Discover Financial Services (Form: 8-K, Received: 08/14/2023 17:13:57)

DISCOVER FINANCIAL SERVICES

Date: August 14, 2023

/s/ Hope D. Mehlman

Hope D. Mehlman

Executive Vice President, Chief Legal Officer, General Counsel and Secretary

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 14, 2023 (August 13, 2023)

DISCOVER FINANCIAL SERVICES

(Exact name of registrant as specified in its charter)

Commission File Number: 001-33378


Delaware		36-2517428
(State or Other Jurisdiction of Incorporation)		(IRS Employer Identification No.)

2500 Lake Cook Road, Riverwoods, Illinois 60015

(Address of principal executive offices, including zip code)

(224) 405-0900

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading

Symbol(s)

Name of Each Exchange

on Which Registered

Common Stock, par value $0.01 per share

DFS

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter)or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)

On August 13, 2023, the Board of Directors (the “Board”) of Discover Financial Services (the “Company”) accepted the resignation of Roger C. Hochschild from his positions as Chief Executive Officer and President of the Company, a member of the Board and a director and officer of Discover Bank (the “Bank”), each effective August 14, 2023 (the “Effective Date”). To assist with the transition, Mr. Hochschild will continue to be employed by the Company as an advisor to the Chair of the Board from the Effective Date through December 31, 2023, pursuant to the terms of a transition employment letter (the “Transition Letter”), described below.

The Board has established a special search committee to conduct a search for a permanent successor to Mr. Hochschild.

(c)

On August 13, 2023, the Board appointed John B. Owen as Interim Chief Executive Officer and Interim President of the Company and as Interim President of the Bank, effective August 14, 2023. Mr. Owen will continue to serve as a director of the Company, but is resigning as a member of the Risk Oversight Committee of the Board during his term as Interim Chief Executive Officer and Interim President.

John Owen, a financial services veteran with more than 38 years of experience in banking and information technology that spans multiple industries including banking, insurance, airlines, and the defense industry, was elected to the Board and appointed to the Board’s Risk Oversight Committee on June 6, 2022. Prior to joining the Company, Mr. Owen retired from Regions Financial Corp., one of the nation’s largest full-service providers of consumer and commercial banking, wealth management and mortgage products and services, in March 2021, where he had been Chief Operating Officer since 2018. Prior thereto, Mr. Owen served in various senior management roles at the bank, including head of Operations and Technology, head of Consumer Services Group, head of Regional Banking group, and head of Enterprise Services and Consumer Banking. Active in the community, Mr. Owen has served on the board of directors for the Birmingham Business Alliance, Innovation Depot and the United Way of Central Alabama, as well as the advisory board for the UAB Collat School of Business. Under his leadership at Regions, the bank consistently evolved how it served its customers, such as unveiling an overhauled and upgraded mobile app for both iOS and Android devices. He brings valuable leadership experience and has a clear understanding of the overall governance structure associated with a highly regulated industry such as banking.

Mr. Owen has no family relationships with any director or executive officer of the Company. There are no arrangements or understandings between Mr. Owen and any other person pursuant to which Mr. Owen was selected as the Company’s Interim Chief Executive Officer and Interim President, and there are no transactions involving Mr. Owen that would be required to be reported under Item 404(a) of Regulation S-K.

In connection with his appointment, Mr. Owen will receive an annual base salary of $950,000, to be paid in accordance with the Company’s ordinary payroll practices beginning August 15, 2023. Mr. Owen will also receive a special restricted stock unit award with a value of $500,000, to vest on the earlier of (1) the date on which the Company’s permanent successor to Mr. Hochschild begins employment and (2) the one year anniversary of the award’s grant date.

(d)

On August 13, 2023, the Board appointed J. Michael Shepherd as a director of the Company and as a member of the Board of Directors of the Bank, effective August 14, 2023. In connection with his appointment to the Board, Mr. Shepherd is being named to the Risk Oversight Committee of the Board.

