Board Leadership Structure and Practices
The independent directors periodically review Allstate’s leadership structure and whether separating the roles of Chair and CEO is in the best interests of Allstate and its stockholders. When making this determination, the independent directors consider the recommendation of the nominating and governance committee, the current circumstances at Allstate, the skills and experiences of the individuals involved and the leadership composition of the Board. The roles of Chair and CEO were split during a transition of leadership in 2007 and 2008. The independent directors also appoint an independent lead director with robust powers and responsibilities. A strong lead director role provides an effective independent counterbalance if the independent directors choose to combine the Chair and CEO roles.
At present, the independent directors have determined Allstate is well-served by having these roles performed by Mr. Wilson, who provides excellent leadership and direction for both management and the Board. This promotes a strong connection between the Board and management that is subject to strong independent oversight by Allstate’s independent lead director and the other independent directors. The Board believes it benefits from the considerable knowledge and perspective that Mr. Wilson has acquired from more than 23 years of insurance industry experience. Given his extensive company knowledge and his ability to effectively fulfill both roles simultaneously, he is uniquely qualified to lead discussions of the Board and is in the best position to facilitate the flow of business information and communications between the Board and management.
Independent Lead Director
Allstate’s Board places great importance on strong independent Board leadership and has had a strong lead director role in place for over seven years. Allstate’s Corporate Governance Guidelines describe the responsibilities of the lead director and the selection process, including the characteristics that the Board considers important in a lead director.
The lead director is elected annually by the independent directors, and it is generally expected that the lead director serve more than one year.
JUDITH A. SPRIESER
Considerations in Selecting Current Lead Director
The independent directors consider several factors, including the director’s corporate governance expertise, operational and leadership experience, board service and tenure, integrity, prior Board leadership roles, and ability to meet the required time commitment. It is preferable that the lead director hold a previous position as chair of a Board committee, either at Allstate or another company. Ms. Sprieser was chosen by the independent directors as she exemplified these characteristics. She has devoted significant time fulfilling her duties as lead director since May of 2015. During her tenure on Allstate’s Board, she has cultivated an expansive knowledge of Allstate in multiple operating environments. Her long-term perspective complements the perspectives of newer Board members, seven of whom have joined in the last five years. The independent directors believe that Ms. Sprieser is exceptionally well-qualified to serve as Allstate’s independent lead director.
Lead Independent Director Responsibilities
- Board Meetings and Executive Sessions
- Has the authority to call meetings of the independent directors
- Approves meeting agendas and schedules and information sent to the Board to ensure there is sufficient time for discussion of all items and that directors have the information necessary to perform their duties
- Chairs executive sessions of independent directors at every Board meeting
- Presides at all Board meetings when the Chair is not present
- Duties to the Board
- Has regular communications with the CEO about Allstate’s strategy and performance
- Performs additional duties designated by the independent directors
- Succession Plans
- Facilitates the development of a succession plan for the Chair and CEO
- Board and Individual Director Evaluations
- Facilitates the evaluation of individual director, Board and committee performance with the chair of the nominating and governance committee and the Chair
- CEO Performance Evaluation
- Facilitates and communicates the Board’s performance evaluation of the Chair and CEO with the chair of the compensation and succession committee
- Communication Between Chair and Independent Directors
- Serves as liaison between the Chair and independent directors
- Consults with the Chair and discusses items raised in executive sessions
- Communication with Stockholders
- Communicates with significant stockholders and other stakeholders on matters involving broad corporate policies and practices, when appropriate
- Committee Involvement
- Works with the Chair and committee chairs to ensure coordinated coverage of Board responsibilities and ensures effective functioning of all committees
- Ensures the implementation of a committee self-evaluation process and regular committee reports to the Board
Board Role in Risk Oversight
The Board oversees enterprise risk and return management practices (“ERRM”) and regularly reviews Allstate’s significant risk exposures and management’s design and implementation of ERRM. Allstate’s overall risk position and alignment with risk and return principles is reviewed twice a year. External resources are used when appropriate. Material risks, including those affected by climate, investment markets, and cybersecurity, are regularly identified, measured, managed, and reported to senior management and the Board.
The key risk areas overseen by each Board committee are included below.
Risk Management and Compensation
We believe our compensation policies and practices are appropriately structured and do not provide incentives for employees to take unnecessary or excessive risks, utilizing analysis provided by an external consultant, the chief risk officer, and a review by the compensation and succession committee. Compensation plans provide a balanced and appropriate mix of cash and equity through annual and long-term incentives that align with short and long-term business goals. No one, regardless of eligibility, is guaranteed an award under the annual cash incentive program. We utilize multiple performance measures that correlate with long-term stockholder value creation and diversify the risk associated with any single performance indicator. In addition, the annual incentive program contains a funding adjustment for senior executives in the event of a net loss, which reduces the corporate pool funding for those officers by 50% of actual performance. Likewise, for the performance stock award program, the committee requires positive net income for our executives to earn awards above target. Equity awards to executive officers after 2009 and annual cash incentive awards beginning in 2010 are subject to clawback in the event of certain financial restatements. Executives are also subject to rigorous stock ownership requirements.
Based on this analysis, we believe Allstate’s compensation policies ensure appropriate levels of risk-taking, while avoiding unnecessary risks that could have a material adverse effect on Allstate.
Board Role in Management Succession
The Board oversees the recruitment, development, and retention of executive talent. Management succession is discussed four times annually in compensation and succession committee meetings, Board meetings, and executive sessions.
Discussions cover the CEO and other senior executive roles and include a broader discussion on organizational health. The Board also has regular and direct exposure to senior leadership and high-potential officers through one-on-one breakfasts and other informal meetings held throughout the year.
