specified events. These payments and benefits are provided under two separate programs:

 

•

the Prudential Severance Plan for Senior Executives (the “Severance Plan”); and

 

•

the Prudential Financial Executive Change in Control Severance Program.

We have not entered into individual employment agreements with our executive officers. Instead, the rights of our executive officers with respect to post-employment compensation upon specific events, including death, disability, severance or retirement, or a change in control of the Company, are covered by these two programs.

We use plans, rather than individually negotiated agreements, to provide severance and change in control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of these arrangements from time to time. An employment agreement would require that the affected executive officer consent to any changes. Second, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate severance or other employment separation payments and benefits on a case-by-case basis. In addition, it assures each of our executive officers that his or her severance payments and benefits are comparable to those of other executive officers with similar levels of responsibility and tenure.

As previously noted, our executive officers, including the NEOs, except for our CEO, are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause.” These executive officers and our CEO are also eligible for “double trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our equity awards are also designed to be “double trigger,” so long as such awards are allowed to continue in effect following any change in control transaction on substantially equivalent terms and conditions to those applicable prior to such transaction.

 

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The payment of these awards at target achievement rewards the executive officer for his or her expected performance prior to the change in control transaction.

For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control.”

Perquisites and Other Personal Benefits

We do not provide our executive officers, including the NEOs, with perquisites or other personal benefits, except for the use of Company aircraft, Company-provided vehicles and drivers, and, in the case of our CEO and Vice Chairman, security services. These items are provided because we believe that they serve a necessary business purpose and represent an immaterial element of our executive compensation program. The cost allocated to the personal use of Company-provided vehicles and drivers, including commuting expenses, and the incremental cost associated with the security services, to the extent not reimbursed to us, are reported in the Summary Compensation Table. Our executive officers, including the NEOs, are required to reimburse us for the incremental cost of any personal use of Company aircraft.

We do not provide tax reimbursements or any other tax payments, including excise tax “gross-ups”, to any of our executive officers.

 

Other Compensation Related Policies

In addition to the other components of our executive compensation program, we maintain the policies described below. These policies are consistent with evolving best practices and help ensure that our executive compensation program does not encourage our executive officers to engage in behaviors that are beyond our ability to effectively identify and manage risk.

Clawback Policy

In 2015, we strengthened our clawback policy to cover all incentive compensation and to address material financial restatements and improper conduct (including failure to report).

The revised clawback policy covers all executive officers (including the NEOs) and applies to all incentive-based compensation (including stock options and other equity awards) paid to or in respect of an executive officer. The policy provides that if (i) the Company is required to undertake a material restatement of any financial statements filed with the SEC or (ii) an executive officer engages in improper conduct that either has had, or could reasonably be expected to have, a significant adverse reputational or economic impact on the Company or any of its affiliates or divisions, then the Board may, in its sole discretion, after evaluating the associated costs and benefits, seek to recover all or any portion of the incentive-based compensation paid to any such executive officer during the three-year period preceding the restatement, or the occurrence of the improper conduct, as the case may be.

The policy also requires us to disclose to our shareholders, not later than the filing of the next proxy statement the action taken by the Board, or the Board’s decision not to take action, with regard to compensation recovery following the occurrence of a material restatement or improper conduct, so long as such event has been previously disclosed in our SEC filings.

For purposes of the policy a “restatement” means any material restatement (occurring after the effective date of this policy) of any of the Company’s financial statements that have been filed with the SEC under the Exchange Act or the Securities Act of 1933, as amended. “Improper conduct” means willful misconduct (including, but not limited to, fraud, bribery or other illegal acts) or gross negligence, which, in either case, includes any failure to report properly, or to take appropriate remedial action with respect to, such misconduct or gross negligence by another person.

Other Long-Term Compensation Recovery Policies

In 2015, we adopted a “resignation notice period” requirement as part of the terms and conditions of all long-term incentive awards granted to certain designated grades of executives, including the NEOs. The requirement is applicable to awards granted

 

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in 2015 and subsequent years. The requirement is intended to reduce the adverse and disruptive effect of a sudden voluntary departure of an executive subject to the requirement, and requires him or her to provide notice for a specified period prior to the effective date of a voluntary resignation, or otherwise risk forfeiting his or her outstanding long-term incentive awards.

The terms and conditions of long-term incentive awards also provide for forfeiture in the event a recipient violates applicable non-solicitation or non-competition agreements.

Process for Approving Long-Term Incentive Awards

The Committee approves long-term incentive awards (including stock options, book value units, performance shares, performance units and, restricted stock units) on an annual basis at its regularly scheduled February meeting.

The Committee has delegated authority to management to approve long-term incentive awards for new hires, promotions, and retention purposes within specified limits to employees below the level of senior vice president. The Committee approves any long-term incentive awards to newly hired or promoted senior executives.

Under the terms of our 2016 Omnibus Plan, which was approved by shareholders in 2016, stock options are required to be priced at the fair market value of our Common Stock on the date of grant, which is based on the closing market price of our Common Stock on the date of grant. The number of shares of our Common Stock subject to a stock option grant to an individual is determined by dividing the compensation value of the grant by the fair value of each stock option based on the average closing market price of our Common Stock on the NYSE for the final 20-day trading period in the month prior to the grant date.

The number of performance shares and units or restricted stock units awarded to an individual is determined by a formula that divides the compensation value of the award by the average closing market price of our Common Stock on the NYSE for the final 20-day trading period in the month prior to the grant date.

Stock Ownership Guidelines

We have adopted stock ownership guidelines for our executive officers to encourage them to build their ownership position in our Common Stock over time by direct market purchases, making investments available through the PESP and the Deferred Compensation Plan, and retaining shares they earn under long-term incentive awards. In 2015, we revised the guidelines to increase the CEO stock ownership level from 500% to 700% of base salary. The guidelines are framed in terms of stock value as a percentage of base salary as follows:

 

Position		Stock Value as a Percentage of Base Salary
Chief Executive Officer			700%
Vice Chairman and Executive Vice Presidents			300%
Senior Vice Presidents			200%

Each of the NEOs meets his individual stock ownership level. Under the current stock ownership guidelines, once an executive officer attains his or her individual ownership level, he or she will remain in compliance with the guidelines despite future changes in stock price and base salary, as long as his or her holdings do not decline below the number of shares at the time the stock ownership guidelines were met.

Stock Retention Requirements

We have adopted stock retention requirements for our executive officers. Each executive officer is required to retain 50% of the net shares (after payment of the applicable exercise price (if any), fees, and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold such shares until the later of one year following the date of acquisition of such shares (even if this one-year holding period extends beyond termination of employment) or the date that he or she satisfies our stock ownership guidelines.

Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities

Our Board has adopted a policy prohibiting all employees, including the NEOs, and members of the Board from engaging in any hedging transactions with respect to any of our equity securities held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) designed to hedge or offset any decrease in the market value of such equity securities.

 

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Our Board has also adopted a policy prohibiting our Section 16 officers and members of the Board from pledging, or using as collateral, our securities to secure personal loans or other obligations, which includes holding shares of our Common Stock in a margin account.

 

DEDUCTIBILITY OF EXECUTIVE COMPENSATION

It is our policy to structure and administer our annual and long-term incentive compensation plans and stock option grants for our CEO and the other NEOs to maximize the tax deductibility of the payments as “performance-based compensation” for purposes of Section 162(m) to the extent practicable. In 2016, all such performance-based compensation was deductible. The Committee may provide compensation that is not tax deductible if it determines that such action is appropriate and in the best interests of the Company. Further, the rules and regulations promulgated under Section 162(m) are complicated, and may change from time to time, sometimes with retroactive effect. As such, there can be no guarantee that any compensation intended to qualify as “performance-based compensation” will so qualify.

The 2016 Omnibus Plan contains an overall limit on compensation paid to covered executives to comply with the conditions for determining “performance-based compensation” under Section 162(m). Under the terms of the 2016 Omnibus Plan, payment on annual incentive awards to an NEO who is subject to Section 162(m) in a taxable year may not exceed 0.4% of our pre-tax AOI for the year ended prior to the year in which payment is due. Awards of restricted stock units, performance shares, performance units and book value units and associated dividend equivalents have a performance condition that our pre-tax AOI must be positive in at least one fiscal year during which the award is outstanding for at least 276 days of that year, and a maximum limitation that the amount payable in any year may not exceed 0.4% of the highest amount of our pre-tax AOI for any of the three years ended prior to the year payment on those awards is due. For awards granted prior to May 2016 under the Omnibus Incentive Plan, the total payout on awards of annual incentives, restricted stock units, performance shares, performance units and book value units and associated dividend equivalents for an NEO who is subject to Section 162(m) in a taxable year cannot exceed 0.6% of pre-tax AOI for the prior year.

 

 

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Executive Compensation

2016 Summary Compensation Table

The following table presents, for the years ended December 31, 2016, 2015, and 2014, the compensation of Mr. Strangfeld, our principal executive officer, Mr. Falzon, our principal financial officer, and Messrs. Grier, Lowrey and Pelletier, our three most highly compensated executive officers (other than the principal executive officer and principal financial officer) who were serving as executive officers as of December 31, 2016.

For information on the role of each compensation component within the total compensation packages of the NEOs, please see the relevant description in the “Compensation Discussion and Analysis (“CD&A”).” The compensation data in this table is presented in accordance with the SEC disclosure rules. For the Compensation Committee’s view of 2016 performance year compensation, see the “Supplemental Compensation Analysis — Total Direct Compensation” in the CD&A.

 

 

 

(1)	The amounts reported in the Salary column for 2016 include elective contributions of a portion of their base salary to the SESP by Messrs. Strangfeld, Falzon, Grier, Lowrey, and Pelletier in the amounts of $45,400, $19,769, $37,000, $20,200, and $20,200, respectively.

 

(2)

The amounts reported in the Stock Awards column represent the aggregate grant date fair value for performance shares and performance units at target in each respective year. The maximum number of performance shares and performance units payable for 2016, 2015, and 2014 are 1.25 times the target amounts.

