2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 226 PRUDENTIAL FINANCIAL, INC. CorporateGovernance Board Risk Oversight TheBoardoverseestheCompany’sriskprofileandmanagement’sprocessesforassessingandmanagingrisk,bothasawhole Boardandthroughitscommittees.Atleastannually,theBoardreviewsstrategicrisksandopportunitiesfacingtheCompany andcertainofitsbusinesses.OtherimportantcategoriesofriskareassignedtodesignatedBoardcommitteesthatreportback tothefullBoard.Ingeneral,thecommitteesoverseethefollowingrisks: • AuditCommittee: insuranceriskandoperationalrisks,includingmodelrisk,aswellasrisksrelatedtofinancialcontrols,legal, regulatoryandcompliancerisks,andtheoverallriskmanagementgovernancestructureandriskmanagementfunction; • CompensationCommittee: thedesignandoperationoftheCompany’scompensationprogramssothattheydonotencourage unnecessaryorexcessiverisk-taking; • CorporateGovernanceandBusinessEthicsCommittee: theCompany’soverallethicalculture,politicalcontributions,lobbying expensesandoverallpoliticalstrategy,aswellastheCompany’senvironmental(whichincludesclimaterisk),sustainability andcorporatesocialresponsibilitytominimizereputationalriskandfocusonfuturesustainability; • FinanceCommittee: liquidityrisk,risksinvolvingourcapitalmanagement,theincurrenceandrepaymentofborrowings,the capitalstructureoftheenterprise,fundingofbenefitplansandstatutoryinsurancereserves; • InvestmentCommittee: investmentrisk,marketriskandthestrengthoftheinvestmentfunction;and • RiskCommittee: thegovernanceofsignificantrisksthroughouttheCompany,theestablishmentandongoingmonitoringof ourriskprofile,riskcapacityandriskappetite,andcoordinationoftheriskoversightfunctionsoftheotherBoard committees. Inperformingitsoversightresponsibilities,theBoardanditscommitteesreviewpoliciesandguidelinesthatseniormanagement usestomanagetheCompany’sexposuretomaterialcategoriesofrisk.Astheseissuessometimesoverlap,committeesholdjoint meetingswhenappropriateandaddresscertainissuesatthefullBoardlevel.During2017,thefullBoardreceivedareportfrom theChiefRiskOfficerontheimportantstrategicissuesandrisksfacingtheCompany.Inaddition,theBoardandcommittees reviewtheperformanceandfunctioningoftheCompany’soverallriskmanagementfunction. TheRiskCommitteeiscomprisedofthechairsofeachoftheotherBoardcommitteesandourViceChairman,whosupervises theChiefRiskOfficeroftheCompany.TheprincipalactivitiesoftheRiskCommitteeareto:overseetheCompany’sassessment andreportingofmaterialrisksbyreviewingthemetricsusedbymanagementtoquantifyrisk,applicablerisklimitstructuresand riskmitigationstrategies;reviewtheCompany’sprocessesandproceduresforriskassessmentandriskmanagement,including therelatedassumptionsusedacrosstheCompany’sbusinessesandmaterialrisktypes;andreceivereportsfrommanagement onmaterialandemergingrisktopicsthatarereviewedbytheCompany’sinternalmanagementcommittees. TheCompany,undertheBoard’soversight,isorganizedtopromoteastrongriskawarenessandmanagementculture.The ChiefRiskOfficersitsonmanymanagementcommitteesandheadsanindependententerpriseriskmanagementdepartment; theGeneralCounselandChiefComplianceOfficeralsositonkeymanagementcommitteesandthefunctionstheyoversee operateindependentlyofthebusinessestoseparatemanagementandoversight.Employeeappraisalsevaluateemployeeswith respecttoriskandethics. Inaddition,theBoardoverseestheCompany’scyberriskmanagementprogram.Inordertorespondtothethreatofsecurity breachesandcyberattacks,wehavedevelopedaprogram,overseenbytheCompany’sChiefInformationSecurityOfficerand ourInformationSecurityOffice,thatisdesignedtoprotectandpreservetheconfidentiality,integrityandcontinuedavailabilityof allinformationownedby,orinthecareof,theCompany.Thisprogramalsoincludesacyberincidentresponseplan.TheAudit Committee,whichistaskedwithoversightofcertainriskissues,receivesperiodicreportsfromtheChiefInformationSecurity Officer,theChiefInformationOfficerandtheHeadofOperationalRisk.TheBoardandtheAuditCommitteealsoreceiveupdates abouttheresultsofperiodicexercisesandresponsereadinessassessmentsledbyoutsideadvisorswhoprovideathird-party independentassessmentofourtechnicalprogramandourinternalresponsepreparedness.TheAuditCommitteeregularlybriefs thefullBoardonthesematters,andthefullBoardalsoreceivesperiodicbriefingsoncyberthreatsinordertoenhanceour directors’literacyoncyberissues. Wemonitortherisksassociatedwithourcompensationprogramandindividualexecutivecompensationdecisionsonanongoing basis.EachyearmanagementundertakesareviewoftheCompany’svariouscompensationprogramstoassesstherisksarising fromourcompensationpoliciesandpractices.ManagementpresentstheseriskassessmentstotheCompensationCommittee. TheriskassessmentshaveincludedareviewoftheprimarydesignfeaturesoftheCompany’scompensationplans,theprocess todeterminecompensationpoolsandawardsforemployeesandananalysisofhowthosefeaturescoulddirectlyorindirectly encourageormitigaterisk-taking.Aspartoftheriskassessments,ithasbeennotedthattheCompany’scompensationplans allowfordiscretionarynegativeadjustmentstotheultimateoutcomes,whichservestomitigaterisk-taking. 