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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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x	Definitive Proxy Statement

 

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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’s long history includes special relationships with the U.S. Military, Veterans and their families. For 50 years, Prudential has helped meet the life insurance needs of active and Veteran members of the U.S. Armed Forces.

 

		As the greatest number of Veterans since World War II are re-entering the workforce, we also have a responsibility to help them transition from success in the military to success in the workplace. In 2010, Prudential created a Veterans Initiative Office to conduct a broad range of programs supporting U.S. Military Veterans in their transition back into the workforce and their communities.

		•		Prudential’s focus on Veterans includes attracting and hiring Veterans as part of an overall talent acquisition strategy. As the lead sponsor of VETalent, Prudential partners with the non-profit Workforce Opportunity Services and major universities to prepare transitioning enlisted Veterans for new careers. Successful completion of the VETalent program results in a certification from a major university and an opportunity for full-time employment with sponsoring companies. Prudential is continuing to introduce the VETalent model to other corporations.
		•		Along with preparing Veterans for success in corporate careers, in 2014, Prudential provided grants and sponsorships to 16 non-profit organizations that support Veterans and their families in their transition to civilian life. These organizations cover a broad spectrum of Veterans’ needs, with an emphasis on helping them achieve meaningful employment.
		•		In addition to job training and philanthropy, our Veterans Initiative Office has been helping to deepen understanding of Veterans’ workplace challenges. The effort is designed to better equip employee assistance professionals and behavioral health practitioners to help Veterans and their families meet the challenges they face when transitioning from military life to the civilian workplace.
		Our work on behalf of Veterans is delivering results. Even better, other companies are joining our efforts. There is much more to be done, but together, we are making a difference in the lives of many Veterans and their families. It’s one small way we can give back to those who have given so much.

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

 

 

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		Letter from the Board of Directors

 

 

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		Letter from the Board of Directors

 

 

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Dear Fellow Shareholders:

You are invited to the Annual Meeting of Shareholders on May 12, 2015, at 751 Broad Street, Newark, NJ, at 2:00 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 550,000 trees through the incentive initiative. This year, trees will be planted in Loyalsock State Forest located in Pennsylvania, as well as in Tydall Air Force Base located in Florida.

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 12, 2015   Time: 2:00 p.m.				AGENDA:   •   Election of 11 directors named in the proxy statement;   •   Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015;   •   Advisory vote to approve named executive officer compensation; 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 13, 2015.   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, Vice President and Corporate Secretary   March 24, 2015   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, including the election of directors and the non-binding advisory vote to approve named executive officer compensation, we call your attention to the following information about the Company’s 2014 financial performance and key executive compensation actions and decisions. 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 the complete Proxy Statement.

Business Highlights

2014 was a year of progress and accomplishment for our Company on many fronts:

 

Our Financial Services Businesses reported after-tax adjusted operating income of $4.36 billion and earnings per share of Common Stock of $9.21 for 2014, compared to $4.59 billion, and $9.67 per share of Common Stock, for 2013. 2013 results benefited significantly from market related and actuarial assumption updates while these items had a net negative impact on 2014 results.(1)
We reported book value for our Financial Services Businesses, excluding accumulated other comprehensive income and the impact of foreign currency exchange rate remeasurement on net income or loss, of $64.75 per share of Common Stock as of December 31, 2014, compared to $59.99 per share as of year-end 2013. Based on U.S. generally accepted accounting principles as of December 31, 2014, we reported book value for our Financial Services Businesses of $88.80 per share of Common Stock, compared to $72.30 per share as of year-end 2013.
Our Financial Services Businesses reported operating return on average equity based on after-tax adjusted operating income of 14.8% in 2014 and 16.4% for 2013, exceeding our long-term target of 13-14% in each year.(2)

 

(1)

Adjusted Operating Income (“AOI”) and earnings per share (“EPS”) are defined in the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement. We use EPS and return on equity (“ROE”), which are based on AOI, and book value excluding accumulated other comprehensive income and the impact of foreign currency exchange rate measurement on net income or loss as performance measures in our incentive compensation programs.

(2)	Excludes impact on attributed equity of accumulated other comprehensive income and foreign currency exchange rate remeasurement included in net income or loss.

 

 

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		Summary Information

 

Compensation Highlights

The Compensation Committee has instituted the following changes to our executive compensation program to align with evolving competitive and governance practices:

 

 

For additional information, see the CD&A in this Proxy Statement.

The compensation of our NEOs reflects both our 2014 performance and the increased rigor of our annual executive compensation program.

 

Named Executive Officer		2014 Base Salary ($)				2014 Annual Incentive Award (as adjusted for mandatory deferrals)(1) ($)				2014 Long-Term Incentive Award Value(2) ($)				2014 Total Direct Compensation ($)
John R. Strangfeld			1,400,000				5,460,000				10,840,000				17,700,000
Robert M. Falzon			650,000				2,310,000				3,990,000				6,950,000
Mark B. Grier			1,190,000				4,550,000				8,950,000				14,690,000
Charles F. Lowrey			770,000				3,780,000				6,120,000				10,670,000
Stephen Pelletier			700,000				2,800,000				5,200,000				8,700,000

 

(1)	The following amounts are not included in the 2014 Annual Incentive Award column because they have been mandatorily deferred into the Book Value Performance Program: Mr. Strangfeld $2,340,000; Mr. Falzon, $990,000; Mr. Grier, $1,950,000; Mr. Lowrey, $1,620,000; and Mr. Pelletier, $1,200,000.

 

(2)	Represents long-term incentive awards granted in 2015 for 2014 performance. Amounts include portions of Annual Incentive Awards mandatorily deferred into the Book Value Performance Program.

 

 

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		Summary Information

Response to advisory vote and shareholder feedback

Approximately 86% of the votes cast at the 2014 Annual Meeting of Shareholders on the non-binding advisory vote on our named executive officer compensation 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 review our executive compensation program to ensure alignment between the interests of our senior executives and shareholders, and, in part based on feedback from shareholders, made several modifications to the compensation program for NEOs as discussed above and in more detail in the CD&A.

Recent Corporate Governance Changes

Compensation Recovery Policies. In 2015, we strengthened our clawback policy and adopted a resignation notice period requirement for all long-term incentive awards as described above.

Enhanced Risk Oversight. In February 2015, the Board established a new Risk Committee comprised of the chairs of each of the other Board committees to enhance the Board’s oversight of significant risks and risk oversight functions across the enterprise.

Increased Shareholder Engagement. In 2014, the Company met with shareholders who hold a majority of our shares. During these meetings, shareholders were encouraged to identify potential Board candidates and share feedback on the Company, its practices and governance policies. Our Board recently adopted proxy access based on the feedback from these meetings. The Company also responded to shareholder feedback on our executive compensation program by implementing several enhancements to better align executive compensation with the long-term interests of our shareholders, as described above under “Compensation Highlights.” Finally, our Lead Independent Director has recorded a video message to shareholders highlighting the Board’s view regarding corporate governance, explaining his role and describing the Board’s structure. You can find this video on our website at www.prudential.com/leadindependentdirector.

Shareholder Actions

Election of Directors (Item 1)

You will find below important information about the qualifications and experience of each of the director nominees whom you are being asked to elect. The Corporate Governance and Business Ethics Committee performs an annual assessment to see that your directors have the skills and experience to effectively oversee the Company. All of your Directors have proven leadership ability, sound judgment, integrity, and a commitment to the success of our Company.

Ratification of the Appointment of the Independent Registered Public Accounting Firm (Item 2)

The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the Company’s independent registered public accounting firm (independent auditor) for 2015. While we are not required to have shareholders ratify the selection of PricewaterhouseCoopers as the Company’s independent auditor, we are doing so because we believe it is good corporate practice. If shareholders do not ratify the selection, the Audit Committee will reconsider the appointment, but may nevertheless retain PricewaterhouseCoopers as the Company’s independent auditor.

Advisory Vote to Approve Named Executive Officer Compensation (Item 3)

Shareholders are being asked to cast a non-binding advisory (“Say on Pay”) vote on our NEO compensation. Last year, approximately 86% of the votes cast by our shareholders on this proposal supported our executive compensation program. Please see “Consideration of Last Year’s ‘Say on Pay’ Vote” in the CD&A for a discussion of how the Board and the Compensation Committee responded to the results of the 2014 advisory vote.

Consistent with the recommendation of the Board and the preference of our shareholders, we have decided to hold annual Say on Pay votes. In evaluating this year’s Say on Pay proposal, we recommend that you carefully review the CD&A, which explains how and why the Compensation Committee arrived at its executive compensation actions and decisions for the 2014 performance year. We suggest you also refer to our corporate governance policies which are contained in this Proxy Statement.

 

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Voting Securities and Principal Holders			30
General Information About the Meeting			71
Voting Instructions and Information			71
Board Recommendations			72
Attending the Annual Meeting			72
Submission of Shareholder Proposals and Director Nominations			72

Proxy Statement

The Board of Directors of Prudential Financial, Inc. (“Prudential Financial” or the “Company”) is providing this Proxy Statement in connection with the Annual Meeting of Shareholders to be held on May 12, 2015, at 2:00 p.m., at Prudential Financial’s Corporate Headquarters, 751 Broad Street, Newark, NJ 07102, and at any adjournment or postponement thereof. Proxy materials or a Notice of Internet Availability were first sent to shareholders on or about March 24, 2015.

 

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Item 1—Election of Directors

Our Board of Directors has nominated 11 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 2015 Annual Meeting. All 12 directors, then serving on the Board, attended the 2014 Annual Meeting.