 

For 2016, the maximum performance shares and units payable and valued at the grant date price of $63.59 to Messrs. Strangfeld, Falzon, Grier, Lowrey, and Pelletier are 103,896 or $6,606,747; 41,558 or $2,642,673; 83,116 or $5,285,346; 49,350 or $3,138,167; and 46,754 or $2,973,087, respectively.

 

For 2015, the maximum performance shares and units payable and valued at the grant date price of $78.08 to Messrs. Strangfeld, Falzon, Grier, Lowrey, and Pelletier are 77,556 or $6,055,572; 27,374 or $2,137,362; 63,870 or $4,986,970; 41,060 or $3,205,965; and 36,498 or $2,849,764, respectively.

 

For 2014, the maximum performance shares and units payable and valued at the grant date price of $84.53 to Messrs. Strangfeld, Falzon, Grier, Lowrey, and Pelletier are 72,158 or $6,099,516; 22,073 or $1,865,831; 59,425 or $5,023,195; 38,203 or $3,229,300; and 12,735 or $1,076,490, respectively. Mr. Pelletier received an additional grant upon his promotion to Executive Vice President in April 2014 that has a maximum number of performance shares and performance units payable and valued at the grant date price of $81.17 of 13,108 or $1,063,976.

 

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(3)

The amounts reported in the Options Awards column represent the aggregate grant date fair value for stock options granted in each respective year for the prior year’s performance as calculated under ASC Topic 718. The assumptions made in calculating the grant date fair value amounts for these stock options are incorporated herein by reference to the discussion of those assumptions and found below in the Grants of Plan-Based Awards Table. Note that the amounts reported in this column do not necessarily correspond to the actual economic value that will be received by the Named Executive Officers from the options.

 

(4)

The aggregate amounts reported in the Non-Equity Incentive Plan Compensation column for 2016 represent annual incentives paid in February 2017 for performance in 2016, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2017, and additionally in April 2016 for Mr. Pelletier; for 2015 represent annual incentives paid in February 2016 for performance in 2015, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2016, and additionally in April 2015 for Mr. Pelletier; for 2014 represent annual incentives paid in February 2015 for performance in 2014, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2015:

 

		2016								2015								2014
Name		Annual Incentive Award				Book Value Units Value Paid				Annual Incentive Award				Book Value Units Value Paid				Annual Incentive Award				Book Value Units Value Paid
Strangfeld		$	4,183,200			$	4,764,238			$	4,140,500			$	4,612,768			$	5,460,000			$	3,813,192
Falzon		$	2,093,000			$	1,701,452			$	1,820,000			$	1,266,410			$	2,310,000			$	658,637
Grier		$	3,556,000			$	3,950,580			$	3,570,000			$	3,840,736			$	4,550,000			$	3,151,901
Lowrey		$	2,789,500			$	2,951,704			$	2,975,000			$	2,902,390			$	3,780,000			$	2,346,216
Pelletier		$	2,789,500			$	1,866,128			$	2,240,000			$	1,341,969			$	2,800,000			$	614,542

 

For Mr. Falzon, 2015, and 2014 also include the value of carried interest payments of $4,747 and $15,600, respectively.

 

For Mr. Lowrey, 2016, 2015, and 2014 also include the value of carried interest payments of $64,393, $197,029, and $237,147, respectively.

 

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The carried interest payments relate to carried interest programs in which Mr. Falzon and Mr. Lowrey participate as a result of previous positions held within the Company’s Asset Management Business. While Mr. Falzon and Mr. Lowrey are no longer entitled to invest in or be granted new carried interests in these programs, they will continue to receive distributions if and when they are earned.

 

(5)

The amounts reported in the Change in Pension Value column represent the change in the actuarial present value of each NEO’s accumulated benefit under the Merged Retirement Plan, the Supplemental Retirement Plan, and the SERPs, as applicable, determined using interest rate and mortality rate assumptions consistent with those used for our consolidated financial statements on December 31, 2013, December 31, 2014, December 31, 2015, and December 31, 2016, as applicable; namely, the RP 2000 generational mortality table with white collar adjustments for 2013, and the RP 2014 generational mortality table with white collar adjustments, and an adjustment to reflect recent Prudential-specific experience for 2014, 2015, and 2016, an interest discount rate of 4.95% for 2013, 4.10% for 2014, 4.50% for 2015, and 4.15% for 2016, a Cash Balance Formula interest crediting rate of 4.25% for 2013, 2014, 2015 and 2016, and a PSI Cash Balance Formula interest crediting rate of 5.00% for 2013, 2014, 2015 and 2016. The amounts represented above may fluctuate significantly in a given year depending on a number of factors that affect the formula to determine pension benefits, including age, years of service, and the measurement of average annual earnings.

 

Messrs. Strangfeld and Pelletier accrue pension benefits under the Traditional Pension Formula and Messrs. Falzon, Grier, and Lowrey accrue pension benefits under the Cash Balance Formula (both formulas are described in the “Pension Benefits” section of this Proxy Statement). In accordance with the provisions of the Traditional Pension Formula, the years of earnings used for determining Average Eligible Earnings change every two years (most recently on January 1, 2016).

 

The amounts reported in this column include payments from the Supplemental Retirement Plan of $2,524 for Mr. Falzon, $21,367 for Mr. Grier and $13,899 for Mr. Lowrey in 2014; $5,549 for Mr. Falzon, $29,589 for Mr. Grier and $20,597 for Mr. Lowrey in 2015; and $10,643 for Mr. Falzon, $31,095 for Mr. Grier and $20,990 for Mr. Lowrey in 2016; and above-market interest on the SESP of $82 for Mr. Strangfeld, $6 for Mr. Falzon, $56 for Mr. Grier, $24 for Mr. Lowrey and $17 for Mr. Pelletier in 2014; $4,229 for Mr. Strangfeld, $359 for Mr. Falzon, $2,905 for Mr. Grier, $1,235 for Mr. Lowrey and $917 for Mr. Pelletier in 2015; and $10,388 for Mr. Strangfeld, $1,138 for Mr. Falzon, $7,239 for Mr. Grier, $3,158 for Mr. Lowrey, and $2,433 for Mr. Pelletier in 2016.

 

The actual change in pension value for Mr. Strangfeld in 2015 was $(382,375). In accordance with SEC instructions, the amount included in this column for the change in pension value for 2015 is $0.

 

(6)	The amounts reported in the All Other Compensation column are itemized in the supplemental “All Other Compensation” table below.

 

(7)	Mr. Pelletier was appointed an executive officer in April 2014.

All Other Compensation

 

		Year				Perquisites(1)				PESP Contributions(2)				SESP Contributions(2)				Total
John R. Strangfeld			2016			$	47,964			$	8,615			$	45,400			$	101,979
			2015			$	32,371			$	8,615			$	45,400			$	86,386
			2014			$	32,437			$	8,615			$	45,800			$	86,852
Robert M. Falzon			2016			$	17,478			$	8,173			$	19,769			$	45,420
			2015			$	14,800			$	8,308			$	17,092			$	40,200
			2014			$	15,047			$	8,000			$	15,600			$	38,647
Mark B. Grier			2016			$	33,041			$	10,600			$	37,000			$	80,641
			2015			$	30,175			$	10,600			$	37,000			$	77,775
			2014			$	39,243			$	10,400			$	37,200			$	86,843
Charles F. Lowrey			2016			$	17,330			$	10,600			$	20,200			$	48,130
			2015			$	14,395			$	10,600			$	20,200			$	45,195
			2014			$	15,470			$	10,392			$	20,400			$	46,262
Stephen Pelletier			2016			$	35,806			$	8,292			$	20,200			$	64,298
			2015			$	29,849			$	8,173			$	19,769			$	57,791
			2014			$	20,661			$	8,077			$	14,908			$	43,646

 

(1)

For Messrs. Strangfeld and Grier, the amounts reported in the Perquisites column for 2016 represent the incremental cost for security services of $25,658 and $7,029 respectively, and the costs associated with Company-provided vehicles for personal and commuting purposes of $22,306 and $26,012, respectively. For Messrs, Falzon, Lowrey and Pelletier, the amounts reported represent the costs of commuting and limited personal use of Company-provided vehicles. The amounts reported in the table for commuting and personal use of vehicles reflect our determination of the costs allocable to the actual commuting and personal use of each individual and are based on a formula that takes into account various expenses, including costs associated with the driver and fuel.

 

(2)

The amounts reported in the PESP and SESP Contributions columns represent our contributions to the account of each NEO under (a) The Prudential Employee Savings Plan (the “PESP”), a defined contribution plan which provides employees with the opportunity to contribute up to 50% of eligible earnings in any combination of before-tax, Roth 401(k) and/or after-tax contributions (subject to Internal Revenue Code limits) and (b) the Prudential Supplemental Employee Savings Plan, a non-qualified plan which provides employees who exceed the Internal Revenue Code earnings limit ($265,000 in 2016) with the opportunity to defer up to 4% of eligible earnings in excess of the earnings limit. We match 100% of the first 4% of an employee’s before-tax or Roth 401(k) deferrals under the PESP (after one year of service) and 100% of an employee’s deferrals under the SESP.

 

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Grants of Plan-Based Awards

The following table presents, for each of the NEOs, information concerning awards under our Long-Term Incentive Program (including our Book Value Performance Program) and grants of equity awards made during 2016 for 2015 performance.

