Table of Contents

 

 

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

 

 

Filed by the Registrant                          Filed by a Party other than the Registrant  

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  Definitive Proxy Statement
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Marsh & McLennan Companies, Inc.

(Name of Registrant as Specified in its Charter)

 

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Table of Contents

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Table of Contents

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Table of Contents

Notice of Annual Meeting

of Stockholders and Proxy Statement

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders of Marsh & McLennan Companies, Inc. at:

 

    

DATE

   

    

TIME

   

    

LOCATION

Thursday,    

10:00 a.m.

   

1166 Avenue of the Americas

May 21, 2020

    

       

New York, NY 10036

    

If you plan to attend the meeting, you will need to register in advance and provide proof that you own the Company’s common stock. Please see page 83 for more information about attending the meeting.

Items of Business

 

1.

To elect thirteen (13) persons named in the accompanying proxy statement to serve as directors for a one-year term;

 

2.

To approve, by nonbinding vote, the compensation of our named executive officers;

 

3.

To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm;

 

4.

To approve the Marsh & McLennan Companies, Inc. 2020 Incentive and Stock Award Plan; and

 

5.

To conduct any other business that may properly come before the meeting.

Your Vote is Very Important

Only stockholders of record as of close of business on March 23, 2020 may vote, in person or by proxy, at the annual meeting. Whether or not you plan to attend the annual meeting, your vote is very important. We urge you to participate in the election of our directors and deciding the other items on the agenda for the annual meeting.

You may vote over the Internet or by telephone.

 

 

If you accessed this proxy statement through the Internet, instructions appear in the Notice of Internet Availability of Proxy Materials.

 

 

If you received this proxy statement by mail, you may also vote by mail and instructions appear on the enclosed proxy card.

 

LOGO

KATHERINE J. BRENNAN

Deputy General Counsel, Corporate Secretary & Chief Compliance Officer

April 3, 2020

Important Notice Regarding the Availability of Proxy Materials for the Marsh & McLennan Companies Annual Meeting of Stockholders to be held on May 21, 2020: This proxy statement and the Company’s 2019 Annual Report, which includes financial statements as of and for the fiscal year ended December 31, 2019, are available at proxy.mmc.com

This notice and proxy statement is being mailed or made available on the Internet to stockholders on or about April 3, 2020.

In these materials, we refer to Marsh & McLennan Companies, Inc. as the “Company”, “we”, and “our”.

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement            


Table of Contents

 

 Proxy Summary

 

 

This summary highlights information contained elsewhere in this proxy statement. You should read the entire proxy statement carefully before voting.

 

      

 

Voting Matters

 

             
             

 

Page number for

more information

 

   

 

Board’s 

   recommendation 

 

       
 

 

 

 

Election of Directors (Item 1)

 

   

 

   16

 

 

 

   

 

FOR      

 

 

 

 
 

 

To elect thirteen (13) persons named in the accompanying proxy
statement to serve as directors for a one-year term

 

 

 
 

 

 

 

Advisory (Nonbinding) Vote to Approve Named Executive Officer
Compensation (Item 2)

 

 

   

 

   25

 

 

 

   

 

FOR      

 

 

 

 
 

 

To approve, by nonbinding vote, the compensation of our named executive officers

 

 

 
 

 

 

 

Ratification of Independent Auditor (Item 3)

 

   

 

   63

 

 

 

   

 

FOR      

 

 

 

 
 

 

To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm

 

 

 
 

 

 

 

Approval of Marsh & McLennan Companies, Inc. 2020 Incentive and
Stock Award Plan (Item 4)

 

 

   

 

   66

 

 

 

   

 

FOR      

 

 

 

 
 

 

To approve the proposed 2020 Incentive and Stock Award Plan to replace
our current equity incentive plan, which will expire in 2021

 

 

 
       

 

 

   Highlights of Our Business and Strategy

 

 

 

 

 

 

    BUSINESS

   

 

We are a global professional services firm offering clients solutions in risk, strategy and people. Our businesses include:

 

 
   

Risk & Insurance Services

 

           

Consulting

 

         
   

 

  Insurance broking
  & risk management
  

 

  MARSH

 

   

 

  Reinsurance
  & capital strategies

 

  GUY CARPENTER

 

   

 

  Health, wealth &
  career consulting

 

  MERCER

 

   

 

  Strategy, economic
  & brand consulting

 

  OLIVER WYMAN

 

     
       

 

With 76,000 COLLEAGUES worldwide, we provide analysis, advice and transactional capabilities in over 130 COUNTRIES.

 

   

 

 

 

 

    STRATEGY

   

 

We are focused on four imperatives –

 

 
   

    

 

  Creating

  breakthrough impact

  for our clients

 

 

 

 

    

  Embracing

  innovation and the

  digital future

 

   

  Being a

  great place to work

 

   

  Driving growth and

  creating value

 

 
       

As the challenges confronting our clients are increasingly interrelated and more complex, we are collaborating more closely across our businesses to better address these challenges and deliver greater value as one enterprise. Our business model is designed to create exceptional value and superior returns for our stockholders.

 

Every year, the Board reviews the Company’s long-term strategic plan and the strategic plans of the Company’s businesses.

 

   

 

 

 

i          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Proxy Summary (Continued)

 

 

 

 

   Key Governance Policies and Practices

 

 

 

 

BOARD OF DIRECTORS

 

 

 

LOGO

 

 

 

Two directors have joined in the past twelve months, and a total of four directors have joined since 2016, enhancing the Board’s breadth and depth of experience and diversity

 

 

 

 

 

LOGO

 

 

Our chairman of the Board is an independent director

 

 

 

 

 

LOGO

 

 

All of our directors are elected annually

 

 

 

 

 

LOGO

 

 

Our directors’ areas of expertise are presented in a matrix on page 10

 

 

 

 

 

LOGO

 

 

Our Governance Guidelines articulate the Board’s responsibility, alongside management, for setting the “tone at the top” and overseeing management’s strategy to promote a culture of integrity throughout the Company

 

 
                  

LOGO

 

Recent Changes

Tamara Ingram and Jane H. Lute joined the Board in July 2019 and March 2020, respectively. Elaine La Roche, who had served with distinction as a director since 2012, passed away in August 2019.

 

   

 

STOCKHOLDER ENGAGEMENT

 

 

 

 

LOGO

 

 

 

In 2011, we expanded the breadth and consistency of our stockholder engagement. In each of the past five years, we have engaged with institutional stockholders holding approximately 36% to 45% of our stock

 

   

 

STOCKHOLDER RIGHTS

 

 

 

 

LOGO

 

 

Our bylaws provide for proxy access (3% ownership / 3 years / group of up to 20 /greater of 20% of Board seats or 2 directors)

 

 
 

 

LOGO

 

 

Our bylaws allow holders of at least 20% of the voting power of the Company’s outstanding common stock to call a special meeting

 

 
   

 

LOGO

 

 

Directors must receive a majority of the votes cast to be elected in uncontested elections

 

   

 

COMPENSATION AND
EQUITY

 

 

 

LOGO

 

 

We have stock ownership guidelines for directors and senior executives

 

 
 

 

LOGO

 

 

We prohibit hedging transactions by directors and colleagues, including senior executives

 

 
   

 

LOGO

 

Directors and senior executives are prohibited from pledging Company securities as collateral for a loan or otherwise

 

   

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          ii


Table of Contents

 

 Proxy Summary (Continued)

 

 

 

 

   Key Executive Compensation Policies and Practices

 

 

 

 

 

STOCKHOLDER ALIGNED EXECUTIVE COMPENSATION

PROGRAM

 

 

 

LOGO

 

 

 

Our senior executives have a high percentage of variable (“at risk”) pay

 

 
 

LOGO

 

 

Long-term incentive compensation for our senior executives is delivered in stock options and performance stock unit awards, the value of which depends on stock price appreciation or achievement of specific Company financial objectives

 

 
 

LOGO

 

 

We mitigate the potential dilutive effect of equity-based awards through our share repurchase program

 

 
   

LOGO

 

 

Our Compensation Committee has an independent compensation consultant

 

   

 

 

COMPENSATION RECOVERY POLICIES

 

 

 

 

LOGO

 

 

 

We have clawback policies for senior executive annual bonus awards and for equity-based compensation

 

   

 

 

SEVERANCE AND CHANGE IN CONTROL

 

 

 

LOGO

 

 

 

 

Severance protections for our senior executives, including our CEO, are at a 1x multiple of base salary and bonus, with a pro-rata bonus for the year of termination. Further, we are required as a matter of policy to obtain stockholder approval for severance agreements with certain senior executives if they provide for cash severance that exceeds 2.99 times the executive’s base salary and three-year average annual bonus award

 

 
 

LOGO

 

 

We provide “double-trigger” vesting of equity-based awards and payment of severance benefits following a change in control of the Company

 

 
   

LOGO

 

 

We do not provide golden parachute excise tax gross-ups in connection with a change in control of the Company

 

   

 

 

SAY ON PAY

 

 

 

 

LOGO

 

 

 

 

We hold an advisory vote on named executive officer compensation each year

 
 

 

LOGO

 

 

 

Stockholder support of the executive compensation program has been consistently strong with an approval rate of 93% in 2019 and 95% in 2018

 

   

 

 

 

iii          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Proxy Summary (Continued)

 

 

 

   Highlights of Our 2019 Performance and Compensation

 

 

 

POSITIONING

FOR THE FUTURE

 

LOGO

 

 

 

 

 

In April 2019, WE ACQUIRED JARDINE LLOYD THOMPSON PLC (“JLT”), the largest acquisition in our nearly 150-year history. With the addition of JLT’s colleagues and capabilities, we’ve enhanced our position in higher-growth and higher-margin areas and increased collaboration across our businesses to deliver even greater value as one enterprise.

 

 
 

 

 

In addition to the JLT acquisition and integration, we made meaningful progress on advancing our position more broadly. We continued to make acquisitions to BUILD OUT MARSH & MCLENNAN AGENCY and continued to ADVANCE THE DIGITAL STRATEGIES in each of our businesses.

 

   

 

FINANCIAL OBJECTIVES

 

LOGO

 

 

 

 

 

In 2019, Marsh & McLennan Companies DELIVERED STRONG PERFORMANCE as we successfully executed on our long-term financial and strategic objectives.

 

 
 

 

 

GAAP EPS INCREASED 6%, and we delivered 7% GROWTH IN ADJUSTED EARNINGS PER SHARE (“EPS”)* despite modest dilution in the first year following the acquisition of Jardine Lloyd Thompson plc.

 

 
 

 

 

We generated $17 BILLION OF REVENUE, an increase of 11% compared with 2018, our highest annual top-line growth in 20 years. We achieved 4% GROWTH in underlying revenue, the 10th year in a row where our underlying growth was 3% or above.

 

 
   

 

 

Our OVERALL ADJUSTED MARGIN* INCREASED 110 BASIS POINTS, our 12th consecutive year of margin improvement, and we increased adjusted operating income* for both the Risk & Insurance Services and Consulting segments for the tenth consecutive year.

 

   

 

 

CAPITAL MANAGEMENT

 

LOGO

 

 

 

 

 

We increased our quarterly dividend from $0.415 to $0.455 per share beginning in the third quarter of 2019, resulting in an ANNUAL DIVIDEND INCREASE OF 10.1%, from $1.58 to $1.74. Our dividend has increased every year since 2010.

 

 
 

 

 

We used approximately $485 million in cash to REPURCHASE APPROXIMATELY 4.8 MILLION SHARES, reducing our outstanding common stock by approximately 0.2 million shares on a net basis.

 

   

 

STOCK PERFORMANCE

 

LOGO

 

 

 

 

 

Our TOTAL STOCKHOLDER RETURN (“TSR”) was 42.3%, outperforming the S&P 500 ® index TSR by 10.9 percentage points for 2019.

 

 
 

 

 

Our FIVE-YEAR ANNUALIZED TSR OF 16.5% also outperformed the S&P 500 ® index TSR by 4.8 percentage points.

 

   

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          iv


Table of Contents

 

 Proxy Summary (Continued)

 

 

 

   Highlights of Our 2019 Performance and Compensation

 

 

 

EXECUTIVE COMPENSATION

 

LOGO

 

 

 

 

 

In 2020, we made two key changes to the annual long-term incentive design in order to more closely align executive rewards with stockholder interests. We INCREASED THE PROPORTION OF PERFORMANCE STOCK UNITS TO 50% (eliminating the 25% previously allocated to restricted stock units) for our senior executives and ADDED A RELATIVE TSR MODIFIER based on the Company’s three-year TSR versus S&P 500 ® companies. In making these decisions, the Compensation Committee took into account views expressed by stockholders.

 

 
 

 

We achieved THREE-YEAR ADJUSTED EPS GROWTH OF 10.7% for our 2017 performance stock unit awards, which was above our 8% target for the award and resulted in a payout at 168% of target.

 

 
 

 

SHARES REPURCHASED during the year MORE THAN OFFSET the increase in shares attributable to the exercise of stock options and the distribution of shares for stock units from PREVIOUSLY GRANTED EQUITY-BASED AWARDS.

 

 
   

 

The Compensation Committee assessed our STRONG PERFORMANCE AGAINST 2019 FINANCIAL AND STRATEGIC OBJECTIVES, along with the successful closing and ongoing integration of JLT, and determined above-target bonuses for all of our named executive officers.

 

   

 

SENIOR EXECUTIVE

CHANGES

 

LOGO

 

 

 

 

 

 

MARTINE FERLAND was appointed President and Chief Executive Officer of Mercer effective March 1, 2019.

 

 
 

 

 

DOMINIC BURKE, who served as the group chief executive officer of JLT, was appointed Vice Chair of Marsh & McLennan effective April 1, 2019, upon the acquisition of JLT.

 

 
   

 

 

In January 2020, the CEOs of our businesses were appointed Vice Chairs of Marsh & McLennan to reflect their enterprise-wide responsibilities.

 

   

 

  *

Please see Exhibit A for a reconciliation of our non-GAAP financial measures to GAAP financial measures and related disclosures.

 

 

 

v          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Proxy Summary (Continued)

 

 

 

   Highlights of the Proposed 2020 Incentive and Stock Award Plan

 

 

 

NEW EQUITY PLAN

 

LOGO

 

 

 

 

 

Stockholders are being asked to approve a NEW EQUITY INCENTIVE PLAN TO REPLACE OUR CURRENT EQUITY INCENTIVE PLAN, which will expire in 2021.

 

 
 

 

 

NEW AWARDS WOULD NOT BE GRANTED UNDER OUR CURRENT EQUITY INCENTIVE PLAN following approval of the proposed 2020 plan.

 

 
   

 

 

GRANTS to non-employee directors will CONTINUE to be made UNDER THE SEPARATE DIRECTORS’ STOCK COMPENSATION PLAN.

 

   

 

 

SHARES REQUESTED

 

LOGO

 

 

 

 

 

20 MILLION SHARES REQUESTED for the proposed 2020 plan.

 

 
 

 

 

LIMIT ON FULL-VALUE AWARDS of 12.5 million shares.

 

 
 

 

 

The shares are estimated to ALLOW FOR EQUITY GRANTS FOR APPROXIMATELY 3 TO 4 YEARS.

 

 
   

 

 

Based on our outstanding equity awards and common shares outstanding as of the record date, OUR ESTIMATED TOTAL OVERHANG WOULD BE 6.7% following the approval of the 2020 Plan.

 

   

 

STOCKHOLDER-FRIENDLY PROVISIONS

 

LOGO

 

   

 

The proposed 2020 plan includes stockholder-friendly provisions, such as:

 
 

 

 

 

 

NO LIBERAL SHARE COUNTING; shares may not be added back to the Plan that are: (1) used to satisfy tax withholding obligations or to pay an exercise price, (2) repurchased by the Company using option exercise proceeds or (3) used to settle an award (e.g., cashless exercise or net settlement).

 

 
 

 

 

NO DIVIDENDS ON UNVESTED AWARDS, meaning no dividends or dividend equivalents will be paid until underlying awards are vested and earned.

 

 
 

 

 

TWELVE-MONTH MINIMUM VESTING PERIOD applies to 95% of awards.

 

 
 

 

 

NO REPRICING OF STOCK OPTIONS or SARs is permitted without stockholder approval.

 

 
 

 

 

AWARDS ARE SUBJECT TO CLAWBACK and other Company policies.

 

 
     

See “Item 4—Approval of the 2020 Incentive and Stock Award Plan” on page 66 for additional stockholder-friendly provisions.