James Unruh, 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 11 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 TENURE FOR 2015 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.   Since 2010, two new directors have joined the Board. We anticipate that over the next three years we will replace three of our longest tenured directors. Our Board’s blend of tenure strikes a balance that provides superior company, regulatory and industry knowledge, while executing effective oversight and independence in the best interests of our shareholders.

 

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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 Board has also carefully considered whether the slate of director nominees, taken as a whole, has representatives with the above-listed skills and qualifications.

Additionally, 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, Jr. Age: 51 Director Since: October 2008		Prudential Committees:   •   Executive   •  Finance   •   Investment (Chair)   •  Risk   Former Directorships Held During the Past Five Years:   •   Integra Life Sciences Corporation (August 2012)		Public Directorships:   •   RLJ Lodging Trust   •  Duke Realty Corporation

 

 

 

Skills and Qualifications

 

 

 

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		Item 1—Election of Directors: Director Nominees

 

 

		Gordon M. Bethune Age: 73 Director Since: February 2005		Prudential Committees:   •   Compensation   •  Corporate Governance and Business Ethics		Public Directorships:   •   Honeywell International Inc.   •   Sprint Nextel Corporation

 

 

 

Skills and Qualifications

 

 

		Gilbert F. Casellas Age: 62 Director Since: January 2001 (Director of Prudential Insurance since April 1998)		Prudential Committees:   •   Corporate Governance and Business Ethics   •   Finance

 

 

 

Skills and Qualifications

 

 

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		Item 1—Election of Directors: Director Nominees

 

 

		James G. Cullen Age: 72 Director Since: January 2001 (Director of Prudential Insurance since April 1994)		Prudential Committees:   •   Finance   •  Investment		Public Directorships:   •   Agilent Technologies, Inc. (Non-Executive Chairman) •  Avinger Inc. •  Johnson & Johnson (Mr. Cullen will not be standing for re-election in May 2015) •  Keysight Technologies •  NeuStar, Inc.(Non-Executive  Chairman)

 

 

 

Skills and Qualifications

 

 

		Mark B. Grier Age: 62 Director Since: January 2008		Prudential Committees:   •   None

 

 

 

Skills and Qualifications

 

 

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		Item 1—Election of Directors: Director Nominees

 

 

		Constance J. Horner Age: 73 Director Since: January 2001 (Director of Prudential Insurance since April 1994)		Prudential Committees:   •   Compensation                           •   Corporate Governance and Business Ethics (Chair)   •  Executive   •   Risk		Public Directorships:               •   Ingersoll-Rand plc   •  Pfizer Inc.

 

 

 

Skills and Qualifications

 

 

		Martina Hund-Mejean Age: 54 Director Since: October 2010		Prudential Committees:   •   Audit

 

 

 

Skills and Qualifications

 

 

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		Item 1—Election of Directors: Director Nominees

 

		Karl J. Krapek Age: 66 Director Since: January 2004 Lead 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

Mr. Krapek is a co-founder of The Keystone Companies, which was founded in 2002 and develops residential and commercial real estate. Mr. Krapek served as the President and COO of United Technologies Corporation (“UTC”) from 1999 until his retirement in January 2002. Prior to that time, Mr. Krapek held other management positions at UTC, which he joined in 1982.

 

 

Skills and Qualifications

 

 

		Christine A. Poon Age: 62 Director Since: September 2006		Prudential Committees:   •   Executive   •  Finance (Chair)   •   Investment   •  Risk		Public Directorships:   •   Koninklijke Philips Electronics NV   •  Regeneron Pharmaceuticals   •   The Sherwin-Williams Company

Ms. Poon served as Dean of Fisher College of Business at The Ohio State University from May 2009 until November 2014 and is now a member of the faculty. She served as Vice Chairman and a Member of the Board of Directors of Johnson & Johnson from 2005 until her retirement in March 2009. Ms. Poon joined Johnson & Johnson in 2000 as Company Group Chair in the Pharmaceuticals Group. She became a Member of Johnson & Johnson’s Executive Committee and Worldwide Chair, Pharmaceuticals Group, in 2001, and served as Worldwide Chair, Medicines and Nutritionals from 2003 to 2005. Prior to joining Johnson & Johnson, she served in various management positions at Bristol-Myers Squibb for 15 years.

 

 

Skills and Qualifications

 

 

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		Item 1—Election of Directors: Director Nominees

 

 

		Douglas A. Scovanner Age: 59 Director Since: November 2013		Prudential Committees:               •   Audit   Former Directorships Held During the Past Five Years:   •   TCF Financial Corporation (September 2010)

 

 

 

Skills and Qualifications

 

 

		John R. Strangfeld Age: 61 Director Since: January 2008 (Elected Chairman May 2008)		Prudential Committees:               •   Executive

 

 

 

Skills and Qualifications

 

 

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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, 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.

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 candidates 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. In anticipation of turnover over the next several years, the Committee is seeking several candidates who meet the criteria described under “Director Criteria, Qualifications and Experience.” The Committee is being assisted with its recruitment efforts by an independent search firm to recommend candidates who satisfy the Board’s criteria. The search firm also provides research and pertinent information regarding candidates, as requested.

Shareholder Nominations and Recommendations of Director Candidates

We recently amended our By-laws to permit a group of up to 20 shareholders who have owned at least 3% of our 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.

Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in our By-laws should follow the instructions under “Submission of Shareholder Proposals and Director Nominations” in this Proxy Statement.

Shareholders who wish to recommend candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer, Vice President and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director selection described under “Director Criteria, Qualifications and Experience.”

 

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		Corporate Governance: Director Attendance

 

Director Attendance

During 2014, the Board of Directors held 10 meetings. Together, the directors attended 98% of the combined total meetings of the full Board and the committees on which they served in 2014 and no director attended less than 89% of the combined total meetings of the full Board and the committees on which he or she served in 2014.

Director Independence

The current Board consists of 12 directors, two of whom are currently employed by the Company (Messrs. Strangfeld and Grier). The Board conducted an annual review and affirmatively determined that all of the non-employee directors (Ms. Horner, Ms. Hund-Mejean and Ms. Poon, and Messrs. Baltimore, Bethune, Casellas, Cullen, Krapek, Scovanner and Unruh) are “independent” as that term is defined in the listing standards of the NYSE and in Prudential Financial’s Corporate Governance Principles. In addition, the Board previously determined that Mr. Gaston Caperton, who did not stand for re-election at our 2014 Annual Meeting, was an “independent” director.

Independent Director Meetings

The independent directors generally meet in an executive session at both the beginning and the end of each regularly scheduled Board meeting, with the Lead Independent Director serving as Chair.

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.

 

 

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Letter from the Lead Independent Director

Under our Corporate Governance Principles and Practices, Prudential’s 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. As your Lead Independent Director, it is an honor to serve with my fellow Board members who share my commitment to strong independent Board leadership, effectiveness and diversity. This year, I have also participated in a video which is contained in our on-line proxy materials as well as on the Corporate Governance Section of the Prudential website.

As my first year as Lead Independent Director draws to a close, I want to let you know how the Board views board governance and why we believe that our philosophy and practices serve the best interests of our stakeholders.

Board Independence. Both the Board and Management believe that strong, independent Board leadership is a critical aspect of effective corporate governance. As the Lead Independent Director, I work with the other independent directors to oversee management. In order to provide that oversight, the independent directors generally meet in executive sessions at both the beginning and the end of each regularly scheduled Board meeting. I chair these sessions and serve as a liaison between the Chairman and the independent directors. I am also authorized to call additional meetings of the independent directors.

In my role as Lead Independent Director, I review and approve the information sent to the Board, including the quality, quantity and appropriateness and timeliness of such information, and approve the meeting agendas. It’s important that there is sufficient time for discussion of all agenda items. Accordingly, I evaluate and approve the meeting schedules and make changes if needed. I am also authorized to retain outside advisors and consultants to report directly to the Board of Directors on Board issues. I am also available, if requested by shareholders, for consultation and direct communication when appropriate.

Board Composition and Refreshment. Our Company’s business is international and multi-cultural. Diversity is a cornerstone value and priority for the Board.

The Corporate Governance and Business Ethics Committee screens and recommends candidates for nomination by the full Board. Using our skills matrix as a guide, individual conversations with directors, and the assistance of an independent search firm, the Committee identifies areas of expertise that would complement and enhance the current Board’s skills and experience. Over the past several years we have added two new Board members. Always maintaining a long-term approach to Board refreshment, the Committee routinely evaluates a diverse collection of candidates. The pool reflects individuals with demonstrated ability to identify trends that will impact Prudential’s competitive standing and long-term business opportunities.

Board Effectiveness. The Board recognizes that constructive board evaluation is as an essential component of good governance practices and promotes board effectiveness.

Our Corporate Governance and Business Ethics Committee reviews incumbent directors as part of the annual nomination process, and in the context of the overall review of the strengths and weaknesses of the Board as a whole.

The Committee reviews each incumbent director with respect to a variety of factors, including his or her attendance, participation in committee initiatives, skills, and overall contribution to the Board. In addition, the Committee works with an experienced outside third-party consultant to complement internal efforts by introducing an objective perspective and knowledge of best practices. We believe that this adds rigor to the process.

I appreciate the opportunity to serve as your Lead Independent Director. Under my leadership, the Board will maintain our independence of thought–and action–by governing in a responsible and prudent manner. We appreciate your continued support.