2016 Grants of Plan-Based Awards Table

 

						Grant Date				Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1)												Estimated Future Payouts Under Equity Incentive Plan Awards(2)								All Other Option Awards; Number of Securities Underlying Options (#)(3)				Exercise or Base Price of Option Awards ($/Sh)				Grant Date Fair Value of Stock and Option Awards ($)(4)
										Number of Book Value Units (#)				Target ($)				Maximum ($)				Target (#)				Maximum (#)
John R. Strangfeld, Chairman and Chief Executive Officer			Annual Incentive				n/a								6,000,000				12,000,000
			PS				2/9/2016																41,558				51,948												2,642,673
			PU				2/9/2016																41,558				51,948												2,642,673
			Option				2/9/2016																								126,183			$	63.59				1,864,985
			BVU				2/9/2016				51,292				3,774,578
Robert M. Falzon, Executive Vice President and Chief Financial Officer			Annual Incentive				n/a								3,000,000				6,000,000
			PS				2/9/2016																16,623				20,779												1,057,057
			PU				2/9/2016																16,623				20,779												1,057,057
			Option				2/9/2016																								50,474			$	63.59				746,006
			BVU				2/9/2016				21,472				1,580,124
Mark B. Grier, Vice Chairman			Annual Incentive				n/a								5,100,000				10,200,000
			PS				2/9/2016																33,246				41,558												2,114,113
			PU				2/9/2016																33,246				41,558												2,114,113
			Option				2/9/2016																								100,947			$	63.59				1,491,997
			BVU				2/9/2016				42,534				3,130,077
Charles F. Lowrey, Executive Vice President and Chief Operating Officer, International Businesses			Annual Incentive				n/a								4,000,000				8,000,000
			PS				2/9/2016																19,740				24,675												1,255,267
			PU				2/9/2016																19,740				24,675												1,255,267
			Option				2/9/2016																								59,937			$	63.59				885,869
			BVU				2/9/2016				30,236				2,225,067
Stephen Pelletier, Executive Vice President and Chief Operating Officer, U.S.			Annual Incentive				n/a								4,000,000				8,000,000
			PS				2/9/2016																18,701				23,377												1,189,197
			PU				2/9/2016																18,701				23,377												1,189,197
			Option				2/9/2016																								56,783			$	63.59				839,253
			BVU				2/9/2016				25,276				1,860,061

 

(1)

The amounts reported in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column represent the potential amounts for annual incentives for the 2016 performance year. Actual amounts earned by the NEOs are reflected in the Summary Compensation Table. In addition, individual amounts are reported by grant date to represent the value of the book value units awarded to the NEOs under the Omnibus Plan on February 9, 2016, and reflected in the Number of Book Value Units column, based on the book value per share of the company of $73.59 as originally reported as of December 31, 2015.

 

(2)

The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards columns represent performance shares and performance units awarded to the NEOs under the Omnibus Plan in 2016. Performance share and performance unit awards are granted for a three-year performance period with payout determined at the end of the period based on our performance against our ROE goals. The ROE goals for the 2016 grant are within a range of 10% to 14%.

 

(3)

The amounts reported in the All Other Option Awards column represent the number of stock options granted to each Named Executive Officer under the Omnibus Plan in 2016. These stock options vest one-third each year on the anniversary of the grant date. These stock options expire 10 years from their respective grant date. The exercise price for the February 9, 2016 grant of stock options is the closing price of our Common Stock on the grant date of February 9, 2016 ($63.59 per share).

 

(4)	The amounts in the Grant Date Fair Value column have been calculated in the case of performance shares and performance units as the target number of performance shares and performance units multiplied by the closing price of our Common Stock on the grant date of February 9, 2016 ($63.59 per share).

For stock options, the grant date fair values are hypothetical values developed under a binomial option pricing model, which is a complex, mathematical formula to determine fair value of stock options on the date of grant. The binomial option pricing model is a flexible, lattice-based valuation model that takes into consideration transferability, fixed estimate of volatility, and expected life of the options. As such, the amounts reported in the table are hypothetical values and may not reflect the actual economic value a Named Executive Officer would realize upon exercise.

We made the following assumptions when calculating the grant date fair value of the stock option grants: exercise price is equal to our share price on the grant date, and for the grants of February 9, 2016, 5.61 year life expected for each option, expected dividend yield is 3.92%, risk-free rate of return of 1.25%, and expected price volatility of 38.36%.

 

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Outstanding Equity Awards

The following table provides information on the NEOs’ outstanding equity awards as of December 31, 2016. The equity awards reported in the Stock Awards columns consist of performance share and performance unit awards. The equity awards reported in the Option Awards columns consist of non-qualified stock options.

2016 Outstanding Equity Awards at Fiscal Year-End Table

 

 

						Option Awards(1)																Stock Awards
Name		Grant Date				Number of Securities Underlying Unexercised Options (# Exercisable)				Number of Securities Underlying Unexercised Options (# Unexercisable)				Option Exercise Price ($)				Option Expiration Date				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Rights That Have Not Vested (#)(2)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Rights That Have Not Vested ($)(2)
John R. Strangfeld			2/9/2016				—				126,183				63.59				2/9/2026				103,896				10,811,418
			2/10/2015				28,634				57,268				78.08				2/10/2025				77,556				8,070,478
			2/11/2014				49,062				24,532				84.53				2/11/2024				72,158				7,508,762
			2/12/2013				247,094				—				57.00				2/12/2023
			2/14/2012				223,685				—				59.41				2/14/2022
			2/8/2011				170,667				—				64.01				2/8/2021
Robert M. Falzon			2/9/2016				—				50,474				63.59				2/9/2026				41,558				4,324,526
			2/10/2015				—				20,213				78.08				2/10/2025				27,374				2,848,539
			2/11/2014				—				7,504				84.53				2/11/2024				22,074				2,297,021
Mark B. Grier			2/9/2016				—				100,947				63.59				2/9/2026				83,116				8,649,051
			2/10/2015				23,581				47,162				78.08				2/10/2025				63,870				6,646,313
			2/11/2014				40,404				20,202				84.53				2/11/2024				59,426				6,183,870
			2/12/2013				135,660				—				57.00				2/12/2023
			2/14/2012				57,895				—				59.41				2/14/2022
Charles F. Lowrey			2/9/2016				—				59,937				63.59				2/9/2026				49,350				5,135,361
			2/10/2015				15,159				30,319				78.08				2/10/2025				41,060				4,272,704
			2/11/2014				25,974				12,988				84.53				2/11/2024				38,204				3,975,509
			2/12/2013				130,814				—				57.00				2/12/2023
			2/14/2012				105,264				—				59.41				2/14/2022
Stephen Pelletier			2/9/2016				—				56,783				63.59				2/9/2026				46,754				4,865,222
			2/10/2015				13,475				26,950				78.08				2/10/2025				36,498				3,797,982
			4/7/2014				8,909				4,455				81.17				4/7/2024				13,108				1,364,019
			2/11/2014				8,658				4,330				84.53				2/11/2024				12,736				1,325,309
			2/14/2012				17,105				—				59.41				2/14/2022
			2/8/2011				11,733				—				64.01				2/8/2021
			2/9/2010				2,599				—				48.36				2/9/2020

 

(1)	The options reported in the Option Awards column vest at the rate of one-third per year on the anniversary of the date of grant.

 

(2)

The Equity Incentive Plan Awards columns reflect the number of outstanding performance shares and performance units that would be received by each Named Executive Officer at the maximum payout level for the 2016, 2015 and 2014 grants. The dollar values reported represent the estimated value of the outstanding performance shares and performance units at the maximum payout level for the 2016, 2015 and 2014 grants, based on the closing market price for our Common Stock on December 31, 2016 ($104.06 per share). Performance shares and performance units are subject to a three-year performance period with payout determined at the end of the period based on our performance against our ROE goals.

Grants were made for three-year performance cycles with the 2014 grant as the 2014-2016 performance cycle, the 2015 grant as the 2015-2017 performance cycle, and the 2016 grant as the 2016-2018 performance cycle.

 

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Option Exercises and Stock Vested

The following table provides information on the value realized by each of the NEOs as a result of the exercise of options and stock awards that vested from January 1, 2016 through December 31, 2016.

2016 Option Exercises and Stock Vested Table

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized On Exercise ($)				Number of Shares Acquired on Vesting   (#)1				Value Realized on Vesting   (#)2
John R. Strangfeld			490,938				11,052,346				44,357				2,820,662
Robert M. Falzon			63,873				934,172				10,437				663,689
Mark B. Grier			66,310				152,158				36,530				2,322,943
Charles F. Lowrey			201,056				4,331,934				23,483				1,493,284
Stephen Pelletier			42,657				904,350				7,829				497,846

 

(1)	The amounts in the Stock Awards—Number of Shares Acquired on Vesting column represent the payout of shares of our Common Stock for the vesting of the 2013 performance shares grants and payout of the 2013 performance units as cash.

 

(2)	The amounts in the Stock Awards—Value Realized on Vesting column represent the product of the number of performance shares and performance units released and the closing sale price of our Common Stock on February 9, 2016, $63.59.

Pension Benefits

The following table provides information on the defined benefit retirement plans in which the NEOs participate, including the present value of accumulated benefits as of December 31, 2016, except as noted, payable for each of the NEOs under each of these plans determined using interest rate and mortality rate assumptions consistent with those used in our consolidated financial statements; namely, the RP 2014 generational mortality table with white collar adjustments and an adjustment to reflect recent Prudential-specific experience and an interest discount rate of 4.15%. Cash Balance Formula and PSI Cash Balance Formula accounts are assumed to grow with interest at 4.25% and 5.00%, respectively, until commencement of pension benefits. No additional earnings or service after December 31, 2016 are included in the calculation of the accumulated benefits.