Board Review of Succession Planning and Talent Development Practices
Board Role in Setting Compensation
The compensation and succession committee reviews the executive compensation program throughout the year with the assistance of an independent compensation consultant, Compensation Advisory Partners (“CAP”). CAP benchmarks Allstate’s plans and compensation payments to the market and evaluates changes to the executive compensation program. The compensation consultant also assesses Allstate’s executive compensation design, peer group selection, relative pay for performance, and total direct compensation for individual senior executive positions. Representatives of the compensation consultant participated in six out of seven compensation and succession committee meetings in 2017.
The compensation and succession committee annually evaluates the compensation consultant’s performance and independence.
The compensation and succession committee makes recommendations to the Board on compensation for the CEO and executive officers and the structure of plans used for executive officers.
The compensation and succession committee grants all equity awards to individuals designated as executive officers for purposes of Section 16 of the Securities Exchange Act of 1934 or covered employees as defined in Internal Revenue Code section 162(m). The compensation and succession committee has authority to grant equity awards to eligible employees in accordance with the terms of our 2013 Equity Incentive Plan. The Board has delegated limited authority to the CEO to grant equity awards to non-executive officers. All awards granted between compensation and succession committee meetings are reported at the next meeting.
The compensation consultant also provides the nominating and governance committee with competitive information on director compensation, including updates on practices and emerging trends.
Allstate proactively discusses corporate governance issues with significant stockholders throughout the year. Dialogue, transparency, and responsiveness are the cornerstones of our stockholder engagement program. Such discussions are held before the annual meeting, during stockholder voting, and after the annual meeting and include our lead director, chair of the nominating and governance committee, Chair of the Board, and other committee chairs or directors as necessary. Direct engagement typically involves our largest stockholders representing approximately one-third of our total outstanding shares. We also engage with proxy and other investor advisory firms that represent the interests of various stockholders. In addition to input on current governance and executive compensation topics specific to Allstate, we invite discussion on any other topics or trends stockholders may wish to share with us. Their input is reported to the nominating and governance committee, which in turn allocates specific issues to relevant Board committees for further consideration. Each Board committee reviews relevant feedback and determines if additional discussion or actions are necessary by the respective committee or full Board. In addition, broader investor surveys provide perspective on investor concerns.
Stockholder Engagement Cycle
Each incumbent director attended at least 75% of the combined Board meetings and meetings of committees of which he or she was a member. Directors are expected to attend Board and committee meetings and the annual meeting of stockholders. All directors who stood for election at the 2017 annual meeting of stockholders attended the annual meeting.
Average attendance of incumbent directors as a group at Board and committee meetings during 2017.
Related Person Transactions
The nominating and governance committee has adopted a written policy on the review, approval, or ratification of transactions with related persons, which is posted on the Corporate Governance section of allstateinvestors.com.
There were no related person transactions identified for 2017.
The committee or committee chair reviews transactions with Allstate in which the amount involved exceeds $120,000 and in which any related person had, has, or will have a direct or indirect material interest. In general, related persons are directors, executive officers, their immediate family members, and stockholders beneficially owning more than 5% of our outstanding stock. The committee or committee chair approves or ratifies only those transactions that are in, or not inconsistent with, the best interest of Allstate and its stockholders. Transactions are reviewed and approved or ratified by the committee chair when it is not practicable or desirable to delay review of a transaction until a committee meeting. The committee chair reports any approved transactions to the committee. Any ongoing, previously approved, or ratified related person transactions are reviewed annually.
Management Participation in Committee Meetings
Key members of management regularly attend and participate in Board meetings, presenting on key topics for the Board. Regular attendees include the CEO, Vice Chair, CFO, General Counsel, President of Allstate Personal Lines, President of Allstate Financial, President of Service Businesses, Chief Investment and Corporate Strategy Officer, and Chief Risk Officer. Other senior leaders attend as meeting topics warrant. In addition, senior leadership also participates in committee meetings.
|Audit Committee||The CFO, chief audit executive, chief compliance executive, chief risk officer, CEO, vice chair, general counsel and controller all actively participate in meetings. Senior business unit and technology executives, including the chief technology officer, are present when appropriate. Executive sessions of the committee are scheduled and held throughout the year, including sessions in which the committee meets exclusively with the independent registered public accountant, chief audit executive, and chief ethics, compliance and privacy officer.|
|Compensation and Succession Committee||
The executive vice president, human resources, general counsel, CFO and CEO regularly participate in meetings. The committee regularly meets in executive sessions that include just the independent compensation consultant or executive vice president, human resources,when necessary.
|Nominating and Governance Committee||
The CEO and general counsel participate in meetings. The committee regularly meets in executive session without management present.
|Risk and Return Committee||
The chief risk officer, CFO, general counsel, CEO, vice chair, chief audit executive, and operating unit risk officers participate in meetings. The committee regularly meets in executive session, including sessions with the chief risk officer.
Communication with the Board
The Board has established a process to facilitate communication by stockholders and other interested parties with directors as a group. The general counsel reports regularly to the nominating and governance committee on all correspondence received that, in her opinion, involves functions of the Board or its committees or that she otherwise determines merits Board attention.
In addition, the audit committee has established procedures for the receipt, retention, and treatment of any complaints about accounting, internal accounting controls, or auditing matters. The communication process and the methods to communicate with directors are posted on the “Corporate Governance” and “Management & Directors” sections of www.allstateinvestors.com.
The Allstate Board welcomes your input on compensation, governance, and other matters.
|The Allstate Corporation,
Nominating & Governance
Committee, 2775 Sanders Road,
Suite F7, Northbrook, IL 60062-6127
c/o General Counsel