To learn more about the role of the Lead Independent Director, please watch a short video I have prepared by going to the Corporate Governance section at our website www.prudential.com/leadindependentdirector. We view this video as an additional means for our shareholders to evaluate the Board.

On behalf of the entire Board, thank you for your support and vote of confidence.

 

				Karl J. Krapek Lead Independent Director

 

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		Corporate Governance: Board Risk Oversight

 

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;

 

•

Finance Committee: risks involving the capital structure of the enterprise, including borrowing, liquidity, allocation of capital, major capital transactions and expenditures, and funding of benefit plans, statutory insurance reserves and policyholder dividends;

 

•

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

 

•

Risk Committee: In February 2015, the Board established a Risk Committee comprised of the chairs of each of the other Board committees in order to enhance the Board’s oversight of risks throughout the Company. The Risk Committee will also see that matters are appropriately elevated from the committees to the Board. The Board expects to further develop the Risk Committee’s risk oversight role during 2015.

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.

In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function and management’s establishment of appropriate systems for managing risk (including brand and reputational risk), credit/counterparty risk, market risk (including interest rate and asset/liability matching risk), insurance risk, product risk, operational risk, legal and regulatory/compliance risk, liquidity and capital risk, and emerging risk/event risk.

During 2014, the full Board received reports on the important strategic issues and risks facing the Company. The Board and committees also received reports from the Company’s Chief Risk Officer and other senior management regarding compliance with applicable risk-related policies, procedures and limits.

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 and the process to determine compensation pools and awards for employees and analyzed 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

 

 

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. 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,

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

 

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 number of meetings. 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.

Audit Committee

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, Messrs. Unruh and Scovanner and Ms. Hund-Mejean, are financially literate and are audit committee financial experts as defined by the SEC. The Audit Committee met 11 times in 2014.

Compensation Committee

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 “Compensation Discussion and Analysis” section of this Proxy Statement. The Compensation Committee met six times in 2014.

Corporate Governance and Business Ethics Committee

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. The Corporate Governance and Business Ethics Committee met six times in 2014.

Executive Committee

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. The Executive Committee did not meet in 2014.

Finance Committee

The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, subsidiary structure and major capital expenditures. The Finance Committee met nine times in 2014.

Investment Committee

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. The Investment Committee met four times in 2014.

Risk Committee

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. The Board expects to further develop the Risk Committee’s risk oversight role during 2015.

 

 

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		Corporate Governance: Certain Relationships and Related Party Transactions

 

The following table indicates the current members of each Board committee.

 

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.

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.

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 2014. The brother of Robert Falzon, our Executive Vice President and Chief Financial Officer, Michael Falzon, is a Vice President for Infrastructure Systems Development. In 2014, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was less than $370,000. 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 2014, the total compensation paid to Mr. Howard, including salary and bonus, was less than $130,000. 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

 

 

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 $50,000 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 Community Resources Oversight Committee, which oversees Prudential’s corporate social responsibility work. These directors inform the Company’s social responsibility efforts in strategic philanthropy, employee engagement, corporate community involvement and investing for social return.

 

 

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		Corporate Governance: Environmental, Sustainability and Corporate Social Responsibility

 

 

 

 

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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 2015. 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 2014 and 2013.

Worldwide Fees (In Millions)

 

Service		2014				2013
Audit(A)		$	47			$	45
Audit-Related(B)		$	4			$	4
Tax(C)		$	2			$	1
All Other			—				—
Total		$	53			$	50

 

(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 2014, tax compliance and preparation fees total $1.7M and tax advisory fees total $0.6M, and in 2013, tax compliance and preparation fees totaled $1.3M and tax advisory fees totaled $0.1M.

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 and tax services paid by these entities of $14M in 2014 and $12M in 2013.

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 their independence.

PricewaterhouseCoopers has been the Company’s independent auditor since 1996.

 

 

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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 Chairman 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 Chairman 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.

 

 

REPORT OF THE AUDIT COMMITTEE

Three non-management directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board. The Board has determined that each member of the Committee has no material relationship with the Company under the Board’s independence standards and that each is independent and financially literate under the listing standards of the NYSE and under the SEC’s standards relating to independence of audit committees.

In addition, the Board of Directors has determined that all of our Audit Committee members, Messrs. Unruh 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, 2014 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.

 

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		Item 3—Advisory Vote to Approve Named Executive Officer Compensation

 

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 fee, 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, 2014 for filing with the SEC.

THE AUDIT COMMITTEE

James A. Unruh (Chairman)

Martina Hund-Mejean

Douglas A. Scovanner

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 the 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 2014 executive compensation program and policies for the 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 the named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of the 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” advisory votes. Accordingly, the next “Say on Pay” vote will occur in 2016.

 

 

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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 10022			38,247,251	(1)			8.4%
The Vanguard Group 100 Vanguard Boulevard, Malvern, PA 19355			24,156,986	(2)			5.29%

 

(1)

Based on information as of December 31, 2014 contained in a Schedule 13G/A filed with the SEC on January 23, 2015 by BlackRock, Inc. The Schedule 13G/A indicates that BlackRock, Inc. has sole dispositive power with respect to all of these shares and sole voting power with respect to 32,757,612 of these shares.

 

(2)

Based on information as of December 31, 2014 contained in a Schedule 13G filed with the SEC on February 10, 2015. The schedule 13G indicates that The Vanguard Group has sole dispositive power with respect to 23,413,509 of the shares, shared dispositive power with respect to 743,477 of the shares and sole voting power with respect to 790,151 of these 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 13, 2015, by:

 

•

each Director and Named Executive Officer; and

 

•

all Directors and Executive Officers of the Company 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				Percent of Class
Thomas J. Baltimore, Jr.			250								250				28,118				28,368				*
Gordon M. Bethune			13,935								13,935				1,808				15,743				*
Gilbert F. Casellas			500								500				27,840				28,340				*
James G. Cullen			2,033								2,033				41,115				43,148				*
Constance J. Horner			6,720								6,720				6,200				12,920				*
Martina Hund-Mejean			128								128				10,948				11,076				*
Karl J. Krapek			1,007								1,007				39,791				40,798				*
Christine A. Poon			7,967								7,967				12,519				20,486				*
Douglas A. Scovanner			4,600								4,600				5,181				9,781				*
James A. Unruh			32,377								32,377				4,552				36,929				*
John R. Strangfeld			344,926	5			1,146,178				1,491,104				345,996				1,837,100				*
Mark B. Grier			321,761				275,906				597,667				252,649				850,316				*
Robert Falzon			24,055				31,269				55,324				91,443				146,767				*
Charles F. Lowrey			44,066				414,475				458,541				162,418				620,959				*
Stephen Pelletier			3,351				42,141				45,492				137,187				182,679				*
All directors and executive officers as a group (21 persons)			970,847				2,485,420				3,456,267				1,520,570				4,976,837				1.1%

 

*	Less than 1%.

 

(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 13, 2015.

 

(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, 28,118; Mr. Bethune, 1,808; Mr. Casellas, 27,840; Mr. Cullen, 41,115; Ms. Horner, 6,200; Ms. Hund-Mejean 10,948; Mr. Krapek, 39,791; Ms. Poon, 12,519; Mr. Scovanner, 5,181; Mr. Unruh, 4,552; Mr. Strangfeld, 39,210; and Mr. Pelletier, 30,049.

 

(3)

Includes the following shares representing the target number of shares to be received prior to the impact of the Company’s performance versus the ROE goals under the performance shares program described under “Compensation Discussion and Analysis”: Mr. Strangfeld, 89,456; Mr. Grier, 73,671; Mr. Falzon, 26,736; Mr. Lowrey, 47,360; and Mr. Pelletier, 30,155.

 

(4)	Includes the following unvested stock options: Mr. Strangfeld, 217,330; Mr. Grier, 178,978; Mr. Falzon, 64,707; Mr. Lowrey, 115,058; and Mr. Pelletier, 76,983.

 

(5)	Includes 4,400 shares held by the John and Mary K. Strangfeld Foundation.

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 2014 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 the 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 2014:

 

Compensation Element*		Director Compensation Program
Annual 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 has 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. Poon and Ms. Horner. The Community Resources Oversight Committee met three times in 2014.

 

***

As of December 31, 2014, each of our non-employee Directors satisfied this guideline, with the exception of our newest Director, Mr. Scovanner, who joined the Board in November 2013. 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 and fees 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

 

2014 Director Compensation

 

		Fees Earned or Paid in
Name		Cash($)				Stock Awards($)(1)				Total($)
Thomas J. Baltimore, Jr.			170,000				150,000				320,000
Gordon M. Bethune			150,000				150,000				300,000
Gaston Caperton			63,750				0				63,750
Gilbert F. Casellas			153,750				150,000				303,750
James G. Cullen			183,333				150,000				333,333
Constance J. Horner			173,750				150,000				323,750
Martina Hund-Mejean			150,000				150,000				300,000
Karl J. Krapek			205,000				150,000				355,000
Christine A. Poon			174,167				150,000				324,167
Douglas A. Scovanner			150,000				150,000				300,000
James A. Unruh			185,000				150,000				335,000

 

(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, 2014, 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: 28,118 and $2,543,554; Mr. Bethune: 1,808 and $163,551; Mr. Casellas: 27,840 and $2,518,406; Mr. Cullen: 41,115 and $3,719,262; Ms. Horner: 6,200 and $560,852; Ms. Hund-Mejean: 10,948 and $990,356; Mr. Krapek: 44,969 and $4,067,895; Ms. Poon: 12,519 and $1,132,468; Mr. Scovanner: 5,181 and $468,673 and Mr. Unruh: 7,336 and $663,614.