 

   

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          vi


Table of Contents

 

  Table of Contents

 

 

 

            

 

 

Corporate Governance

 

  

 

 

 

 

1

 

 

 

 

 

Overview

 

  

 

 

 

 

1

 

 

 

 

 

Corporate Governance Practices

 

  

 

 

 

 

1

 

 

 

 

 

Guidelines for Corporate Governance

 

  

 

 

 

 

2

 

 

 

 

 

Stockholder Engagement

 

  

 

 

 

 

3

 

 

 

 

 

Risk Oversight

 

  

 

 

 

 

3

 

 

 

 

 

Environmental, Social and Governance (ESG) Oversight and Activities

 

  

 

 

 

 

3

 

 

 

 

 

Codes of Conduct

 

  

 

 

 

 

4

 

 

 

 

 

CEO Succession Planning and Succession Planning for Senior Executives

 

  

 

 

 

 

4

 

 

 

 

 

Director Recruitment, Nomination and Succession Planning

 

  

 

 

 

 

4

 

 

 

 

 

Director Orientation and Continuing Education

 

  

 

 

 

 

6

 

 

 

 

 

Director Independence

 

  

 

 

 

 

6

 

 

 

 

 

Review of Related Person Transactions

 

  

 

 

 

 

6

 

 

 

 

 

Stockholder Nominations for Director Candidates

 

  

 

 

 

 

7

 

 

 

 

 

Director Election Voting Standard

 

  

 

 

 

 

7

 

 

 

 

 

Communicating with Directors

 

  

 

 

 

 

7

 

 

 

 

 

Communicating Concerns Regarding Accounting Matters

 

  

 

 

 

 

8

 

 

 

 

          

 

Board of Directors and Committees

 

  

 

 

 

 

9

 

 

 

 

 

Board Composition, Leadership and Size

 

  

 

 

 

 

9

 

 

 

 

 

Director Qualifications

 

  

 

 

 

 

9

 

 

 

 

 

Director Skills and Experience

 

  

 

 

 

 

10

 

 

 

 

 

Board Diversity

 

  

 

 

 

 

11

 

 

 

 

 

Board Refreshment

 

  

 

 

 

 

11

 

 

 

 

 

Retirement

 

  

 

 

 

 

11

 

 

 

 

 

Attendance

 

  

 

 

 

 

11

 

 

 

 

 

Executive Sessions

 

  

 

 

 

 

11

 

 

 

 

 

Board and Committee Evaluations

 

  

 

 

 

 

11

 

 

 

 

 

Committees

 

  

 

 

 

 

12

 

 

 

 

          

 

Election of Directors

 

  

 

 

 

 

16

 

 

 

 

 

Item 1: Election of Directors

 

  

 

 

 

 

16

 

 

 

 

 

Executive Compensation

 

  

 

 

 

 

25

 

 

 

 

 

Item 2: Advisory (Nonbinding) Vote to Approve Named Executive Officer Compensation

 

  

 

 

 

 

25

 

 

 

 

 

Compensation Discussion and Analysis

 

  

 

 

 

 

26

 

 

 

 

 

Compensation Committee Report

 

  

 

 

 

 

48

 

 

 

 

 

Compensation of Executive Officers

 

  

 

 

 

 

49

 

 

 

 

          

 

Audit

 

  

 

 

 

 

63

 

 

 

 

 

Item 3: Ratification of Selection of Independent Registered Public Accounting Firm

 

  

 

 

 

 

63

 

 

 

 

 

Fees of Independent Registered Public Accounting Firm

 

  

 

 

 

 

63

 

 

 

 

 

Audit Committee Report

 

  

 

 

 

 

64

 

 

 

 

          

 

Approval of the 2020 Incentive and Stock Award Plan

 

  

 

 

 

 

66

 

 

 

 

 

Item 4: Approval of the Marsh & McLennan Companies, Inc. 2020 Incentive and Stock Award Plan

 

  

 

 

 

 

66

 

 

 

 

          

 

Additional Information

 

  

 

 

 

 

75

 

 

 

 

 

Stock Ownership of Directors, Management and Certain Beneficial Owners

 

  

 

 

 

 

75

 

 

 

 

 

Director Compensation

 

  

 

 

 

 

77

 

 

 

 

 

Equity Compensation Plan Information

 

  

 

 

 

 

79

 

 

 

 

 

CEO Pay Ratio

 

  

 

 

 

 

81

 

 

 

 

 

Transactions with Management and Others

 

  

 

 

 

 

81

 

 

 

 

 

Information about Our Annual Meeting and Solicitation of Proxies

 

  

 

 

 

 

82

 

 

 

 

 

Submission of Stockholder Proposals and Other Items of Business for 2021 Annual Meeting

 

  

 

 

 

 

86

 

 

 

 

 

No Incorporation by Reference

 

  

 

 

 

 

86

 

 

 

 

 

Exhibit A

 

  

 

 

 

 

87

 

 

 

 

 

Exhibit B

 

  

 

 

 

 

90

 

 

 

 

 

Exhibit C

 

  

 

 

 

 

91

 

 

 

 

 

 

 

 

vii        Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Corporate Governance

 

 

We describe key features of the Company’s corporate governance environment below and in the next section of this proxy statement, captioned “Board of Directors and Committees.” Our key corporate governance materials are available online at mmc.com/about/corporate-governance.html.

Overview

Our Board of Directors currently has thirteen (13) members, including H. Edward Hanway, our independent chairman, and Daniel S. Glaser, our President and Chief Executive Officer. Mr. Glaser is the only member of management who serves as a director. As described in more detail under “Board of Directors and Committees,” our Board maintains an Audit Committee, a Compensation Committee, a Directors and Governance Committee, a Finance Committee, an ESG Committee and an Executive Committee.

Corporate Governance Practices

The Company is committed to best practices in corporate governance. Highlights of our corporate governance practices are described below.

BOARD STRUCTURE

 

    Board Independence.   All of the Company’s directors are independent, with the exception of our CEO, who is the only member of management serving on the Board.

 

    Independent Chairman.   The Company maintains separate roles of chief executive officer and chairman of the Board as a matter of policy. An independent director acts as chairman of the Board.

 

    Offer to Resign upon Change in Circumstances.   Pursuant to our Governance Guidelines, any director undergoing a significant change in professional circumstances must offer to resign from the Board.

ELECTION OF DIRECTORS

 

    Annual Election of Directors.   The Company’s charter provides for the annual election of directors.

 

    Majority Voting in Director Elections.   The Company’s bylaws provide that, in uncontested elections, director candidates must be elected by a majority of the votes cast. Each director candidate has previously tendered an irrevocable resignation that will be effective upon his or her failure to receive the requisite votes and the Board’s acceptance of such resignation.

PROXY ACCESS

 

    Proxy Access.   The Company’s bylaws permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years to nominate and include in the Company’s proxy materials directors constituting up to the greater of two or 20% of board seats, if the stockholder(s) and the nominee(s) meet the requirements in our bylaws.

RIGHT OF STOCKHOLDERS TO CALL SPECIAL MEETINGS

 

    Stockholder Right to Call Special Meetings.   The Company’s bylaws allow holders of record of at least 20% of the voting power of the Company’s outstanding common stock to call a special meeting.

STOCKHOLDER RIGHTS PLAN

 

    No Poison Pill.   The Company does not have a stockholder rights plan in place.

COMPENSATION PRACTICES

 

    Compensation Structure for Independent Directors.   The Company’s director compensation structure is transparent to investors and does not provide for meeting fees or retainers for non-chair committee membership.

 

    Cap on Executive Severance Payments.   The Company is required as a matter of policy to obtain stockholder approval for severance agreements with certain senior executives if they provide for cash severance that exceeds 2.99 times the executive’s base salary and three-year average annual bonus award. Severance protections for our senior executives, including our CEO, are at a 1x multiple of base salary and bonus, as described in “Severance Arrangements” on page 44.

 

    “Double-Trigger” Condition for Vesting of Equity-Based Awards following a Change in Control.   Our equity-based awards contain a “double-trigger” vesting provision, which requires both a change in control of the Company and a specified termination of employment in order for vesting to be accelerated.

 

 

 

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    “Clawback” Policies.   The Company may as a matter of policy recoup (or “claw back”) certain executive bonuses in the event of misconduct leading to a financial restatement. Also, our 2011 Incentive and Stock Award Plan allows the Company to “claw back” outstanding or already settled equity-based awards, and the proposed 2020 Incentive and Stock Award Plan includes this “clawback” feature.

EQUITY OWNERSHIP AND HOLDING REQUIREMENTS

 

    Senior Executive Equity Ownership and Holding Requirements.   The Company requires senior executives to hold shares or stock units of our common stock with a value equal to a multiple of base salary. The multiple for our Chief Executive Officer is six, and the multiple for our other senior executives is three. Senior executives are required to hold shares of the Company’s common stock acquired in connection with equity-based awards until they reach their ownership multiple and may not sell any shares of the Company’s common stock unless they maintain their ownership multiple.

 

    Director Equity Ownership and Holding Requirements.   Directors are required to acquire over time, and thereafter hold (directly or indirectly), shares or stock units of our common stock with a value equal to at least five times the Board’s basic annual retainer (currently, $600,000). Directors may not sell shares of the Company’s common stock until this ownership threshold is attained.

Guidelines for Corporate Governance

The Company and the Board of Directors formally express many of our governance policies through our Guidelines for Corporate Governance (our “Governance Guidelines”). The Governance Guidelines are posted on our website at mmc.com/about/corporate-governance.html.

The Governance Guidelines summarize certain policies and practices designed to assist the Board in fulfilling its fiduciary obligations to the Company’s stockholders, including the following (parenthetical references are to the relevant section of the Governance Guidelines):

 

  The Board’s responsibility, alongside management, for setting the “tone at the top” and overseeing management’s strategy to promote a culture of integrity throughout the Company. (Section A)

 

  Specific Board functions (Section B), such as:

Corporate Focus

 

    reviewing, monitoring and, where appropriate, approving the Company’s strategic and operating plans, fundamental financial objectives and major corporate actions;

 

    assessing major risks facing the Company and reviewing enterprise risk management (“ERM”) programs and processes;

 

    overseeing the integrity of the Company’s financial statements and financial reporting processes;

 

    reviewing processes to maintain the Company’s compliance with legal and ethical standards; and

 

    reviewing and monitoring the effectiveness of the Company’s corporate governance practices.

Management Focus

 

    selecting the CEO and planning for succession;

 

    regularly evaluating the performance of, and determining the compensation paid to, the CEO; and

 

    providing oversight and guidance regarding the selection, evaluation, development, succession and compensation of other senior executives.

 

  Succession planning and management development. (Section C)

 

  Director qualification standards and director independence. (Sections D.2 and D.3)

 

  Limits on serving on more than four public company boards. (Section D.5)

 

  Majority voting in director elections. (Section E.3)

 

  Resignation and retirement requirements for independent directors. (Section E.5)

 

  Separation of chairman and CEO roles. (Section F.2)

 

 

 

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  Executive sessions of independent directors at every in-person meeting of the Board. (Section H.3)

 

  Annual Board review of the Company’s long-term strategic plan and the strategic plans of the Company’s businesses. (H.4)

 

  Board access to management and professional advisors. (Section I)

 

  Director stock ownership requirements. (Section K.2)

 

  Prohibition on directors’ hedging and pledging Company securities. (Section K.3)

 

  Annual Board and committee evaluations. (Section L)

 

  Policy on interested stockholder transactions. (Section O)

Stockholder Engagement

In 2011, we expanded the breadth and consistency of our stockholder engagement. In each of the past five years, we have engaged with institutional stockholders holding approximately 36% to 45% of our stock. Discussions with stockholders cover corporate governance, executive compensation and environmental and social topics. Feedback received during the stockholder engagement process is shared with senior executives, the Board and its committees. We are committed to ongoing engagement with our stockholders and intend to continue these outreach efforts.

Risk Oversight

It is the responsibility of the Company’s senior management to assess and manage our exposure to risk and to bring to the Board’s attention the most material risks facing the Company. The Board oversees risk management directly and through its committees.

Annually, the Board reviews management’s assessment of the Company’s key enterprise risks. Senior management then briefs the Board on its strategy with respect to each risk and provides a mid-year status update and a report at year-end. The Board receives updates from management on specific risks throughout the year, including on human capital management and cybersecurity.

The Audit Committee regularly reviews the Company’s policies and practices with respect to risk assessment and risk management, including cybersecurity risk. The Directors and Governance Committee considers risks related to CEO succession planning, and the Compensation Committee considers risks relating to the design of executive compensation programs and arrangements. See the discussion under “Committees” on page 12 for additional information about the Board’s committees.

Environmental, Social and Governance (ESG) Oversight and Activities

The Board has formally focused on key aspects of the Company’s environmental, social and governance (ESG) initiatives since 2008, when it created a Board committee to focus on this area. In addition, the Company has a management committee with colleagues across our four global businesses and corporate departments to coordinate and communicate on the Company’s ESG initiatives. Our most recent Corporate Citizenship Report, Pay Equity Statement, statement on Human Rights and related information is available on our website at mmc.com/about/esg.html.

The Board oversees the Company’s ESG initiatives and strategies primarily through its committees.

ESG Committee.   The ESG Committee (formerly, the Corporate Responsibility Committee) oversees and supports the Company’s commitment to social, environmental and other public policy initiatives. It includes members from each of the Board’s other committees. The ESG Committee receives reports at least annually on environmental matters from the Company’s Chief Sustainability Officer and on diversity and inclusion and social impact matters from the Company’s Chief Human Resources Officer. The ESG Committee maintains contact with the Directors and Governance Committee and the Compensation Committee on matters of mutual interest relating to corporate governance.

Compensation Committee.   The Compensation Committee has responsibility to review certain key human resource strategic activities, including those relating to diversity, training and recruitment. The Compensation Committee coordinates with the ESG Committee on diversity initiatives and receives annual reports on diversity and inclusion from the Company’s Chief Human Resources Officer.

Directors and Governance Committee.   The Directors and Governance Committee takes a leadership role in shaping the Company’s corporate governance principles and practices. It receives regular updates on governance practices and developments from the Company’s General Counsel.

 

 

 

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Audit Committee.   The Audit Committee has responsibility for the Company’s policies, systems and controls designed to promote ethical behavior and compliance with applicable legal and regulatory requirements. It receives regular updates from the Company’s Chief Compliance Officer.

Following each committee meeting, the respective committee chair reports on the meeting to the full Board. See the discussion under “Committees” on page 12 for additional information about the Board’s committees.

Management ESG Committee.   In 2018, a committee was formed with members drawn from across the Company to coordinate and communicate the Company’s ESG initiatives. The committee is comprised of colleagues from our four global businesses and corporate departments. Members of the committee include the Company’s Deputy General Counsel, Corporate Secretary & Chief Compliance Officer, secretaries to the Board’s committees, the Company’s Chief Sustainability Officer, as well as other colleagues who support the Company’s ESG initiatives.

Codes of Conduct

Our reputation is fundamental to our business. The Company’s directors, senior executives and colleagues are expected to act ethically at all times. The Company’s codes of conduct and ethics are posted on the Company’s website at mmc.com and copies are available to any stockholder upon request.

THE GREATER GOOD

Foundational to who we are is our culture of integrity, reflected in The Greater Good, our code of conduct everywhere we do business in the world. The Greater Good applies to all of our directors, officers and other colleagues and requires the Company’s agents, subcontractors and suppliers to comply with relevant aspects of our compliance policies. Each year, the Company’s directors and senior executives certify their commitment to The Greater Good.

The Greater Good supports colleagues in making decisions in situations where it may not be clear—or easy. Our colleagues are provided with comprehensive training and communication of The Greater Good, including through our digital hub at integrity.mmc.com. In 2020, an updated version of The Greater Good is being distributed to colleagues, accompanied by manager-led training and discussions about what it means to live The Greater Good.

CODE OF ETHICS FOR THE CEO AND SENIOR FINANCIAL OFFICERS

The Company has also adopted an additional Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which applies to our chief executive officer, chief financial officer and controller. We will disclose any amendments to, or waivers of, the Code of Ethics for the Chief Executive Officer and Senior Financial Officers on our website within four business days.

CEO Succession Planning and Succession Planning for Senior Executives

The Board believes that planning for CEO succession is one of its most important responsibilities. CEO succession planning is regularly discussed at Board meetings and in executive sessions. In addition, every year our CEO and Chief Human Resources Officer review with the Board potential internal candidates, including their qualifications, experience and development. At least annually, independent directors meet with the CEO to discuss potential successors. The Board, taking into account the recommendations of the Directors and Governance Committee, approves and maintains a succession plan for the CEO. In addition, a confidential procedure is maintained for the timely and efficient transfer of the CEO’s responsibilities in the event of an emergency or his sudden incapacitation or departure.

The Board also believes that planning for succession below the CEO level is a key responsibility. The CEO periodically reviews with the independent directors the performance of senior executives and their qualifications, experience and development. The Compensation Committee has responsibility for reviewing the Company’s executive talent review process for senior executives. Every year, our Chief Human Resources Officer and CEO review with the Compensation Committee succession plans for direct reports to the CEO and other key executive positions.

Directors engage with senior executives and others at Board, committee and preparatory meetings as well as an annual meeting of the Board and the MMC Executive Committee. Directors also engage with senior executives and others in less formal settings to allow directors to personally assess potential candidates for CEO and senior executive roles.

Director Recruitment, Nomination and Succession Planning

The Board, taking into account the recommendation of the Directors and Governance Committee, is responsible for nominating a slate of director candidates for election at the Company’s annual meeting of stockholders.

 

 

 

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DIRECTOR RECRUITMENT

The Board has delegated to the Directors and Governance Committee the authority to identify, consider and recommend to the Board potential new director candidates. An overview of the Board’s director recruitment process is provided below.

 

 

OVERVIEW OF DIRECTOR RECRUITMENT PROCESS

 

 

  EVALUATE BOARD COMPOSITION

  

 

  The Directors and Governance Committee reviews Board composition at least annually.

 

  The Committee reviews with the Board periodically the skills and characteristics to be sought in director candidates.

 

 

  IDENTIFY DIVERSE POOL

  OF CANDIDATES

  

 

  The Directors and Governance Committee and the Board seek to reflect gender, racial and ethnic diversity in the pool of director candidates.

 

  Candidates may be recommended by search firms engaged by the Committee, other directors and stockholders.

 

 

  ASSESS POTENTIAL CANDIDATES

  

 

  Potential candidates are evaluated against the “Director Qualifications” on page 9 and the skills and experiences shown in the “Director Skills and Experience” matrix on page 10, as well as for independence and potential conflicts.

 

  Members of the Directors and Governance Committee and other directors meet with potential candidates.

 

 

  RECOMMEND CANDIDATES FOR

  APPROVAL

  

 

  The Directors and Governance Committee recommends candidates to the Board for approval.

 

  Stockholders vote on director nominees at the annual meeting of stockholders.