22 | NoticeofAnnualMeetingofShareholdersand2018ProxyStatement Total of 02 pages in section PSEG CorporateGovernance PSEG2018ProxyStatement 11 Risk Management Oversight TheBoard is responsible for the oversight of risk atPSEG, both as awhole and through delegation toBoard committees,which meet regularly and report back to the fullBoard.All committees play significant roles in carrying out the risk oversight function. In particular: • TheCorporateGovernanceCommittee provides oversight of the policies and processes bywhich theCompany assesses andmanages enterprise risk.TheCorporateGovernanceCommittee reviews themapping of identified enterprise risks to the Board and its committees andmakes recommendations to theBoardwith respect to suchmapping.OurChiefRiskOfficer andChiefFinancialOfficer report on riskmanagement to theCorporateGovernanceCommittee, directly aswell as through the reports of theCorporateGovernanceCommitteeChair, to theBoard.TheCorporateGovernanceCommittee also evaluatesBoard and committee performance,monitors composition of theBoard and the qualifications of theBoardmembers and nominees, assists theBoard in administering corporate governance practices and oversees our political participation activities and expenditures. In doing so, theCorporateGovernanceCommittee seeks to ensure our governance and leadership structure is appropriately designed tomitigate reputational risk. • TheAuditCommittee oversees risks related to theCompany’s financial statements, the financial reporting process, accounting and legalmatters and cybersecurity.TheAuditCommittee provides oversight on legal and business compliance, financial reporting, disclosure controls and procedures, cybersecurity riskmanagement and riskmanagement controls and reviews in a generalmanner the guidelines, policies and processes bywhich theCompany assesses andmanages enterprise risk, consistentwith the listing standards of theNYSE.OurChiefRiskOfficer andChiefFinancialOfficer report on riskmanagement to theAuditCommittee at itsmeetings. • TheFinanceCommittee oversees financing transactions and approves appropriate commodity portfolio risk tolerance limits. Compliance ismonitored through regular reporting to theBoard.TheFinanceCommittee is responsible formonitoring risk related to our investments in our pension and post-retirement benefits and nuclear decommissioning trusts and receives periodic reports on their performance. • TheFossilGenerationOperationsOversightCommittee and theNuclearGenerationOperationsOversightCommittee monitor and evaluate risks associatedwith our electric station operations, including risks associatedwith environmental, safety and other compliance and personnel and performancematters. • TheO&CC considers the risks and rewards associatedwith our compensation and human resources philosophy and programs.As discussed on page 62, theO&CC has reviewed our compensation policies and practices as they relate to risk management and seeks to administer our compensation plans so as to appropriately balance the incentive nature of the compensationwithmechanisms that serve tomitigate risk. Risk Mapping Under the oversight and direction of theCorporateGovernanceCommittee and theAuditCommittee, in 2016we conducted a comprehensive review of the riskmanagement oversight responsibilities of theBoard and the committees.As a result,we mapped the key enterprise risks identified bymanagement to theBoard and committees based on the committees’ respective areas of oversight.Thismapping of risks serves to clarify the oversight responsibilities of each committee and ensure proper oversight of each identified risk.Changesweremade to committee charters as necessary to reflect the specific oversight responsibilities of each committee. In addition, theBoard and each committee determined specific