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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under §240.14a-12 | |
Brighthouse Financial, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
| ☒ | No fee required. | |||
| ☐ | Fee paid previously with preliminary materials | |||
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 | |||
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| Notice of Annual Meeting of Stockholders | i |
Notice of Annual Meeting of Stockholders
On behalf of the Board of Directors, I am honored to invite you to attend the 2022 Annual Meeting of Stockholders (the “Annual Meeting”) of Brighthouse Financial, Inc. (“Brighthouse Financial”)
| Brighthouse Financial® will hold its Annual Meeting solely by means of remote communication via the internet (a “virtual meeting”). In light of the uncertainty surrounding the COVID-19 pandemic and out of concern for the safety of our stockholders, we have determined that it is advisable to hold our Annual Meeting as a virtual meeting. All stockholders as of April 11, 2022 (the “Record Date”) will be able to attend, vote, and participate in the meeting by remote communication. For additional information about participating in the Annual Meeting, see “Attending the Annual Meeting” in the accompanying Proxy Statement. |
Date and Time
Wednesday, June 8, 2022, at 8:00 a.m., Eastern Time
Meeting Website
www.virtualshareholdermeeting.com/BHF2022
Agenda
At the Annual Meeting, stockholders will consider and vote on the following matters:
| 1. | Proposal 1: Election of nine (9) Directors to serve a one-year term ending at the 2023 Annual Meeting of Stockholders; |
| 2. | Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as Brighthouse Financial’s independent registered public accounting firm for fiscal year 2022; |
| 3. | Proposal 3: Advisory vote to approve the compensation paid to Brighthouse Financial’s Named Executive Officers; and |
| 4. | Any such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
Our Board of Directors recommends that you vote “FOR” the election of each of the nominees named in Proposal 1 and “FOR” Proposals 2 and 3. Information about the matters to be acted upon at the Annual Meeting is contained in the accompanying Proxy Statement.
Voting Your Shares
Stockholders of record who hold shares of Brighthouse Financial common stock, par value $0.01 per share (“Shares”), as of the close of business on the Record Date are entitled to vote at the Annual Meeting.
You may submit a proxy to vote your Shares in advance of the Annual Meeting by any of the following means:
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Internet | |
| Please log on to www.ProxyVote.com and submit a proxy to vote your Shares by 11:59 p.m., Eastern Time, on Tuesday, June 7, 2022. | ||
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Telephone | |
| Please call 1-800-690-6903 until 11:59 p.m., Eastern Time, on Tuesday, June 7, 2022. | ||
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| If you received printed copies of the proxy materials, please complete, sign, date, and return your proxy card by mail so that it is received by Brighthouse Financial, Inc., c/o Broadridge Financial Solutions, Inc., prior to the Annual Meeting. | ||
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| ii | Notice of Annual Meeting of Stockholders |
You may also attend and vote at the Annual Meeting.
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Annual Meeting | |
| You may attend the Annual Meeting and cast your vote at www.virtualshareholdermeeting.com/BHF2022. |
Beneficial owners whose Shares are held at a brokerage firm, or by a bank or other nominee, should follow the voting instructions that they received from the nominee (see information in the Proxy Statement under “Beneficial Owners or Holders in Street Name”). Participants in retirement and savings plans should refer to the voting instructions in the Proxy Statement under “Voting by Participants in Retirement Plans.”
During the Annual Meeting, any stockholder attending the Annual Meeting may access a list of the stockholders entitled to vote at the Annual Meeting at www.virtualshareholdermeeting.com/BHF2022 by following the instructions contained in the Proxy Statement.
This notice is being delivered to the holders of Shares as of the close of business on April 11, 2022, the record date fixed by the Board of Directors for the purposes of determining the Brighthouse Financial stockholders entitled to receive notice of, and to vote at, the Annual Meeting, and constitutes notice of the Annual Meeting under Delaware law.