 

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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 2014 Summary Compensation Table and other compensation tables contained in this Proxy Statement:

 

Executive Summary

 

(1)	Excludes impact on attributed equity of accumulated other comprehensive income and foreign currency exchange rate remeasurement included in net income or loss.

 

 

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Executive Compensation Highlights

The Compensation Committee made the following changes to our executive compensation program to align with evolving competitive and governance practices:

 

 

 

(1)

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

(2)

Represents long-term awards granted in 2015 and 2014 for 2014 and 2013 performance, respectively.

 

 

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		Compensation Discussion and Analysis: Executive Summary

Consideration of Last Year’s “Say on Pay” Vote

Following our 2014 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executive compensation (“Say on Pay”) that was held at the meeting with respect to the 2013 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 86% of the votes cast on the proposal were voted in support of the compensation of our NEOs. This compares with approximately 78% of the votes cast in support of the “Say on Pay” proposal submitted for shareholder consideration at the 2013 Annual Meeting of Shareholders. In part in response to the 2014 vote, the Committee took several actions to better align our executive compensation program with evolving competitive and governance practices. See “Executive Compensation Highlights” above.

Our Commitment to Shareholder Engagement

In 2014, we again demonstrated our commitment to shareholder engagement, communication and transparency. During the year, representatives of the Company met with holders of more than a majority of the total number of shares of Common Stock outstanding.

Ongoing Corporate Governance Policies

We endeavor to maintain good corporate governance standards, including those that impact the oversight of our executive compensation policies and practices. We have the following policies and practices:

 

 

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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Aligning our Compensation Policies with Shareholders’ Interests

 

 

Specific Compensation and Corporate Governance Policies and Practices

Our compensation philosophy and related governance features are complemented by several specific policies and practices that are designed to align our executive compensation with long-term shareholder interests, including:

 

 

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		Compensation Discussion and Analysis: Philosophy and Objectives of Our Executive Compensation Program

 

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:

 

 

2014 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 EPS achievement relative to the Company’s externally disclosed EPS targets.

 

•

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

 

 

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		Compensation Discussion and Analysis: How We Make Compensation Decisions

 

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:

 

 

Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the non-employee 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 employee 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.

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 2014, the Compensation Consultant performed the following specific services:

 

 

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The Compensation Consultant provided no services to management during 2014.

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 2014 was $134,645. 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 2014, the Peer Group consisted of the following 20 companies:
• AFLAC, Incorporated   • American Express Company   • Ameriprise Financial, Inc.   • Bank of America Corporation   • The Bank of New York Mellon Corporation   • BlackRock, Inc.		• Capital One Financial Corporation   • Citigroup Inc.   • Franklin Resources, Inc.   • JPMorgan Chase & Co.   • Lincoln National   • Manulife Financial Corporation   • MetLife, Inc.		• Northern Trust Corporation   • PNC Financial Services Group, Inc.   • Principal Financial Group   • State Street Corporation   • Sun Life Financial Inc.   • U.S. Bancorp   • Wells Fargo & Company		For the 2014 performance period, the Committee eliminated The Hartford Financial Services Group, Inc. from the Peer Group as its business mix has shifted significantly to property and casualty insurance.

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.

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 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

 

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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 and the purpose of each component are presented in the following table. We measure the program’s competitiveness both by comparing relevant market data against the 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.

 

Compensation Component		Key Characteristics		Purpose		Principal 2014 Actions
Base Salary		Fixed compensation component. Reviewed annually and adjusted if and when appropriate.		Intended to compensate executive officers fairly for the responsibility level of the position held.		Mr. Pelletier received a salary increase upon his promotion to Executive Vice President and Chief Operating Officer, U.S. Businesses in April 2014. None of the other NEOs received an increase in base salary in 2014.
Annual Incentive Awards		Variable compensation component. Performance-based award opportunity. Payable based on corporate and business unit performance and level of individual contributions to that performance.		Intended to motivate and reward executive officers for achieving our short-term (annual) business objectives; intended to encourage accountability by rewarding based on absolute performance and performance relative to life insurance peers.		The NEOs received annual incentive awards ranging from $3,300,000 to $7,800,000 in February 2015 (with 30% of these amounts being mandatorily deferred into the Book Value Performance Program).
Long-Term Incentive Awards		Variable compensation component. Performance-based award opportunity, generally granted annually as a combination of performance shares and units, stock options and book value units. Amounts actually earned will vary based on stock price appreciation and corporate performance.		Intended to motivate executive officers by tying 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 and to reinforce the link between the interests of our executive officers and our shareholders.		The NEOs received long-term incentive awards with aggregate values ranging from $3,000,000 to $8,500,000 in February 2015 (not including the mandatory deferral of 30% of the annual incentive awards into the Book Value Performance Program).
Health, Welfare, and Retirement Plans		Fixed compensation component.		Intended to provide benefits that promote employee health and support employees in attaining financial security.		No changes to benefits in 2014 that affected the NEOs.
Perquisites and Other Personal Benefits		Fixed compensation component.		Intended to provide a business-related benefit to our Company, and to assist in attracting and retaining executive officers.		No changes to benefits in 2014 that affected the NEOs.
Post-Employment Compensation		Fixed compensation component.		Intended to provide temporary income following an executive officer’s involuntary termination of employment and, in the case of a change of control, to also provide continuity of management.		No changes to programs in 2014 that affected the NEOs.

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. Investors should not apply these performance measures and goals to other contexts.

 

 

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Annual Incentive Award Decisions for 2014

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

At the beginning of 2014, 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
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:
•   EPS based on after-tax AOI of $9.21 in 2014, and EPS under the Annual Incentive Award Program formula of $9.89, which exceeded the high end of guidance;   •   After-tax AOI for our Financial Services Businesses of $4.36 billion for 2014, compared to $4.59 billion for 2013;   •   Exceeded the 13%-14% ROE goal by a significant margin;   •   Growth in book value per share of Common Stock, excluding accumulated other comprehensive income and the impact of foreign currency exchange rate remeasurement on net income or loss, to $64.75 at December 31, 2014 versus $59.99 per share at December 31, 2013, an increase of $4.76 after payment of four quarterly dividends totaling $2.17 per share;   •   Retirement and Individual Annuities account values surpassed the $500 billion milestone, reaching a record high $522.5 billion at December 31, 2014;   •   Assets under management reached a record-high $1.176 trillion at December 31, 2014, up 6% from a year earlier;		•   International Insurance pre-tax adjusted operating income of $3.25 billion for 2014, up 3% from 2013;   •   Expansion of our leading position in the pension risk transfer market with over $37 billion of case wins in 2014;   •   Restructuring of the Closed Block Business and resulting enhancement of our financial flexibility;   •   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 diversify risks and maintain appropriate returns; and   •   The Company’s ongoing constructive engagement with the Federal Reserve, international regulators, and other supervisory bodies.
ANNUAL INCENTIVE AWARD DECISION
Based on the Final Performance Factor and the Committee’s evaluation of his performance, in February 2015, the Committee recommended, and the independent members of our Board approved, an annual incentive award of $7,800,000 for Mr. Strangfeld for 2014, or approximately 1.39 times his target award amount. This award is the same as his 2013 annual incentive award. Of the $7,800,000, $2,340,000 was mandatorily deferred into the Book Value Performance Program.

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 of Directors approved, the following annual incentive awards for each of the other NEOs:

 

 

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Mr. Lowrey
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 a 3% increase in pre-tax AOI for 2014, compared to 2013;   •   His oversight of our distribution through Life Planners, which achieved constant dollar annualized new business premiums of $1.2 billion in 2014, representing a 6% increase from 2013;   •   His leadership in the active management of proprietary distribution at Gibraltar Life, resulting in an increase in agent productivity as measured by policies sold per agent, per month;   •   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;		•   His role in helping drive expansion into new markets outside of Japan, including key roles in our memorandum of understanding to acquire an indirect ownership interest in AFP Habitat in Chile and our acquisition of a 70% interest in an established life insurance company in Malaysia through the formation of a joint venture; and   •   His leadership of the U.S. Businesses during the first quarter of 2014, and transitioning of that position to Mr. Pelletier.
ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Lowrey’s annual incentive award was $5,400,000 or approximately 1.35 times his target award amount. This award compares to an annual incentive award of $5,600,000 for 2013, representing a decrease of 4%. Of the $5,400,000, $1,620,000 was mandatorily deferred into the Book Value Performance Program.

 

Mr. Pelletier
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 U.S. Retirement business to achievement of record-high pretax adjusted operating income of $1.2 billion for 2014;   •   His instrumental role in the expansion of our leading position in the pension risk transfer market, with over $37 billion of case wins in 2014;   •   His oversight of successful product development and diversification in the Annuities business, which recorded a 3% increase in account values as of December 31, 2014 compared to a year earlier;		•   His contributions to the success of our Asset Management business, which recorded a 7% increase in assets under management as of December 31, 2014 compared to a year earlier; and   •   His prudent oversight of our Individual Life Insurance and Group Insurance Businesses, including adaptation of Individual Life products to current market conditions and strategic actions in Group Insurance to reprice or allow termination of cases failing to meet profitability objectives.
ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Pelletier’s annual incentive award was $4,000,000 or approximately 1.33 times his target award amount. Of the $4,000,000, $1,200,000 was mandatorily deferred into the Book Value Performance Program.

