2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 90 PRUDENTIAL FINANCIAL, INC. SummaryInformation Corporate Governance Highlights In2017,managementandBoardmembersengagedwithshareholderswhoholdamajorityofourshares.Duringthese discussions,shareholderswereencouragedtoidentifypotentialBoardcandidatesandsharefeedbackontheCompany,our Boardstructure,ourgovernancepracticesandpolicies,andourcompensationframeworkandprograms.Our2017corporate governancehighlightsinclude: • ExecutiveCompensationProgram. Received93%shareholdersupportin2017. • ShareholderEngagement. In2017,managementandBoardmembersmetwithshareholderswhoownamajorityofour shares. • BoardRefreshment. Electedfournewdirectorssince2015,includingthreein2016,enhancingtheBoard’sbreadthand depthofexperienceanddiversity.OuraverageBoardtenureissevenyears. • BoardRecognition. WereceivedtheGoverningBoardDiversityChampionAwardfromtheCaliforniaDepartmentof InsuranceforourleadershipandinnovativeapproachtodiversifyingourBoard. BoardofDirectorsNomineesandCommittees Name/Age Independent DirectorSince CommitteeMembership OtherPublicBoards ThomasJ.Baltimore,54 Yes Oct.2008 • Executive(Chair) • Compensation • LeadIndependent Director(since2017) • Investment(Chair) • Risk(Chair) 1 GilbertF.Casellas,65 Yes Jan.2001 • CorporateGovernance& BusinessEthics(Chair) • Executive • Risk 0 MarkB.Grier,65 No Jan.2008 • Risk 0 MartinaHund-Mejean,57 Yes Oct.2010 • Audit 0 KarlJ.Krapek,69 Yes Jan.2004 • Compensation(Chair) • Executive • Risk 2 PeterR.Lighte,69 Yes Mar.2016 • CorporateGovernance& BusinessEthics • Investment 0 GeorgePaz,62 Yes Mar.2016 • Audit 2 SandraPianalto,63 Yes Jul.2015 • CorporateGovernance& BusinessEthics • Finance 3 ChristineA.Poon,65 Yes Sep.2006 • Executive • Finance(Chair) • Investment • Risk 3 DouglasA.Scovanner,62 Yes Nov.2013 • Audit(Chair) • Executive • Risk 0 JohnR.Strangfeld,64 No Jan.2008 • Executive 0 MichaelA.Todman,60 Yes Mar.2016 • Compensation • Finance 2 AnnualMeetingProposals Proposal RecommendationofBoard ElectionofDirectors FOReachofthenominees RatificationofAuditors FOR Advisoryvotetoapprovenamedexecutiveofficercompensation FOR ShareholderproposalregardinganindependentBoardChairman AGAINST 8 | NoticeofAnnualMeetingofShareholdersand2018ProxyStatement SummaryInformation Corporate Governance Highlights In2017,managementandBoardmembersengagedwithshareholderswhoholdamajorityofourshares.Duringthese discussions,shareholderswereencouragedtoidentifypotentialBoardcandidatesandsharefeedbackontheCompany,our Boardstructure,ourgovernancepracticesandpolicies,andourcompensationframeworkandprograms.Our2017corporate governancehighlightsinclude: • ExecutiveCompensationProgram. Received93%shareholdersupportin2017. • ShareholderEngagement. In2017,managementandBoardmembersmetwithshareholderswhoownamajorityofour shares. • BoardRefreshment. Electedfournewdirectorssince2015,includingthreein2016,enhancingtheBoard’sbreadthand depthofexperienceanddiversity.OuraverageBoardtenureissevenyears. • BoardRecognition. WereceivedtheGoverningBoardDiversityChampionAwardfromtheCaliforniaDepartmentof InsuranceforourleadershipandinnovativeapproachtodiversifyingourBoard. Board of Directors Nominees and Committees Name/Age Independent DirectorSince CommitteeMembership OtherPublicBoards ThomasJ.Baltimore,54 Yes Oct.2008 • Executive(Chair) • Compensation • LeadIndependent Director(since2017) • Investment(Chair) • Risk(Chair) 