 

DIRECTOR NOMINATION PROCESS

As part of the process for nominating director candidates, the Board evaluates each individual director in the context of the Board as a whole, with the objective of recommending a group that can best support the success of our business and represent stockholder interests. In deciding whether to nominate an incumbent director for re-election, the Board considers many factors, including the criteria described under “Director Qualifications” on page 9 such as gender, racial and ethnic diversity, as well as his or her length of service and performance on the Board.

DIRECTOR SUCCESSION PLANNING

The Board is committed to effective succession planning. The Directors and Governance Committee has responsibility to review the composition and structure of the Board as a whole, taking into account such factors as the Board’s current mix and diversity of skills, backgrounds and experiences, and to make recommendations to the Board as appropriate. In its review of Board composition, the Directors and Governance Committee considers succession planning in light of factors such as skills needed and upcoming retirements and other potential departures.

CHANGES IN DIRECTORS SINCE THE LAST ANNUAL MEETING OF STOCKHOLDERS

Ms. Ingram and Ms. Lute joined the Board in July 2019 and March 2020, respectively. Elaine La Roche, who served with distinction as a director since 2012, passed away in August 2019.

Ms. Ingram and Ms. Lute were identified and recommended to the Directors and Governance Committee by a search firm retained by the Committee. In addition to identifying and providing information on a number of potential director candidates during each search, the search firm reviewed and provided information about Ms. Ingram and Ms. Lute for review by the Directors and Governance Committee and the Board.

 

 

 

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 Corporate Governance (Continued)

 

 

Director Orientation and Continuing Education

All new directors participate in an orientation program throughout their first year on the Board to familiarize them with the Company’s business, strategy, finances, policies, corporate governance practices and culture. The orientation program includes in-person meetings with the Company’s senior executives and comprehensive background materials, including our code of conduct, The Greater Good. Directors certify their commitment to The Greater Good every year. Additional orientation sessions with key advisors are provided for Audit and Compensation Committee members. Orientation sessions are tailored upon request to meet directors’ needs and interests.

Directors are also encouraged to participate in continuing education programs. Continuing education programs may be part of regular Board or committee meetings or third-party presentations. Additionally, the Company pays for directors to have access to third-party resources that provide updates on issues and programs relevant to public companies and their directors.

Director Independence

The Board has determined that all directors other than Mr. Glaser are independent under the New York Stock Exchange (“NYSE”) listed company rules and the standards set forth in the Governance Guidelines. Additionally, the Board determined that Elaine La Roche, who served as a director until she passed away in August 2019, was independent under these standards. Therefore, the Board has satisfied the objective, set forth in the Governance Guidelines, that a substantial majority of the Company’s directors be independent of management.

For a director to be considered independent, the Board must affirmatively determine that the director has no direct or indirect material relationship with the Company. The Board has established standards to assist it in making determinations of director independence. These standards conform to, or are more exacting than, the independence requirements provided in the NYSE listed company rules. The Company’s director independence standards are set forth as Annex A to our Governance Guidelines.

All members of the Audit, Compensation and Directors and Governance Committees must be independent directors under the NYSE listed company rules and the standards set forth in the Company’s Governance Guidelines. Members of the Audit Committee must also satisfy a separate Securities and Exchange Commission (“SEC”) and NYSE independence requirement, which provides that they may not be affiliates and may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than compensation received in their capacity as members of the Board or any committee of the Board. The Board evaluated each member of the Compensation Committee under the additional NYSE compensation committee member independence standards and also determined that these members qualify as “non-employee directors” (as defined under Rule 16b-3 under the Securities Exchange Act of 1934).

Under our Governance Guidelines, if a director whom the Board has deemed independent has a change in circumstances or relationships that might cause the Board to reconsider that determination, he or she must immediately notify the chairman of the Board and the chair of the Directors and Governance Committee.

Review of Related Person Transactions

The Company maintains a written Policy Regarding Related Person Transactions, which sets forth standards and procedures for the review and approval or ratification of transactions between the Company and related persons. The policy is administered by the Directors and Governance Committee with assistance from the Company’s Corporate Secretary.

In determining whether to approve or ratify a related person transaction, the Directors and Governance Committee will review the facts and circumstances including: the commercial reasonableness of the transaction; the benefits of the transaction to the Company; the availability of other sources for the products or services involved in the transaction; the materiality and nature of the related person’s direct or indirect interest in the transaction; the potential public perception of the transaction and the potential impact of the transaction on the independence of any of the Company’s directors. The Directors and Governance Committee will approve or ratify a related person transaction only if the Committee determines that the related person transaction is in, or is not inconsistent with, the best interests of the Company and its stockholders.

If the Directors and Governance Committee determines not to approve or ratify a related person transaction, the transaction will not be entered into or continued. No member of the Directors and Governance Committee will participate in any review or determination if the Committee member or any of his or her immediate family members is the related person.

See the discussion under “Transactions with Management and Others” on page 81.

 

 

 

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Stockholder Nominations for Director Candidates

Stockholders may recommend or nominate director candidates in writing to the Company’s Corporate Secretary. All stockholder recommendations for director candidates are considered, and they are evaluated in the same manner as other director candidates. Nominating stockholders must meet the requirements described in Article III of our bylaws. The notice of nomination also must meet bylaw requirements, including as to timeliness and form. Recommendations and notices of nomination should be delivered to the Company’s Corporate Secretary at our principal executive offices: Marsh & McLennan Companies, Inc., Attn: Directors and Governance Committee, c/o Katherine J. Brennan—Corporate Secretary, 1166 Avenue of the Americas, New York, New York 10036-2774. See the discussion under “Submission of Stockholder Proposals and Other Items of Business for 2021 Annual Meeting” on page 86.

Director Election Voting Standard

The Company’s bylaws provide that, in an uncontested election of directors (i.e., where the number of nominees does not exceed the number of directors to be elected), a director nominee must receive more votes cast “for” than “against” his or her election in order to be elected to the Board.

In connection with the Company’s majority voting standard for director elections, the Board has adopted the following procedures, which are set forth more fully in Section E.3 of our Governance Guidelines:

 

  The Board shall nominate for election only director candidates who agree to tender to the Board an irrevocable resignation that will be effective upon (i) a director’s failure to receive the required number of votes for re-election at the next meeting of stockholders at which he or she faces re-election and (ii) the Board’s acceptance of such resignation.

 

  Following a meeting of stockholders at which an incumbent director who was a nominee for re-election does not receive the required number of votes for election, the Directors and Governance Committee shall make a recommendation to the Board as to whether to accept or reject such director’s resignation. Within 90 days following the certification of the election results, the Board shall decide whether to accept or reject the director’s resignation and shall publicly disclose that decision and its rationale.

 

  If the Board accepts a director’s resignation, the Directors and Governance Committee will recommend to the Board whether to fill the resultant vacant Board seat or reduce the size of the Board.

Communicating with Directors

Holders of the Company’s common stock and other interested parties may send communications to the Board of Directors, the independent chairman, any of the directors or the independent directors as a group by mail (addressed to Katherine J. Brennan—Corporate Secretary, at the address shown below), online at ethicscomplianceline.com or by telephone (local dialing instructions can be found at ethicscomplianceline.com). Items unrelated to the directors’ duties and responsibilities as Board members may be excluded by the Corporate Secretary, including solicitations and advertisements, product-related communications, surveys and job referral materials such as resumes.

 

 

 

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 Corporate Governance (Continued)

 

 

Communicating Concerns Regarding Accounting Matters

The Audit Committee of the Board of Directors has established procedures to enable anyone who has a concern about the Company’s accounting, internal accounting controls or auditing practices to communicate that concern directly to the Audit Committee. These communications, which may be made on a confidential or anonymous basis, may be submitted in writing, by telephone or online as follows:

By mail to:

Marsh & McLennan Companies, Inc.

Audit Committee of the Board of Directors

c/o Katherine J. Brennan—Corporate Secretary

1166 Avenue of the Americas, Legal Department

New York, New York 10036-2774

By telephone or online:

Go to this website for dialing instructions or to raise a concern online:

ethicscomplianceline.com

Further details of the Company’s procedures for handling complaints and concerns of colleagues and other interested parties regarding accounting matters are posted on our website at mmc.com/about/corporate-governance.html.

Company policy prohibits retaliation against anyone who raises a concern in good faith.

 

 

 

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 Board of Directors and Committees

 

 

Board Composition, Leadership and Size

At the 2020 annual meeting, stockholders will vote on the election of thirteen (13) directors. H. Edward Hanway currently serves as the Board’s independent chairman.

The only member of management who serves on the Board is Daniel S. Glaser, the Company’s President and Chief Executive Officer. The position of chairman of the Board has been held by an independent director since 2005. The Board believes that this currently is the best leadership structure for the Company.

 

LOGO

Director Qualifications

As provided in our Governance Guidelines, all directors must demonstrate the highest standards of ethics and integrity, must be independent thinkers with strong analytical ability and must be committed to representing all of the Company’s stockholders rather than any particular interest group. In addition to these characteristics, our Governance Guidelines provide that each director candidate be evaluated by the Board against the following criteria: (1) the candidate’s personal and professional reputation and background; (2) the candidate’s knowledge and experience with the company’s businesses and industries; (3) the candidate’s experience with businesses or other organizations comparable to the Company in terms of size or complexity; (4) the interplay of the candidate’s skills and experience with those of the incumbent directors; (5) the extent to which the candidate would provide substantive expertise that is currently sought by the Board or any committees of the Board; (6) the candidate’s ability to commit the time necessary to fulfill a director’s responsibilities; (7) relevant legal and regulatory requirements and evolving best practices in corporate governance; (8) the gender, racial, ethnic and cultural diversity of each potential candidate and (9) any other criteria the Board deems appropriate.

 

 

 

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 Board of Directors and Committees (Continued)

 

 

Director Skills and Experience

As a global professional services firm offering clients advice and solutions in risk, strategy and people, the eight areas of expertise described in the chart below support our business and strategy. The chart identifies the five principal skills that the Directors and Governance Committee considered for each director when evaluating that director’s experience and qualifications to serve as a director. Additional information about each director’s background, business experience and other matters, as well a description of how each individual’s experience qualifies him or her to serve as a director of the Company is provided under the heading “Item 1—Election of Directors” beginning on page 16.

 

    

Skills and Experience

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

   

Leadership:

Business and strategic management experience from service in a significant leadership position, such as a chief executive officer, chief financial officer or other senior leadership role.

  🌑        🌑       🌑        🌑       🌑        🌑       🌑        🌑       🌑        🌑       🌑        🌑       🌑     
   

Financial:

Background and experience in finance, accounting, banking, capital markets, financial reporting or economics.

  🌑        🌑       🌑        🌑       🌑                🌑       🌑        🌑       🌑        🌑       🌑     
   

Industry:

Experience in the Company’s businesses and industries, including insurance, insurance and reinsurance brokerage, consulting and healthcare.

  🌑            🌑        🌑                   🌑           🌑               🌑     
   

International:

International background or global experience, including in growth markets.

      🌑       🌑        🌑           🌑       🌑        🌑               🌑             
   

Technology:

Experience in technology, innovation or cybersecurity, particularly as a senior executive.

                  🌑        🌑       🌑        🌑                   🌑        
   

Corporate Governance & Responsibility:

Experience with governance principles or corporate responsibility initiatives, including sustainability and diversity and inclusion.

  🌑        🌑               🌑        🌑               🌑            🌑            🌑     
   

Government Relations & Regulatory:

Experience with government relations, regulatory matters or regulated industries and political affairs.

      🌑           🌑           🌑       🌑            🌑        🌑           🌑        
   

Risk Management:

Experience in risk management, strategic planning or compliance.

  🌑            🌑            🌑            🌑            🌑        🌑       🌑        🌑       🌑     
   

Diversity:

Gender, racial, ethnic or cultural diversity.

  🌑        🌑               🌑        🌑       🌑                        🌑        

 

 

 

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 Board of Directors and Committees (Continued)

 

 

Board Diversity

We are committed to maintaining a diverse and inclusive Board. Of our thirteen directors, six (46%) are diverse, including three women.

Our Governance Guidelines specify that the gender, racial, ethnic and cultural diversity of each potential director candidate be considered by the Board. In its recruitment process, the Directors and Governance Committee and the Board seek to reflect gender, race, ethnic and cultural diversity in the pool of director candidates. The Directors and Governance Committee and the Board also consider gender, race, ethnic and cultural diversity in the director nomination process.

Board Refreshment

The Board is committed to effective succession planning and refreshment. Two directors have joined in the past twelve months, and a total of four directors have joined since 2016, enhancing the Board’s breadth and depth of experience and diversity. The average tenure of our directors is nine years. In deciding whether to nominate an incumbent director for re-election, the Board considers many factors, including tenure and an assessment of independence. The Board believes that term limits might arbitrarily deprive the Board of the contributions of directors who have valuable insight, developed over time, into the Company and its industries. The Board believes that a mix of director tenures provides fresh viewpoints, institutional knowledge and historical perspective.

Retirement

Our Governance Guidelines require our independent directors to resign no later than at the annual meeting of stockholders following their 75th birthday. Any director who is an employee of the Company will resign from the Board when his or her employment ends.

Attendance

The Board held nine meetings, including telephonic meetings, during 2019. The average attendance by directors at meetings of the Board and its committees held during 2019 was approximately 96%. All directors attended at least 75% of the meetings of the Board and committees on which they served. The Board’s policy is to have all directors attend the annual meetings of stockholders. All but one of our then-serving directors attended the 2019 annual meeting of stockholders.

Executive Sessions

Our independent directors meet in executive session without management at regularly scheduled in-person Board meetings. In 2019 they held six executive sessions, which were presided over by the independent chairman of the Board. In addition, the members of the Audit, Compensation and Directors and Governance Committees meet in executive session without management at regularly scheduled in-person committee meetings.

Board and Committee Evaluations

Our Governance Guidelines provide that the Directors and Governance Committee oversees an annual evaluation of the Board’s performance and effectiveness. In addition, the charters for the Audit, Compensation, Directors and Governance and ESG Committees provide that each committee evaluates its own performance annually.

BOARD EVALUATIONS

The annual evaluation of the Board focuses on its contribution to the Company over the preceding year, including areas in which the Board or management believes the Board could enhance its future contributions. More generally, directors are encouraged to make suggestions at any time for improving the Board’s practices.

 

 

 

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 Board of Directors and Committees (Continued)

 

 

An overview of the Board self-evaluation process is provided below.

 

 

OVERVIEW OF BOARD SELF-EVALUATION PROCESS

 

 

DETERMINE FORM AND CONTENT OF SELF-EVALUATION

 

 

  

 

  The Directors and Governance Committee determines the form and content of the evaluation each year, taking into account director and stockholder feedback and best practices.

 

 

 

 

DISCUSS IN EXECUTIVE SESSION

 

 

  

 

  The self-evaluation takes place in executive session using a compilation of unattributed responses, which is provided to directors in advance of the meeting.

 

 

 

 

RESPOND TO FEEDBACK

 

 

  

 

  Based on director feedback, changes are considered and, as appropriate, implemented.

 

 

 

 

For the evaluation of 2019, the Directors and Governance Committee considered the form of the evaluation, including whether to engage a third party for the evaluation, and determined to use a questionnaire soliciting qualitative commentary and quantitative ratings from each director. Recent changes to the questionnaire include beginning with open-ended discussion questions, soliciting more qualitative feedback, including regarding key indicators of the strength of the Company’s culture, and shortening the questionnaire by deleting and consolidating items that cover similar topics. The questionnaire also solicits the directors’ views on topics such as:

 

  the Board’s key priorities

 

  the Board’s knowledge base

 

  fulfillment of the Board’s and committees’ responsibilities

 

  the Board’s interaction with management

 

  the Board’s structure, composition and committees

 

  Board meetings and related processes
 

 

Recent changes made in response to director feedback from the Board evaluation include changing committee assignments and holding more Board meetings in locations other than the Company’s principal offices in New York City.

COMMITTEE EVALUATIONS

The Audit, Compensation, Directors and Governance and ESG Committees evaluate their own performance annually pursuant to their respective charters. Each committee is provided material in advance to assist with assessing its performance of its responsibilities under its charter and our Governance Guidelines. These materials include questions for discussion, summaries of the committee’s activities and responsibilities and feedback from the Board self-evaluation regarding the committee. Each committee conducts its self-evaluation in executive session.

Committees

Our Board maintains an Audit Committee, a Compensation Committee, a Directors and Governance Committee, a Finance Committee, an ESG Committee and an Executive Committee to assist the Board in discharging its responsibilities. Following each committee meeting, the respective committee chair reports the highlights of the meeting to the full Board.

Membership on each of the Audit, Compensation and Directors and Governance Committees is limited to independent directors as required by the Company, the listing standards of the NYSE and the SEC’s independence rules. The ESG Committee must consist of a majority of independent directors as required by the Company. Each of these committees is governed by a charter, which is available on our website at mmc.com/about/corporate-governance.html.