By Order of the Board of Directors,
Jacob M. Jenkelowitz
Corporate Secretary
Charlotte, North Carolina
April 26, 2022
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Important Notice Regarding the Availability of Proxy Materials
The accompanying Proxy Statement, our 2021 Annual Report to Stockholders, and additional information about
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Brighthouse Financial | 2022 Proxy Statement
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| Chairman’s Letter to Our Stockholders | iii |
Chairman’s Letter to Our Stockholders
Dear Fellow Stockholders:
On behalf of the Board of Directors, I want to thank you for your continued support of, and investment in, Brighthouse Financial, Inc. (the “Company” or “Brighthouse Financial”). I am pleased to present Brighthouse Financial’s 2022 Proxy Statement and cordially invite you to our 2022 Annual Meeting of Stockholders.
In 2021, the Board remained focused on our role of overseeing Brighthouse Financial’s strategy to grow the Company and deliver long-term value for our stockholders. I am proud of Brighthouse Financial’s accomplishments in 2021, as it continued to execute its strategy while navigating the unpredictable environment resulting from the COVID-19 pandemic. These accomplishments include achieving its target of returning $1.5 billion to its stockholders by the end of 2021, delivering strong sales of annuities and life insurance, further expanding its distribution footprint and enhancing its product portfolio, launching its institutional spread margin business, and completing a major platform conversion as the Company continues to implement its future state operations and technology platform. Additional 2021 highlights can be found in the accompanying Proxy Statement.
I am also proud of management for its continued focus on enhancing Brighthouse Financial’s already strong culture as part of its efforts to attract and retain talent and its commitment to being a great place to work. In particular, I commend management for its ongoing dedication to advancing Diversity, Equity, and Inclusion (“DE&I”) throughout Brighthouse Financial. This is important work that the Board fully supports and in which we remain deeply engaged as part of our oversight of the Company’s human capital management strategy.
On behalf of the Board, I am now pleased to share with you some highlights of the Board’s work in 2021 and our priorities for 2022:
Strategy and Risk Management Oversight. The Board believes that Brighthouse Financial has developed and is executing its focused strategy to deliver long-term value for its stockholders. Throughout 2021, we devoted significant attention in our meetings and engaged with management on the Company’s strategy, including, among other topics, product development and sales, expansion of distribution channels, financial management, hedging strategy, expense management, culture and human capital management, and the Company’s progress toward its future state operations and technology platform. We also continued to oversee key risks to the Company’s strategy, including financial risk, market risk, operational risk, and cybersecurity risk. In addition, while Brighthouse Financial’s navigation of the pandemic continues to be a focus of the Board and its Committees, we also continue to monitor the geopolitical and macroeconomic headwinds that have emerged more recently. The Board believes that Brighthouse Financial remains well positioned to weather the current environment and to continue executing its strategy and delivering on its mission. The Proxy Statement provides further detail about the Board’s areas of oversight.
Sustainability. The Board and its Committees also continue to oversee the progress of Brighthouse Financial’s sustainability program, focusing on Environmental, Social, and Governance (“ESG”) factors that are most significant to the Company. The Board and the Compensation and Human Capital Committee have focused on Brighthouse Financial’s human capital management practices, culture, and DE&I strategy (discussed in more detail below). I would also highlight our Committees’ oversight of climate risk, including the Finance and Risk Committee’s oversight of physical and transition risks and potential impacts on the Company’s risk profile, as well as the Investment Committee’s oversight of management’s development of an ESG Investment Policy, applicable to the Company’s general accounts. By the third quarter of 2022, Brighthouse Financial plans to publish its first corporate sustainability report, which will offer stakeholders a more comprehensive picture of Brighthouse Financial’s sustainability progress throughout 2021.
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| iv | Chairman’s Letter to Our Stockholders |
Diversity, Equity, and Inclusion. The Board remains proud and supportive of Brighthouse Financial’s activities to further advance DE&I across the Company. We continue to oversee the development and execution of Brighthouse Financial’s DE&I strategy, including its progress toward increasing representation of underrepresented populations across the Company, strengthening its inclusive culture, engaging diverse suppliers and vendors, supporting the communities we serve, and working with educational institutions and other organizations to help create more opportunities for individuals from underrepresented groups in our industry. We are proud of Brighthouse Financial for taking action in 2021 to help advance DE&I within our industry, joining forces with other leading financial services firms and industry resource groups to create the Coalition for Equity in Wholesaling, which aims to increase diversity among insurance wholesalers. More recent initiatives include Brighthouse Financial’s launch in January 2022 of a number of employee network groups, which are designed to offer opportunities for networking, development, learning, and allyship, as well as drive additional employee engagement. In recognition of the importance of DE&I to Brighthouse Financial, in 2021, the Compensation and Human Capital Committee began to incorporate into its assessment of our senior leaders’ performance their contributions to Brighthouse Financial’s DE&I strategy.