2016 Pension Benefits Table

 

Name		Plan Name		Number of Years of Credited Service (#)				Present Value of Accumulated Benefit ($)				Payments During Last Fiscal Year ($)
John R. Strangfeld		Merged Retirement Plan—Traditional Benefit Formula			39			$	3,366,600				—
		Supplemental Retirement Plan—Traditional Pension Formula			39			$	78,916,344				—
		Supplemental Retirement Plan—Cash Balance Formula			n/a	(1)		$	35,305				—
Robert M. Falzon		Merged Retirement Plan—Cash Balance Formula			33	(2)		$	1,416,208				—
		Merged Retirement Plan—PSI Cash Balance Formula			n/a	(2)		$	79,995				—
		Supplemental Retirement Plan—Cash Balance Formula			33	(2)		$	1,172,293			$	10,643	(3)
Mark B. Grier		Merged Retirement Plan—Cash Balance Formula			21			$	2,453,655				—
		Supplemental Retirement Plan—Cash Balance Formula			21			$	10,360,074			$	31,095	(3)
Charles F. Lowrey		Merged Retirement Plan—Cash Balance Formula			15			$	1,905,356				—
		Supplemental Retirement Plan—Cash Balance Formula			15			$	2,593,622			$	20,990	(3)
Stephen Pelletier		Merged Retirement Plan—Traditional Benefit Formula			18			$	1,262,686				—
		Merged Retirement Plan—Cash Balance Formula			n/a	(1)		$	5,660				—
		Merged Retirement Plan—PSI Cash Balance Formula			n/a	(4)		$	109,234				—
		Supplemental Retirement Plan—Traditional Pension Formula			18			$	17,551,601				—
		PSI Supplemental Retirement Plan for Executives			n/a	(4)		$	400,733				—

 

(1)	This benefit is a result of an allocation of demutualization compensation distributed to all participants in the Merged Retirement Plan in 2002 (“Demutualization Credit”). Ongoing service is not a consideration in determining this benefit for the NEOs.

 

(2)

Mr. Falzon transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula and subsequently, the Cash Balance Formula upon his election of this formula in 2001; in accordance with the Merged Retirement Plan Cash Balance Formula, credited service includes service with the Company’s subsidiaries, in particular Prudential Securities Incorporated. As a result of his transfer, ongoing service is not a consideration in determining his benefit under the PSI Cash Balance Formula.

 

(3)	This payment was a distribution from the Supplemental Retirement Plan Cash Balance Formula to pay for FICA taxes due and accrued in 2015 on this benefit, and federal, state and local taxes on the distributed amount. The entire payment was withheld to pay these taxes.

 

(4)	Mr. Pelletier transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula. As a result, ongoing service is not a consideration in determining this benefit.

The Merged Retirement Plan

Our wholly owned subsidiary, The Prudential Insurance Company of America, sponsors our tax-qualified defined benefit retirement plan, The Prudential Merged Retirement Plan (the “Merged Retirement Plan”), which is available to our executive officers, including the NEOs, and other salaried U.S. employees. The Merged Retirement Plan has two formulas under which

 

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participants may have their retirement benefits for ongoing service determined: the “Traditional Pension Formula” or the “Cash Balance Formula.” In addition, employees who previously worked for Prudential Securities Incorporated also have retirement benefits for their service with Prudential Securities Incorporated under a third component of the Merged Retirement Plan: the “PSI Cash Balance Formula.”

TRADITIONAL PENSION FORMULA

Under the Traditional Pension Formula, employees are fully vested in their accrued benefits. These benefits (which are subject to Internal Revenue Code limits) are determined using the following formula, which is based on Average Eligible Earnings (as defined) and years of Credited Service (as defined):

 

For a separation from service in 2016, Average Eligible Earnings are determined by taking the average of earnings (base salary plus annual incentive payment) over the period beginning January 1, 2009, and ending on the date of separation after dropping the lowest two years of earnings in that period. Under the Traditional Pension Formula, the starting point for the averaging period is moved forward two years on January 1 of every even calendar year. “Covered Compensation” for a year is the average of the Social Security wage bases for the 35 years ending in the year the participant will reach Social Security normal retirement age. Benefits are payable as early as age 55 (with a reduction in benefits) as a single life annuity if not married or an actuarially equivalent 50% joint and survivor annuity if married.

Generally, a participant’s benefit will be determined as the greater of:

 

•

the benefit as determined above calculated at the time of separation from service;

 

•

the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and

 

•

If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. (Messrs. Strangfeld and Pelletier each elected to receive their Supplemental Retirement Plan benefit in the form of a lump sum; consequently, this provision does not apply to them.)

Additional benefits are provided to participants who are eligible to retire upon separation from service. A participant is eligible to retire if he or she separates from service either: (a) after attainment of age 55 (with 10 years of vesting service) or age 65 or (b) due to an involuntary termination (other than for cause or exhausting short-term disability benefits) after attainment of age 50 (with 20 years of continuous service).

If a participant is eligible to retire, he or she is eligible for survivor benefits (with no actuarial reduction), a lesser (or no) reduction in benefit for benefit commencement before age 65, and an additional benefit paid to age 65.

The benefits reported in the Pension Benefits Table above are assumed to commence in the form of a 50% joint and survivor annuity on the later of January 1, 2017 and the date the participant is eligible for an unreduced benefit, i.e., the earlier of (i) the first of the month on or following the later of attainment of age 60 and 30 years of service and (ii) the first of the month on or following attainment of age 65 (“Normal Retirement Date”).

 

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CASH BALANCE FORMULA

The Cash Balance Formula was added to the Merged Retirement Plan in 2001 for employees hired on or after January 1, 2001, except employees of Prudential Securities Incorporated. At that time, we offered a one-time conversion election for the current Merged Retirement Plan participants with benefits under the Traditional Pension Formula to opt to have their individual retirement benefits determined under the Cash Balance Formula. Participants who made this election to use the Cash Balance Formula are fully vested in their Cash Balance Formula benefit. Otherwise, participants are generally vested in their Cash Balance Formula benefit after three years of service.

Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account that is allocated basic credits equal to 2% to 14% (depending on age and service) of base salary and annual incentive payments. Interest credits are made to the hypothetical account each month using an interest rate set each year based on the average yield on 30-year U.S. Treasury securities (constant maturities) for October of the prior year, with a minimum rate of 4.25%. The rate in effect for 2016 was 4.25%.

Active participants on June 30, 2003 received an additional credit equal to his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of January 1, 2002, if any. Active participants on June 30, 2012 received an additional credit of no more than his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of April 1, 2012, if any.

Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity; 50%, 75%, or 100% joint and survivor annuity; or 50% contingent annuity. Employees who made the one-time conversion election to use the Cash Balance Formula (specifically, Messrs. Falzon and Grier) have a frozen “Grandfathered Benefit” determined as the accrued benefit under the Traditional Pension Formula as of January 1, 2002. The value of the Grandfathered Benefit, and early retirement subsidies on this benefit, if applicable, are included in determining the payable benefit.

As reported in the Pension Benefits Table, cash balance accounts are assumed to grow with interest until, and benefits will commence on:

 

•

for Messrs. Strangfeld and Pelletier (whose Cash Balance Formula benefits are due only to the Demutualization Credit), the same date benefits are assumed to commence under the Traditional Pension Formula; and

 

•

for Messrs. Falzon, Grier, and Lowrey, the participant’s Normal Retirement Date.

Benefits are assumed to commence in a form that is based on a value comparison between a lump sum and a 50% joint and survivor annuity.

PSI CASH BALANCE FORMULA

The PSI Cash Balance Formula applies only to employees who previously worked for Prudential Securities Incorporated. At this time, all participants are fully vested in their PSI Cash Balance Formula benefit. Messrs. Falzon and Pelletier are the only NEOs with a benefit under this formula.

PSI Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account. Prior to January 1, 2004, the hypothetical accounts were allocated basic credits equal to 1.7% to 7% (depending on age and service) of eligible earnings. Since then, interest credits only have been made to the hypothetical account each month using an interest rate set each year, with a minimum rate of 5.00%. The rate in effect for 2016 was 5.00%.

Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity; 50%, 75%, or 100% joint and survivor annuity; 50% or 100% contingent annuity; or single life annuity with 5 or 10 years guaranteed.

As reported in the Pension Benefits Table, PSI Cash Balance accounts are assumed to grow with interest until, and benefits will commence on:

 

•

for Mr. Falzon, the participant’s Normal Retirement Date; and

 

•

for Mr. Pelletier, the same date benefits are assumed to commence under the Traditional Pension Formula.

Benefits are assumed to commence with 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity.

 

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The Supplemental Retirement Plan and SERPs

The Supplemental Retirement Plan is a non-qualified retirement plan designed to complement the Merged Retirement Plan by providing benefits to all participants of the Merged Retirement Plan, including the NEOs, who are prohibited from receiving additional benefits under the Merged Retirement Plan because of Internal Revenue Code limits. Benefits under the Supplemental Retirement Plan are generally payable at the earlier of six months after separation from service and age 65.

The Prudential Insurance Supplemental Executive Retirement Plan and the PFI Supplemental Executive Retirement Plan (collectively, the “Prudential SERPs”) provide “Early Retirement Benefits” to certain eligible executives, including the NEOs, subject to the approval of our Board and the Committee. Early Retirement Benefits are designed to recognize the service and contributions of eligible executives who are involuntarily terminated by exempting them from the reduction factor for early retirement between the ages of 55 and 65, a reduction of up to 50%, which would otherwise be applicable under the Traditional Pension Formula and the Grandfathered Benefit under the Cash Balance Formula of the Merged Retirement Plan and the Supplemental Retirement Plan. Benefits under the Prudential SERPs are generally payable at the earlier of six months after separation from service and age 65.

No NEO is currently eligible for benefits under the Early Retirement Benefits provision. Upon an involuntary termination of employment, Messrs. Strangfeld, Grier, and Lowrey will not be eligible for benefits under the Early Retirement Benefits provision due to a variety of factors; Messrs. Falzon and Pelletier are potentially eligible for benefits under the Early Retirement Benefits provision. However, were Mr. Falzon to qualify for Early Retirement Benefits, only the Grandfathered Benefit portion of his benefits would not be subject to reduction.

In 2008, the NEOs (with the exception of Mr. Lowrey) were permitted to make an irrevocable election regarding the form of payment for their pension benefits and each NEO (with the exception of Mr. Falzon) elected to receive his Supplemental Retirement Plan and Prudential SERPs benefits, if any, in a lump sum.