 

 

 

12          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


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 Board of Directors and Committees (Continued)

 

 

The table below shows current committee assignments and the number of times each committee met in 2019:

 

  Director            Audit    Compensation   

 

Directors

and

Governance

   Finance    ESG    Executive

 

  Anthony K. Anderson

 

           

 

🌑

 

                 

 

🌑

 

    

 

  Oscar Fanjul

 

                

 

🌑

 

       

 

CHAIR

 

       

 

🌑

 

 

  Daniel S. Glaser

 

                          

 

🌑

 

       

 

🌑

 

 

  H. Edward Hanway

 

                

 

🌑

 

  

 

🌑

 

  

 

🌑

 

       

 

CHAIR

 

 

  Deborah C. Hopkins

 

                

 

🌑

 

  

 

🌑

 

  

 

🌑

 

         

 

  Tamara Ingram

           

 

🌑

                 

 

🌑

    

 

  Jane H. Lute

           

 

🌑

                 

 

🌑

    

 

  Steven A. Mills

                

 

CHAIR

  

 

🌑

            

 

🌑

 

  Bruce P. Nolop

           

 

CHAIR

 

            

 

🌑

 

       

 

🌑

 

 

  Marc D. Oken

                          

 

🌑

 

  

 

🌑

 

    

 

  Morton O. Schapiro

                

 

🌑

 

  

 

CHAIR

 

       

 

🌑

 

  

 

🌑

 

 

  Lloyd M. Yates

           

 

🌑

 

                 

 

CHAIR

 

    

 

  R. David Yost

                

 

🌑

 

  

 

🌑

 

  

 

🌑

 

         

 

  2019 Meetings

           

 

10

 

  

 

6

 

  

 

4

 

  

 

4

 

  

 

4

 

  

 

0

 

AUDIT COMMITTEE

The Audit Committee is charged, among other things, with assisting the Board in fulfilling its oversight responsibilities with respect to:

 

  the integrity of the Company’s financial statements;

 

  the qualifications, independence and performance of our independent registered public accounting firm;

 

  the performance of the Company’s internal audit function;

 

  the Company’s policies and implementation of systems and controls designed to promote ethical behavior;

 

  compliance by the Company with legal and regulatory requirements; and

 

  the Company’s enterprise risk management programs and processes.

The Audit Committee selects, oversees and approves, pursuant to a pre-approval policy, all services to be performed by our independent registered public accounting firm. The Company’s independent registered public accounting firm reports to the Audit Committee.

All members of the Audit Committee are “financially literate,” as required by the NYSE and determined by the Board. The Board has determined that Anthony K. Anderson, Bruce P. Nolop and Lloyd M. Yates have the requisite qualifications to satisfy the SEC definition of “audit committee financial expert.”

COMPENSATION COMMITTEE

The primary responsibilities of the Compensation Committee are to:

 

  evaluate the performance and determine the compensation of our chief executive officer;

 

  review and approve the compensation of our other senior executives;

 

  review certain key human resource strategic activities, including those relating to diversity, training and recruitment; and

 

  oversee and discharge its responsibilities for the Company’s incentive compensation plans for our senior executives and equity-based award plans.

Meeting Schedule.   The Compensation Committee met six times in 2019, including a special meeting in February to complete its annual review of, and make decisions on, executive compensation. Decisions relating to significant matters are usually presented to the Compensation Committee and discussed at more than one meeting to allow for full consideration of the implications and possible alternatives before a final decision is made. The Compensation Committee

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          13


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 Board of Directors and Committees (Continued)

 

 

receives support from its independent compensation consultant and the Company’s management, including the Company’s human resources staff, as described below. At each of its meetings, the Compensation Committee meets in executive session and without management present. The independent compensation consultant attends portions of the executive sessions.

The Compensation Committee may delegate all or a portion of its duties and responsibilities to the chair of the Compensation Committee or a subcommittee of the Compensation Committee. If necessary, the chair is authorized to take action on behalf of the Compensation Committee between its regularly scheduled meetings, within prescribed guidelines. If any such action is taken, the chair reports such action to the Compensation Committee at its next regularly scheduled meeting.

Independent Compensation Consultant.   The Compensation Committee has engaged Pay Governance LLC as its independent compensation consultant to support the Compensation Committee in performing its duties and to provide analysis and make recommendations to the Compensation Committee regarding our executive compensation program. The independent compensation consultant reports directly to the Compensation Committee and provides advice and analysis solely to the Compensation Committee. The independent compensation consultant supports the Compensation Committee by:

 

  participating in meetings and executive sessions of the Compensation Committee to advise the Compensation Committee on specific matters that arise;

 

  offering objective advice regarding the compensation and policy recommendations presented to the Compensation Committee by the Company’s management, including senior members of the Company’s human resources staff; and

 

  providing data regarding the compensation practices of comparable companies.

The Compensation Committee requested and received advice from the independent compensation consultant with respect to all significant matters addressed by the Compensation Committee during 2019. Except for the services provided to the Compensation Committee, neither the individual compensation consultant nor Pay Governance LLC nor any of its affiliates provided any services to the Company or its affiliates in 2019.

The Compensation Committee assessed the work of Pay Governance LLC during 2019 pursuant to SEC rules and concluded that Pay Governance’s work did not raise any conflict of interest.

Company Management.   The Company’s management, including the Company’s human resources staff, supports the Compensation Committee by:

 

  developing meeting agendas in consultation with the chair of the Compensation Committee and preparing background materials for Compensation Committee meetings;

 

  making recommendations to the Compensation Committee on the Company’s compensation philosophy, governance initiatives and short-term and long-term incentive (“LTI”) compensation design, and by providing input regarding the individual performance component of annual bonus awards; and

 

  responding to actions and initiatives proposed by the Compensation Committee.

In addition, our President and Chief Executive Officer provides recommendations with respect to the compensation of our other senior executives.

Our President and Chief Executive Officer, senior members of the Company’s human resources staff and internal legal counsel attended Compensation Committee meetings when invited but were not present for executive sessions or for any discussion of their own compensation.

Timing and Procedures of Equity-Based Compensation Awards.   Annual awards under our LTI compensation program are approved at a prescheduled meeting of the Compensation Committee each February and, consistent with our historical practice, are granted on that same date.

In addition, the Compensation Committee periodically grants restricted stock unit awards to newly hired senior executives and to continuing senior executives for increased responsibilities that accompany changes in position and for retention purposes. These awards are approved at prescheduled meetings of the Compensation Committee. The Compensation Committee has also authorized our President and Chief Executive Officer to make such awards to individuals who are not senior executives, subject to prescribed parameters. These awards are granted on the first calendar day of the month following approval of the award by the Compensation Committee or our President and Chief

 

 

 

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 Board of Directors and Committees (Continued)

 

 

Executive Officer, as applicable. In the event that an award is approved prior to an individual’s start date with the Company, the award will be granted on the first calendar day of the first month on or following the individual’s start date; however, if an award is approved contingent on the award recipient providing documentation supporting the forfeiture of compensation from a former employer and that documentation has not been provided as of the individual’s start date, the award will be granted on the first calendar day of the month following the provision of such documentation and acceptance by the Company.

Typically, equity-based awards are denominated as a dollar value and then converted into a number of performance stock units, restricted stock units or stock options. The number of performance stock units or restricted stock units is determined based on the fair market value of the Company’s common stock, which is defined as the average of the high and low trading prices of the Company’s common stock on the trading day immediately preceding the grant date. The number of stock options is determined based on the grant date fair value of a stock option to purchase a share of the Company’s common stock. The grant date fair value of stock options and performance stock units is determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”). Stock options have an exercise price equal to the average of the high and low trading prices of the Company’s common stock on the trading day immediately preceding the grant date. We believe that our equity-based compensation grant procedures effectively protect against the manipulation of grant timing for employee gain.

The Company’s human resources staff regularly monitors, and updates the Compensation Committee on, the use of shares of the Company’s common stock for equity-based awards and the number of shares available for future awards under our equity-based compensation plans. As part of the process of granting annual LTI compensation, the Compensation Committee considers share use and equity run rate (as defined in “Item 4 — Approval of the 2020 Incentive and Stock Award Plan” on page 66) so that annual LTI awards, and the extent to which shares of the Company’s common stock are used for those awards, are maintained at a reasonable level.

DIRECTORS AND GOVERNANCE COMMITTEE

The Directors and Governance Committee’s duties and responsibilities include, among other things:

 

  assisting the Board by identifying, considering and recommending, consistent with criteria approved by the Board, qualified candidates for election as directors, including the slate of directors to be nominated by the Board for election at the Company’s annual meeting of stockholders;

 

  recommending Board committee assignments;

 

  overseeing the development and implementation of succession planning for the Company’s chief executive officer; and

 

  developing and recommending to the Board the Company’s Governance Guidelines, including taking a leadership role in shaping the Company’s corporate governance.

FINANCE COMMITTEE

The Finance Committee reviews and makes recommendations to the Board concerning, among other matters, the Company’s capital structure, capital management and methods of corporate finance (including proposed issuances of securities or other financing transactions) and proposed acquisitions, divestitures or other strategic transactions.

ESG COMMITTEE

The ESG Committee’s purpose is to oversee and support the Company’s commitment to social, environmental and other public policy initiatives. The ESG Committee receives at least annual updates on sustainability, environmental matters, social impact and diversity and inclusion topics and reports to the Board on a regular basis.

EXECUTIVE COMMITTEE

The Executive Committee is empowered to act for the full Board during the intervals between Board meetings, except with respect to matters that, under Delaware law or the Company’s bylaws, may not be delegated to a committee of the Board. The Executive Committee meets as necessary, with all actions taken by the Committee reported at the next Board meeting.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          15


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 Election of Directors

 

 

Item 1 — Election of Directors

At the 2020 annual meeting, stockholders will vote on the election of the thirteen (13) nominees listed on the following page for a one-year term. As described under “Director Recruitment, Nomination and Succession Planning” on page 5, Ms. Ingram and Ms. Lute joined the Board in the past twelve months, and they appear on the ballot for the first time.

The Board has nominated each of these individuals to serve until the 2021 annual meeting. Each nominee has indicated that he or she will serve if elected. We do not anticipate that any of the nominees will be unable or unwilling to stand for election, but if that happens, your proxy may be voted for another person nominated by the Board or the Board may reduce its size. Each director holds office until his or her successor has been duly elected and qualified or his or her earlier resignation, death or removal.

In nominating the following slate of director candidates for election at the Company’s annual meeting of stockholders, the Board has evaluated each nominee by reference to the criteria described above on pages 9 and 10 under the headings “Director Qualifications” and “Director Skills and Experience.” In addition, the Board evaluates each individual director in the context of the Board as a whole, with the objective of recommending a group that can best support the success of our businesses and represent stockholder interests.

The following section contains information provided by the nominees about their principal occupations, business experience and other matters, including their current committee assignments, as well as a description of how each individual’s experience qualifies him or her to serve as a director of the Company.

The Board of Directors recommends that you vote FOR all of the director nominees.

 

 

 

16          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


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 Election of Directors (Continued)

 

 

     Name/Age

 

 

Director

Since

 

 

Background

 

 

Independent       

 

 

 

Other
Public
Company
Boards

 

   

Committees

 

      
   

 

Anthony K. Anderson, 64       

 

 

2016

 

 

Former Vice Chair and Midwest Area Managing Partner of Ernst & Young LLP

 

 

 

Yes

 

 

 

 

3

 

 

 

 

Audit

ESG

 

       
   

 

Oscar Fanjul, 70

 

 

2001

 

 

Vice Chairman of Omega Capital, Founding Chairman and Former Chief Executive Officer of Repsol

 

 

 

Yes

 

 

 

 

2

 

 

 

 

Compensation

Executive

Finance (Chair)

 

       
   

 

Daniel S. Glaser, 59

 

 

2013

 

 

President and Chief Executive Officer of Marsh & McLennan Companies, Inc.

 

 

 

No

 

 

 

 

0

 

 

 

 

Executive

Finance

 

       
   

 

H. Edward Hanway, 68

 

 

2010

 

 

Former Chairman and Chief Executive Officer of CIGNA Corporation

 

 

Yes

 

 

 

 

0

 

 

 

 

Compensation

Directors and Governance Executive (Chair)

Finance

 

       
   

 

Deborah C. Hopkins, 65

 

 

2017

 

 

Former Chief Executive Officer of Citi Ventures, Former Chief Innovation Officer of Citigroup

 

 

 

Yes

 

 

 

 

2

 

 

 

 

Compensation

Directors and Governance

Finance

       
   

 

Tamara Ingram, 59

 

 

2019

 

 

Global Chairman, Wunderman Thompson

 

 

 

Yes

 

 

 

 

0

 

 

 

 

Audit

ESG

 

       
   

 

Jane H. Lute, 63

 

 

2020

 

 

President and Chief Executive Officer, SICPA North America

 

 

 

Yes

 

 

 

 

2

 

 

 

 

Audit

ESG

 

       
   

 

Steven A. Mills, 68

 

 

2011

 

 

Former Executive Vice President of Software & Systems of International Business Machines Corporation (IBM)

 

 

 

Yes

 

 

 

 

0

 

 

 

 

Compensation (Chair)

Directors and Governance

Executive

 

       
   

 

Bruce P. Nolop, 69

 

 

2008

 

 

Former Executive Vice President and Chief Financial Officer of E*Trade Financial Corporation

 

 

Yes

 

 

 

 

2

 

 

 

 

Audit (Chair)

Executive

Finance

 

       
   

 

Marc D. Oken, 73

 

 

2006

 

 

Chairman of Falfurrias Capital Partners

 

 

 

Yes

 

 

 

 

1

 

 

 

 

ESG

Finance

 

       
 

 

Morton O. Schapiro, 66

 

 

2002

 

 

President and Professor of

 

 

Yes

 

 

 

 

0

 

 

 

 

Compensation

 
            Economics, Northwestern University              

Directors and Governance (Chair) ESG

Executive

 

       
   

 

Lloyd M. Yates, 59

 

 

2011

 

 

Former Executive Vice President of Duke Energy and President of Duke Energy’s Carolinas Region

 

 

 

Yes

 

 

 

 

3

 

 

 

 

Audit

ESG (Chair)

       
 

 

R. David Yost, 72

 

 

2012

 

 

Former President and Chief Executive

 

 

Yes

 

 

 

 

2

 

 

 

 

Compensation

 
           

Officer of AmerisourceBergen

 

             

Directors and Governance Finance

 

       

 

 

LOGO

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          17


Table of Contents

 

 Election of Directors (Continued)

 

 

                       

     

 

LOGO

    

Anthony K. Anderson

 

    

    

    

 

 

Director since: 2016

 

Age: 64

 

Other Public Company Boards:

AAR Corp.

Avery Dennison Corporation

Exelon Corporation

Past five years: First American Financial

Corporation

  

 

 

Committees:

Audit

ESG

 

Key Skills and Experience:

Leadership

Financial

Industry

Corporate Governance & Responsibility

Risk Management

 

 

 

Business Experience

Mr. Anderson served as Vice Chair and Midwest Area Managing Partner of Ernst & Young LLP from 2006 until his retirement in April 2012. He joined Ernst & Young in 1977 and held various management positions during his 35-year career there. Mr. Anderson served on the Board of the Federal Reserve Bank of Chicago from 2008 to 2010. He is a member of the American, California and Illinois Institutes of Certified Public Accountants. Mr. Anderson is also a director of AAR Corp., Avery Dennison Corporation and Exelon Corporation. He is a former director of First American Financial Corporation.

 

Qualifications

We believe Mr. Anderson’s qualifications to serve on our Board of Directors include his significant experience as an audit partner serving insurance and insurance brokerage entities and his leadership and management experience with a global professional services organization.

 

                       

     

 

LOGO

    

Oscar Fanjul

 

    

    

    

 

 

Director since: 2001

 

Age: 70

 

Other Public Company Boards:

LafargeHolcim

Ferrovial

Past five years: Acerinox and Deoleo

  

 

 

Committees:

Compensation

Executive

Finance (Chair)

 

Key Skills and Experience:

Leadership

Financial

International

Corporate Governance & Responsibility

Government Relations & Regulatory

 

 

 

Business Experience

Mr. Fanjul is Vice Chairman of Omega Capital, a private investment firm based in Spain. Mr. Fanjul is the Founding Chairman and former Chief Executive Officer of Repsol. Mr. Fanjul is Vice Chairman of the Board of LafargeHolcim and a director of Ferrovial. He is a Trustee of the Museo Nacional Centro de Arte Reina Sofia. Mr. Fanjul is a former director of Unilever, the London Stock Exchange, Areva, Acerinox and Deoleo. He is a dual Spanish and Chilean national and has a PhD in Economics.

 

Qualifications

We believe Mr. Fanjul’s qualifications to serve on our Board of Directors and chair our Finance Committee include his extensive experience in international markets with global companies, his understanding of global business practices and his perspective from being based outside the US.

 

 

 

18          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


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 Election of Directors (Continued)

 

 

                       

     

 

LOGO

    

Daniel S. Glaser

 

    

    

    

 

 

Director since: 2013

 

Age: 59

 

Other Public Company Boards:

N/A

  

 

 

Committees:

Executive

Finance

 

Key Skills and Experience:

Leadership

Financial

Industry

International

Risk Management

 

 

 

Business Experience

Mr. Glaser is President and Chief Executive Officer of Marsh & McLennan Companies. Prior to starting his current role in January 2013, Mr. Glaser served as Group President and Chief Operating Officer of the Company. He rejoined Marsh & McLennan Companies in December 2007 as Chairman and Chief Executive Officer of Marsh, returning to the firm where he had begun his career right out of university in 1982. Mr. Glaser is an insurance industry veteran who has held senior positions in commercial insurance and insurance brokerage, working in the United States, Europe and the Middle East. Mr. Glaser serves as the Chairman of the US Federal Advisory Committee on Insurance (FACI). He is a member of the Board of Trustees for The Institutes and Ohio Wesleyan University; the Board of Directors for the Partnership for New York City. He is also the Co-Chair of the International Advisory Board for BritishAmerican Business.

 

Qualifications

As the only member of the Company’s management team on the Board, Mr. Glaser’s presence on the Board provides directors with direct access to the Company’s chief executive officer and helps facilitate director contact with other members of the Company’s senior management.