The Board has determined that Mr. Shepherd has no material relationship with the Company or the Bank (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company) and is independent for purposes of the New York Stock Exchange listing standards applicable to the Company. There are no arrangements or understandings between Mr. Shepherd and any other person pursuant to which Mr. Shepherd was selected as a director, and there are no transactions involving Mr. Shepherd that would be required to be reported under Item 404(a) of Regulation S-K.

In connection with his appointment, Mr. Shepherd’s compensation will be consistent with the Company’s previously disclosed standard compensatory arrangements for non-employee directors, which are described in the Company’s most recent proxy statement filed with the Securities and Exchange Commission on March 17, 2023, under the heading “Director Compensation.” Mr. Shepherd’s compensation will be prorated to reflect the commencement date of his Board service.

(e)

Mr. Hochschild and the Company entered into the Transition Letter on August 13, 2023. Pursuant to the terms of the Transition Letter, Mr. Hochschild will serve as an advisor to the Chair of the Board and will continue to receive his base salary through December 31, 2023, but he will not participate in the Company’s short-term incentive program with respect to the fiscal year ending December 31, 2023, will not be eligible for additional equity grants from the Company and will not receive severance in connection with his resignation. Mr. Hochschild’s equity awards that are outstanding on the Effective Date shall continue to vest through December 31, 2023 and will continue to be eligible for retirement treatment, except that the Company and Mr. Hochschild have agreed that equity awards previously granted during 2023 will be cancelled as of the Effective Date.

The foregoing description of the Transition Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Transition Letter, which is attached hereto as Exhibit 10.1, and incorporated herein by reference.

Item 8.01.

Other Events.

Copies of the press releases announcing these changes are attached as Exhibits 99.1 and 99.2 to this report.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits


Exhibit No.		Description

10.1		Transition Letter, dated as of August 13, 2023 between Discover Financial Services and Roger C. Hochschild.

99.1		Press Release of the Company dated August 14, 2023.

99.2		Press Release of the Company dated August 14, 2023.

104		Cover Page Interactive Data File – the cover page from this Current Report on Form 8-K, formatted as Inline XBRL (included as Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 10.1

August 13, 2023

Roger C. Hochschild,

at the address on file with

Discover Financial Services.

Dear Roger,

This letter agreement (this “Agreement”) sets forth the terms we have agreed regarding your transition from Discover Financial Services (the “Company”), including your service as an Advisor to the Chair of the Company’s Board of Directors (the “Board”) through December 31, 2023 to support the Company’s transition to new leadership.

1.	Your Resignation

This letter confirms your resignation, effective August 14, 2023 (the “Effective Date”), as the Company’s Chief Executive Officer and President, as well as a member of the Board. It also confirms your resignation as a director and officer of Discover Bank (the “Bank”) and any other role you have at the Company, the Bank or their affiliates, other than your continuing role as an Advisor, as of the Effective Date.

2.	Your Continuing Service as Advisor

From and including the Effective Date through December 31, 2023, you will continue as an employee of the Company and serve as Advisor to the Chair of the Board. As Advisor, you will report to the Chair, with responsibility for providing transition services and advising the Chair, in each case as reasonably requested by the Chair, and providing such other services as may be reasonably agreed between you and the Board. Your services may be performed at such location as you reasonably determine appropriate, which may include the Company’s offices as mutually agreed with the Chair from time to time. You shall continue to maintain your administrative assistant through December 31, 2023, any required travel during this period shall be at the same class level as in effect as of the date hereof, and the Company agrees to indemnify you for acts and omissions as Advisor through December 31, 2023 on the same basis as you are currently indemnified.

At the close of business on December 31, 2023, your employment with the Company will end automatically without further action by you or the Company. You agree to execute any further documentation the Company reasonably may request to evidence your resignation and transition of authority in Section 1 of this Agreement or the termination of your service as Advisor in this Section 2. Following your termination, you shall receive all vested accrued amounts to which you are entitled under the Company’s benefit plans and arrangements and shall be eligible for COBRA health continuation benefits if you timely elect such coverage for yourself and your eligible dependents. Your entitlement to your Company equity awards is provided in Section 4 of this Agreement. The Company shall not terminate your service as Advisor before December 31, 2023 without “Cause” (as defined in your Company equity awards).