The Prudential Securities Incorporated Supplemental Retirement Plan for Executives (“PSI SERP”) was designed to make it more attractive to certain key executives to remain employees of Prudential Securities Incorporated and its subsidiaries. Mr. Pelletier is the only NEO that is accruing benefits under the PSI SERP. Mr. Pelletier’s PSI SERP benefit will be paid as an annuity upon separation from service, irrespective of age. The PSI SERP benefit is determined as a target benefit, less the benefit payable from the PSI Cash Balance Formula and an estimated Social Security retirement benefit. The target benefit is 60% of an employee’s average salary times a ratio of service to 30 years. Mr. Pelletier stopped accruing service credit under this plan upon his transfer to Prudential from Prudential Securities Incorporated.

Notwithstanding the foregoing, benefits reported in the Pension Benefits Table are assumed to commence in the same form and at the same time as under the Merged Retirement Plan benefit to be consistent with assumptions used in the Company’s financial statements.

Nonqualified Deferred Compensation

The following table provides information on the NEOs’ participation in the Prudential Supplemental Employee Savings Plan (The “SESP”) and the Deferred Compensation Plan:

2016 Nonqualified Deferred Compensation Table

Name		Plan				Executive Contributions in Last Fiscal Year ($)(1)				Registrant Contributions in Last Fiscal Year ($)(2)				Aggregate Earnings in Last Fiscal Year  ($)(3)				Aggregate Withdrawals/ Distributions ($)				Aggregate Balance at Last Fiscal Year End ($)(4)
John R. Strangfeld			SESP			$	45,400			$	45,400			$	45,788							$	1,407,990
			Deferred Compensation			$	—			$	—			$	1,474,976			$	—			$	9,762,441
Robert M. Falzon			SESP			$	19,769			$	19,769			$	4,909							$	172,044
			Deferred Compensation			$	—			$	—			$	189,361			$	—			$	2,541,179
Mark B. Grier			SESP			$	37,000			$	37,000			$	31,869							$	987,646
			Deferred Compensation			$	—			$	—			$	—			$	—			$	—
Charles F. Lowrey			SESP			$	20,200			$	20,200			$	13,877							$	437,522
			Deferred Compensation			$	—			$	—			$	632,849			$	—			$	12,492,842
Stephen Pelletier			SESP			$	20,200			$	20,200			$	10,659							$	342,360
			Deferred Compensation			$	—			$	—			$	1,217,282			$	—			$	11,956,082

 

(1)

The amounts reported in the Executive Contributions in Last Fiscal Year column represent elective contributions of a portion of their base salary to the SESP (which amounts are also included in the Salary column of the Summary Compensation Table) and elective contributions to the Deferred Compensation Plan from the annual Bonus column.

 

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(2)	The amounts reported in the Registrant Contributions in Last Fiscal Year column represent the Company’s contributions to each NEO’s SESP account (which amounts are also included in the All Other Compensation column of the Summary Compensation Table).

 

(3)

The amounts reported in the Aggregate Earnings in Last Fiscal Year column include amounts reported for above-market interest on the SESP in the Change in Pension Value column of the Summary Compensation Table. Specifically, $10,388 for Mr. Strangfeld, $1,138 for Mr. Falzon, $7,239 for Mr. Grier, $3,158 for Mr. Lowrey and $2,433 for Mr. Pelletier.

 

(4)	The amounts reported in the Aggregate Balance at Last Fiscal Year-End column represent balances from the SESP and the Deferred Compensation Plan and include various amounts previously reported in the Summary Compensation Table as Salary, Bonus or All Other Compensation.

SESP

The SESP is a non-qualified profit-sharing plan designed to provide benefits in excess of amounts permitted to be contributed under the PESP. It allows employees, including the NEOs, to elect to defer from 1% to 4% of their eligible earnings paid after the Code limit is exceeded in the year ($265,000 in 2016) to a hypothetical recordkeeping account on a pre-tax basis through payroll deduction. We match 100% of an employee’s deferrals. Eligible earnings for the NEOs under the SESP are limited to base salary only. Interest is earned on a participant’s account at the same rate as the Fixed Rate Fund under the PESP. This rate is generally set quarterly within a calendar year, and the rate in effect for each quarter of 2016 was 3.50%. A participant’s account is distributed to the employee six months after the participant’s separation from service.

Deferred Compensation Plan

The Deferred Compensation Plan is a non-qualified, unfunded plan that provides certain designated executives in the United States, including the NEOs, with the ability to defer taxation on up to 85% of their annual cash incentive awards. Deferrals may be invested in notional funds that generally mirror the PESP fund offerings, including shares of our Common Stock.

Post-Employment Compensation Arrangements

While we have not entered into employment agreements with our executive officers, including the NEOs, they are eligible to receive certain payments and benefits in the event of a termination of employment, including following a change in control of the Company, under the Severance Plan and Change in Control Program. Mr. Strangfeld does not participate in the Severance Plan.

In the case of the NEOs, and in many cases subject to the approval of our Board, the various payments and benefits provided under the Severance Plan, the Change in Control Program, the Omnibus Plan and other Company programs, as applicable, are as follows:

 

Severance

Annual Incentives

Stock Options

Performance Shares/ Performance Units

Book Value Units

SERP

Additional Retirement Accruals

Health/Life

Voluntary Termination; Early or Normal Retirement

—

Annual Incentive Program

Omnibus Plan*

Omnibus Plan*

Omnibus Plan*

—

Merged Retirement Plan and Supplemental Retirement Plan

—

Involuntary Termination Without Cause

Severance Plan

Annual Incentive Program

Omnibus Plan**

Omnibus Plan**

Omnibus Plan**

Prudential SERP

Merged Retirement Plan and Supplemental Retirement Plan

—

Separation in Connection With Change in Control1

Change in Control Program

Change in Control Program and Annual Incentive Program

Change in Control Program and Omnibus Plan

Change in Control Program and Omnibus Plan

Change in Control Program and Omnibus Plan

Prudential SERP

Merged Retirement Plan and Supplemental Retirement Plan

Change in Control Program

Separation Due to Disability

—

Annual Incentive Program

Omnibus Plan

Omnibus Plan

Omnibus Plan

—

Merged Retirement Plan and Supplemental Retirement Plan

Prudential Welfare Benefits Plan

Separation Due to Death

—

Annual Incentive Program

Omnibus Plan

Omnibus Plan

Omnibus Plan

—

Merged Retirement Plan and Supplemental Retirement Plan

—

See footnotes below.

 

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		Executive Compensation

 

 

 

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		Executive Compensation

 

 

 

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Estimated Post-Employment Payments and Benefits

Name		Type of Payment or Benefit								Voluntary Termination/Early or Normal Retirement ($)				Involuntary Termination Without Cause ($)				Separation Due to Change in Control ($)				Separation Due to Disability ($)				Separation Due to Death ($)
John R. Strangfeld			Severance Payment																21,462,445	(1)
			Annual Incentive								5,976,000	(2)			5,976,000	(2)			6,000,000				7,171,700				7,171,700
			Long-term Incentive:				Stock Options(3)
							RSUs
							Performance Shares(4)												10,556,159	(4)			10,556,159	(4)			10,556,159	(4)
							Performance Units(5)												10,556,159	(5)			10,556,159	(5)			10,556,159	(5)
			Book Value Performance				Book Value Units(6)												9,106,014	(6)			9,106,014	(6)			9,106,014	(6)
			Benefits:				SERP
							Health/Life												27,369	(7)
							Addtl. Retire Accurals				47,904				47,904				89,340				2,112,300				1,056,660
			Total								6,023,904				6,023,904				57,797,486				39,502,332				38,446,692
Robert M. Falzon			Severance Payment												5,100,000				7,850,324	(1)
			Annual Incentive								2,990,000	(2)			2,990,000	(2)			3,000,000				2,630,000				2,630,000
			Long-term Incentive:				Stock Options(3)
							RSUs
							Performance Shares(4)												3,787,888	(4)			3,787,888	(4)			3,787,888	(4)
							Performance Units(5)												3,787,888	(5)			3,787,888	(5)			3,787,888	(5)
			Book Value Performance				Book Value Units(6)												3,477,905	(6)			3,477,905	(6)			3,477,905	(6)
			Benefits:				SERP								118,620				118,620
							Health/Life												27,369	(7)
							Addtl. Retire Accurals				320,068				866,004				321,139				2,962,251				284,040
			Total								3,310,068				9,074,624				22,371,134				16,645,933				13,967,722
Mark B. Grier			Severance Payment												10,835,100				18,376,355	(1)
			Annual Incentive								5,080,000	(2)			5,080,000	(2)			5,100,000				6,033,400				6,033,400
			Long-term Incentive:				Stock Options(3)
							RSUs
							Performance Shares(4)												8,591,610	(4)			8,591,610	(4)			8,591,610	(4)
							Performance Units(5)												8,591,610	(5)			8,591,610	(5)			8,591,610	(5)
			Book Value Performance				Book Value Units(6)												7,551,015	(6)			7,551,015	(6)			7,551,015	(6)
			Benefits:				SERP
							Health/Life												33,072	(7)			394,678
							Addtl. Retire Accurals				697,097				2,183,928				699,841				1,554,473				832,609
			Total								5,777,097				18,099,028				48,943,503				32,716,786				31,600,244
Charles F. Lowrey			Severance Payment												8,780,100				13,512,271	(1)
			Annual Incentive								3,985,000	(2)			3,985,000	(2)			4,000,000				5,083,400				5,083,400
			Long-term Incentive:				Stock Options(3)
							RSUs
							Performance Shares(4)												5,353,367	(4)			5,353,367	(4)			5,353,367	(4)
							Performance Units(5)												5,353,367	(5)			5,353,367	(5)			5,353,367	(5)
			Book Value Performance				Book Value Units(6)												5,567,475	(6)			5,567,475	(6)			5,567,475	(6)
			Benefits:				SERP
							Health/Life												33,207	(7)
							Addtl. Retire Accurals				418,930				1,341,953				420,508				4,453,070				538,840
			Total								4,403,930				14,107,053				34,240,195				25,810,679				21,896,449
Stephen Pelletier			Severance Payment												6,280,050				12,201,885	(1)
			Annual Incentive								3,985,000	(2)			3,985,000	(2)			4,000,000				3,416,700				3,416,700
			Long-term Incentive:				Stock Options(3)
							RSUs
							Performance Shares(4)												4,540,866	(4)			4,540,866	(4)			4,540,866	(4)
							Performance Units(5)												4,540,866	(5)			4,540,866	(5)			4,540,866	(5)
			Book Value Performance				Book Value Units(6)												4,018,476	(6)			4,018,476	(6)			4,018,476	(6)
			Benefits:				SERP								274,380				1,446,516
							Health/Life												31,729	(7)
							Addtl. Retire Accurals				1,990,500				5,500,164				2,010,048				1,457,004				802,104
			Total								5,975,500				16,039,594				32,790,386				17,973,912				17,319,012

1	Includes severance payments equal to two times annual cash compensation (subject to execution of a non-competition agreement), and a cash payment for the pension impact of additional two years of credited service.