 

                       

     

 

LOGO

    

H. Edward Hanway

 

    

    

    

 

 

Director since: 2010

 

Age: 68

 

Other Public Company Boards:

N/A

  

 

 

Committees:

Compensation

Directors and Governance

Executive (Chair)

Finance

 

Key Skills and Experience:

Leadership

Financial

Industry

International

Government Relations & Regulatory

 

 

 

Business Experience

Mr. Hanway served as Chairman and Chief Executive Officer of CIGNA Corporation from 2000 until his retirement in 2009. From 1999 to 2000, he served as President and Chief Operating Officer of CIGNA. From 1996 to 1999, he was President of CIGNA HealthCare and from 1989 to 1996 was President of CIGNA International. Mr. Hanway is a former member of the Board of Directors of America’s Health Insurance Plans (AHIP). He is also a past Chairman of the Council on Affordable Quality Healthcare (CAQH) and has been active in a wide range of issues and initiatives associated with children’s health and education. He serves on the Board of Trustees of the Delaware County Community Foundation and is Chairman of the Drexel Neumann Academy and Faith in the Future Foundation, an organization committed to growth of Catholic education in the Archdiocese of Philadelphia.

 

Qualifications

We believe Mr. Hanway’s qualifications to chair our Board of Directors include his years of executive experience in the insurance industry, together with his background in the health and benefits sector, which provide our Board with insight into important areas in which the Company conducts business.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          19


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 Election of Directors (Continued)

 

 

                       

     

 

LOGO

    

Deborah C. Hopkins

 

    

    

    

 

 

Director since: 2017

 

Age: 65

 

Other Public Company Boards:

Union Pacific Corporation

Virtusa Corporation

Past five years: Qlik Technologies

  

 

 

Committees:

Compensation

Directors and Governance

Finance

 

Key Skills and Experience:

Leadership

Financial

Corporate Governance & Responsibility

Technology

Risk Management

 

 

 

Business Experience

Ms. Hopkins was the founder and Chief Executive Officer of Citi Ventures and served as Citigroup’s first Chief Innovation Officer. Previously at Citi she was Chief Operations and Technology officer of the company and Senior Advisor to the Corporate and Investment Bank. She retired at the end of 2016. Prior to joining Citigroup in 2003 as Head of Corporate Strategy and M&A, she was Chief Financial Officer of Lucent Technologies and The Boeing Company and held senior-level positions at General Motors in the US and Zurich and at Unisys Corporation, after starting her career at Ford. Ms. Hopkins was twice named to Fortune’s 10 most powerful women in business and was on Institutional Investor’s Top 50 list every year from 2011 until she retired. Ms. Hopkins is an independent member of the Executive board, Treasurer and Finance Chair of St. John’s Hospital Foundation located in Jackson, Wyoming. She is a director of Union Pacific Corporation, Virtusa Corporation and privately-held cybersecurity company, Deep Instinct. She is a former director of Qlik Technologies, E.I. DuPont de Nemours & Company and Dendrite International. Ms. Hopkins holds honorary doctorate degrees from Westminster College and Walsh College and a B.A. in Accounting from Walsh College.

 

Qualifications

We believe Ms. Hopkins’s qualifications to serve on our Board of Directors include her significant leadership positions in finance, technology and innovation at various multinational companies.

 

                       

     

 

LOGO

    

Tamara Ingram

 

    

    

    

 

 

Director since: 2019

 

Age: 59

 

Other Public Company Boards:

N/A

Past five years: Serco Group plc

  

 

 

Committees:

Audit

ESG

 

Key Skills and Experience:

Leadership

International

Technology

Corporate Governance & Responsibility

Government Relations & Regulatory

 

 

 

Business Experience

Ms. Ingram is Global Chairman, Wunderman Thompson, an international global advertising agency. Ms. Ingram held previous roles at WPP plc, a media conglomerate, including Global Chief Executive Officer of J. Walter Thompson, Grey UK’s Group Chief Executive Officer, Global Leader on their Procter & Gamble account, as well as roles at WPP’s wholly owned data investment division, Kantar. Prior to joining WPP plc, Ms. Ingram was Chief Executive Officer of McCann Worldgroup in London and Chief Executive Officer of Saatchi & Saatchi’s London office. Ms. Ingram previously served as a non-executive director of London Stock Exchange-listed companies Sage Group plc and Serco Group plc. She is a Trustee of Save the Children International (UK) and was awarded an OBE (Officer of the Most Excellent Order of the British Empire) for her services to tourism through her work as Chairman of Visit London.

 

Qualifications

We believe Ms. Ingram’s qualifications to serve on our Board of Directors include her significant leadership experience in leading client-focused, global businesses, particularly internationally, and her corporate governance experience from other board service.

 

 

 

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 Election of Directors (Continued)

 

 

                       

     

 

LOGO

    

Jane H. Lute

 

    

    

    

 

 

Director since: 2020

 

Age: 63

 

Other Public Company Boards:

Atlas Air Worldwide Holdings, Inc.

Union Pacific Corporation

  

 

 

Committees:

Audit

ESG

 

Key Skills and Experience:

Leadership

International

Technology

Government Relations & Regulatory

Risk Management

 

 

 

Business Experience

Ms. Lute is the President and CEO of SICPA North America, a company that specializes in providing material and digital integrity solutions to authenticate the provenance and protect the value of products, processes, and documents. Ms. Lute also serves as Special Advisor to the Secretary-General of the United Nations, where she has held several positions in peacekeeping and peace building. Previously, Ms. Lute served as United States Deputy Secretary of Homeland Security from 2009-2013. She also served as Chief Executive Officer of the Center for Internet Security, an operating not-for-profit organization providing cybersecurity services for state, local, tribal and territorial governments. She began her distinguished career in the United States Army and served on the National Security Council staff under both Presidents George H.W. Bush and William Jefferson Clinton. Ms. Lute holds a Ph.D. in political science from Stanford University and a J.D. from Georgetown University. Ms. Lute serves on the Board of Directors of Union Pacific Corporation and Atlas Air Worldwide Holdings, Inc.

 

Qualifications

We believe Ms. Lute’s qualifications to serve on our Board of Directors include her broad expertise in cybersecurity, vast international experience and her experience managing large, complex organizations.

 

                       

     

 

LOGO

    

Steven A. Mills

 

    

    

    

 

 

Director since: 2011

 

Age: 68

 

Other Public Company Boards:

N/A

  

 

 

Committees:

Compensation (Chair)

Directors and Governance

Executive

 

Key Skills and Experience:

Leadership

Financial

Industry

International

Technology

 

 

 

Business Experience

Mr. Mills was a senior executive at International Business Machines Corporation (IBM) before his retirement at the end of December 2015. Mr. Mills joined IBM in 1973 and during the course of his 40-plus-year career held various executive leadership positions across the Company. At the time of his retirement, Mr. Mills was the Executive Vice President of Software & Systems, with responsibility for directing IBM’s $40 billion product business, which included over 100,000 employees spanning development, manufacturing, sales, marketing and support professions.

 

Qualifications

We believe Mr. Mills’ qualifications to serve on our Board of Directors and chair our Compensation Committee include his executive leadership and management experience, his technology expertise, his extensive international experience at IBM and his overall knowledge of global markets.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          21


Table of Contents

 

 Election of Directors (Continued)

 

 

                       

     

 

LOGO

    

Bruce P. Nolop

 

    

    

    

 

 

Director since: 2008

 

Age: 69

 

Other Public Company Boards:

TEGNA Inc.

On Deck Capital, Inc.

  

 

 

Committees:

Audit (Chair)

Executive

Finance

 

Key Skills and Experience:

Leadership

Financial

Corporate Governance & Responsibility

Government Relations & Regulatory

Risk Management

 

 

 

Business Experience

Mr. Nolop retired in 2011 from E*TRADE Financial Corporation, where he served as Executive Vice President and Chief Financial Officer from September 2008 through 2010. Previously he was Executive Vice President and Chief Financial Officer of Pitney Bowes Inc. from 2000 to 2008 and Managing Director of Wasserstein Perella from 1993 to 2000. Prior thereto he held positions with Goldman, Sachs & Co., Kimberly-Clark Corporation and Morgan Stanley & Co. Mr. Nolop also serves on the Board of Directors of TEGNA Inc. (formerly Gannett Co., Inc.), On Deck Capital, Inc. and privately-held CLS Group Holdings AG.

 

Qualifications

We believe Mr. Nolop’s qualifications to serve on our Board of Directors and chair our Audit Committee include his experience in financial accounting and corporate finance and his familiarity with internal financial controls and strategic transactions acquired through executive-level finance positions held in public companies and 18 years’ experience as an investment banker.

 

                       

     

 

LOGO

    

Marc D. Oken

 

    

    

    

 

 

Director since: 2006

 

Age: 73

 

Other Public Company Boards:

Sonoco Products Company

Past five years: Capital Bank

Financial Corp.

  

 

 

Committees:

ESG

Finance

 

Key Skills and Experience:

Leadership

Financial

Industry

Government Relations & Regulatory

Risk Management

 

 

 

Business Experience

Mr. Oken is Chairman of Falfurrias Capital Partners, a private equity firm. He was Chief Financial Officer of Bank of America Corporation from 2004 to 2005. Mr. Oken joined Bank of America in 1989 as Executive Vice President-Chief Accounting Officer, a position he held until 1998, when he became Executive Vice President-Principal Finance Executive. Prior to joining Bank of America, he was a partner at Price Waterhouse, serving there for 13 years. Mr. Oken is also a director of Sonoco Products Company and a former Director of Capital Bank Financial Corp. He also served in Vietnam as a Navy pilot.

 

Qualifications

We believe Mr. Oken’s qualifications to serve on our Board of Directors include his extensive experience with public and financial accounting matters for complex global organizations, as well as his executive leadership and management experience.

 

 

 

22          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Election of Directors (Continued)

 

 

                       

     

 

LOGO

    

Morton O. Schapiro

 

    

    

    

 

 

Director since: 2002

 

Age: 66

 

Other Public Company Boards:

N/A

  

 

 

Committees:

Compensation

Directors and Governance (Chair)

ESG

Executive

 

Key Skills and Experience:

Leadership

Financial

International

Corporate Governance & Responsibility

Risk Management

 

 

 

Business Experience

Mr. Schapiro has been President and Professor of Economics at Northwestern University since 2009. Prior to that, he was President and Professor at Williams College from 2000. Previous positions include Dean of the College of Letters, Arts and Sciences of the University of Southern California from 1994 to 2000, the University’s Vice President for planning from 1999 to 2000 and Chair of its Department of Economics from 1991 to 1994. Mr. Schapiro is among the nation’s leading authorities on the economics of higher education and has expertise in labor and development economics.

 

Qualifications

We believe Mr. Schapiro’s qualifications to serve on our Board of Directors and chair our Directors and Governance Committee include his executive leadership and management with large and complex educational institutions, which provides the Board with a diverse perspective, as well as his more than 30 years of experience as a professor of economics.

 

                       

     

 

LOGO

    

Lloyd M. Yates

 

    

    

    

 

 

Director since: 2011

 

Age: 59

 

Other Public Company Boards:

American Water Works Company

NiSource Inc.

Sonoco Products Company

  

 

 

Committees:

Audit

ESG (Chair)

 

Key Skills and Experience:

Leadership

Financial

Technology

Government Relations & Regulatory

Risk Management

 

 

 

Business Experience

Mr. Yates served as Executive Vice President of Duke Energy and President of Duke Energy’s Carolinas Region until his retirement in September 2019. Previously, Mr. Yates served as Executive Vice President of Customer Operations for Duke Energy. Mr. Yates has more than 35 years of experience in the energy industry, including the areas of nuclear and fossil generation and energy delivery. Before the merger between Duke Energy and Progress Energy in July 2012, Mr. Yates served as President and Chief Executive Officer for Progress Energy Carolinas. Mr. Yates joined Progress Energy’s predecessor, Carolina Power & Light, in 1998. Before joining Progress Energy, he worked for PECO Energy for 16 years in several line operations and management positions.

 

Qualifications

We believe Mr. Yates’s qualifications to serve on our Board of Directors and chair our ESG Committee include the executive leadership and management experience he has acquired throughout his career in the energy industry, as well as his risk management experience with nuclear and fossil energy generation and delivery.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          23


Table of Contents

 

 Election of Directors (Continued)

 

 

                       

     

 

LOGO

    

R. David Yost

 

    

    

    

 

 

Director since: 2012

 

Age: 72

 

Other Public Company Boards:

Bank of America

Johnson Controls International plc

Past five years: Exelis Inc.

  

 

 

Committees:

Compensation

Directors and Governance
Finance

 

Key Skills and Experience:

Leadership

Financial

Industry

Corporate Governance & Responsibility

Risk Management

 

 

 

Business Experience

Mr. Yost served as the President and Chief Executive Officer of AmerisourceBergen, a comprehensive pharmaceutical services provider, from 2001 until his retirement in 2011. Mr. Yost also held a variety of other positions with AmeriSource Health Corporation and its predecessors from 1974 to 2001, including Chairman, President and Chief Executive Officer from 1997 to 2001. Mr. Yost is a graduate of the U.S. Air Force Academy and was previously a Captain in the United States Air Force. He also holds an M.B.A. from the University of California, Los Angeles. He serves on the Board of Directors of Johnson Controls International plc and Bank of America. Mr. Yost is a former director of Exelis Inc. Mr. Yost also serves on the U.S. Air Force Academy Foundation Board.

 

Qualifications

We believe Mr. Yost’s qualifications to serve on our Board of Directors include his extensive leadership experience gained as the chief executive of a large publicly traded company in the healthcare industry and as a director of other publicly traded companies.

 

 

 

24          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Executive Compensation

 

 

Item 2 — Advisory (Nonbinding) Vote to Approve Named Executive

Officer Compensation

Recognizing that executive compensation is an important matter for our stockholders, and in accordance with SEC rules, we are asking our stockholders to approve an advisory resolution on the compensation of our named executive officers as disclosed in this proxy statement.

This proposal, commonly known as a “say-on-pay” proposal, is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and our executive compensation philosophy, policies and practices as described in this proxy statement. Although the voting results are not binding, the Board and the Compensation Committee will take into account the results of the vote when considering future executive compensation arrangements. We will conduct this annual advisory vote through our 2023 Annual Meeting of Stockholders, when the next advisory vote on the frequency of future say-on-pay votes will occur.

We encourage our stockholders to read the Compensation Discussion and Analysis, which immediately follows this proposal. The Compensation Discussion and Analysis describes our executive compensation program and related policies and practices and explains the decisions the Compensation Committee has made under this program and the factors considered in making those decisions. We also encourage our stockholders to review the 2019 Summary Compensation Table and the other compensation tables and accompanying narratives, which provide detailed information on the compensation of our named executive officers.

STOCKHOLDERS ARE BEING ASKED TO VOTE ON THE FOLLOWING RESOLUTION:

RESOLVED, that the stockholders of Marsh & McLennan Companies approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narratives.

The Board of Directors recommends that you vote FOR the approval of our named executive officer compensation on an advisory basis.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          25


Table of Contents

 

 Executive Compensation (Continued)

 

 

Compensation Discussion and Analysis

The following is a discussion and analysis of our compensation program for our senior executives, focusing on our key compensation principles, policies and practices.

This section describes the compensation decisions with respect to the individuals who served during 2019 as our President and Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers as of December 31, 2019, as listed below. These individuals are included in the “2019 Summary Compensation Table” on page 49.

 

 

 Name    Title

 Daniel S. Glaser

   President and Chief Executive Officer (“CEO”)

 Mark C. McGivney

   Chief Financial Officer

 John Q. Doyle

  

President and Chief Executive Officer of Marsh

Vice Chair, Marsh & McLennan

 Martine Ferland

  

President and Chief Executive Officer of Mercer

Vice Chair, Marsh & McLennan

 Dominic J. Burke

  

Vice Chair of Marsh & McLennan

and former group Chief Executive Officer of Jardine Lloyd Thompson PLC

 

We refer to these individuals collectively in this Compensation Discussion and Analysis as our “named executive officers.” When we refer to our “senior executives” in this proxy statement, we mean our CEO, the chief executive officers of our four businesses and certain leaders of our corporate staff. Background information regarding our senior executives is provided on our website at mmc.com/about/leadership.html.

 

 

 

2019 Highlights

 

  

 

POSITIONING

FOR THE FUTURE

 

LOGO

 

   In April 2019, WE ACQUIRED JARDINE LLOYD THOMPSON PLC (“JLT”), the largest acquisition in our nearly 150-year history. With the addition of JLT’s colleagues and capabilities, we’ve enhanced our position in higher-growth and higher-margin areas and increased collaboration across our businesses to deliver even greater value as one enterprise.

 

   In addition to the JLT acquisition and integration, we made meaningful progress on advancing our position more broadly. We continued to make acquisitions to BUILD OUT MARSH & MCLENNAN AGENCY and continued to ADVANCE THE DIGITAL STRATEGIES in each of our businesses.

 

 

 

 

26          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

2019 Highlights (continued)

 

  

 

FINANCIAL OBJECTIVES

 

LOGO

 

   In 2019, Marsh & McLennan Companies DELIVERED STRONG PERFORMANCE as we successfully executed on our long-term financial and strategic objectives.

 

   GAAP EPS INCREASED 6%, and we delivered 7% GROWTH IN ADJUSTED EPS* despite modest dilution in the first year following the acquisition of Jardine Lloyd Thompson plc.

 

   We generated $17 BILLION OF REVENUE, an increase of 11% compared with 2018, our highest annual top-line growth in 20 years. We achieved 4% GROWTH in underlying revenue, the 10th year in a row where our underlying growth was 3% or above.

 

   Our OVERALL ADJUSTED MARGIN* INCREASED 110 BASIS POINTS, our 12th consecutive year of margin improvement, and we increased adjusted operating income* for both the Risk & Insurance Services and Consulting segments for the tenth consecutive year.

 

*  Please see Exhibit A for a reconciliation of our non-GAAP financial measures to GAAP financial measures and related disclosures.

 

 

CAPITAL MANAGEMENT

 

LOGO

 

 

   We increased our quarterly dividend from $0.415 to $0.455 per share beginning in the third quarter of 2019, resulting in an ANNUAL DIVIDEND INCREASE OF 10.1%, from $1.58 to $1.74. Our dividend has increased every year since 2010.