processes and schedules for performing their duties in connectionwith themapped risks.Themapping of risks and the annual schedulewere further reviewed and adjusted in 2017, including an increase in the frequency of updates on cybersecurity. Risk ManagementPolicy Riskmanagement is a key part of our strategic planning and business operations.TheBoard has approved aRiskManagement Policy and it reviews and adopts theCompany’sFinancialRiskManagementPractice. In accordancewith theRiskManagement Policy,wemaintain and execute aRiskManagementProgram for identifying, quantifying,monitoring,managing and reporting on our risks, including evolving issues such as cybersecurity.TheFinancialRiskManagementPractice serves to define themajor roles, responsibilities and procedures, including controls and reporting, necessary to activelymanage our financial risk exposure consistentwith our business plans. It is reviewed and approved periodically by theAuditCommittee, theCorporateGovernance Committee and theFinanceCommittee and recommended to theBoard for its approval. RED HAT, INC. BOARD OPERATIONS RISKOVERSIGHT Managementisresponsiblefortheday-to-daymanagementoftheriskstheCompanyfacesandourBoardhasresponsibilityfor theoversightofriskmanagement,includingstrategicrisk,risktoourbrandandreputationandcybersecurityrisk.TheBoard anditscommitteesregularlyreceiveinformationandreportsfrommembersofseniormanagementonareasofmaterialrisk.In addition,theBoardregularlydiscussesourstrategicdirectionandtherisksandopportunitiesfacingtheCompanyinlightof trendsanddevelopmentsinthesoftwareindustryandgeneralbusinessenvironment. BOARDOFDIRECTORS AUDIT COMMITTEE COMPENSATION COMMITTEE NOMINATING& CORPORATE GOVERNANCE COMMITTEE PRIMARYRISKOVERSIGHT FinancialandLegal CompensationPlans andArrangements ExecutiveSuccession PlanningandBoard Composition REDHATANDITSSTOCKHOLDERS OurBoardandmanagementfocusoncreatinglong-term,sustainablestockholdervalue.Keytothisgoalisregularstockholder engagementthroughmeetingswithstockholdersatconferencesandinone-on-onemeetingstodiscussourfinancial performance,corporategovernancepractices,executivecompensationprogramsandothermatters.Additionally,fromtimeto time,weinviteinvestorstoattendroadshowsandvisitRedHatfacilitiesandprovideperiodice-mailcommunicationsabout developmentsofinterest,suchasacquisitions.Avarietyoffinancial,investorandcorporategovernanceinformationisavailable onourwebsite. Ourconversationswithstockholdersallowustobetterunderstandourstockholders’perspectivesandprovideuswithuseful feedbacktocalibrateourpriorities.StockholdersandotherinterestedpartieswhowishtocommunicatewiththeBoard,the BoardChair,independentmembersoftheBoardasagroup,oranycommitteechairmaydosobyfollowingtheprocessset forthonourwebsiteatwww.redhat.comunder“AboutRedHat—InvestorRelations—CorporateGovernance—ContacttheBoard.” KEYBOARDPRACTICES BOARDMEETINGSANDATTENDANCE DirectorsareresponsibleforattendingallmeetingsoftheBoard,theBoardcommitteesonwhichtheyserveandtheannual meetingofstockholders.TheBoardmet11timesduringFiscal2018,eitherinpersonorbyteleconference.DuringFiscal2018, eachmemberofourBoardattendedatleast75%oftheaggregateofthemeetingsoftheBoardandthecommitteesonwhich heorsheserved.Allofthethen-servingmembersofourBoardattendedour2017AnnualMeeting. EXECUTIVESESSIONS Ourindependentdirectorsmeetinseparateregularlyscheduledexecutivesessions,withoutmanagement.Ourpracticeisfor ourBoardChairortheapplicablecommitteechairtopresideoveranyexecutivesession. 13 RR DONNELLEY COMPANYINFORMATION BoardLeadership TheBoardhasdeterminedthathavinganindependentdirectorserveaschairoftheBoardisinthebestinterestofstockholdersatthis time.ThestructureensuresagreaterrolefortheindependentdirectorsintheoversightoftheCompanyandactiveparticipationofthe independentdirectorsinsettingagendasandestablishingprioritiesandproceduresfortheworkoftheBoard.Nosingleleadershipmodel isrightforallcompaniesatalltimes,however,andtheBoardrecognizesthat,dependingonthecircumstances,otherleadershipmodels mightbeappropriate.Accordingly,theBoardperiodicallyreviewsitsleadershipstructure.TheBoard’s PrinciplesofCorporateGovernance providethat,generally,nodirectormayserveaschairoftheBoardoranycommitteeformorethanthreeyears,providedthatthe CorporateResponsibility&GovernanceCommitteemayrecommendtotheBoard,andtheBoardmayapprove,asingleextensionofthe termofachairoftheBoardoranycommitteeforanadditionalthreeyearsoncethechair’sinitialthree-yeartermhasendedandthe