1 GilbertF.Casellas,65 Yes Jan.2001 • CorporateGovernance& BusinessEthics(Chair) • Executive • Risk 0 MarkB.Grier,65 No Jan.2008 • Risk 0 MartinaHund-Mejean,57 Yes Oct.2010 • Audit 0 KarlJ.Krapek,69 Yes Jan.2004 • Compensation(Chair) • Executive • Risk 2 PeterR.Lighte,69 Yes Mar.2016 • CorporateGovernance& BusinessEthics • Investment 0 GeorgePaz,62 Yes Mar.2016 • Audit 2 SandraPianalto,63 Yes Jul.2015 • CorporateGovernance& BusinessEthics • Finance 3 ChristineA.Poon,65 Yes Sep.2006 • Executive • Finance(Chair) • Investment • Risk 3 DouglasA.Scovanner,62 Yes Nov.2013 • Audit(Chair) • Executive • Risk 0 JohnR.Strangfeld,64 No Jan.2008 • Executive 0 MichaelA.Todman,60 Yes Mar.2016 • Compensation • Finance 2 Annual Meeting Proposals Proposal RecommendationofBoard ElectionofDirectors FOReachofthenominees RatificationofAuditors FOR Advisoryvotetoapprovenamedexecutiveofficercompensation FOR ShareholderproposalregardinganindependentBoardChairman AGAINST 8 | NoticeofAnnualMeetingofShareholdersand2018ProxyStatement Summary Information To assist you in reviewing the proposals to be acted upon at the Annual Meeting, we call your attention to the following information about the Company’s 2017 financial performance and k y executive compensation actions and decisions, and our key corporate governance policies and practices. The following description is only a summary. For more complete information about these topics, please review the Company’s Annual Report on Form 10-K and this Proxy Statement. Business Highlights Wereportednetincomeof$7.86billion,or$17.86pershareof CommonStockin2017,comparedto$4.37billion,or$9.71per share,in2016,basedonU.S.generallyacceptedaccounting principles(“GAAP”). Netincomein2017includesabenefitof$2.87billion,or$6.64per shareofCommonStock,asaresultoftheenactmentoftheTaxCuts andJobsAct. GAAPNet Income $4.37B 2016 $7.86B 2017 EPS Based on GAAPNet Income $9.71 2016 $17.86 2017 Wereportedafter-taxadjustedoperatingincomeof$4.65billion,or $10.58persharein2017,comparedto$4.11billion,or$9.13per share,in2016. (1) AOI $4.11B 2016 $4.65B 2017 EPS Based on AOI $9.13 2016 $10.58 2017 WereportedGAAPbookvalueof$125.24pershareofCommonStock asofDecember31,2017,comparedto$104.91pershareasof year-end2016. Adjustedbookvalueamountedto$88.28pershareofCommonStock asofDecember31,2017comparedto$78.95pershareasof year-end2016. (1) GAAPbookvaluepershareandadjustedbookvaluepershareasof December31,2017,includebenefitsof$6.59and$2.74, respectively,asaresultoftheenactmentoftheTaxCutsandJobsAct. GAAP Book Value PerShare $125.24 2016 2017 $104.91 AdjustedBook Value Per Share $88.28 2016 2017 $78.95 Wereportedreturnonaverageequitybasedonnetincomeof16%for 2017,comparedto8.8%for2016. Wereportedoperatingreturnonaverageequityof13%for2017, comparedto12%for2016. (1) GAAP Return on Average Equity Operating Return on Average Equity 2017 2016 2017 2016 8.8% 16% 13% 12% (1) Consolidatedadjustedoperatingincome(“AOI”)andoperatingreturnonaverageequityarenon-GAAPmeasuresoffinancialperformance.Adjustedbookvalue isanon-GAAPmeasureoffinancialposition.Weuseearningspershare(“EPS”)basedonAOI,operatingreturnonaverageequity,andadjustedbookvalueas performancemeasuresinourincentivecompensationprograms.Foradiscussionofthesemeasuresandforreconciliationstothenearestc mparableGAAP measures,seeAppendixAtothisProxyStatement. 