 

   We used approximately $485 million in cash to REPURCHASE APPROXIMATELY 4.8 MILLION SHARES, reducing our outstanding common stock by approximately 0.2 million shares on a net basis.

 

 

STOCK PERFORMANCE

 

LOGO

 

 

   Our TOTAL STOCKHOLDER RETURN (“TSR”) was 42.3%, outperforming the S&P 500 ® index TSR by 10.9 percentage points for 2019.

 

   Our FIVE-YEAR ANNUALIZED TSR OF 16.5% also outperformed the S&P 500 ® index TSR by 4.8 percentage points.

 

 

EXECUTIVE COMPENSATION

 

LOGO

 

 

   In 2020, we made two key changes to the annual long-term incentive (“LTI”) design in order to more closely align executive rewards with stockholder interests. We INCREASED THE PROPORTION OF PERFORMANCE STOCK UNITS TO 50% (eliminating the 25% previously allocated to restricted stock units) for our senior executives and ADDED A RELATIVE TSR MODIFIER based on the Company’s three-year TSR versus S&P 500 ® companies. In making these decisions, the Compensation Committee took into account views expressed by stockholders.

 

   We achieved THREE-YEAR ADJUSTED EPS GROWTH OF 10.7% for our 2017 performance stock unit awards, which was above our 8% target for the award and resulted in a payout at 168% of target.

 

   SHARES REPURCHASED during the year MORE THAN OFFSET the increase in shares attributable to the exercise of stock options and the distribution of shares for stock units from PREVIOUSLY GRANTED EQUITY-BASED AWARDS.

 

   The Compensation Committee assessed our STRONG PERFORMANCE AGAINST 2019 FINANCIAL AND STRATEGIC OBJECTIVES, along with the successful closing and ongoing integration of JLT, and determined above-target bonuses for all of our named executive officers.

 

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          27


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

2019 Highlights (continued)

 

  

 

 

SENIOR EXECUTIVE

CHANGES

 

LOGO

 

 

 

   MARTINE FERLAND was appointed President and Chief Executive Officer of Mercer effective March 1, 2019.

 

   DOMINIC BURKE, who served as the group chief executive officer of JLT, was appointed Vice Chair of Marsh & McLennan effective April 1, 2019, upon the acquisition of JLT.

 

   In January 2020, the CEOs of our businesses were appointed Vice Chairs of Marsh & McLennan to reflect their enterprise-wide responsibilities.

 

 

 

 

   Key Executive Compensation Policies and Practices

 

 

 

STOCKHOLDER ALIGNED EXECUTIVE COMPENSATION PROGRAM

 

 

 

 

Our senior executives have a high percentage of variable (“at risk”) pay

 

 
 

 

 

Long-term incentive compensation for our senior executives is delivered in stock options and performance stock unit awards, the value of which depends on stock price appreciation or achievement of specific Company financial objectives

 

 
 

 

 

We mitigate the potential dilutive effect of equity-based awards through our share repurchase program

 

 
   

 

 

Our Compensation Committee has an independent compensation consultant

 

   

 

COMPENSATION RECOVERY POLICIES

 

 

 

 

 

We have clawback policies for senior executive annual bonus awards and for equity-based compensation

 

   

 

SEVERANCE AND CHANGE IN CONTROL

 

 

 

 

 

Severance protections for our senior executives, including our CEO, are at a 1x multiple of base salary and bonus, with a pro-rata bonus for the year of termination. Further, we are required as a matter of policy to obtain stockholder approval for severance agreements with certain senior executives if they provide for cash severance that exceeds 2.99 times the executive’s base salary and three-year average annual bonus award

 

 
 

 

 

We provide “double-trigger” vesting of equity-based awards and payment of severance benefits following a change in control of the Company

 

 
   

 

 

We do not provide golden parachute excise tax gross-ups in connection with a change in control of the Company

 

   

 

SAY ON PAY

 

 

 

 

 

We hold an advisory vote on named executive officer compensation each year

 

 
   

 

 

 

 

Stockholder support of the executive compensation program has been consistently strong with an approval rate of 93% in 2019 and 95% in 2018

 

   

 

 

 

28          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

Executive Summary

 

  

OUR BUSINESS

We are a global professional services firm offering clients solutions in risk, strategy and people. With 76,000 colleagues worldwide, we provide analysis, advice and transactional capabilities in over 130 countries.

Our businesses include:

 

 

Risk & Insurance Services  

 

               

 

Consulting

 

         

 

  Insurance broking &   risk management

   

 

  Reinsurance &

  capital strategies

   

 

  Health, wealth &

  career consulting

   

 

  Strategy, economic &

  brand consulting

 

  MARSH

 

     

 

  GUY CARPENTER

 

     

 

  MERCER

 

     

 

  OLIVER WYMAN GROUP  

 

OUR STRATEGY

We are focused on four imperatives — creating breakthrough impact for our clients, embracing innovation and the digital future, being a great place to work, and driving growth and creating value. As the challenges confronting our clients are increasingly interrelated and more complex, we are collaborating more closely across our businesses to better address these challenges and deliver greater value as one enterprise.

Our business model is designed to create exceptional value and superior returns for our stockholders:

 

 

  REVENUE

  Sustain long-term revenue and   earnings growth

 

 

 

  CAPITAL

  Maintain low capital   requirements

 

 

 

  CASH FLOW

  Generate high levels of cash

 

 

 

  RISK

  Manage risk intelligently

 

 

As a professional services firm, our product is the expertise and capabilities of our colleagues. Our long-term success depends on their skill, integrity and dedication. To achieve our business objectives, we have designed our executive compensation program to attract, motivate and retain highly talented individuals to lead the Company and our various businesses in ways that meet our clients’ needs and, in turn, promote the long-term interests of our stockholders.

We continued to execute on our long-term financial and strategic objectives:

 

 

  Deliver on financial objectives

 

 

 

  Generate top line growth

  through innovation and organic

  investments

 

 

 

 

  Make Marsh & McLennan a great place to   work

 

 

 

 

  Focus on strategic priorities,

  including mergers and

  acquisitions, technology

  and innovation

 

 

 

 

  Execute a balanced capital

  management strategy

 

 

 

  Promote a high standard of ethical

  behavior and social responsibility

  throughout the Company

 

The financial performance measures used in our executive compensation program include Company and business net operating income, EPS growth and relative TSR and are defined in “Definitions of Financial Performance Measures” on page 43.

The strength of our financial performance and strategic accomplishments over the past five years is reflected in our total stockholder return. The following graph compares the annual cumulative stockholder return for the five-year period ended December 31, 2019 of Marsh & McLennan Companies common stock with the S&P 500 ® Stock Index, assuming an investment of $100 on December 31, 2014.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          29


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

Executive Summary (continued)

 

  

 

LOGO

2019 STOCKHOLDER ADVISORY VOTE ON EXECUTIVE

COMPENSATION AND STOCKHOLDER ENGAGEMENT

 

 

LOGO

 

 

At our 2019 Annual Meeting of Stockholders, we held a nonbinding advisory vote with respect to the compensation of our named executive officers (commonly referred to as a “say-on-pay” vote). Approximately 93% of the votes cast on the say-on-pay proposal were voted in favor of our executive compensation policies and practices.

 

Following our 2019 Annual Meeting of Stockholders, members of our management, at the direction of the Compensation Committee, discussed our executive compensation policies and practices, as well as the results of our 2019 say-on-pay vote, with a number of our large institutional stockholders and the major proxy advisory firms. These discussions were favorable, consistent with our 93% approval rate in 2019.

 

Over the years, certain stockholders have expressed a preference for a larger proportion of performance stock unit awards and for a relative performance measure in those awards. The Compensation Committee took these views into account when it increased the proportion of performance stock units to 50% (eliminating the 25% previously allocated to restricted stock units) and added a relative TSR modifier based on the Company’s three-year TSR versus S&P 500 ® companies.

 

The Compensation Committee is committed to ongoing engagement with our stockholders and the major proxy advisory firms and intends to continue these outreach efforts.

 

 

 

30          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

 

 

Executive Summary (continued)

 

  

2019 AND 2020 ANNUAL TOTAL DIRECT COMPENSATION OF NAMED EXECUTIVE OFFICERS

The following table summarizes the decisions made by the Compensation Committee in February 2020 and February 2019 with respect to the annual total direct compensation of our named executive officers. The compensation decisions reflected here, and the rationale for such decisions, are discussed in “Executive Compensation Determinations” beginning on page 34.

For Ms. Ferland and Mr. Burke, only February 2020 compensation decisions are shown because they were not named executive officers in our 2019 proxy statement. A special restricted stock unit award made in connection with Ms. Ferland’s new position is described in “2019 LTI Award for Ms. Ferland in Connection with Her New Position” on page 39. LTI awards and retention arrangements made in connection with Mr. Burke joining the Company following the closing of the JLT transaction are described in “2019 LTI Awards and Retention Arrangements for Mr. Burke” on page 39.

 

  Name    Decision Date      Base Salary      Annual
Bonus Award
     Annual LTI
Award1
     Total Direct  
Compensation  
 

 Mr. Glaser

  

 

2/19/2020

 

  

 

$1,500,000

 

  

 

$6,500,000

 

  

 

$11,500,000

 

  

 

$19,500,000 

 

  

 

2/19/2019

 

  

 

$1,500,000

 

  

 

$4,500,000

 

  

 

$11,500,000

 

  

 

$17,500,000 

 

    

 

Change

 

  

 

0.0%

 

  

 

+44.4%

 

  

 

0.0%

 

  

 

+11.4% 

 

 Mr. McGivney

  

 

2/19/2020

 

  

 

$800,000

 

  

 

$2,100,000

 

  

 

$2,800,000

 

  

 

$5,700,000 

 

  

 

2/19/2019

 

  

 

$800,000

 

  

 

$1,750,000

 

  

 

$2,500,000

 

  

 

$5,050,000 

 

    

 

Change

 

  

 

0.0%

 

  

 

+20.0%

 

  

 

+12.0%

 

  

 

+12.9% 

 

 Mr. Doyle

  

 

2/19/2020

 

  

 

$1,000,000

 

  

 

$4,000,000

 

  

 

$3,200,000

 

  

 

$8,200,000 

 

  

 

2/19/2019

 

  

 

$1,000,000

 

  

 

$3,250,000

 

  

 

$2,800,000

 

  

 

$7,050,000 

 

    

 

Change

 

  

 

0.0%

 

  

 

+23.1%

 

  

 

+14.3%

 

  

 

+16.3% 

 

 Ms. Ferland

  

 

2/19/2020

 

  

 

$850,000

 

  

 

$2,000,000

 

  

 

$2,000,000

 

  

 

$4,850,000 

 

 Mr. Burke2

  

 

2/19/2020

 

  

 

$1,011,810

 

  

 

$2,041,484

 

  

 

$0

 

  

 

$3,053,294 

 

 

  1 

Annual LTI awards as determined by the Compensation Committee are denominated in U.S. dollars and granted as a combination of stock options and PSUs. For stock options, 50% of the LTI value shown in the table is converted into a number of stock options based on the grant date fair value per share using the Black-Scholes value. For PSUs, 50% of the LTI value shown in the table is converted into a number of PSUs based on the fair market value of Company common stock, which is equal to the average of the high and low trading prices of shares of the Company common stock on the trading date immediately preceding the date of grant. The grant date fair value of the PSUs, as calculated in accordance with ASC Topic 718, may differ from the value of the PSUs calculated based on fair market value of Company common stock. In addition, stock options and PSUs granted are rounded up to the nearest whole number.

 
  2 

Mr. Burke’s base salary and annual bonus award have been converted from British pounds into U.S. dollars at the average currency exchange rate for 2019 used by the Company for financial reporting purposes in accordance with U.S. GAAP (£1 = $1.27592727). LTI awards and retention arrangements made in connection with Mr. Burke joining the Company following the closing of the JLT transaction are described in “2019 LTI Awards and Retention Arrangements for Mr. Burke” on page 39.

 

 

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          31


Table of Contents

 

 Executive Compensation (Continued)

 

 

Executive Compensation Design, Elements and Process

Our executive compensation program is governed by:

 

  Aligning with stockholder value creation with a focus on balancing risk and reward in compensation programs, policies and practices

 

  Supporting a strong performance culture through short-term and long-term variable compensation, with the ability to differentiate among individuals based upon actual results

 

  Setting target compensation at competitive levels in markets where we operate with flexibility to recognize different business models and markets for talent

 

  Maximizing colleagues’ perceived value of our programs through transparent processes and communication

The principal elements of our executive compensation program are base salary, annual bonuses and annual LTI awards. The Compensation Committee believes that each compensation element, and all of these elements combined, are important to maintain an executive compensation program that is competitive, performance-based and stockholder-focused.

Our integrated compensation framework heavily weights variable compensation to reward achievements against pre-established, quantifiable financial performance objectives and individual strategic performance objectives. In addition, because a significant portion of variable compensation is delivered in the form of equity-based awards, the value ultimately realized by our senior executives from these awards depends on stockholder value creation as measured by the future performance of our stock price.

As of December 31, 2019, variable compensation represented about 91% of our CEO’s target total direct compensation and about 83% for our other named executive officers, as shown in the following chart.

 

LOGO

COMPETITIVENESS OF PAY

The Compensation Committee regularly reviews market data with the objective of understanding and evaluating the competitiveness of our executive compensation program and each senior executive’s total direct compensation and pay mix, taking into account the individual’s role, responsibilities and performance. The Compensation Committee uses this information and exercises its judgment in determining individual compensation levels and seeks input from its independent compensation consultant prior to making compensation decisions for our senior executives. Market-based executive compensation data is used as a “market check” only and compensation levels for our senior executives are not set to correspond to any specific level of market competitiveness.

The Compensation Committee reviews executive compensation information for direct competitors as well as companies in the broader financial services and general industry sectors. Competitive analyses from these different perspectives recognize that the Company is diverse on an enterprise-wide basis and competes for executive talent in different businesses.

Peer Group for Executive Compensation Purposes

In 2019, the Compensation Committee reviewed the executive compensation data disclosed in the publicly available filings of the companies that comprise our peer group for executive compensation purposes. The peer group is based on business lines, talent pool and company size, as reflected by revenue and market capitalization, and includes

 

 

 

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 Executive Compensation (Continued)

 

 

insurance, consulting and other business services companies, as listed in the table below. The Compensation Committee reviews the peer group periodically and makes adjustments that it deems are appropriate or necessary, for example, as a result of business combinations and other changes. In September 2019, the Compensation Committee reviewed an analysis relating to peer groups that included Marsh & McLennan. Following this review, the Compensation Committee added American International Group, Inc. and S&P Global Inc. to the peer group. The Company’s position within the peer group in terms of size remained consistent following the inclusion of these companies.

 

 

2019 Peer Group for Executive Compensation

 

 

Insurance Brokers

  

 

Insurance Carriers

  

 

Consulting and Business Services

Aon plc

  

American International Group, Inc.*

  

Automatic Data Processing, Inc.

Willis Towers Watson plc

  

Chubb Limited

  

Accenture plc

Arthur J. Gallagher & Co.

 

  

The Travelers Companies, Inc.

  

S&P Global Inc.*

 

*

Added in September 2019.

Financial Services and General Industry Surveys

The Compensation Committee also reviewed executive compensation data drawn from two industry subsets (Financial Services and General Industry) of S&P 500 ® companies that participated in an executive compensation survey conducted by an independent compensation consulting firm. Each subset was refined based on revenue and market capitalization. For a list of the companies comprising these subsets, please refer to Exhibit B. The business CEO comparisons were based on subsidiaries or divisions of all companies that participated in the executive compensation survey (instead of only S&P 500 ® companies) in order to have a significant sample size for these particular comparisons.

EMPLOYMENT LETTERS

Each of our senior executives has an employment letter that sets forth his or her compensation arrangements and other terms and conditions of employment. These letters are discussed in “Employment Letters” on page 51.

BASE SALARY

Base salary is intended to provide a fixed level of compensation that is appropriate given a senior executive’s role in the organization, his or her skills and experience, the competitive market for his or her position and internal equity considerations. A senior executive’s base salary is set forth in his or her employment letter and may be adjusted when the Compensation Committee determines an adjustment is appropriate to reflect a change in these factors.

ANNUAL BONUS

Our annual bonus is a variable pay program intended to link cash-based incentive compensation to:

 

    the financial performance of our Company and our businesses and  

 

    each senior executive’s achievement of pre-established individual strategic objectives.  

The Compensation Committee takes a holistic approach to assessing performance and determining the actual bonus award for each senior executive. The Compensation Committee believes that annual bonus awards should be based on the achievement of objective, measurable financial results and how those results are achieved. In addition, the Compensation Committee believes it is important to measure individual executive performance against his or her achievement toward strategic objectives and other Company priorities. After the end of the year, each senior executive’s performance was assessed by Mr. Glaser and the Compensation Committee (and, in the case of Mr. Glaser’s performance, solely by the Compensation Committee).

A senior executive’s target annual bonus is set forth in his or her employment letter and may be adjusted when the Compensation Committee determines an adjustment is appropriate or necessary to reflect a change in his or her responsibilities, the competitive market for talent or internal equity considerations. The target annual bonuses for our named executive officers for 2019 are set forth in “Determination of 2019 Annual Bonuses” on page 38.

ANNUAL LTI AWARD

Annual LTI compensation is a variable pay program intended to align the financial interests of our senior executives with maximizing the return to our stockholders. The Compensation Committee reviews the mix of equity-based awards each year.

The Compensation Committee made two key changes to the annual LTI awards granted to senior executives in 2020 in order to more closely align executive rewards with stockholder interests. In making these decisions, the Compensation Committee took into account views expressed by certain stockholders over the years.