Stockholder Engagement. As a Board, we continue to engage with our stockholders as part of our robust and proactive stockholder engagement program. Our interactions provide invaluable opportunities for us to listen to, and consider the perspectives of, our stockholders. The Board carefully considers your feedback in our oversight of Brighthouse Financial. We have also been pleased by the increased stockholder engagement we have seen at our annual meetings since we transitioned to a virtual format in 2020 in response to the pandemic. This year, we will again hold our Annual Meeting in a virtual format. Holding our annual meetings virtually has allowed a greater number of stockholders to safely and conveniently attend the Annual Meeting, as well as to ask questions live or submit them in advance of the Annual Meeting.
Board Composition and Refreshment. Our Board believes that it is important that we routinely assess the Board’s composition to ensure we have the necessary mix of skills and experience to oversee the Company. We continue to recruit Directors whose skills and experience allow them to oversee Brighthouse Financial’s strategy and who add to the overall diversity of our Board. To that end, in November, we welcomed Carol Juel to the Board and appointed her to the Audit Committee and the Finance and Risk Committee. Carol brings an impressive combination of experience as a senior technology and operations executive as well as deep technology and financial services experience to our Board. We look forward to her perspective and expertise as we remain focused on overseeing Brighthouse Financial’s strategy to generate sustainable, long-term stockholder value.
Thank you again for your investment in Brighthouse Financial and your continued support. We look forward to your participation in our Annual Meeting. Your views are important to us, and we encourage you to read these proxy materials and to vote your shares “FOR” each proposal.
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Sincerely,
Chuck Chaplin Chairman of the Board Brighthouse Financial, Inc.
April 26, 2022 |
Brighthouse Financial | 2022 Proxy Statement
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| Contents | 1 |
Proxy Statement
The Board of Directors (the “Board” or the “Board of Directors”) of Brighthouse Financial, Inc. (“Brighthouse Financial” or the “Company”) is providing this Proxy Statement in connection with the Annual Meeting of Stockholders to be held on June 8, 2022, at 8:00 a.m., Eastern Time (the “Annual Meeting”) and at any adjournment or postponement thereof. Stockholders holding shares of common stock, par value $0.01 per share, of the Company (“Shares”) as of the close of business on April 11, 2022 (the “Record Date”) are entitled to vote at the Annual Meeting. Proxy materials or a Notice of Internet Availability were first made available, sent, or given to the Company’s stockholders on or about April 26, 2022.
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| 2 | Contents |
Brighthouse Financial | 2022 Proxy Statement
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| Proxy Summary | 3 |
This section summarizes important information contained in this Proxy Statement and in our 2021 Annual Report to Stockholders (the “2021 Annual Report”), but it does not contain all the information that you should consider when casting your vote. Please review the entire Proxy Statement and 2021 Annual Report carefully before voting.