2	Includes annual incentive award amount for 2016 performance.

3	For disability and death, accelerated vesting of all stock options with up to three years to exercise.

4	Includes the value of 2016, 2015, and 2014 target performance shares paid based on the closing market price of our Common Stock on December 31, 2016 ($104.06 per share).

5	Includes the value of 2016, 2015, and 2014 target performance units paid based on the closing market price of our Common Stock on December 31, 2016 ($104.06 per share).

6	Includes the value of 2016, 2015, and 2014 book value units paid based on the Company’s book value per share as of December 31, 2016 ($78.95 per share).

7	Reflects the expected contribution subsidy for 18 months and the associated tax gross-up. For this purpose, we have assumed the 2017 premium and contribution rates continue for the full 18 months.

 

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General Information About The Meeting

Voting Instructions and Information

Who Can Vote

You are entitled to vote your Common Stock if our records show that you held your shares as of the record date of March 10, 2017. At the close of business on that date, a total of 430,370,040 shares of Common Stock were outstanding and entitled to vote. Each share of Common Stock is entitled to one vote at this Annual Meeting. Your voting instructions are confidential and will not be disclosed to persons other than those recording the vote, except if a shareholder makes a written comment on the proxy card, otherwise communicates his or her vote to management, as may be required in accordance with the appropriate legal process, or as authorized by you.

Voting Your Proxy

If your Common Stock is held through a broker, bank or other nominee (held in street name), you will receive instructions from such entity that you must follow in order to have your shares voted. If you want to vote in person, you must obtain a legal proxy from your broker, bank or other nominee and bring it to the meeting, and submit it with your vote.

If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may instruct the proxies how to vote by following the instructions listed on the Notice of Internet Availability or the proxy card to vote online, or by signing, dating and mailing the proxy card in the postage-paid envelope. Of course, you can always come to the meeting and vote your shares in person.

Whichever method you select to transmit your instructions, the proxies will vote your shares in accordance with those instructions. Except as discussed below with respect to shares held in certain company plans, if you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board of Directors: FOR each director nominee, FOR ratification of the appointment of the independent registered public accounting firm, FOR the advisory vote to approve named executive officer compensation, for “EVERY YEAR” on the advisory vote on the frequency of future advisory votes to approve named executive officer compensation, and AGAINST the shareholder proposal regarding an independent Board Chairman.

Special Voting Instructions for Plan Shares

If you are a participant in The Prudential Employee Savings Plan (“PESP”) and your account is invested in the Common Stock Fund, you may instruct the PESP Trustee how to vote the shares of Common Stock credited to your PESP account and held in the Fund on March 7, 2017. The PESP Trustee, the shareholder of record, will vote these shares in accordance with your instructions or, if you do not provide voting instructions, in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions subject to the terms of the PESP plan document, its trust agreement and applicable law. If you hold shares of Common Stock through your participation in the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan (collectively, “the Plan”), on those shares will be voted by the Plan administrator in accordance with your instructions or, if you do not provide voting instructions, in accordance with the Board of Directors’ recommendation subject to the terms of the Plan and applicable law.

Matters to Be Presented

We are not aware of any matters to be presented at the Annual Meeting other than those described in this Proxy Statement. If any matters not described in this Proxy Statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is adjourned or postponed, the proxies can vote your shares at the adjournment or postponement as well.

Revoking Your Proxy

If you hold your shares in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. If you are a holder of record and wish to revoke your proxy instructions, you must deliver later-dated proxy instructions, advise the Chief Governance Officer and Corporate Secretary in writing before the proxies vote your shares at the meeting, or attend the meeting and vote your shares in person.

 

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Quorum

A quorum is required to transact business at our Annual Meeting. Shareholders of record holding shares of stock constituting 50% of the shares entitled to be cast shall constitute a quorum. If you have returned valid proxy instructions or attend the meeting in person, your shares will be counted for the purpose of determining whether there is a quorum, even if you abstain from voting on some or all matters introduced at the meeting. In addition, broker non-votes will be treated as present for purposes of determining whether a quorum is present.

Voting Requirements

You may either vote for, against or abstain on each of the proposals, with the exception of Item 4 where you may vote for one year, two years, three years or abstain. The affirmative vote of a majority of the votes cast is required to approve each proposal. Broker non-votes and abstentions will have no impact, as they are not counted as votes cast.

Although the advisory votes in Items 3 and 4 are non-binding, as provided by law, our Board will review the results of the votes and, consistent with our commitment to shareholder engagement, will take them into account in making a determination concerning our named executive officer compensation and the frequency of future advisory votes to approve named executive officer compensation. If you hold your shares in street name, and you do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares in their discretion on the election of directors, the advisory vote to approve executive compensation, the advisory vote on the frequency of future advisory votes to approve named executive officer compensation, or the shareholder proposal regarding an independent Board Chairman, but may still be permitted to vote your shares in their discretion on the ratification of the independent registered public accounting firm.

Election of Directors

At the meeting, each nominee must receive the affirmative vote of a majority of the votes cast with respect to his or her election in order to be elected. If an incumbent nominee is not elected by the requisite vote, he or she must tender his or her resignation, and the Board, through a process managed by the Corporate Governance and Business Ethics Committee, will decide whether to accept the resignation.

BOARD RECOMMENDATIONS

 

Cost of Proxy Solicitation

We are providing these proxy materials in connection with the solicitation by the Company’s Board of Directors of proxies to be voted at our Annual Meeting. We will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, we expect that a number of our employees will solicit shareholders personally, electronically and by telephone. None of these employees will receive any additional compensation for doing this. We have retained Georgeson, Inc. to assist in the solicitation of proxies for a fee of $25,000 plus reimbursement of expenses. We will, on request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.

Attending the Annual Meeting

If you attend the Annual Meeting, you will be asked to present valid, government-issued photo identification, such as a driver’s license. If you are a holder of record, the top half of your proxy card or your Notice of Internet Availability is your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares, and submit it with your vote.

 

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Attendance at the Annual Meeting is limited to shareholders of Prudential as of the record date. Each shareholder may appoint only one proxy holder or representative to attend the Annual Meeting on his or her behalf.

Submission of Shareholder Proposals and Director Nominations

Proposals and Director Nominations for Inclusion in the Proxy Statement for the 2018 Annual Meeting

In order to submit shareholder proposals for the 2018 Annual Meeting of Shareholders for inclusion in our Proxy Statement pursuant to SEC Rule 14a-8, materials must be received by the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark, New Jersey, no later than the close of business on November 21, 2017.

We have adopted proxy access, which permits a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding capital stock for at least three years, to submit director nominees for up to 20% of the Board for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in our By-laws. Notice of director nominations submitted under these proxy access By-law provisions must be received no earlier than December 10, 2017 and no later than January 9, 2018. However, if the 2018 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 2017 Annual Meeting was mailed or public disclosure of the meeting date was made.

Proposals submitted for inclusion in our Proxy Statement must comply with all of the requirements of SEC Rule 14a-8, and director nominations submitted pursuant to the proxy access provisions of our By-laws must comply with all of the requirements of our By-laws. As the rules of the SEC and our By-laws make clear, simply submitting a proposal or nomination does not guarantee its inclusion.

Other Proposals or Director Nominations for Presentation at the 2018 Annual Meeting

Our By-laws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the Proxy Statement, but that a shareholder instead wishes to present directly at an Annual Meeting. To be properly brought before the 2018 Annual Meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark (see below) not less than 120 or more than 150 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Company’s By-laws (and not pursuant to SEC Rule 14a-8) must be received no earlier than December 10, 2017 and no later than January 9, 2018. However, if the 2018 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 2018 Annual Meeting was mailed or public disclosure of the meeting date was made. All director nominations and shareholder proposals must comply with the requirements of the Company’s By-laws, a copy of which may be obtained at no cost from the Chief Governance Officer and Corporate Secretary. The Chairman may refuse to acknowledge or introduce any such matter at the Annual Meeting if notice of the matter is not received within the applicable deadlines or does not comply with the Company’s By-laws. If a shareholder does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual Meeting.

All proposals and director nominations should be addressed to: Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, Prudential Financial, Inc., 751 Broad Street, Newark, NJ 07102.

Eliminating Duplicative Proxy Materials

A single Proxy Statement and Annual Report, along with individual proxy cards, or individual Notices of Internet Availability, will be delivered in one envelope to multiple shareholders having the same last name and address and to individuals with more than one account registered at Computershare with the same address unless contrary instructions have been received from an affected shareholder.

If you would like to enroll in this service or receive individual copies of all documents, now or in the future, please contact Computershare by calling 1-800-305-9404 or writing Computershare, P.O. Box 43033, Providence, RI 02940-3033. We will

 

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deliver a separate copy of all documents to a shareholder at a shared address to which a single copy of the documents was delivered promptly upon request to the address or telephone number provided above.