 

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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.

To align to changes in market practice and to achieve a more strongly performance-based program, in February 2014 the Committee changed the long-term incentive mix to provide a greater portion in performance shares and units and less in stock options. The mix of long-term incentives granted in February 2014 and February 2015 with respect to 2013 and 2014 performance, respectively, 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. In addition, in the case of long-term incentive awards to any NEO who is subject to Section 162(m), the total amount of performance shares and units, restricted stock units, and book value units, as well as the annual incentive payment in any tax year, may not exceed 0.6% of our pre-tax AOI for the prior year.

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.

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. Previously, maximum awards ranged up to 150% of the targets.

The lower maximum award of 125% of target recognizes the Company’s sustainable ROE objective of 13% to 14%. The preliminary payout is 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.

Starting with the February 2015 awards with respect to the 2015 to 2017 performance period, the Company is introducing a relative performance modifier. This modifier provides a balance between absolute performance and performance relative to the North American Life Insurance subset of the Peer Group. It is based on the Company’s three-year performance in ROE, book value per share growth and EPS growth. The modifier will increase or decrease the award payment by up to 10% within the 0% to 125% range. The table below shows the components and weightings of the modifier.

 

Metric		Methodology		Weighting
ROE		Average annual ranking over 3 years			50	%
Book Value Per Share Growth		3-year compounded annual growth rate			25	%
EPS Growth		3-year compounded annual growth rate			25	%

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. The ROE figures are subject to standard adjustments for one-time items and Standard & Poor’s 500 performance as part of our pre-set formulaic framework.

For awards commencing in 2013 and thereafter and payouts in respect of certain years within the performance periods of outstanding awards, ROE will also be adjusted to exclude the non-economic effects as of December 31, 2012 and for subsequent periods of foreign exchange remeasurement of non-yen liabilities and assets.

 

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

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.

BOOK VALUE PERFORMANCE PROGRAM

Our Book Value Performance Program is intended to link 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. Book value per share is calculated by dividing our book value by the number of shares of our Common Stock outstanding. Our calculations of book value and book value per share exclude certain balance sheet items that do not, and may never, flow through the income statement. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the 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 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

 

–

for the NEOs, 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.

 

•

For purposes of the Book Value Performance Program, book value units are based on the equity attributable to our Financial Services Businesses divided by the number of shares of our Common Stock outstanding at the end of the period, on a fully diluted basis. For 2013 and thereafter, these units track the value of book value per share of Common Stock, excluding total accumulated other comprehensive income and the non-economic effects as of December 31, 2012 and for subsequent periods of foreign exchange remeasurement of non-yen liabilities and assets.

 

•

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

 

Named Executive Officer		Number of Book Value Units Held at January 1, 2014 (#)				Value of Book Value Units Held at January 1, 2014 1 ($)				Value of Book Value Units Distributed in 2014 2 ($)				Value of Book Value Units Awarded in 2014 3 ($)				Number of Book Value Units Held at December 31, 2014 (#)				Value of Book Value Units Held at December 31, 2014 4 ($)
John R. Strangfeld			106,548				6,391,815				3,039,573				4,040,087				123,226				7,978,884
Robert M. Falzon			11,958				717,360				310,448				1,117,074				25,404				1,644,909
Mark B. Grier			87,788				5,266,402				2,483,106				3,350,082				102,240				6,620,040
Charles F. Lowrey			63,008				3,779,850				1,738,390				2,580,050				77,038				4,988,211
Stephen Pelletier			18,234				1,093,858				539,490				905,069				24,328				1,575,238

 

(1)	Represents the aggregate market value of the number of book value units held at January 1, 2014 obtained by multiplying the book value per share of $59.99 as of December 31, 2013 by the number of book value units outstanding.

 

(2)	Represents the aggregate market value distributed on February 21, 2014.

 

(3)	Represents the aggregate market value awarded on February 11, 2014 for all NEOs. Mr. Pelletier received an additional grant upon his promotion on April 7, 2014 which is included.

 

(4)	Represents the aggregate market value of the number of book value units held at December 31, 2014 obtained by multiplying the book value per share of $64.75 as of December 31, 2014 by the number of book value units outstanding.

LONG-TERM INCENTIVE AWARD DECISIONS FOR 2014

In February 2015, the Committee granted long-term incentive awards to the NEOs based on updated market data and its assessment of their individual performance during 2014. 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 2014 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 as well as 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 book value per share).

The following table presents the long-term incentive awards granted to each NEO in February 2015, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of the 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 2016. For discussion of the long-term incentive awards granted in February 2014 for 2013 performance and included in this year’s Summary Compensation Table, see our 2014 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		$	4,040,000			$	1,700,000			$	2,550,000			$	2,550,000			$	10,840,000
Robert M. Falzon		$	1,590,000			$	600,000			$	900,000			$	900,000			$	3,990,000
Mark B. Grier		$	3,350,000			$	1,400,000			$	2,100,000			$	2,100,000			$	8,950,000
Charles F. Lowrey		$	2,520,000			$	900,000			$	1,350,000			$	1,350,000			$	6,120,000
Stephen Pelletier		$	2,000,000			$	800,000			$	1,200,000			$	1,200,000			$	5,200,000

 

(1)	Includes amounts that were mandatorily deferred from the Annual Incentive Program (30%) that total $2,340,000 for Mr. Strangfeld; $990,000 for Mr. Falzon; $1,950,000 for Mr. Grier; $1,620,000 for Mr. Lowrey, and $1,200,000 for Mr. Pelletier.

 

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PERFORMANCE SHARE AND PERFORMANCE UNIT AWARDS

The NEOs currently have three performance share and unit awards outstanding. In February 2015, the Committee granted the performance share and unit awards for the 2015 to 2017 performance period. The key features of these 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
2013–2015		- Return on equity		Average ROE of 13.5% for the 2013 through 2015 performance period.		100% at target level and 150% if average ROE is 14.5% or more.		To be determined between 0% and 150% of target number by the Committee in February 2016 based on average ROE over the 2013-2015 performance period compared to the Company’s ROE targets.
2014–2016		- Return on equity		Average ROE of 13.5% for the 2014 through 2016 performance period.		100% at target level and 125% if average ROE is 14% or more.		To be determined between 0% and 125% of the target number by the Committee in February 2017 based on average ROE over the 2014-2016 performance period compared to the Company’s ROE targets.
2015–2017		- Return on equity - 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.

 

 

The final award payments to the NEOs in February 2015 for the 2012 to 2014 performance period were:

 

Named Executive Officers		Target Number of Shares/Units Awarded				Actual Number of Shares/Units Awarded1
John R. Strangfeld			61,540				92,310
Robert M. Falzon			3,620				5,430
Mark B. Grier			47,784				71,676
Charles F. Lowrey			28,960				43,440
Stephen Pelletier			9,412				14,118

 

(1)	Targets and awards are 50% shares and 50% units.

 

 

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		Compensation Discussion and Analysis: Post-Employment Compensation

 

 

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.”

We periodically 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 or reimbursements to any of our executive officers.

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

 

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		Compensation Discussion and Analysis: Other Compensation Related Policies

 

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 takeovers 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.

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.

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 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, material financial restatements, and improper conduct (including failure to report). The Company’s former clawback policy covered only a material restatement of the Company’s annual consolidated income statement, and only book value program awards.

 

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The new clawback policy covers all executive officers (including the NEOs) and applies to 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 the Company to disclose to its shareholders not later than the filing of the next following 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 the Company’s 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 also adopted a resignation notice period requirement as part of the terms and conditions of all long-term awards granted to certain designated grades of executives, including the NEOs. The requirement is applicable to awards granted in 2015 and subsequent years. The requirement is intended to reduce the adverse and disruptive effect of a sudden voluntary departure of a participant, and requires participants to provide notice for a specified period prior to the effective date of a voluntary resignation, or otherwise forfeit their outstanding long-term awards.

The terms and conditions of long-term awards also provide for forfeiture in the event participants violate applicable non-solicitation or non-compete 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 below the level of senior vice president. These awards are effective on the 15th of the month following the applicable event. The Committee approves any long-term incentive awards to newly hired or promoted senior executives. The grant date for these awards is the applicable meeting date of the Committee at which the awards are approved.

Under the terms of our Omnibus Incentive Plan (the “Omnibus Plan”), which was approved by shareholders in 2003, stock options are required to be priced at the closing market price of our Common Stock on the date of grant. The number of shares of Common Stock subject to a stock option grant to an individual is determined by dividing the compensation value 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

 

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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 equity securities of the Company 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.

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

 

Impact of Tax Policies

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” under Section 162(m) to the extent practicable. In 2014, 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.

The Omnibus Plan contains an overall limit on compensation paid to each executive officer to comply with the conditions for determining “performance-based compensation” under Section 162(m). Under the terms of the Omnibus Plan, the total amount of annual incentives, book value units, performance shares and units, and restricted stock units awarded to a NEO who is subject to Section 162(m) in a taxable year cannot exceed 0.6% of our pre-tax AOI for the prior year.

 

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Executive Compensation

2014 Summary Compensation Table

The following table presents, for the years ended December 31, 2014, 2013, and 2012, 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, 2014.

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 2014 performance year compensation, see the “Supplemental Compensation Analysis” in the CD&A.

 

 

(1)	The amounts reported in the Salary column for 2014 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 $45,800, $15,600, $37,200, $20,400, and $14,908, respectively.

 

(2)	The amounts reported in the Bonus column represent bonuses paid in February 2014 for performance in 2013 and February 2013 for performance in 2012.