Increased proportion of PSUs. The Compensation Committee increased the proportion of performance stock units (PSUs) to 50%, eliminating the 25% previously allocated to restricted stock units.

 

 

 

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 Executive Compensation (Continued)

 

 

LOGO

Relative TSR modifier. The Compensation Committee added a relative TSR modifier to the PSUs based on the Company’s three-year TSR versus S&P 500 ® companies. The Compensation Committee selected S&P 500 ® companies as the comparator group given that a broad index is commonly used by other companies that have relative TSR as a performance measure. In addition, we compete for “investment dollars” against other S&P 500 ® companies rather than narrowly against our peer group for executive compensation, which is relatively small and subject to potentially significant change over time. The design of the 2020 PSU awards is described in “PSU Awards” on page 40.

 

Summary of 2020 LTI Awards

 

Award Type    Proportion of LTI Award Value1    Performance Alignment
Stock Options    50%    Rewards stock price appreciation and the
creation of stockholder value
Performance Stock Units    50%    Rewards the achievement of specific
Company financial objectives and relative
TSR versus S&P 500 ® companies

 

1

Annual LTI awards as determined by the Compensation Committee are denominated in U.S. dollars and granted as a combination of stock options and PSUs. For stock options, 50% of the LTI value shown in the table is converted into a number of stock options based on the grant date fair value per share using the Black-Scholes value. For PSUs, 50% of the LTI value shown in the table is converted into a number of PSUs based on the fair market value of Company common stock, which is equal to the average of the high and low trading prices of shares of the Company common stock on the trading date immediately preceding the date of grant. The grant date fair value of the PSUs, as calculated in accordance with ASC Topic 718, may differ from the value of the PSUs calculated based on fair market value of Company common stock. In addition, stock options and PSUs granted are rounded up to the nearest whole number.

 

Executive Compensation Determinations

The Compensation Committee takes a total compensation approach in setting the pay of our senior executives and makes decisions regarding base salary, annual bonuses and LTI awards in February of each year. This approach enables the Compensation Committee to evaluate performance on a consistent basis each year and to consider the appropriate level of fixed and variable compensation within each senior executive’s total compensation package.

While the Compensation Committee recognizes that elements of compensation may be interrelated, it does not require or assume any fixed relationship among the various elements of compensation within the total direct compensation framework or between the compensation of our CEO and that of any other senior executive. In addition, accrued pension and amounts realized or realizable under previously granted equity-based awards did not influence the Compensation Committee’s decisions.

The Compensation Committee considers the recommendations of our CEO when determining the compensation of our other senior executives.

BASE SALARY

The Compensation Committee increased Mr. McGivney’s base salary, effective April 1, 2019, from $750,000 to $800,000 based on a review of the competitive market and internal equity. The Compensation Committee set Ms. Ferland’s base salary, effective March 1, 2019, at $850,000, based on a review of the competitive market and internal equity. The Compensation Committee set Mr. Burke’s base salary, effective April 1, 2019, at £793,000, which

 

 

 

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was Mr. Burke’s base salary as the group chief executive officer of JLT, to induce him to join the Company following the closing of the JLT transaction and facilitate the integration of the businesses. The Compensation Committee did not adjust the base salaries of our other named executive officers during 2019.

ANNUAL BONUS

The Compensation Committee determined the 2019 annual bonus awards for our named executive officers using the following framework:

 

LOGO

Each senior executive’s target bonus was allocated between financial and strategic performance according to weightings associated with his or her position. The Compensation Committee then assessed financial performance and each senior executive’s strategic performance and determined a payout level for each portion of the senior executive’s target annual bonus. The multiplier for Company financial performance as reflected by adjusted EPS growth (as modified for executive compensation purposes) versus target was determined and applied to the sum of the payout levels for financial and strategic performance for each senior executive. Using this result, the Compensation Committee then conducted a qualitative assessment to determine the actual bonus award for each senior executive. The Compensation Committee believes that the use of judgment in the qualitative assessment helps reward performance appropriately, particularly on a year-to-year basis.

Adjustments to Target Bonuses

In early 2019, the Compensation Committee increased Mr. Glaser’s target bonus from $3,000,000 to $3,750,000. Mr. Glaser’s increase was based on a review of the competitive market and an assessment of his long-term performance and contributions as CEO. The Compensation Committee also increased Mr. McGivney’s target bonus, from $1,200,000 to $1,300,000, based on a review of the competitive market and internal equity. The Compensation Committee set Ms. Ferland’s target bonus, effective March 1, 2019, at $1,700,000, based on a review of the competitive market and internal equity. The Compensation Committee set Mr. Burke’s target bonus, effective April 1, 2019, at £1,189,500, which was Mr. Burke’s target bonus as the group chief executive officer of JLT, to induce him to join the Company following the closing of the JLT transaction and facilitate the integration of the businesses.

In early 2020, the Compensation Committee adjusted the target bonus for Mr. Doyle, from $2,250,000 to $2,500,000, based on a review of the competitive market and internal equity.

Financial and Strategic Performance Measures

The Compensation Committee selected the following measures and weightings for the 2019 annual bonus awards:

 

     
     Financial Performance

 

   Strategic Performance

 

 
Senior Executive    Weighting      Measure    Weighting      Measure  

Company CEO

  

 

80%

 

  

Company

net operating income

     20%       

Individual objectives

established for each senior

executive

 

 

 

 

Other Corporate

Senior Executives

     70%        30%  

 

Business

Chief Executive Officers

     80%     

Business

net operating income

     20%  

The financial performance measure used for Company and business net operating income in the 2019 annual bonus framework is defined in “Definitions of Financial Performance Measures” on page 43.

 

 

 

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 Executive Compensation (Continued)

 

 

The financial performance factor for net operating income ranged from 0% to 150% of the target level as indicated in the following table:

 

  Performance Level

 

  

 

Performance

as a %

of Target

 

      

 

Financial

Performance

Factor

 

 

 

 Maximum

 

  

 

 

 

 

³110%

 

 

 

 

    

 

 

 

 

150%

 

 

 

 

 

 Target

 

  

 

 

 

 

100%

 

 

 

 

    

 

 

 

 

100%

 

 

 

 

 

 Threshold

 

  

 

 

 

 

90%

 

 

 

 

    

 

 

 

 

50%

 

 

 

 

 

 Below Threshold

 

  

 

 

 

 

<90%

 

 

 

 

    

 

 

 

 

<50%

 

 

 

 

Note: Interpolation is used to determine the performance factor for performance as a percentage of target between threshold/target or target/maximum. In the event of performance below threshold, the Compensation Committee would exercise its discretion to determine a financial performance factor from 0% up to 50%.

Multiplier for Company Financial Performance

The financial performance factor for Company annual adjusted EPS growth ranged from 0.70x to 1.30x as indicated in the following table:

 

 

  Performance Level

 

    

 

Adjusted EPS Growth versus Target

 

    

 

Multiplier

 

 

 

 Maximum

 

    

 

Target plus 2 percentage points (or higher)

 

    

 

 

 

 

1.30x

 

 

 

 

 

 Target

 

    

 

Target

 

    

 

 

 

 

1.00x

 

 

 

 

 

 Minimum

 

    

 

Target minus 2 percentage points (or lower)

 

    

 

 

 

 

0.70x

 

 

 

 

Note: Interpolation is used to determine the multiplier for a percentile ranking between minimum/target or target/maximum.

The financial performance measure used for adjusted EPS growth in the 2019 annual bonus framework is defined in “Definitions of Financial Performance Measures” on page 43.

2019 Financial Performance Measure

For 2019, the financial performance measure for all senior executives was Company or business net operating income, as applicable, as modified for executive compensation purposes. The Compensation Committee set challenging targets for our named executive officers to align with our 2019 objective of driving strong earnings growth across the Company.

Performance targets for 2019 were set above the targeted and actual performance for 2018. Performance targets were based on threshold, target and maximum levels in dollars rather than growth rates. Target and actual results in the table below are expressed as a percentage of prior-year results.

 

Name

 

 

Measure

 

 

 

2019 Actual

as % of

Prior-Year Result

 

   

 

2019 Target

as % of

Prior-Year Result

 

   

 

2019 Actual

as % of Target

 

   

2019
Financial
Performance
Factor

 

 

 

Mr. Glaser

 

  Company net operating income     113.3%       111.0%       102.1%       110.6%  

 

Mr. McGivney

 

 

 

Mr. Burke

 

 

Mr. Doyle

 

 

Marsh net operating income

 

   

 

112.4%

 

 

 

   

 

108.9%

 

 

 

   

 

103.2%

 

 

 

   

 

116.1%

 

 

 

 

Ms. Ferland

 

 

Mercer net operating income

 

   

 

107.8%

 

 

 

   

 

110.2%

 

 

 

   

 

97.8%

 

 

 

   

 

89.2%

 

 

 

2019 Strategic Performance Measure

In early 2019, the Compensation Committee reviewed strategic objectives relating to operational performance, risk management and human capital for each named executive officer (except Mr. Burke who joined the Company in April 2019 in connection with the acquisition of JLT). At the beginning of 2020, the Compensation Committee reviewed the strategic accomplishments for each named executive officer for 2019. The Compensation Committee and Mr. Glaser

 

 

 

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(and, in the case of Mr. Glaser, solely the Compensation Committee) assessed each named executive officer’s strategic performance as above target for the year and determined a payout factor for 2019 strategic performance. The Compensation Committee considered the following in its assessment of each named executive officer’s performance:

 

 

Name

 

  Description

Mr. Glaser

President and CEO

 

   Successfully completed the JLT transaction, the largest acquisition in the Company’s history that is providing clients with enhanced talent, capabilities and geographic footprint.

   Led the Company to generate underlying revenue growth of 4%, which is the 10th consecutive year of underlying revenue growth in the range of 3% to 5%, and to deliver 7% growth in adjusted EPS*, despite modest dilution in the first year of the acquisition of JLT. Our strong financial performance was reflected in our 42% TSR, which outperformed the S&P 500 ® index and our peer group median.

   Continued leadership of a dynamic and effective executive team, including the seamless transition of Mercer’s leadership to Martine Ferland.

   Mr. Glaser’s leadership within the insurance industry, including his service as the Chairman of the U.S. Federal Advisory Committee on Insurance.

 

Mr. McGivney

Chief Financial Officer

 

  Effective oversight of the Company’s near-term financial plan and continued focus on our long-term growth strategy.

  Contributions to the completion of the JLT transaction, including execution of the financing plan and the successful integration of the JLT finance function and financial reporting environment.

  Achievement of our capital management objectives to increase our dividend by double digits and reduce our total shares outstanding.

  Achievement of our cost savings related to the JLT transaction, with savings now expected to be at least $350 million, which is higher than initial expectations.

 

Mr. Doyle

President and Chief Executive Officer of Marsh

 

Vice Chair, Marsh & McLennan

 

   Marsh’s revenue in 2019 was $8 billion, an increase of 17%, or 4% on an underlying basis, with strong performance in Asia Pacific, which grew revenue 39%, EMEA, where it increased 16%, and Latin America, where it increased 15%.

   Successful first year integrating the Marsh and JLT businesses, achieving key integration milestones, expanding existing client relationships and winning new business with the enhanced value proposition of the combined team.

   Continued to invest in Marsh & McLennan Agency, our fast-growing U.S. middle market brokerage business, completing five acquisitions in 2019 and achieving the current run rate revenue of $1.7 billion.

   Mr. Doyle’s leadership role in continuing to progress Marsh’s innovation agenda. This includes the launch of enhanced consulting capabilities to quantify cyber risk that offer clients new insight into the impact of their cybersecurity investments and the launch of Blue[i] Claims, an enhanced analytics platform designed to help clients improve claims outcomes.

 

Ms. Ferland

President and Chief Executive Officer of Mercer

 

Vice Chair, Marsh & McLennan

 

 

  Mercer delivered $5 billion in revenue, an increase of 6% or 2% on an underlying basis, with strong growth in Health and Career.

  Continued the transformation of Mercer’s portfolio towards high-growth areas of client need. Mercer was ranked first by worldwide, outsourced assets under management by Pensions & Investments with global assets under management passing $300 billion in 2019.

  Implemented organizational changes that streamline Mercer’s operating model, create more efficiency and enable better execution.

Mr. Burke

Vice Chair of Marsh & McLennan

 

and former group Chief Executive Officer of Jardine Lloyd Thompson PLC

 

 

   Successfully delivered the JLT acquisition on April 1, 2019, by retaining key clients, bringing along key talent and executing on an aggressive timeline.

   Progressed the integration of JLT, playing a critical role in the retention of key colleagues and the successful combination of the JLT and Marsh & McLennan cultures.

   Instrumental in Marsh & McLennan’s ongoing operating model transformation to more effectively leverage the collective strength, expertise and relationships across our businesses to deliver enhanced value to clients and drive growth.

 

*

Please see Exhibit A for a reconciliation of our non-GAAP financial measures to GAAP financial measures and related disclosures.

 

 

 

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 Executive Compensation (Continued)

 

 

2019 Multiplier for Company Financial Performance

The financial performance factor for the Company is measured by annual adjusted EPS growth. For 2019, the target was initially set at 8% consistent with the PSU award target and then adjusted to 5.1% to reflect the expectation of modest dilution from the JLT acquisition in the first year of the transaction. The multiplier ranges from 0.7x to 1.3x to reflect lower or higher awards based on actual performance, and interpolation is used to determine the multiplier for a percentile ranking between threshold/target or target/maximum.

Using the framework described above, our adjusted EPS growth as modified for executive compensation purposes relating to the 2019 bonus framework was 6.9% resulting in a multiplier of 1.27x.

Qualitative Assessment

The Compensation Committee believes that the use of judgment in making final bonus award decisions helps reward performance appropriately on a year-to-year basis and also on an internal equity basis among senior executives. In addition to performance as measured against the previously described financial and strategic objectives, the Compensation Committee also assessed how these objectives were achieved and considered each senior executive’s current-year performance and bonus award vis-à-vis his or her prior-year performance and bonus award; compensation relative to peers at direct competitors; and his or her total direct compensation. The Compensation Committee also assessed the Company’s relative financial performance, including for TSR against peer companies and the S&P 500 ® index.

 

Factors considered in determining 2019 bonus awards for the named executive officers

 

 

  The successful closing of the JLT transaction. The legal and regulatory aspects of closing were significant and complex, and all required regulatory approvals were secured to achieve closing by our April 1 target. Additionally, the financing for the transaction was completed on favorable terms while maintaining credit ratings.

 

  The ongoing integration of JLT, reflecting effective planning, leadership in driving execution and achievement of strong financial performance, colleague retention and cost savings.

 

  The meaningful progress made in advancing our position more broadly, including building out Marsh & McLennan Agency through acquisitions, advancing the digital strategies in our businesses and improved colleague engagement scores.

 

  Strong underlying revenue growth and EPS growth.

 

  A 42% TSR for 2019, significantly exceeding the TSRs of the S&P 500 ® index and our peer group median.

 

Using its assessment of the 2019 financial and strategic performance factors and the Company’s financial performance as its basis, the Compensation Committee determined the 2019 bonus award for each named executive officer in the manner described above.

Determination of 2019 Annual Bonuses

The actual annual bonuses paid to our named executive officers for 2019 were as follows.

 

  Name

 

  

2019 Target

Bonus Award

 

    

 

2019 Bonus

as a % of

Target

 

           

2018 Actual

Bonus

 

    

2019 Actual

Bonus

 

    

% Change

 

 

 

Mr. Glaser (1)

 

  

 

$

 

 

3,750,000

 

 

 

 

  

 

 

 

 

173%

 

 

 

 

          

 

$

 

 

4,500,000

 

 

 

 

  

 

$

 

 

6,500,000

 

 

 

 

  

 

 

 

 

+44.4%

 

 

 

 

 

Mr. McGivney (2)

 

  

 

 

 

 

1,300,000

 

 

 

 

  

 

 

 

 

162%

 

 

 

 

          

 

 

 

 

1,750,000

 

 

 

 

   $

 

2,100,000

 

 

 

  

 

 

 

 

+20.0%

 

 

 

 

 

Mr. Doyle

 

  

 

 

 

 

2,250,000

 

 

 

 

  

 

 

 

 

178%

 

 

 

 

          

 

 

 

 

3,250,000

 

 

 

 

   $

 

4,000,000

 

 

 

  

 

 

 

 

+23.1%

 

 

 

 

 

Ms. Ferland

  

 

 

 

1,700,000

 

 

  

 

 

 

118%

 

 

          

 

 

 

N/A

 

 

   $ 2,000,000     

 

 

 

N/A

 

 

 

 

Mr. Burke (3)

  

 

 

 

 

 

1,517,715

 

 

 

  

 

 

 

 

 

135%

 

 

 

          

 

 

 

 

 

N/A

 

 

 

  

 

$

 

2,041,484

 

 

  

 

 

 

 

 

N/A

 

 

 

(1)

Mr. Glaser’s target bonus was increased from $3,000,000 in 2018 to $3,750,000 in 2019.

(2)

Mr. McGivney’s target bonus was increased from $1,200,000 in 2018 to $1,300,000 in 2019.

(3)

Mr. Burke’s annual bonus award has been converted from British pounds into U.S. dollars at the average currency exchange rate for 2019 used by the Company for financial reporting purposes in accordance with U.S. GAAP (£1 = $1.27592727).

 

 

 

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 Executive Compensation (Continued)

 

 

LTI AWARDS

2019 LTI Award for Ms. Ferland in Connection with Her New Position

On March 1, 2019, Ms. Ferland received a special restricted stock unit award with a grant date fair value of $1 million in recognition of her appointment to a senior executive position. This award is scheduled to vest on March 15, 2022, subject to the terms and conditions of the award.