Delivery of Proxy Materials

We want to communicate with you in the way that is most convenient for you. You may choose to receive either a full set of printed materials—which will include an Annual Report, Proxy Statement, and proxy card—or an email with instructions for how to view the materials and vote online. To select a method of delivery during the voting season, registered shareholders may follow the instructions when voting online at www.investorvote.com/prudential. Following the 2017 Annual Meeting, you may continue to choose your method of delivery of future documents by visiting www.computershare.com/investor. If you own shares indirectly through a broker, bank, or other nominee, please contact your financial institution for additional information regarding delivery options.

If you do not choose a method of delivery as outlined above, you may receive a one-page Notice of Internet Availability instructing you how to access the materials and vote in lieu of printed or electronic materials. As a publicly traded company, Prudential is legally required to make these materials available to all shareholders and it is not possible to opt out of the mailing.

Important Notice Regarding the Availability of Proxy Materials for the 2017 Annual Meeting of Shareholders to Be Held on May 9, 2017: Our 2017 Proxy Statement and Annual Report for the year ended December 31, 2016, are available free of charge on our website at www.prudential.com/governance.

Annual Report on Form 10-K

The Company will provide by mail, without charge, a copy of its Annual Report on Form 10-K, at your request. Please direct all inquiries to the Company’s Corporate Information Service at 1-877-998-ROCK (7625) or 751 Broad Street, Newark, NJ 07102.

Incorporation By Reference

To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of Prudential Financial under the Securities Act of 1933 or the Exchange Act, the sections of this Proxy Statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and “Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.

Shareholder List

A list of shareholders entitled to vote at the Annual Meeting will be available for examination by shareholders at the Annual Meeting.

 

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Appendix A - Non-GAAP Measures

Adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. Also, we believe that our use of these non-GAAP measures helps investors understand and evaluate the Company’s results of operations and financial position, by providing measures that are primarily attributable to our business operations separate from the portion attributable to external and potentially volatile capital and currency market conditions.

Adjusted Operating Income

Adjusted operating income excludes “Realized investment gains (losses), net,” as adjusted, and related charges and adjustments. A significant element of realized investment gains and losses are impairments and credit-related and interest rate-related gains and losses. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as interest rate-related gains or losses, is largely subject to our discretion and influenced by market opportunities as well as our tax and capital profile.

Realized investment gains (losses) within certain of our businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income generally excludes realized investment gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset-liability management program related to the risk of those products. However, the effectiveness of our hedging program will ultimately be reflected in adjusted operating income over time. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are classified as other trading account assets.

Adjusted operating income also excludes investment gains and losses on trading account assets supporting insurance liabilities and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately accrue to contractholders. In addition, adjusted operating income excludes the results of divested businesses, which are not relevant to our ongoing operations. Discontinued operations and earnings attributable to noncontrolling interests, each of which is presented as a separate component of net income under GAAP, are also excluded from adjusted operating income. The tax effect associated with pre-tax adjusted operating income is based on applicable IRS and foreign tax regulations inclusive of pertinent adjustments.

 

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		Appendix A

 

 

Reconciliations of GAAP Net Income to After-Tax Adjusted Operating Income

(in billions)

 

		Year Ended December 31
		2016				2015
Net income attributable to Prudential Financial, Inc.		$	4.37			$	5.64
Income attributable to noncontrolling interests		$	0.05			$	0.07
Net income		$	4.42			$	5.71
Less: Income from discontinued operations, net of taxes		$	—			$	—
Income from continuing operations (after-tax)		$	4.42			$	5.71
Less: Earnings attributable to noncontrolling interests		$	0.05			$	0.07
Income from continuing operations attributable to Prudential Financial, Inc.		$	4.37			$	5.64
Less: Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests		$	(0.00	)		$	(0.06	)
Income from continuing operations (after-tax) before equity in earnings of operating joint ventures		$	4.37			$	5.70
Less: Reconciling Items:
Realized investment gains (losses), net, and related charges and adjustments		$	0.52			$	1.58
Investment losses on trading account assets supporting insurance liabilities, net		$	(0.02	)		$	(0.52	)
Change in experience-rated contractholder liabilities due to asset value changes		$	0.02			$	0.43
Divested businesses:
Closed Block division		$	(0.13	)		$	0.06
Other divested businesses		$	(0.08	)		$	(0.07	)
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests		$	(0.01	)		$	0.06
Total reconciling items, before income taxes		$	0.31			$	1.54
Less: Income taxes, not applicable to adjusted operating income		$	0.04			$	0.49
Total reconciling items, after income taxes		$	0.26			$	1.05
After-tax adjusted operating income		$	4.11			$	4.65

 

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Reconciliations of GAAP Earnings per Share to After-Tax Adjusted Operating Income Earnings per Share

(shares in millions)

 

		Year Ended December 31
		2016				2015
Net income attributable to Prudential Financial, Inc.		$	9.71			$	12.17
Less: Income from discontinued operations, net of taxes			—				—
Income from continuing operations (after-tax) attributable to Prudential Financial, Inc.			9.71				12.17
Less: Reconciling Items:
Realized investment gains (losses), net, and related charges and adjustments			1.17				3.43
Investment gains (losses) on trading account assets supporting insurance liabilities, net			(0.04	)			(1.14	)
Change in experience-rated contractholder liabilities due to asset value changes			0.05				0.94
Divested businesses:
Closed Block division			(0.30	)			0.13
Other divested businesses			(0.19	)			(0.14	)
Difference in earnings allocated to participating unvested share-based payment awards			—				(0.02	)
Total reconciling items, before income taxes			0.69				3.20
Less: Income taxes, not applicable to adjusted operating income			0.11				1.07
Total reconciling items, after income taxes			0.58				2.13
After-tax adjusted operating income		$	9.13			$	10.04
Weighted average number of outstanding Common shares (diluted)			446.6				460.4

 

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Adjusted Book Value

Reconciliations of GAAP Book Value to Adjusted Book Value

(in millions, except for per share data)

 

		Year Ended December 31
		2016				2015
GAAP book value (total PFI equity) at end of period		$	45,863			$	41,890
Less: Accumulated other comprehensive income (AOCI)		$	14,621			$	12,285
GAAP book value excluding AOCI		$	31,242			$	29,605
Less: Cumulative effect of foreign exchange remeasurement and currency
translation adjustments corresponding to realized gains/losses		$	(3,199	)		$	(3,747	)
Adjusted book value		$	34,441			$	33,352
Number of diluted shares at end of period			436.2				453.2
GAAP book value per common share - diluted(1)			104.91				92.39
Adjusted book value per common share - diluted			78.95				73.59

 

(1)

Book value per share of Common Stock, including accumulated other comprehensive income, for the fourth quarter of 2015, includes a $500 million increase in equity and a 5.6 million increase in diluted shares reflecting the dilutive impact of exchangeable surplus notes when book value per share is greater than $88.90. The fourth quarter of 2016 includes a $500 million increase in equity and a 5.75 million increase in diluted shares, reflecting the dilutive impact of exchangeable surplus notes when book value per share is greater than $86.92.

Operating Return on Average Equity

Operating Return on Average Equity represents adjusted operating income after-tax divided by average adjusted book value. The comparable GAAP measure is return on average equity (based on income from continuing operations). Return on average equity (based on income from continuing operations) represents income from continuing operations after-tax, attributable to consolidated Prudential Financial, Inc., as determined in accordance with GAAP, divided by average total Prudential Financial, Inc. equity. Return on average equity (based on income from continuing operations) was 8.8% for the year ended December 31, 2016.

 

84		|   Notice of Annual Meeting of Shareholders and 2017 Proxy Statement

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GENDER PAY POLICY

Prudential’s Total Rewards is integral to our employee value proposition. This package includes compensation, as well as programs and resources available to our employees.

All roles in our U.S. organization are reviewed and assigned a value and market reference range based on market and benchmarking data. These ranges enable us to recruit and promote talent within the context of an individual’s background, experience and performance.

ANNUAL COMPENSATION REVIEW OF ALL U.S. EMPLOYEES

Process

Human Resources and Legal team assesses compensation structure for potential pay disparities by gender and race/ethnicity.

Independent third party reviews Human Resources and Legal team’s evaluation.

If disparities are found, corrective action is taken.

Employee Input

Internal survey contains pay-related questions enabling employees to address compensation issues.

Employees can raise issues regarding pay equity with the Ethics Office, Human Resources or their manager.

Pay discrimination is investigated by trained professionals dedicated to reviewing unlawful discrimination claims.

This integrated approach ensures that we proactively manage pay equity on an ongoing basis for both women and people of color, and that we satisfy our heightened obligations as a federal contractor.

After completion of our annual review, Prudential is confident that, controlling for relevant factors, there are no significant gender or race wage differentials in the U.S. for employees performing substantially similar work.

Our Board receives a review of our pay equity assessment each year as part of our annual human resources strategy update.

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THE ENVIRONMENT:

RISKS, OPPORTUNITIES AND ENGAGEMENT

Prudential has long recognized the connection between climate risk and the company’s long-term vitality.

The company has managed its own impact on the environment by decreasing energy use and installing solar arrays in major employee centers. Other efforts decrease water and paper use and increase recycling.

Prudential also invests in initiatives that contribute to a healthier environment. Our holdings, as of December 31, 2016, include:

Renewable energy investments valued at more than $3.8 billion

27.2 million square feet of LEED Green U.S. real estate totaling $13.7 billion

“Green” bonds totaling over $380 million

Our developing understanding of risks and opportunities comes from engagement with stakeholders, including our investors, customers and employees.

Active involvement in environmental issues is one part of Prudential’s long-term value creation. For more information, go to www.prudential.com/sustainability

PRINTED ON RECYCLED PAPER WITH 10% POST-CONSUMER WASTE.

PAPERS PRODUCED UNDER A SUSTAINABLE FOREST MANAGEMENT PROGRAM. PRINTED USING VEGETABLE-BASED INKS AND RENEWABLE ENERGY.

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Proxy/Voting Instruction Form

q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

A		Proposals — The Board of Directors recommends a vote FOR the election of each director nominee listed in Proposal 1.