| Proposal |
Board Recommendation |
Page | ||||||
| 1. Election of nine (9) Directors to serve a one-year term ending at the 2023 Annual Meeting of Stockholders |
FOR each of the Board’s nominees |
14 | ||||||
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| 2. Ratification of the appointment of Deloitte & Touche LLP as Brighthouse Financial’s independent registered public accounting firm for fiscal year 2022 |
FOR |
37 | ||||||
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| 3. Advisory vote to approve the compensation paid to Brighthouse Financial’s Named Executive Officers (the “Say-on-Pay” vote) |
FOR |
41 | ||||||
The Brighthouse Financial Story
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Who We Are Brighthouse Financial is one of the largest providers of annuities and life insurance in the United States.(1) Brighthouse Financial became an independent, publicly traded company in August 2017, following our separation (the “Separation”) from MetLife, Inc. (“MetLife”), and the listing of our common stock on The Nasdaq Stock Market LLC (“Nasdaq”). In 2019, we became a member of the Fortune® 500, which lists the top 500 U.S. companies by total revenue. | |
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Our Purpose We are on a mission to help people achieve financial security. We specialize in products that are designed to help people protect what they’ve earned and ensure it lasts. We are built on a foundation of experience and knowledge, which allows us to keep our promises and provide value to our distribution partners and the clients they serve. | |
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Our Strategy We believe our focused strategy will generate long-term stockholder value. Our strategy consists of the following core elements, which are fully aligned with our risk appetite and our approach to managing our business: • Offering a targeted set of annuity and life insurance solutions that are simpler, more transparent, and provide value to our distribution partners and the clients they serve. We aim to continue to shift our business mix profile over time, with the addition of more cash flow-generating and less capital-intensive business, along with the runoff of less profitable legacy business. • Selling our products through a diverse, well-established network of distribution partners, continuing to build strategic distribution relationships, and entering new channels as we expand our distribution footprint in the United States. • Effectively managing our expenses by adopting and maintaining an operating model designed to drive our statutory expense ratio down over time. | |
| (1) Ranked by 2020 admitted assets. Best’s Review®: Top 200 U.S. Life/Health Insurers. A.M. Best, 2021. | ||
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| 4 | Proxy Summary |
Board Oversight of Our Strategy. One of the Board’s most important duties is to oversee our strategy to grow the Company and deliver long-term value for our stockholders. The Board discusses key strategy topics with management throughout the year and devotes at least one entire meeting annually to a review of the Company’s strategy. In 2021, the Board and senior management engaged in constructive dialogue regarding our multiyear strategic and financial plan, including the following key topics:
| • | our product, sales, and marketing strategy and plans, as well as the competitive landscape in which we operate; |
| • | the impact of the COVID-19 pandemic on our business; |
| • | our human capital management strategy, including talent development and succession planning; |
| • | our sustainability program, including integration of Environmental, Social, and Governance (“ESG”) factors into our strategy; |
| • | strengthening our culture, including programs to advance Diversity, Equity, and Inclusion (“DE&I”); |
| • | our future state operations and technology platform; |
| • | our investment strategy, including the launch of our institutional spread margin business; |
| • | our financial and risk profile in various market scenarios; and |
| • | our financial plan, including capital return and other financial drivers and goals. |
2021 Highlights – Executing Our Strategy in a Challenging Year
Brighthouse Financial had a strong 2021, as we continued to execute our strategy and delivered solid results despite the challenges resulting from the COVID-19 pandemic. We remain focused on our mission and confident in our strategy, which we continue to believe will enable us to generate long-term value for our stockholders.
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Financial and Capital Strength
Prudent Financial Management – we continue to manage the Company using a multiyear, multiscenario framework to evaluate capital, liquidity, and subsidiary dividend plans.
Normalized Statutory Earnings – generating normalized statutory earnings remains a focus of our financial management strategy. Normalized statutory earnings is used by management to measure our insurance companies’ ability to pay future distributions and is reflective of whether our hedging program functions as intended. For the full year 2021, we had a normalized statutory loss(1) of $264 million, as strong core performance in the variable annuity (“VA”) business was more than offset by weaker results in non-VA business.
Capital Return – we repurchased approximately $499 million of our common stock in 2021, representing approximately 12% of Shares outstanding relative to year-end 2020. We also achieved our target of returning $1.5 billion to our stockholders by year-end 2021, and reduced Shares outstanding by 35% relative to the time we became an independent, public company in 2017.
Capital Management – we ended 2021 with holding company liquid assets of $1.6 billion. We continued to optimize statutory capital to further strengthen our balance sheet. During 2021, we opportunistically extended debt maturities and added permanent equity capital to our balance sheet. We have no debt maturities until 2027.
Statutory Capital – we ended 2021 with $9.5 billion of combined statutory total adjusted capital (an increase of approximately $900 million from year-end 2020) and with a combined Risk-Based Capital (“RBC”) ratio of approximately 500% (above our target of 400-450% in normal market conditions). RBC is a method of measuring an insurance company’s capital, taking into consideration its relative size and risk profile, to ensure compliance with minimum regulatory capital requirements.