2019 LTI Awards and Retention Arrangements for Mr. Burke

On May 1, 2019, Mr. Burke was granted an annual LTI award with an aggregate grant value of $3 million, which approximated the grant value of Mr. Burke’s prior annual LTI award as the group chief executive officer of JLT. Mr. Burke’s annual LTI award reflected the type and weighting of the equity-based awards comprising the annual LTI award granted to Marsh & McLennan senior executives in February 2019. Mr. Burke also received a restricted stock unit award with a grant date fair value of $1 million in lieu of an award that he would have been eligible to receive under JLT’s Deferred Bonus Share Plan. One-third of this restricted stock unit award is scheduled to vest on May 1, 2020, 2021 and 2022, subject to the terms and conditions of the award. In addition, to induce Mr. Burke to remain with the Company as Vice Chair following the closing of the JLT transaction and to facilitate the integration of the JLT business, he will receive a payment of £793,000 on each of the first three anniversaries of the closing of the JLT transaction, subject to his continued employment.

2020 Annual LTI Awards

The annual equity-based awards granted to our senior executives are determined by the Compensation Committee as part of its annual total compensation review. In determining the awards, the Compensation Committee considers the senior executive’s performance and his or her expected future contributions to the Company’s performance along with external market competitiveness, internal equity comparisons and the target LTI award set forth in the senior executive’s employment letter. Mr. Glaser also provides LTI award recommendations for senior executives other than himself.

The annual LTI awards granted to our named executive officers in February 2020 are shown in the following table. They are not reflected in the “2019 Summary Compensation Table” on page 49 because the awards were made after the end of the 2019 fiscal year. Mr. Burke was not granted an LTI award in February 2020.

 

       

 

Annual LTI Awards Granted in 20201

 

 
       

 

Stock

Options

 

      

Performance

Stock Units

 

      

Total

 

 

 

Mr. Glaser

 

    

 

 

$

 

 

5,750,000

 

 

 

    

 

 

$

 

 

5,750,000

 

 

 

    

 

$

 

11,500,000

 

 

Mr. McGivney

 

    

 

 

 

1,400,000

 

 

    

 

 

 

1,400,000

 

 

    

 

 

 

2,800,000

 

 

Mr. Doyle

 

    

 

 

 

1,600,000

 

 

    

 

 

 

1,600,000

 

 

    

 

 

 

3,200,000

 

 

Ms. Ferland

 

    

 

 

 

1,000,000

 

 

    

 

 

 

1,000,000

 

 

    

 

 

 

2,000,000

 

 

 

1

Annual LTI awards as determined by the Compensation Committee are denominated in U.S. dollars and granted as a combination of stock options and PSUs. For stock options, the value shown in the table was converted into a number of stock options based on the grant date fair value per share using the Black-Scholes value. For PSUs, the value shown in the table was converted into a number of PSUs based on the fair market value of Company common stock, which was equal to the average of the high and low trading prices of shares of the Company common stock on the trading date immediately preceding the date of grant. The grant date fair value of the PSUs, as calculated in accordance with ASC Topic 718, may differ from the value of the PSUs calculated based on fair market value of Company common stock. In addition, stock options and PSUs granted are rounded up to the nearest whole number.

The value ultimately realized from these awards is contingent on the named executive officer’s continued service, except in certain circumstances, such as retirement. The value also depends on the future performance of our stock price and, for PSU awards, achieving specific Company financial objectives and the Company’s relative TSR versus S&P 500 ® companies. The terms and conditions of these awards are described in the narrative following the “2019 Grants of Plan-Based Awards Table” on page 52.

 

 

 

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Table of Contents

 

 Executive Compensation (Continued)

 

 

PSU Awards

The performance measure for PSU awards, which represent 50% of 2020 annual LTI compensation for our senior executives, is adjusted EPS growth as modified for executive compensation purposes and measured on a three-year annualized growth rate basis. The PSUs granted in 2020 also include a modifier based on the Company’s three-year TSR versus S&P 500 ® companies. Depending on our actual financial performance results, along with relative TSR performance for the PSUs granted in 2020, 0% to 200% of the number of PSUs granted is delivered in shares of our common stock. The following tables provide the payout (as a percentage of target) for maximum, target and threshold performance levels for the 2020 and 2017 PSU awards, respectively. The Compensation Committee sets the performance levels after reviewing our financial strategy, the design of PSU awards at peer group companies and historical EPS growth data for the S&P 500 ® companies. At the time of setting the target and determining the payouts at varying levels of performance for these awards, the Compensation Committee believed that achievement of the target for adjusted EPS growth was a challenging goal.

The payout of the 2020 PSU awards will be determined as follows. The payouts of PSU awards granted prior to 2020 will be determined with respect to the EPS performance factor only.

 

LOGO

The financial performance measures used in the PSU awards granted in 2020 are defined in “Definitions of Financial Performance Measures” on page 43.

Performance and Payout Levels for Our 2020 PSU Awards

The adjusted EPS growth measure for our 2020 PSU award is shown in the following table.

 

  Performance Level

 

  

 

Adjusted EPS Growth

Performance Factor

(as a % of target)

 

      

 

Adjusted EPS Growth

 

 

 

 Maximum

 

  

 

 

 

 

200%

 

 

 

 

    

 

³

 

 

12%

 

 

 

 

 

 Target

 

  

 

 

 

 

100%

 

 

 

 

    

 

 

 

 

8%

 

 

 

 

 

 Threshold

 

  

 

 

 

 

50%

 

 

 

 

    

 

 

 

 

4%

 

 

 

 

 

 Below Threshold

 

  

 

 

 

 

0%

 

 

 

 

    

 

 

 

 

<4%

 

 

 

 

Note: Interpolation is used to determine the adjusted EPS growth performance factor (as a percentage of target) for a performance result between threshold/target or target/maximum.

The relative TSR modifier for our 2020 PSU award is provided in the following table.

 

  Performance Level

 

  

 

Relative TSR Modifier
(as a % of target)

 

      

 

Relative TSR

(versus S&P 500 ® companies)

 

 

 

 

 Maximum

 

    

 

125%

 

 

 

      

 

³75th percentile

 

 

 

 

 Target

 

    

 

100%

 

 

 

      

 

50th percentile

 

 

 

 

 Minimum

 

    

 

75%

 

 

 

      

 

<25th percentile

 

 

 

Note: Interpolation is used to determine the relative TSR modifier (as a percentage of target) for a performance result between minimum/target or target/maximum.

 

 

 

40          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


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 Executive Compensation (Continued)

 

 

Performance Results for Our 2017 PSU Awards

The following chart shows the threshold, target and maximum performance levels, with corresponding payouts as a percentage of target, for the 2017 PSU awards granted to our senior executives. The chart also shows our actual EPS growth for the three-year performance period (2017-2019) applicable to the determination of the number of shares of our common stock earned for these awards.

 

LOGO

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          41


Table of Contents

 

 Executive Compensation (Continued)

 

 

Summary of PSU Awards Granted from 2017 through 2019

The table below summarizes the three-year performance periods for PSU awards granted from 2017 through 2019, including the payout at 168% of target for our 2017 PSU award based on 10.7% annualized adjusted EPS growth.

 

LOGO

The financial performance measures used in the PSU awards are defined in “Definitions of Financial Performance Measures” on page 43.

 

 

 

42          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)

 

 

Definitions of Financial Performance Measures

The following table defines the financial performance measures used in our executive compensation program.

 

 

  Used for

 

 

 

Measure

 

  

 

Definition

 

 

2019 Annual Bonus Framework—Financial Performance Measure

 

 

Company or business net operating income

  

 

Net operating income calculated in accordance with GAAP, adjusted for the impact of “noteworthy items” identified in Exhibit A to this proxy statement and further adjusted for the impact of currency exchange rate fluctuations and acquisitions and dispositions

 

 

2019 Annual Bonus Framework—Multiplier for Company Financial Performance

 

 

Company earnings per share

  

 

Adjusted EPS is defined as GAAP earnings per shares, adjusted for the impact of “noteworthy items” identified in Exhibit A to this proxy statement and modified to exclude:

 

1.  the variation between actual and budgeted impact of currency exchange rate fluctuations;

 

2.  the variation between actual and budgeted results for Marsh & McLennan Risk Capital Holdings, Ltd. (the legal entity through which the Company owns interests in private equity funds and other investments); and

 

3.  the costs related to the early extinguishment of debt.

 

The year-over-year change is calculated based on adjusted EPS as modified for the above exclusions versus prior-year adjusted EPS without modification for such exclusions.

 

 

PSUs granted in 2017—2019

 

 

Company earnings per share

  

 

Same definition as 2019 Annual Bonus Framework—Multiplier for Company Financial Performance, above.

 

The performance factor is determined based on three-year adjusted EPS growth using three one-year growth rates (annualized). Each year-over-year change is calculated based on adjusted EPS as modified for the above exclusions versus prior-year adjusted EPS without modification for such exclusions.

 

 

PSUs granted in 2020

 

 

Company earnings per share

  

 

Same definition as for PSUs granted in 2017—2019, above, with the exclusion for investment income based on the variation between actual and budgeted results rather than a full exclusion and an additional exclusion relating to pension expense.

 

 

PSUs granted in 2020

 

 

Relative TSR

  

 

Relative TSR is defined as stock price appreciation plus reinvested dividends. The average closing price for the 20 trading days prior to and including the start date of the performance period, December 31, 2019, is used in the calculation of TSR. Only companies included in the S&P 500 ® index at the start of the performance period are included in the determination of the TSR modifier.

 

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          43


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 Executive Compensation (Continued)

 

 

Benefit Plans and Other Programs

RETIREMENT AND DEFERRED COMPENSATION PLANS

We offer retirement and deferred compensation plans, in which all of our senior executives, except Mr. Burke, are eligible to participate, to maintain a competitive compensation program.

We maintain a defined contribution retirement program in the U.S. consisting of the Supplemental Savings & Investment Plan (“SSIP”), an unfunded nonqualified defined contribution retirement plan that is coordinated with our 401(k) Savings & Investment Plan. Additional information about the SSIP, including individual amounts deferred by our named executive officers, Company matching credits and earnings during 2019, as well as account balances as of the end of 2019, is presented in “Nonqualified Deferred Compensation Table” on page 58. Earnings with respect to all of our nonqualified defined contribution plans are based upon actual market performance, and preferential or above-market earnings are not offered.

We discontinued future service accruals in our U.S. and U.K. defined benefit retirement programs effective December 31, 2016 and August 1, 2014, respectively. The features of our U.S. and U.K. retirement programs, including the present value of the accumulated pension benefits for our named executive officers as of the end of 2019, are presented in further detail in “Defined Benefit Retirement Program” on page 56. We do not have individually-designed defined benefit arrangements for any named executive officer.

To induce him to join the Company following the closing of the JLT transaction and facilitate the integration of the businesses, Mr. Burke receives non-pensionable salary supplements, which are consistent with the non-pensionable salary supplements that were provided to him by JLT as its group chief executive officer, in lieu of participation in the Company’s and JLT’s UK retirement programs.

SEVERANCE ARRANGEMENTS

Severance payments and benefits for our senior executives are provided under our Senior Executive Severance Pay Plan, which provides for severance payments in the event of an involuntary termination of employment without cause (as defined in the plan) in an amount equal to the sum of the senior executive’s then-current base salary and average annual bonus award over the three prior years, plus an amount equal to a pro rata bonus for the year of termination. In addition, to induce Mr. Burke to remain with the Company following the closing of the JLT transaction and facilitate the integration of the businesses, his termination of employment will be treated as a termination without cause in certain circumstances, as described in “Mr. Burke’s Employment Arrangements” on page 51.

While compensation decisions regarding our senior executives affect the potential payments under these arrangements, the existence of these severance arrangements did not affect the Compensation Committee’s decisions with respect to other elements of compensation for our named executive officers because these severance arrangements are contingent in nature and may never be triggered.

The terms of the Senior Executive Severance Pay Plan are discussed more fully in “Termination of Employment” on page 61. The amount of the estimated payments and benefits payable to our named executive officers, assuming a termination of employment as of the last business day of 2019, is presented in “Potential Payments Upon Termination or Change in Control” on page 59.

CHANGE-IN-CONTROL ARRANGEMENTS

Change-in-control payments and benefits are provided to our senior executives through our equity-based compensation plans and the Senior Executive Severance Pay Plan, as applicable. These arrangements are intended to retain our senior executives and provide continuity of management in the event of an actual or potential change in control of the Company. Consistent with this objective, the terms of our equity-based awards contain a “double-trigger” vesting provision, which requires both a change in control of the Company and a subsequent specified termination of employment for vesting to be accelerated. The Senior Executive Severance Pay Plan also includes a “double-trigger” change-in-control provision rather than providing severance payments and benefits solely on the basis of a change in control of the Company. We believe that requiring a “double trigger,” rather than providing severance payments (and accelerated vesting of equity-based awards) solely on the basis of a change in control, is more consistent with the purpose of encouraging the continued employment of our senior executives following a change in control of the Company.

We do not provide any excise tax payments, reimbursements or “gross ups” in connection with a change in control of the Company to any of our senior executives under any plan or arrangement.

 

 

 

44          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


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 Executive Compensation (Continued)

 

 

The amount of the estimated payments and benefits payable to our named executive officers, assuming a change in control of the Company and subsequent specified termination of employment as of the last business day of 2019, is presented in “Potential Payments Upon Termination or Change in Control” on page 59.

OTHER BENEFITS AND PERQUISITES

Our senior executives are eligible to participate in our health and welfare benefit programs on the same basis as our other eligible employees. We also provide certain perquisites and other personal benefits to our senior executives. In general, the perquisites or other personal benefits provided to our senior executives include (i) the cost of financial counseling and certain income tax return preparation and (ii) from time to time, relocation or housing costs associated with hiring a newly recruited or promoted senior executive.

In addition, the Compensation Committee has determined to provide Mr. Glaser access to a car and driver for business and commuting purposes and to corporate aircraft, in which we maintain fractional interests, for business and personal travel. Such personal air travel is limited to an amount not to exceed $130,000 per calendar year as determined based on the aggregate incremental cost of such travel to the Company. The imputed income attributable to Mr. Glaser’s personal use of corporate aircraft and a car and driver was taxable income to Mr. Glaser. The taxes associated with this income were not reimbursed or paid by the Company.

To induce him to remain with the Company following the closing of the JLT transaction and facilitate the integration of the businesses, Mr. Burke receives certain compensation and benefits that were provided to him by JLT as its group chief executive officer, as described in “Mr. Burke’s Employment Arrangements” on page 51.

The incremental cost of providing perquisites and other personal benefits during 2019 to our named executive officers is presented in the footnotes to the “All Other Compensation” column of the “2019 Summary Compensation Table” on page 49.

 

 

 

Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement          45


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 Executive Compensation (Continued)

 

 

Risk and Reward Features of Executive Compensation Program

The Compensation Committee strives to maintain an appropriate balance between risk and reward in support of our overall business strategy. Our executive compensation principles, policies and practices are designed to encourage an appropriate level of risk-taking but not to encourage our senior executives to take excessive or unnecessary risks. To achieve this balance, we maintain the following policies and practices:

 

 

  Feature

 

  

 

  Description

 

 

 

Balanced Total

Compensation

Approach

 

  

 

 

The mix of base salary, annual bonus opportunity and LTI awards appropriately balances the shorter-term and longer-term aspects of each senior executive’s responsibilities and performance, without undue emphasis on any single element of compensation.

 

 

Performance-Based

 

Annual Bonus Program

 

  

 

Awards to senior executives are made based on both financial performance measures, which relate to fiscal year performance, and strategic performance objectives, which may relate to longer-term and qualitative objectives. Each senior executive’s target annual bonus and payout range of 0% to 200% is set forth in his or her employment letter. The Compensation Committee determines the bonus for each of our senior executives. We do not guarantee annual bonuses for our senior executives, except in special situations such as the initial bonus award after a senior executive’s hire if the guarantee is deemed necessary to attract a candidate to join the Company.

 

 

Stockholder-Focused

LTI Program

 

  

 

Equity-based awards to our senior executives are granted annually on a discretionary basis by the Compensation Committee taking into consideration each individual’s past performance and expected future contributions. Awards made in 2020 were in a combination of stock options and PSU awards to align the financial interests of our senior executives with maximizing our return to stockholders. PSU awards are earned based on our achievement against financial performance objectives and, starting with the 2020 PSU award, the Company’s TSR versus S&P 500 ® companies over a three-year performance period, both as determined by the Compensation Committee.

 

All equity-based awards are subject to multi-year vesting requirements or performance periods with complete forfeiture of unvested awards upon a voluntary termination of employment by a senior executive (other than by reason of retirement) or termination of employment for cause. None of our equity-based awards are scheduled to begin vesting until after one year following their grant. In addition, the terms of our outstanding and unvested equity-based awards contain a “double-trigger” vesting provision in the event of a change in control of the Company. We do not provide any excise tax payments, reimbursements or “gross ups” in connection with a change in control of the Company to any of our senior executives under any plan or arrangement.

 

 

Executive Stock Ownership Guidelines

 

  

 

Our senior executives are required to acquire and hold shares or stock units of our common stock with an aggregate value at least equal to a specified multiple of their base salary. Our senior executives may not sell shares acquired in connection with the distribution of stock units or exercise of stock options until and unless the specified multiple of base salary is reached and maintained.

 

 

Prohibition Against Speculative Activities, Hedging or Pledging of Company Stock

 

  

 

We prohibit our employees, including our senior executives, and directors from engaging in speculative or hedging activities (including short sales, purchases or sales of puts or calls and trading on a short-term basis) in our common stock. We prohibit our senior executives and directors from pledging our securities as collateral for a loan or for any other purpose.

 

 

 

 

 

46          Marsh & McLennan Companies, Inc. Notice of Annual Meeting and 2020 Proxy Statement


Table of Contents

 

 Executive Compensation (Continued)