Mr. Roger C. Hochschild		Page 2

3.	Your Compensation

During your employment as Advisor, you will continue to receive your base salary in effect prior to the Effective Date. For the avoidance of doubt, you will not be eligible to participate in the Company’s Short-Term Incentive Program with respect to the fiscal year ending December 31, 2023, eligible for additional equity grants from the Company or eligible for severance under the Company Severance Plan in connection with your separation from the Company.

4.	Your Long-Term Equity Awards

Your Company equity awards that are outstanding on the Effective Date shall continue to vest during your employment as Advisor and will be subject to retirement treatment on your termination of service as Advisor in accordance with Section 2 of this Agreement, in each case in accordance with and subject to their current terms. For avoidance of doubt, your 2007 Founders Grant will continue to be subject to its current terms, and nothing herein shall be interpreted to change any rights or entitlements thereunder. Exhibit A sets forth the applicable vesting and payment schedule of such equity awards. You have agreed that, notwithstanding the foregoing, the Company equity awards (e.g. restricted stock units and performance stock units) granted to you during the fiscal year ending December 31, 2023 are cancelled as of the Effective Date and that all obligations of the Company with respect to such awards shall be extinguished at the Effective Date. With respect to your continuing Company equity awards, the Company has no intention to exercise its clawback or forfeiture rights on the basis of facts considered by the Board to date including in connection with its review of the incorrect classification of certain credit card accounts or its review of the Company’s compliance management system.

5.	Cooperation

You agree that, following the Effective Date, at the Company’s request, you shall assist and advise the Company in any investigation which may be performed by the Company or any government agency and any litigation in which the Company may become involved. Such assistance shall include you making yourself reasonably available for interviews by the Company or its counsel, depositions and/or court appearances at the Company’s request. The Company shall attempt to schedule such assistance at mutually convenient times and places. The Company shall reimburse you for reasonable expenses incurred by you at the Company’s request, consistent with the Company’s practices applicable to you during your employment (including fees reasonably incurred by independent legal counsel selected by you if in good faith you believe such counsel to be appropriate). Nothing in this Section 5, however, requires you to act against your own legal interests or the legal interests of any future employer or business partner.

6.	Governing Law

This Agreement shall be interpreted for all purposes in accordance with the laws of the State of Illinois.

7.	Protected Disclosures

You understand that nothing contained in this Agreement or any other agreement with the Company, the Bank or its affiliates shall (a) prohibit you from making reports of possible violations of law or regulation to any governmental agency or entity in accordance with the


Mr. Roger C. Hochschild		Page 3

provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation; or (b) require notification or prior approval by the Company of any reporting described in clause (a).

We look forward to your contributions to the Company’s continued success.


Very truly yours,

/s/ Thomas G. Maheras
Name:		Thomas G. Maheras
Title:		Independent Chairman

I accept the terms and conditions of this letter.


Date:		August 13, 2023

		/s/ Roger C. Hochschild
		Roger C. Hochschild

Exhibit 99.1

DISCOVER FINANCIAL SERVICES ANNOUNCES LEADERSHIP TRANSITION

Roger Hochschild Steps Down as Chief Executive Officer and President

John Owen Appointed Interim CEO and President

RIVERWOODS, Ill., August 14, 2023 – Discover Financial Services (NYSE: DFS) today announced that the Discover Board of Directors and Roger Hochschild have agreed that Hochschild will step down as Chief Executive Officer and President and as a member of the Board. Hochschild will serve in an advisory role at the Company through the end of the year to ensure a smooth transition. John Owen, a member of the Board, has been appointed Interim CEO and President. These changes are effective immediately.

The Board has engaged a leading global executive search firm to commence a process to identify a permanent CEO and President.