Institutional Spread Margin Business – we launched our institutional spread margin business, which we expect will enhance and diversify our earnings profile over time.
Ratings – we maintained our operating companies’ strong financial strength ratings.
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| Proxy Summary | 5 |
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Products and Sales
Annuity Sales – we achieved annuity sales of approximately $9.15 billion, exceeding our 2021 target and an increase of approximately 1% over 2020.
Life Insurance Sales – our life insurance sales were approximately $111 million, exceeding our 2021 target and an increase of approximately 98% over 2020.
Expanded Distribution – we expanded our distribution network, including by adding new distribution partners to our existing channels and entering into new channels, such as the SIMON marketplace and the brokerage general agency (“BGA”) distribution channel. We also continued to enhance the way we support financial professionals and the clients they serve.
Product Enhancements – we rolled out enhancements to our Brighthouse Shield® Level Annuities and Brighthouse SmartCare® products. | |
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Expenses
Corporate Expenses – our run-rate corporate expenses were $890 million. While 2021 expenses were higher than target, we achieved almost 90% of our run-rate expense reduction target relative to our first year post-Separation while simultaneously making strategic investments to launch our institutional spread margin business and to fund future growth. Some of these investments allowed us to provide better support to our distributors and their financial professionals, as well as our policyholders and contract holders. | |
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Technology
Future State Platform – we made significant progress, including a major platform conversion, in our multiyear effort to implement our future state operations and technology platform, which is foundational to our ability to grow our sales in the future. | |
| (1) We use the term “normalized statutory loss” throughout this Proxy Statement to refer to negative normalized statutory earnings. | ||
Our Response to the COVID-19 Pandemic
Despite the significant challenges presented by the pandemic, we maintained the continuity of our operations to deliver strong results in 2021. At the start of the pandemic in 2020, we shifted all our employees to a remote-work environment, and we continue to allow for more flexible work schedules to help our employees manage personal responsibilities while working from home. Since the onset of the pandemic, we have taken, and continue to take, a number of other actions to help support the well-being of our employees, including increasing and enhancing our communications with employees to ensure that they continue to feel connected and informed. As the pandemic continues to evolve, we remain focused on ways to help our employees maintain wellness and avoid burnout. This spring, we plan to begin transitioning to a flexible, hybrid work model that allows our employees to choose whether they want to work fully remotely or use our offices.
Management, overseen by the Board and its Committees, continues to monitor direct and indirect risks related to the pandemic, including, among other things, risks to the economy at large, our financial condition, our operations, the operations of our vendors and service providers, claims activity, and our investment portfolio.
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| 6 | Proxy Summary |
Our Board of Directors: Composition, Qualifications, and Diversity
The fundamental duty of our Board is to oversee the management of Brighthouse Financial for the benefit of our stockholders. It is essential that the Board be composed of directors (“Directors”) who are qualified to oversee the development and execution of our business strategy by management. The Board seeks Directors who possess a broad range of skills, experience, and perspectives and who contribute to the gender and racial or ethnic diversity of our Board. The composition of our Board, as reflected in the table and chart below, is one way we demonstrate our commitment to these principles.
