2018 Guide to Effective Proxies

2.17.5 Elements of pay tables | 375 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES Compensation Discussion and Analysis To assess the competitiveness of our executive compensation program, we analyze Peer Group compensation data obtained from peer company proxy materials as well as compensation and benefits survey data provided by national compensation consulting firms, such as Willis Towers Watson, McLagan Partners, and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review the mix of our compensation components with respect to fixed versus variable, short-term versus long-term, and cash versus equity-based pay. This information is then presented to the Committee for its review and use. The Committee generally compares the compensation of each NEO in relation to both the 50th and the 75th percentiles of the Peer Group for similar positions, as we are significantly above the median of the Peer Group in terms of size. In addition, the Committee takes into account various factors such as our performance within the Peer Group, the unique characteristics of the individual’s position, and any succession and retention considerations. In general, compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range. Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by the scope of their responsibilities, differences in the competitive market pay range for similar positions, and considerations of internal equity. Components of Our Executive Compensation Program The principal components of our executive compensation program, purpose, key characteristic and type of performance measured (if applicable) are presented in the following table. We measure the program’s competitiveness both by comparing relevant market data with the target and actual amounts paid at each executive officer position as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities. Total Direct Compensation Compensation Component Purpose Key Characteristic Performance Measured Base Salary • Compensate executive officers fairly for the responsibility of the position held Fixed Individual Annual Incentive Awards • Motivate and reward executive officers for achieving our short-term business objectives • Provide balance by rewarding performance relative to our Peer Group Variable Corporate and Individual Long-Term Incentive Awards • Motivate executive officers by linking incentives to the achievement of our multi-year financial goals, our relative performance, and the performance of our Common Stock and book value over the long term • Reinforce the link between the interests of our executive officers and shareholders Variable Corporate Other Forms of Compensation Compensation Component Purpose Key Characteristic Health & Welfare, and Retirement Plans • Provide benefits that promote employee health and support employees in attaining financial security Fixed Perquisites and Other Personal Benefits • Provide a business-related benefit to our Company, and assist in attracting and retaining executives Fixed Post-Employment Compensation • Provide temporary income following an executive’s involuntary termination of employment, and in the case of a change of control, also provide continuity of management Fixed In keeping with our commitment to diversity and inclusion in practice, the performance shares and units awarded in February 2018 to executives at the senior vice president level and above, and equivalents, are subject to a performance objective intended to improve the representation of diverse persons among our senior management over the 2018 through 2020 performance period: • If we meet our goal of increased representation of diverse persons by 5 percentage points or more over this period, payouts will be increased by up to 10%. • If there is no change in representation, payouts will be decreased by 5%. • If such representation decreases over this period, payouts will be decreased by up to 10%. Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | 45 PRUDENTIAL FINANCIAL, INC.