6 | NoticeofAnnualMeetingofShareholdersand2018ProxyStatement PSEG Base PSEG 2016 ProxyStatementSummary PSEG2018ProxyStatement 1 OUR COMPANY PSEG is an energy company with a diversified business mix with two principal directly owned operating subsidiaries. • PublicServiceElectric andGasCompany (PSE&G), a public utility engaged principally in the transmission of electricity and distribution of electricity and natural gas in certain areas ofNew Jersey. In addition,PSE&G invests in solar generation projects and energy efficiency and related programs inNew Jersey. • PSEGPower LLC (Power), amulti-regional energy supply company that integrates the operations of itsmerchant nuclear and fossil generating assetswith its powermarketing businesses and fuel supply functions through competitive energy sales inwell-developed energymarkets primarily in theNortheast andMid-AtlanticUnitedStates through its principal directwholly owned subsidiaries. In addition,Power owns and operates solar generation facilities in various states. PSEG’s other directwholly owned subsidiaries are:PSEG Long Island LLC (PSEG LI),which operates the Long IslandPower Authority’s (LIPA) transmission and distribution (T&D) system under anOperationsServicesAgreement (OSA);PSEGEnergy Holdings L.L.C. (EnergyHoldings),which primarily has investments in leveraged leases; andPSEGServicesCorporation (Services),which provides certainmanagement, administrative and general services toPSEG and its subsidiaries at cost. In recent yearswe have transformed our businessmix to include a significantly higher percentage contribution to earnings by PSE&G, as noted on page 3 underBusinessPerformance and in greater detail in ourCD&AExecutiveSummary on pages 40- 46. ANNUALMEETINGPROPOSALS Board Recommendation 1. ElectionofDirectors – vote to elect eleven director nominees to serve one-year terms. See page 6 formore information. FOR 2. ApprovalofExecutiveCompensation – advisory vote to approve the executive compensation of the named executive officers. See page 39 formore information. FOR 3. RatificationofAuditor – ratification of the appointment ofDeloitte&Touche LLPas independent auditor for 2018. See page 81 formore information. FOR NOMINEES FOR ELECTION AS DIRECTOR Name Age Director Since PrimaryOccupation Committee Memberships *WillieA.Deese 62 2016 RetiredExecutiveVicePresidentofMerck&Co. Inc. A,CG,O *WilliamV.Hickey 73 2001 RetiredChairman of theBoard andCEOofSealedAirCorporation F,FG,NG,O Ralph Izzo 60 2006 Chairman of theBoard,PresidentandCEO ofPSEG E (Chair) *ShirleyAnn Jackson 71 2001 PresidentofRensselaerPolytechnic Institute CG (Chair),E,FG,NG,O *David Lilley 71 2009 RetiredChairman of theBoard,PresidentandCEOofCytec Industries A,F,O (Chair) *BarryH.Ostrowsky 67 2018 PresidentandCEO ofRWJBarnabasHealth, Inc. F,O *ThomasA.Renyi 72 2003 RetiredExecutiveChairmanofTheBankofNewYorkMellon LeadDirector,A,E,F *HakCheol (H.C.)Shin 60 2008 ViceChairandExecutiveVicePresidentof3MCompany A,CG,FG (Chair),NG (Chair) *Richard J.Swift 73 1994 RetiredChairman of theBoard,PresidentandCEOofFosterWheeler CG,E,FG,NG,O *SusanTomasky 65 2012 RetiredPresident–AEPTransmissionofAmericanElectricPowerCorporation A (Chair),CG *AlfredW.Zollar 63 2012 RetiredGeneralManager–TivoliSoftwareDivision of IBMCorporation F(Chair),FG,NG * Independent A=AuditCG=CorporateGovernanceE=ExecutiveF=FinanceFG=FossilGenerationNG=NuclearGenerationO=Organization andCompensation