 

For 2013 and 2012, this column does not include 30% of the total bonus carved out to the Book Value Performance Program, which will appear in the Non-Equity Plan Compensation column of the Summary Compensation Table, for the applicable fiscal year in which it is paid.

 

The amounts excluded in the table above for 2013 are $2,340,000 for Mr. Strangfeld; $597,000 for Mr. Falzon; $1,950,000 for Mr. Grier; and $1,680,000 for Mr. Lowrey.

 

The amounts excluded in the table above for 2012 are $1,689,000 for Mr. Strangfeld; $1,447,500 for Mr. Grier; and $1,215,000 for Mr. Lowrey.

 

(3)

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 2014 are 1.25 times the target amounts, and for 2013 and 2012 are 1.5 times the target amounts.

 

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.

 

For 2013, the maximum performance shares and units payable and valued at the grant date price of $57.00 to Messrs. Strangfeld, Falzon, Grier, and Lowrey are 88,713 or $5,056,641; 20,874 or $1,189,818; 73,059 or $4,164,363; and 46,965 or $2,677,005, respectively.

 

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For 2012, the maximum performance shares and units payable and valued at the grant date price of $59.41 to Messrs. Strangfeld, Grier, and Lowrey are 92,310, or $5,484,137; 71,676 or $4,258,271; and 43,440 or $2,580,770, respectively.

 

(4)

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.

 

(5)

The aggregate amounts reported in the Non-Equity Incentive Plan Compensation column 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:

 

 

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The amounts in this column for 2013 represent the value of the book value units paid in February 2014 and for 2012 represent the value of the book value units paid in February 2013. For Mr. Falzon, 2014 and 2013 also include the value of carried interest payments of $15,600 and $140,660, respectively.

 

For Mr. Lowrey, 2014, 2013 and 2012 also include the value of carried interest payments of $237,147, $232,360 and $546,934, respectively.

 

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.

 

(6)

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, 2011, December 31, 2012, December 31, 2013 and December 31, 2014, as applicable; namely, the RP 2000 generational mortality table with white collar adjustments for 2011, 2012 and 2013, and the RP 2014 generational mortality table with white collar adjustments and an adjustment to reflect recent Prudential-specific experience for 2014, an interest discount rate of 4.85% for 2011, 4.05% for 2012, 4.95% for 2013 and 4.10% for 2014, a Cash Balance Formula interest crediting rate of 4.25% for 2011, 4.25% for 2012, 4.25% for 2013 and 4.25% for 2014, and a PSI Cash Balance Formula interest crediting rate of 5.00% for 2012, 5.00% for 2013 and 5.00% for 2014. 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, 2014).

 

The amounts reported in this column include payments from the Supplemental Retirement Plan of $14,415 for Mr. Grier and $9,399 for Mr. Lowrey in 2012; $485 for Mr. Falzon, $2,431 for Mr. Grier and $1,395 for Mr. Lowrey in 2013; and $2,524 for Mr. Falzon, $21,367 for Mr. Grier and $13,899 for Mr. Lowrey in 2014; and above-market interest on the SESP of $4,854 for Mr. Strangfeld, $3,140 for Mr. Grier and $1,183 for Mr. Lowrey in 2012; $2,451 for Mr. Strangfeld, $79 for Mr. Falzon, $1,616 for Mr. Grier and $635 for Mr. Lowrey in 2013; and $82 for Mr. Strangfeld, $6 for Mr. Falzon, $56 for Mr. Grier, $24 for Mr. Lowrey and $17 for Mr. Pelletier in 2014.

 

The actual change in pension value for Mr. Strangfeld in 2013 was $(856,310). In accordance with SEC instructions, the amount included in this column for the change in pension value for 2013 is $0.

 

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

 

(8)	Mr. Falzon was appointed an executive officer in March 2013.

 

(9)	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			2014			$	32,437			$	8,615			$	45,800			$	86,852
			2013			$	33,508			$	8,615			$	45,800			$	87,923
			2012			$	50,691			$	8,615			$	46,000			$	105,306
Robert M. Falzon			2014			$	15,047			$	8,000			$	15,600			$	38,647
			2013			$	12,838			$	7,785			$	13,585			$	34,208
Mark B. Grier			2014			$	39,243			$	10,400			$	37,200			$	86,843
			2013			$	36,292			$	10,200			$	37,400			$	83,892
			2012			$	35,272			$	10,000			$	37,600			$	82,872
Charles F. Lowrey			2014			$	15,470			$	10,392			$	20,400			$	46,262
			2013			$	17,577			$	10,200			$	20,600			$	48,377
			2012			$	18,311			$	9,892			$	20,800			$	49,003
Stephen Pelletier			2014			$	20,661			$	8,077			$	14,908			$	43,646

 

(1)

For Messrs. Strangfeld and Grier, the amounts reported in the Perquisites column for 2014 represent the incremental cost for security services of $16,881 and $17,097, respectively, and the costs associated with Company-provided vehicles for personal and commuting purposes of $15,556 and $22,146, 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 ($260,000 in 2014) 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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Table of Contents

		Executive Compensation: Grants of Plan-based Awards

 

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 Plan) and grants of equity awards made during 2014 for 2013 performance.

2014 Grants of Plan-based Awards Table

 

Name		Grant Date				Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)1								Estimated Future Payouts Under Equity Incentive Plan Awards2								All Other Option Awards; Number of Securities Underlying Options (#)3				Exercise or Base Price of Option Awards ($/Sh)				Grant Date Fair Value of Stock and Option Awards($)4
						Target ($)				Maximum ($)				Target (#)				Maximum (#)
John R. Strangfeld			n/a			$	5,600,000			$	11,200,000
			02/11/14												28,863				36,079											$	2,439,789
			02/11/14												28,863				36,079											$	2,439,789
			02/11/14																				73,594			$	84.53			$	1,594,046
			02/11/14			$	4,040,087
Robert M. Falzon			n/a			$	2,450,000			$	4,900,000
			02/11/14												8,829				11,036											$	746,315
			02/11/14												8,829				11,036											$	746,315
			02/11/14																				22,511			$	84.53			$	487,588
			02/11/14			$	1,117,074
Mark B. Grier			n/a			$	4,800,000			$	9,600,000
			02/11/14												23,770				29,713											$	2,009,278
			02/11/14												23,770				29,713											$	2,009,278
			02/11/14																				60,607			$	84.53			$	1,312,748
			02/11/14			$	3,350,082
Charles F. Lowrey			n/a			$	4,000,000			$	8,000,000
			02/11/14												15,281				19,101											$	1,291,703
			02/11/14												15,281				19,101											$	1,291,703
			02/11/14																				38,962			$	84.53			$	843,917
			02/11/14			$	2,580,050
Stephen Pelletier			n/a			$	3,000,000			$	6,000,000
			04/07/14												5,243				6,554											$	425,574
			04/07/14												5,243				6,554											$	425,574
			04/07/14																				13,364			$	81.17			$	279,308
			04/07/14			$	300,010
			02/11/14												5,094				6,368											$	430,596
			02/11/14												5,094				6,368											$	430,596
			02/11/14																				12,988			$	84.53			$	281,320
			02/11/14			$	605,059

 

(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 2014 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 11, 2014 and a promotional award to Mr. Pelletier on April 7, 2014, based on the book value per share of the company of $59.99 as originally reported as of December 31, 2013.

 

(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 2014. 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 2014 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 2014. 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 11, 2014 grant of stock options is the closing price of our Common Stock on the grant date of February 11, 2014 ($84.53 per share). The exercise price for the April 7, 2014 grant of stock options to Mr. Pelletier is the closing price of our Common Stock on the grant date of April 7, 2014 ($81.17).

 

(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 11, 2014 ($84.53 per share). For Mr. Pelletier’s grant on April 7, 2014, the Grant Date Fair Value amount is based on the target number of performance shares and performance units multiplied by the closing price of our Common Stock on the grant date April 7, 2014 ($81.17).

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.

 

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Table of Contents

		Executive Compensation: Outstanding Equity Awards

 

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 11, 2014, 5.63 year life expected for each option, expected dividend yield is 2.7%, risk-free rate of return of 1.74%, and expected price volatility of 35.52%, and for the grant of April 7, 2014, 5.63 year life expected for each option, expected dividend yield is 2.7%, risk-free rate of return of 1.87%, and expected price volatility of 35.52%.

Outstanding Equity Awards

The following table provides information on the NEOs’ outstanding equity awards as of December 31, 2014. 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.