 

1. Election of Directors:

For

Against

Abstain

For

Against

Abstain

For

Against

Abstain

+

01 - Thomas J. Baltimore, Jr.

☐

☐

☐

05 - Karl J. Krapek

☐

☐

☐

09 - Christine A. Poon

☐

☐

☐

02 - Gilbert F. Casellas

☐

☐

☐

06 - Peter R. Lighte

☐

☐

☐

10 - Douglas A. Scovanner

☐

☐

☐

03 - Mark B. Grier

☐

☐

☐

07 - George Paz

☐

☐

☐

11 - John R. Strangfeld

☐

☐

☐

04 - Martina Hund-Mejean

☐

☐

☐

08 - Sandra Pianalto

☐

☐

☐

12 - Michael A. Todman

☐

☐

☐

 

The Board of Directors recommends a vote FOR Proposal 2, 3 and 1 YEAR For Proposal 4.

For

Against

Abstain

2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017.

☐

☐

☐

The Board of Directors recommends a vote AGAINST Proposal 5.

For

Against

Abstain

3. Advisory vote to approve named executive officer compensation.

☐

☐

☐

5. Shareholder proposal regarding an independent Board Chairman.

☐

☐

☐

1 Year

2 Years

3 Years

Abstain

4. Advisory Vote on frequency.

☐

☐

☐

☐

 

B		Non-Voting Proposal – Please select one option or leave blank if you do not want to participate.

I would like a free tote bag from Prudential.  ☐    I prefer Prudential contribute to a tree planting campaign.      ☐

 

C		Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

 

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) — Please print date below.		Signature 1 — Please keep signature within the box.		Signature 2 — Please keep signature within the box.

/    /

 

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		ANNUAL MEETING OF SHAREHOLDERS
		May 09, 2017, 2:30 p.m.
		751 Broad Street, Newark, New Jersey 07102

If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification.

This card covers the total number of shares of Prudential Financial, Inc. Common Stock (“Common Stock”) registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 10, 2017, and may also cover the total number of shares of Prudential Financial, Inc. Common Stock held in The Prudential Employee Savings Plan (“PESP”) on March 7, 2017. Or, this card may cover the total number of shares of Prudential Financial, Inc. Common Stock for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) registered in your name with Computershare as of the close of business on the record date of March 10, 2017.

You only need to vote once. This card enables you to submit your vote on your Registered Shares; to provide voting instructions to the PESP Trustee for your PESP shares; or to submit voting instructions for your International portion of the Prudential Stock Purchase Plan shares.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 9, 2017. The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential

q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

Proxy/Voting Instruction Form		Prudential Financial, Inc.		+

This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:30 p.m. on May 9, 2017.

The undersigned, having received the Notice of Meeting and Proxy Statement dated March 21, 2017, appoints Margaret M. Foran, Timothy P. Harris and John R. Strangfeld, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:30 p.m., May 9, 2017, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.

If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.

Special Voting Instructions for Plan Shares: If you are a participant in The Prudential Employee Savings Plan (“PESP”), or the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan, your shares will be voted by the applicable trustee or administrator in accordance with the instructions indicated on the reverse side or received by internet or telephone. If no instructions are specified, your PESP shares will be voted in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions, and all other shares will be voted by the plan administrator in accordance with the Board of Directors’ recommendations, in each case, subject to the terms of the applicable plan documents and applicable law.

Comments — We value your feedback. Please provide any comments you have in the space below.

 

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IMPORTANT SHAREHOLDER INFORMATION

YOUR VOTE COUNTS!

 

				ANNUAL MEETING OF SHAREHOLDERS
				May 09, 2017, 2:30 p.m.
				751 Broad Street, Newark, New Jersey 07102
				You can vote and obtain proxy materials online.
				VOTING INSTRUCTIONS ARE LOCATED BELOW

 

Shareholder Meeting Notice & Admission Ticket

Important Notice Regarding the Availability of Proxy Materials for the

Prudential Financial, Inc. Shareholder Meeting to be Held on May 09, 2017

The proxy materials for the annual meeting are available online. The items to be voted on are listed below. Follow the instructions to view the materials and vote online. Your vote is important! To obtain a paper or e-mail copy of the proxy materials follow the instructions on the reverse side.

Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.

The Board of Directors recommends that you vote FOR Proposals 1 – 3 and 1 year for Proposal 4.

 

1.

Election of Directors: Thomas J. Baltimore, Jr., Gilbert F. Casellas, Mark B. Grier, Martina Hund-Mejean, Karl J. Krapek, Peter R. Lighte, George Paz, Sandra Pianalto, Christine A. Poon, Douglas A. Scovanner, John R. Strangfeld and Michael A. Todman.

 

2.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017.

 

3.

Advisory vote to approve named executive officer compensation.

 

4.

Advisory vote on frequency.

The Board of Directors recommends that you vote AGAINST Proposal 5:

 

5.

Shareholder proposal regarding an independent Board Chairman.

This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.

We encourage you to access and review all of the important information contained in the proxy materials before voting.

The proxy statement and annual report to shareholders are available at www.investorvote.com/prudential.

 

		Easy Online Access — A Convenient Way to Vote!
		If you have access to the Internet, you can complete the process in a few easy steps:
		Step 1: Go to www.investorvote.com/prudential
		Step 2: Click the View buttons to see the proxy statement, which contains details of the proposals to be voted on, and the annual report.
		Step 3: Follow the instructions on the screen to log in.
		Step 4: Make your selection as instructed on each screen to select delivery preferences.
		Step 5: Make your voting selections as instructed on the screen and click the vote button to submit your vote.

PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card.

 

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Shareholder Meeting Notice & Admission Ticket

 

Here’s how to order a copy of the proxy materials and select future delivery preference:

Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below.

E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet or e-mail following the instructions below. If you request an e-mail copy of the materials, you will receive an e-mail with a link to view the materials on the Internet.

PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials.

 

g

Internet – Go to www.investorvote.com/prudential. Follow the instructions to log in and order a paper or e-mail copy of the current meeting materials and submit your preference for e-mail or paper delivery of future meeting materials.

 

g

Telephone – Call us free of charge at 1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings.

 

g

E-mail – Send an e-mail to investorvote@computershare.com with “Proxy Materials Prudential” in the subject line. In the e-mail, include your full name and address, plus the number located in the shaded bar on the reverse side of this document. State in the e-mail whether you want a paper or e-mail copy of the current meeting materials. You can also state your preference for an e-mail or paper copy for future meetings.

If you wish to attend and vote at the meeting, please bring this notice and identification with you.

 

 

Prudential Financial, Inc.’s Annual Meeting of Shareholders will be held on May 09, 2017, at 751 Broad Street, Newark, New Jersey 07102, at 2:30 p.m.

If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification.

 

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		Margaret M. Foran
		Chief Governance Officer
		Senior Vice President and Corporate Secretary
		Prudential Financial, Inc.
		751 Broad Street, Newark NJ 07102-3777
		March 21, 2017

Dear Shareholder:

As a shareholder, you have the right to vote on important matters that affect Prudential Financial. We take the opinions of Prudential’s shareholders very seriously and we hope you will provide your input by casting your vote on the items in the 2017 Proxy Statement.

Enclosed you will find a Notice of Internet Availability (Notice), which provides information on how to view the materials and cast your vote online. If you would prefer to vote by mail, you may request a paper copy of the proxy materials by visiting www.investorvote.com/prudential, calling 1-866-641-4276, or by sending an email to investorvote@computershare.com.

Additional information regarding the Notice is located on the reverse side of this letter. The SEC has also created an educational website where you can learn more about proxy voting — www.sec.gov/spotlight/proxymatters.shtml.

To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or contributing to a tree-planting campaign. Since this program’s inception, we have planted more than 730,000 trees through our partnership with American Forests and have provided nearly 525,000 bags to our shareholders.

This year’s tree-planting initiative will continue to support our work with American Forests in our National Parks.

As always, we thank you for your investment in Prudential.

Sincerely,

 

Margaret M. Foran

Chief Governance Officer,

Senior Vice President and Corporate Secretary

Prudential Financial, Inc.

© 2017 Prudential Financial, Inc., and its related entities. All rights reserved.

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FAQ – Internet Availability of Proxy Materials

The Securities and Exchange Commission (SEC) has issued rules requiring public companies to:

 

•	Make proxy materials (such as the Annual Report and Proxy Statement) available on the Internet

•	Notify shareholders how and where to access those materials online

These rules allow companies to give shareholders more options for reviewing important proxy materials. Information can be made available to shareholders more quickly and conveniently—online documents are easily searchable, enabling shareholders to quickly find the information they need to make informed voting decisions.

The SEC also allows companies to send a one-page Notice to holders with instructions on how to access the materials online, rather than sending a full set of materials. Our reasons for choosing the notice-only option are to:

 

•	Adopt more sustainable practices and be more environmentally responsible—by shrinking our carbon footprint through reductions in ink and paper used in printing and fuel used in shipping

•	Increase shareholder value—by reducing print and mail costs

Please refer to the information below to learn more and to find out what your options are as a shareholder to view materials and vote.

 

 

One of your key privileges as an investor is the right to vote on important matters that affect the company you own shares in.   Please vote. Your vote is important to us and our business.

 

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						Dear Shareholder:
						This package includes your proxy and voting materials. We care about what you think and voting is an important way for you to let us know how we’re doing.
						To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or contributing to a tree-planting campaign. Since its inception, this program has resulted in over 730,000 trees being planted and provided nearly 525,000 tote bags to our shareholders. This year’s tree-planting will continue our work with American Forests in our National Parks.
						Whether you vote via the Internet, phone, or mail, you can indicate your choice of either the bag or a tree-planting contribution. If you elect to receive a bag, you can expect to receive your free gift around the end of June.
						Thank you,
						Margaret M. Foran
						Chief Governance Officer,
						Senior Vice President and Corporate Secretary
						Prudential Financial, Inc.

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