CorporateResponsibility&GovernanceCommitteemayrecommendtotheBoard,andtheBoardmayapprove,extendingthetermofthe chairoftheBoardoranycommitteebeyondsixyearsifitdeemssuchanextensiontobeinthebestinterestofthestockholdersandthe Company.Inaddition,serviceasachairoftheBoardoranycommitteepriortothe2014AnnualMeetingshallnotbeconsideredfor purposesofthislimitation. BoardandCommitteeEvaluations TheBoardundertakesathreepartannualevaluationprocessthatiscoordinatedbythechairoftheCorporateResponsibility& GovernanceCommitteewhichincludes:(1)Boardandcommitteeself-evaluations;(2)evaluationscompletedbyapplicablemembersof managementoftheBoardanditscommittees;and(3)interviewsofeachdirectorconductedbyathird-partygovernanceexpert.Results oftheindividualwrittenevaluationsaresharedwiththechairoftheCorporateResponsibility&GovernanceCommittee,thechairofthe BoardandtheChiefExecutiveOfficer,afterwhichitisdeterminedwhetherdiscussionswithanyindividualdirectorconcerning performancearenecessary.ResultsarethensharedwiththechairsoftheapplicablecommitteesbeforebeingsenttotheBoardandeach committeefortheirreview.ThechairoftheCorporateResponsibility&GovernanceCommitteediscussestheresultsfromtheinterviews withthethird-partyexpertandsummarizessuchresultsandpresentsthemtotheBoard.TheBoardhasusedinformationprovided throughtheevaluationprocesstocontinuouslyimproveitsfunctioning. Board’sRoleinRiskOversight TheBoardisactivelyinvolvedinoversightofrisksinherentintheoperationoftheCompany’sbusinessesandtheimplementationofits strategicplan.TheBoardperformsthisoversightrolebyusingseveraldifferentlevelsofreview.Inconnectionwithitsreviewsofthe operationsoftheCompany’sbusinessunitsandcorporatefunctions,theBoardaddressestheprimaryrisksassociatedwiththoseunits andfunctions,includingITandcybersecurityrisks.Inaddition,theBoardreviewsthekeyrisksassociatedwiththeCompany’sstrategic planannuallyandregularlythroughouttheyearaspartofitsconsiderationofthestrategicdirectionoftheCompanyaswellasreviewing theoutputoftheCompany’sriskmanagementprocesseachyear. TheBoardhasdelegatedtotheAuditCommitteeoversightoftheCompany’sriskmanagementprocess.Amongitsduties,theAudit Committeereviewswithmanagement(a)Companypolicieswithrespecttoriskassessmentandmanagementofrisksthatmaybematerial totheCompany,(b)theCompany’ssystemofdisclosurecontrolsandsystemofinternalcontrolsoverfinancialreporting,and(c)the Company’scompliancewithlegalandregulatoryrequirements. EachoftheotherBoardcommitteesalsooverseesthemanagementofCompanyrisksthatfallwithinsuchcommittee’sareasof responsibility.Inperformingthisfunction,eachcommitteehasfullaccesstomanagement,aswellastheabilitytoengageadvisors,and eachcommitteereportsbacktothefullBoard.TheAuditCommitteeoverseesrisksrelatedtotheCompany’sfinancialstatements,the financialreportingprocess,otherfinancialmatters,certaincomplianceissuesandaccountingandlegalmatters.TheAuditCommittee, alongwiththeCorporateResponsibility&GovernanceCommittee,isalsoresponsibleforreviewingcertainmajorlegislativeand regulatorydevelopmentsthatcouldmateriallyimpacttheCompany’scontingentliabilitiesandrisks.TheCorporateResponsibility& GovernanceCommitteealsooverseesrisksrelatedtotheCompany’sgovernancestructureandprocesses,relatedpersontransactions, certaincomplianceissuesandBoardandcommitteestructuretoensureappropriateoversightofrisk.TheHRCommitteeconsidersrisks relatedtotheattractionandretentionofkeymanagementandemployeesandrisksrelatingtothedesignofcompensationprogramsand arrangements,aswellasdevelopmentalandsuccessionplanningforpossiblesuccessorstothepositionofchiefexecutiveofficerand planningforotherkeyseniormanagementpositions. NominationofDirectors ItisthepolicyoftheCorporateResponsibility&GovernanceCommitteetoconsidercandidatesfordirectorrecommendedby stockholders.Inordertorecommendacandidate,stockholdersmustsubmittheindividual’snameandqualificationsinwritingtothe committee(incareoftheSecretaryattheCompany’sprincipalexecutiveofficesat35WestWackerDrive,36 th Floor,Chicago,Illinois 60601)andotherwiseinaccordancewiththeproceduresoutlinedunder SubmittingStockholderProposalsandNominationsfor2019Annual Meeting onpage45ofthisproxystatement.Thecommitteeevaluatescandidatesrecommendedfordirectorbystockholdersinthesame waythatitevaluatesanyothercandidate.Thecommitteealsoconsiderscandidatesrecommendedbymanagementandmembersofthe Boardaswellasnomineesrecommendedbystockholders. 14 RRD 2018NoticeofMeetingandProxyStatement