2018 Guide to Effective Proxies

2.17.5 Elements of pay tables | 379 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES Executive Compensation (continued) 2018 NOTICE OF MEETING AND PROXY STATEMENT Compensation Design Elements Elements of Compensation. Key elements of our total compensation program for our NEOs for 2017 are described below. Element Description Considerations and Rationale Clawback, Forfeiture and Ex Ante Mechanisms (1) Salary Base Salary • Fixed annual cash amount • Paid periodically throughout the year • Compensates employees throughout the year for day-to-day responsibilities — Annual Incentive Compensation Cash Incentive (non-deferred) • Variable cash amount • Paid as part of annual incentive compensation • Provides a limited, immediately paid incentive opportunity based on annual performance ✓ Deferred Value Awards (DVAs) (2) • DVAs are units representing a notional investment in a money market fund • Upon vesting, notional units are paid in cash • Vest ratably in 16 quarterly installments beginning in May 2018 • Number of actual units awarded is increased to provide an estimated annual return of approximately 3% over the deferral period • Subject to time vesting requirements • Retains benefits of deferral for a portion of cash-based incentive compensation • Cash-based DVAs mitigate the dilutive effects of deferred equity compensation ✓ Long-Term Incentive Compensation Performance - Based Restricted Stock Units (RSUs) • Equity-based compensation • The number of RSUs ultimately earned for awards based on 2017 performance are based on State Street’s average annual GAAP ROE performance over the three-year per- formance period 2018-2020, subject to adjustment for pre-established, objectively determinable factors (3) • GAAP ROE performance target is 13%; RSUs are earned under the following schedule: 0% 0% 2% 4% 6% 8% 10% 12% 16% 20% 20% 40% PerformancePayout Threshold Target Maximum 13% 18% 8% GAAPROEPerformance 60% 80% 100% 120% 160% 140% 14% 18% • RSUs ultimately earned “cliff” vest in one installment in February 2021 • Subject to performance-based vesting to align with long-term performance • ROE is an important financial perform- ance metric that is monitored closely in our industry • NEW for 2017 ROE threshold for receiv- ing any of the shares awarded increased from 5% to 8%, with thresh- old payout rate increasing from 40% to 50% • NEW for 2017 ROE performance target increased from 11% to 13% • NEW for 2017 ROE performance required for maximum payout increased to 18% (from 15%). Each award has a maximum payout of 150% (increased from 140%) of the initial number of RSUs awarded which, combined with other design features, results in a risk- balanced incentive for performance above the target • Equity-based compensation directly reflects the rewards and risks shared by our NEOs and our shareholders ✓ Deferred Stock Awards (DSAs) • Equity-based compensation • Vest ratably in four annual installments beginning in February 2019 • Subject to time vesting requirements • Equity-based compensation directly reflects the rewards and risks shared by our NEOs and our shareholders ✓ (1) For more information, see the discussion under “Other Elements of Compensation—Recourse Mechanisms” below. (2) For 2017, Mr. Taraporevala participated in an arrangement referred to as the SSGA Long Term Incentive Plan (SSGA LTIP) based on his role prior to his appointment as President and Chief Executive Officer of SSGA in November 2017. Granting of awards, vesting and payment terms under the SSGA LTIP mirror the terms of the DVAs granted 32 STATE STREET CORPORATION STATE STREET CORPORATION