Tom Maheras, Chair of the Board, said, “The Board and Roger have agreed that now is the right time to transition leadership, and we thank Roger for his 25 years of service to the Company. The Board is continuously focused on Discover reaching its full potential across the business, including our commitment to enhancing compliance, risk management and corporate governance. We will continue to take actions to advance Discover’s strategic priorities and generate high returns and capital.”

Owen said, “Since joining the Board in 2022, I have been impressed by Discover’s dedicated employee base and all the potential that lies ahead for the business. I look forward to working alongside the management executive committee and Board throughout this transition to continue driving organization-wide excellence and sustainable, long-term performance.”

Hochschild said, “It has been a privilege to spend 25 years with the people of Discover at this amazing company. I know that the Company will enjoy continued success.”

About John Owen

John Owen joined the Discover Board of Directors in June 2022. Owen brings 38 years of experience in consumer banking and information technology that spans multiple industries, including banking, insurance, airlines and the defense industry. He retired from Regions Financial Corp., one of the nation’s largest full-service providers of consumer and commercial banking, wealth management and mortgage products and services, in March 2021, where he had been Chief Operating Officer since 2018.

Previously, Owen served in various senior management roles at the bank, including Head of Operations and Technology, Head of Consumer Services Group, Head of Regional Banking group, and Head of Enterprise Services and Consumer Banking.

Prior to joining Regions Financial, Owen was CEO of Assurant Specialty Property, a Fortune 500 company based in Atlanta. Prior to that, Owen was Senior Vice President of Global Systems Development for Citicorp Credit Services, Chief Information Officer of North American Operations for Arrow Electronics and Senior Vice President of Technology for American Airlines. He began his career in information systems with McDonnell-Douglas.

About Discover

Discover Financial Services (NYSE: DFS) is a digital banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover^® card, America’s cash rewards pioneer, and offers private student loans, personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network^® comprised of Discover Network, with millions of merchants and cash access locations; PULSE^®, one of the nation’s leading ATM/debit networks; and Diners Club International^®, a global payments network with acceptance around the world. For more information, visit www.discover.com/company.

Media Contact

Matthew Towson

224-405-5649

matthewtowson@discover.com

@Discover_News

Investor Relations

Eric Wasserstrom

224-405-4555

investorrelations@discover.com

Exhibit 99.2

DISCOVER FINANCIAL SERVICES NAMES J. MICHAEL SHEPHERD TO ITS BOARD OF DIRECTORS

RIVERWOODS, Ill., August 14, 2023 – Discover Financial Services (DFS) announced today that J. Michael Shepherd will join the Company’s Board of Directors, effective immediately, and will serve on the Board’s Risk Oversight Committee. Shepherd brings a unique set of skills developed over his distinguished career in financial services that includes leadership roles in banking, government, and law with deep experience in the areas of compliance, risk management and corporate governance.

Shepherd is the former Chairman and CEO of BancWest Corporation and its subsidiary, Bank of the West, the U.S. retail arm of BNP Paribas Group. Bank of the West was acquired by BMO in February of 2023. He also served as Chairman and as a Director of BNP Paribas USA, Inc. from July 2016 to February 2023. Shepherd joined Bank of the West in 2004 and held a succession of positions, including General Counsel, Chief Administrative Officer and President. He served as CEO from January 2008 until June 2016, when he assumed the role of Chairman of BNP Paribas USA.

Before joining Bank of the West, Shepherd was General Counsel of The Bank of New York Company, Inc. and of Shawmut National Corporation. He served in government as Senior Deputy Comptroller of the Currency, Associate Counsel to the President of the United States and Deputy Assistant Attorney General. Shepherd is also a director of Pacific Mutual Holding Company and previously was a director of First Hawaiian Inc. and CoreLogic.

“We are delighted to welcome Michael to the Discover Board. He is an industry leader bringing significant expertise in financial services, decades of relevant banking industry experience and a valuable background in public affairs and regulatory matters to the bench of talent on our Board,” said Tom Maheras, Chair of the Board. “I am confident that we will benefit greatly from Michael’s insights and contributions as we continue advancing our ambitious goal of becoming a leading digital consumer bank.”