2014 Outstanding Equity Awards at Fiscal Year-End Table

 

							Option Awards1																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			2/11/2014				0				73,594			$	84.53				2/11/2024				57,726			$	5,221,894
			2/12/2013				82,364				164,730			$	57.00				2/12/2023				59,142			$	5,349,985
			2/14/2012				149,123				74,562			$	59.41				2/14/2022				61,540			$	5,566,908
			2/8/2011				170,667				0			$	64.01				2/8/2021
			2/9/2010				135,136				0			$	48.36				2/9/2020
			2/12/2008				146,315				0			$	69.03				2/12/2018
			1/18/2008				143,177				0			$	80.00				1/18/2018
			2/13/2007				66,310				0			$	91.73				2/13/2017
			2/14/2006				71,628				0			$	76.15				2/14/2016
Robert Falzon			2/11/2014				0				22,511			$	84.53				2/11/2024				17,658			$	1,597,343
			2/12/2013				0				38,760			$	57.00				2/12/2023				13,916			$	1,258,841
			2/14/2012				0				4,386			$	59.41				2/14/2022				3,620			$	327,465
Mark B. Grier			2/11/2014				0				60,607			$	84.53				2/11/2024				47,540			$	4,300,468
			2/12/2013				0				135,660			$	57.00				2/12/2023				48,706			$	4,405,945
			2/14/2012				0				57,895			$	59.41				2/14/2022				47,784			$	4,322,541
			2/13/2007				66,310				0			$	91.73				2/13/2017
			2/14/2006				63,669				0			$	76.15				2/14/2016
Charles F. Lowrey			2/11/2014				0				38,962			$	84.53				2/11/2024				30,562			$	2,764,639
			2/12/2013				43,604				87,210			$	57.00				2/12/2023				31,310			$	2,832,303
			2/14/2012				70,176				35,088			$	59.41				2/14/2022				28,960			$	2,619,722
			2/8/2011				74,667				0			$	64.01				2/8/2021
			2/9/2010				41,581				0			$	48.36				2/9/2020
			2/10/2009				45,978				0			$	25.30				2/10/2019
			2/12/2008				41,644				0			$	69.03				2/12/2018
			1/18/2008				35,795				0			$	80.00				1/18/2018
			2/13/2007				7,369				0			$	91.73				2/13/2017
			2/14/2006				7,959				0			$	76.15				2/14/2016
Stephen Pelletier			4/7/2014				0				13,364			$	81.17				4/7/2024				10,486			$	948,564
			2/11/2014				0				12,988			$	84.53				2/11/2024				10,188			$	921,606
			2/12/2013				14,535				29,070			$	57.00				2/12/2023				10,438			$	944,221
			2/14/2012				11,403				11,404			$	59.41				2/14/2022				9,412			$	851,410
			2/8/2011				11,733				0			$	64.01				2/8/2021
			2/9/2010				2,599				0			$	48.36				2/9/2020
			10/14/2008				4,370				0			$	54.10				10/14/2018
			5/13/2008				1,865				0			$	73.86				5/13/2018
			2/12/2008				3,940				0			$	69.03				2/12/2018
			1/18/2008				17,898				0			$	80.00				1/18/2018
			2/13/2007				6,080				0			$	91.73				2/13/2017

 

(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 target payout level for the 2012, 2013, and 2014 grants. The dollar values reported represent the estimated value of the outstanding performance shares and performance units at the target payout level for the 2012, 2013 and 2014 grants, based on the closing market price for our Common Stock on December 31, 2014 ($90.46 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 2012 grant as the 2012-2014 performance cycle, the 2013 grant as the 2013-2015 performance cycle, and the 2014 grant as the 2014-2016 performance cycle.

 

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Table of Contents

		Executive Compensation: Option Exercises and Stock Vested

 

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, 2014 through December 31, 2014.

2014 Option Exercises and Stock Vested Table

 

Name		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			95,026				2,618,422				66,150				5,591,660
Robert M. Falzon			27,322				821,027				4,136				349,616
Mark B. Grier			436,692				10,171,336				51,268				4,333,684
Charles F. Lowrey			29,976				1,521,302				28,944				2,446,636
Stephen Pelletier			12,600				268,733				9,098				769,054

 

(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 2011 performance shares grants and payout of the 2011 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 11, 2014, $84.53.

Pension Benefits

As part of its compensation review, the Compensation Committee considered the dollar amount change in pension value for Mr. Strangfeld and the other NEOs. The change in the present value of Mr. Strangfeld’s pension for 2014 reflects a number of factors, including his 37 years of service, his age, his average earnings, changes in interest rates and life expectancy assumptions used to calculate the pension plan obligations. These factors, as well as our plan design that updates average earnings every other year, resulted in a significant increase in Mr. Strangfeld’s pension accrual for 2014. Pension values may fluctuate significantly from year to year and it is expected that in 2015, should interest rates remain unchanged, the change in Mr. Strangfeld’s pension accrual will be substantially lower. Alternatively, if the discount rate were to rise, it is possible that Mr. Strangfeld’s change in pension value in future years could be a negative amount, as it was in 2013. In any event, should all factors remain constant, it is expected that the change in Mr. Strangfeld’s pension accrual going forward will be substantially less. Given this inherent volatility, the Committee will continue to monitor future accruals for Mr. Strangfeld and the other NEOs. The Traditional Pension Formula that applies to Mr. Strangfeld was closed to employees hired on or after January 1, 2001.

 

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, 2014, 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 4.10%. 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, 2014 are included in the calculation of the accumulated benefits.

 

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Table of Contents

		Executive Compensation: Pension Benefits

 

2014 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			37				3,275,411				—
		Supplemental Retirement Plan—Traditional Pension Formula			37				72,557,458				—
		Supplemental Retirement Plan—Cash Balance Formula			n/a	(1)			33,636				—
Robert M. Falzon		Merged Retirement Plan—Cash Balance Formula			31	(2)			1,265,620				—
		Merged Retirement Plan—PSI Cash Balance Formula			n/a	(2)			74,251				—
		Supplemental Retirement Plan—Cash Balance Formula			31	(2)			397,133				2,524	(3)
Mark B. Grier		Merged Retirement Plan—Cash Balance Formula			19				2,262,326				—
		Supplemental Retirement Plan—Cash Balance Formula			19				7,854,891				21,367	(3)
Charles F. Lowrey		Merged Retirement Plan—Cash Balance Formula			13				1,708,028				—
		Supplemental Retirement Plan—Cash Balance Formula			13				1,361,278				13,899	(3)
Stephen Pelletier		Merged Retirement Plan—Traditional Benefit Formula			16				1,030,524				—
		Merged Retirement Plan—Cash Balance Formula			n/a	(1)			5,228				—
		Merged Retirement Plan—PSI Cash Balance Formula			n/a	(4)			101,111				—
		Supplemental Retirement Plan—Traditional Pension Formula			16				10,978,247				—
		PSI Supplemental Retirement Plan for Executives			n/a	(4)			233,144				—

 

(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 2013 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 indirect wholly owned subsidiary, Prudential Insurance, 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 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 2014, Average Eligible Earnings are determined by taking the average of earnings (base salary plus annual incentive payment) over the period beginning January 1, 2007, 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

 

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Table of Contents

		Executive Compensation: Pension Benefits

 

 

•

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, 2015 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”).

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 2014 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 2014 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.

 

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Table of Contents

		Executive Compensation: Nonqualified Deferred Compensation

 

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.

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 and the Deferred Compensation Plan:

2014 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 ($)				Aggregate Withdrawals/ Distributions($)				Aggregate Balance at Last Fiscal Year End ($)3
John R. Strangfeld			SESP			$	45,800			$	45,800			$	36,674			$	0			$	1,139,454
			Deferred Compensation			$	0			$	0			$	475,842			$	0			$	8,128,472
Robert M. Falzon			SESP			$	15,600			$	15,600			$	2,292			$	0			$	89,908
			Deferred Compensation			$	0			$	0			$	203,737			$	0			$	2,207,855
Mark B. Grier			SESP			$	37,200			$	37,200			$	24,805			$	0			$	779,505
			Deferred Compensation			$	0			$	0			$	0			$	0			$	0
Charles F. Lowrey			SESP			$	20,400			$	20,400			$	10,252			$	0			$	330,812
			Deferred Compensation			$	0			$	0			$	831,056			$	0			$	10,992,550
Stephen Pelletier			SESP			$	14,908			$	14,908			$	7,463			$	0			$	242,828
			Deferred Compensation			$	0			$	0			$	341,864			$	0			$	10,633,677

 

(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.

 

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

 

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		Executive Compensation: Post-Employment Compensation Arrangements

 

The 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 ($260,000 in 2014) 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 2014 was 3.50%. A participant’s account is distributed to the employee six months after the participant’s separation from service.

The 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 Due to 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: Post-Employment Compensation Arrangements

 

 

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		Executive Compensation: Post-Employment Compensation Arrangements

 

 

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		Executive Compensation: Post-Employment Compensation Arrangements

 

 

 

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													20,143,968	1
		Annual Incentive					7,800,000	2			7,800,000	2			5,600,000				6,576,700				6,576,700
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											8,069,394	4			8,069,394	4			8,069,394	4
				Performance Units											8,069,394	5			8,069,394	5			8,069,394	5
		Book Value Performance		Book Value Units											7,978,884	6			7,978,884	6			7,978,884	6
		Benefits:		SERP
				Health/Life											27,217	7			2,156,987
				Addtl. Retire Accruals			4,513,059				4,513,059				649,348				2,364,661				1,182,331
		Total					12,313,059				12,313,059				50,538,205				35,216,020				31,876,703
Robert M. Falzon		Severance Payment									2,925,000				4,426,873	1
		Annual Incentive					3,300,000	2			3,300,000	2			2,450,000				1,300,000				1,300,000
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											1,591,825	4			1,591,825	4			1,591,825	4
				Performance Units											1,591,825	5			1,591,825	5			1,591,825	5
		Book Value Performance		Book Value Units											1,644,909	6			1,644,909	6			1,644,909	6
		Benefits:		SERP							231,147				231,147
				Health/Life											35,470	7			7,614,237
				Addtl. Retire Accruals			322,769				608,860				239,632				2,511,776				128,700
		Total					3,622,769				7,065,007				12,211,681				16,254,572				6,257,259
Mark B. Grier		Severance Payment									10,122,600				16,472,981	1
		Annual Incentive					6,500,000	2			6,500,000	2			4,800,000				5,558,400				5,558,400
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											6,514,477	4			6,514,477	4			6,514,477	4
				Performance Units											6,514,477	5			6,514,477	5			6,514,477	5
		Book Value Performance		Book Value Units											6,620,040	6			6,620,040	6			6,620,040	6
		Benefits:		SERP
				Health/Life											24,607	7			13,638,352
				Addtl. Retire Accruals			812,108				2,076,822				599,710				3,347,924				700,358
		Total					7,312,108				18,699,422				41,546,292				42,193,670				25,907,752
Charles F. Lowrey		Severance Payment									8,230,100				12,323,514	1
		Annual Incentive					5,400,000	2			5,400,000	2			4,000,000				4,716,700				4,716,700
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											4,108,331	4			4,108,331	4			4,108,331	4
				Performance Units											4,108,331	5			4,108,331	5			4,108,331	5
		Book Value Performance		Book Value Units											4,988,211	6			4,988,211	6			4,988,211	6
		Benefits:		SERP
				Health/Life											32,140	7			16,518,958
				Addtl. Retire Accruals			512,531				1,293,675				379,652				5,537,556				452,803
		Total					5,912,531				14,923,775				29,940,179				39,978,087				18,374,376
Stephen Pelletier		Severance Payment									5,112,600				9,607,596	1
		Annual Incentive					4,000,000	2			4,000,000	2			3,000,000				2,708,400				2,708,400
		Long-term Incentive:		Stock Options(3)
				RSUs
				Performance Shares											1,832,901	4			1,832,901	4			1,832,901	4
				Performance Units											1,832,901	5			1,832,901	5			1,832,901	5
		Book Value Performance		Book Value Units											1,575,238	6			1,575,238	6			1,575,238	6
		Benefits:		SERP							2,790,475				2,376,147
				Health/Life											30,711	7			3,969,427
				Addtl. Retire Accruals			2,298,534				3,966,176				1,483,101				1,245,320				622,660
		Total					6,298,534				15,869,251				21,738,595				13,164,187				8,572,100

 

(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 2014 performance.

 

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

 

(4)	Includes the value of 2012, 2013, and 2014 target performance shares paid based on the closing market price of our Common Stock on December 31, 2014 ($90.46 per share).

 

(5)	Includes the value of 2012, 2013, and 2014 target performance units paid based on the closing market price of our Common Stock on December 31, 2014 ($90.46 per share).

 

(6)	Includes the value of 2012, 2013, and 2014 book value units paid based on the Company’s book value per share as of December 31, 2014 ($64.75 per share).

 

(7)	Reflects the expected contribution subsidy for 18 months and the associated tax gross-up. For this purpose, we have assumed the 2015 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, March 13, 2015. At the close of business on that date, a total of 454,183,644 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, and for the advisory vote to approve named executive officer compensation.

If you are a participant in The Prudential Employee Savings Plan (“PESP”), you may instruct the PESP Trustee how to vote the shares of Common Stock credited to your PESP account and held in the Common Stock Fund of the PESP on March 10, 2015. Such shares will be voted by the PESP Trustee 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”), 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.

How Votes Are Counted

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.

 

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		General Information About The Meeting

 

Voting

You may either vote for, against or abstain on each of the proposals. 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 vote in Item 3 is non-binding, as provided by law, our Board will review the results of the vote and, consistent with our commitment to shareholder engagement, will take it into account in making a determination concerning executive 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 and the advisory vote to approve executive compensation, 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.

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

In order to submit shareholder proposals for the 2016 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 25, 2015.

Director nominations must be received no earlier than December 14, 2015 and no later than January 13, 2016.

Proposals must comply with all of the requirements of SEC Rule 14a-8, and director nominations 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.

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

 

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		General Information About The 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 2015 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 above) 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 14, 2015, and no later than January 13, 2016. However, if the 2015 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 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

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 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 2015 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 2015 Annual Meeting of Shareholders to Be Held on May 12, 2015: Our 2015 Proxy Statement and Annual Report for the year ended December 31, 2014, 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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						Admission Ticket
		IMPORTANT ANNUAL MEETING INFORMATION
						Electronic Voting Instructions
						You can vote by Internet or telephone
						Instead of mailing your proxy, you may choose to vote online or by telephone.
						Proxies submitted by the Internet or telephone must be received by 11:59 p.m., May 11, 2015, for Registered Shares and by 11:59 p.m., May 6, 2015, for PESP Shares and PSPP Shares.
								Vote by Internet • Go to www.investorvote.com/prudential. • Follow the steps outlined on the secured website.
								Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to you for the call. • Follow the instructions provided by the recorded message.

 

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 - Mark B. Grier

¨   ¨   ¨   ¨

¨   ¨   ¨   ¨

¨   ¨   ¨   ¨

09 - Christine A. Poon

¨   ¨   ¨

¨   ¨   ¨

¨   ¨   ¨

02 - Gordon M. Bethune

06 - Constance J. Horner

10 - Douglas A. Scovanner

03 - Gilbert F. Casellas

07 - Martina Hund-Mejean

11 - John R. Strangfeld

04 - James G. Cullen

08 - Karl J. Krapek

 

The Board of Directors recommends a vote FOR Proposals 2 and 3.

For

Against

Abstain

2.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015.

¨

¨

¨

For

Against

Abstain

3.

Advisory vote to approve named executive officer compensation

¨

¨

¨

 

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 plant a tree in my honor.          ¨

 

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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PAPER PRODUCED UNDER A SUSTAINABLE FOREST MANAGEMENT PROGRAM.		ANNUAL MEETING OF SHAREHOLDERS   May 12, 2015, 2:00 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. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

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 13, 2015, 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 10, 2015. 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 13, 2015.

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 12, 2015. 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 2:00 p.m. on May 12, 2015.
The undersigned, having received the Notice of Meeting and Proxy Statement dated March 24, 2015, appoints Susan L. Blount, Margaret M. Foran 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 2:00 p.m., May 12, 2015, 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 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 12, 2015, 2:00 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 12, 2015

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:

1.

Election of Directors: Thomas J. Baltimore, Jr., Gordon M. Bethune, Gilbert F. Casellas, James G. Cullen, Mark B. Grier, Constance J. Horner, Martina Hund-Mejean, Karl J. Krapek, Christine A. Poon, Douglas A. Scovanner and John R. Strangfeld.

2.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015.

3.

Advisory vote to approve named executive officer compensation.

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

 

				Obtaining a Copy of the Proxy Materials – If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before May 1, 2015, to facilitate timely delivery.
				You may still request paper copies of the materials after this date; however, your vote will not count if received after 11:59 p.m. on May 11, 2015, via the Internet or telephone or after 10:00 a.m. on May 12, 2015, via a proxy card.

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 12, 2015, at 751 Broad Street, Newark, New Jersey 07102, at 2:00 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. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

 

 

 

 

PAPER PRODUCED UNDER A SUSTAINABLE FOREST MANAGEMENT PROGRAM.                     01ZVVG

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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 having a tree planted in your honor. Since its inception, this program has resulted in over 550,000 trees being planted and provided 375,000 tote bags to our shareholders. This year’s tree planting will continue our work with American Forests in Pennsylvania’s Loyalsock State Forest and Florida’s Tyndall Air Force Base.   Whether you vote via the Internet, phone, or mail, you can indicate your choice of either the bag or a tree planted in your honor. 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, Vice President, and Corporate Secretary, Prudential Financial, Inc.
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		Margaret M. Foran Chief Governance Officer Vice President, and Corporate Secretary   Prudential Financial, Inc. 751 Broad Street, Newark NJ 07102-3777
		March 24, 2015

 

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 2015 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 having a tree planted in your honor. Since this program’s inception, we have planted more than 550,000 trees through our partnership with American Forests and have provided 375,000 bags to our shareholders.
This year’s tree planting initiative will continue to support our work with American Forests in Pennsylvania’s Loyalsock State Forest and Florida’s Tyndall Air Force Base.
As always, we thank you for your investment in Prudential.
Sincerely,
Margaret M. Foran Chief Governance Officer, Vice President, and Corporate Secretary Prudential Financial, Inc.
© 2015 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:

 

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:

 

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.

 

		What is on the one-page Notice?   The Notice contains simple instructions on how to: ·   Access and view the proxy materials online ·   Vote your shares online ·   Request a free set of printed materials ·   Change delivery preferences for future proxy mailings   DO retain the Notice for future reference DO NOT mark your vote on the Notice and return it; the Notice is not a proxy card or ballot   If I received only a one-page Notice, how do I vote my shares?   To vote your shares, follow the instructions on the Notice to vote online. If you request a paper copy of the proxy materials, you’ll receive a proxy card with voting instructions. You may also vote your shares in person by bringing the Notice with you and attending the meeting.   If I received only a one-page Notice, how do I request a full set of printed materials for this meeting or future proxy mailings?   To request a free set of printed materials for this meeting or for future mailings, refer to the Notice for detailed instructions on how to request a copy via Internet, telephone or email.   If I received a full set of materials, may I request only a one-page Notice for future proxy mailings?   Our company will make a decision for each meeting whether or not to use the notice-only option, and send notice-only mailings at our discretion.   Can I elect to receive my proxy materials electronically?   You may elect to receive materials via email for future mailings. You will receive the materials electronically if our company chooses to offer email delivery in the future. To change your delivery preferences, follow the instructions on the Notice.

 

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.

 

002CSN4CFA		© Copyright 2015 Computershare Limited. All rights reserved.