Board Composition Summary
| Name |
Age | Demographic Information |
Selected Skills and Qualifications |
Principal Professional Experience |
Independent | Committee Memberships | ||||||
| Irene Chang Britt Director since 2017 |
59 | • Female • Asian |
• Brand and Marketing • Corporate Governance • Public Company Board Experience • Human Capital/Compensation |
Senior Vice President, Campbell Soup Company, and President, Pepperidge Farm Inc. (Retired) | Yes | • Compensation and Human Capital • Investment • Nominating and Corporate Governance (Chair) | ||||||
| Chuck Chaplin Chairman of the Board Director since 2017 |
65 | • Male • Black/ |
• Executive Leadership • Financial Expertise • Insurance Industry • Risk Management |
President, Chief Financial Officer and Chief Administrative Officer, MBIA Inc. (Retired) | Yes | • Audit • Executive • Finance and Risk (Chair) | ||||||
| Steve Hooley Director since 2020 |
59 | • Male • White/ |
• Executive Leadership • Information Technology and Cybersecurity • Financial Services Industry • Public Company Board Experience |
Chairman, Chief Executive Officer and President of DST Systems (Retired) | Yes | • Audit • Investment | ||||||
| Carol Juel Director since 2021 |
49 | • Female • White/ |
• Information Technology and Cybersecurity • Financial Services Industry • Risk Management • Legal/Regulatory |
Executive Vice President, Chief Technology and Operating Officer, Synchrony Financial | Yes | • Audit • Finance and Risk | ||||||
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| Proxy Summary | 7 |
| Name |
Age | Demographic Information |
Selected Skills and Qualifications |
Principal Professional Experience |
Independent | Committee Memberships | ||||||
| Eileen Mallesch Director since 2018 |
66 | • Female • White/ |
• Financial Expertise • Insurance Industry • Public Company Board Experience • Investments |
Senior Vice President and Chief Financial Officer of the property and casualty business of Nationwide Mutual Insurance Company (Retired) | Yes | • Compensation and Human Capital • Investment (Chair) • Nominating and Corporate Governance | ||||||
| Diane Offereins Director since 2017 |
64 | • Female • White/ |
• Information Technology/Cybersecurity • Financial Services Industry • Human Capital/Compensation • Legal/Regulatory |
Executive Vice President and President – Payments Services, Discover Financial Services | Yes | • Compensation and Human Capital (Chair) • Finance and Risk • Nominating and Corporate Governance | ||||||
| Pat Shouvlin Director since 2017 |
71 | • Male • White/ |
• Accounting and Auditing • Insurance Industry • Investments • Risk Management |
Partner, PricewaterhouseCoopers LLP (Retired) | Yes | • Audit (Chair) • Executive • Investment | ||||||
| Eric Steigerwalt Director since 2016 |
60 | • Male • White/ |
• Deep knowledge of Brighthouse Financial’s business • Insurance Industry • Leadership • Corporate Strategy • Finance and Investments |
President and Chief Executive Officer, Brighthouse Financial, Inc. | No | • Executive (Chair) | ||||||
| Paul Wetzel Director since 2017 |
62 | • Male • White/ |
• Financial Services Industry • Corporate Strategy • Investment Banking • Legal/Regulatory |
Chairman of the Global Financial Institutions Group, Deutsche Bank Securities Inc. (Retired) | Yes | • Compensation and Human Capital • Finance and Risk • Nominating and Corporate Governance | ||||||
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| 8 | Proxy Summary |
Board Skills, Experience, and Diversity
Our Board is composed of Directors who possess a mix of skills and experience that we believe align with, and facilitate effective oversight of, Brighthouse Financial’s strategy and risks, including skills and experience related to the financial services and insurance industries; senior management; accounting; information technology and cybersecurity; brand and marketing; public company board service; risk management; investments; human capital and compensation; and legal and regulatory. The following charts present the number of currently serving Directors who possess substantive skills or experience in these areas and are based on each Director’s self-evaluation.
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| Proxy Summary | 9 |
Board Diversity
The Board believes that a diverse board is better able to effectively oversee the Company’s management and strategy and better positions Brighthouse Financial to deliver long-term value for our stockholders. Our Board recognizes that gender and racial or ethnic diversity add to the overall mix of perspectives of our Board as a whole. The following charts and table present the diversity profile of our currently serving Board.
| Board Diversity Matrix (as of April 26, 2022) | ||||||||
| Total Number of Directors |
9 | |||||||
| Female | Male | Non-Binary | Did Not Disclose Gender | |||||
| Part I: Gender Identity | ||||||||
| Directors |
4 | 5 | 0 | 0 | ||||
| Part II: Demographic Background | ||||||||
| African American or Black |
0 | 1 | 0 | 0 | ||||
| Alaskan Native or Native American |
0 | 0 | 0 | 0 | ||||
| Asian |
1 | 0 | 0 | 0 | ||||
| Hispanic or Latinx |
0 | 0 | 0 | 0 | ||||
| Native Hawaiian or Pacific Islander |
0 | 0 | 0 | 0 | ||||
| White |
3 | 4 | 0 | 0 | ||||
| Two or More Races or Ethnicities |
0 | 0 | 0 | 0 | ||||
| LGBTQ+ |
0 | |||||||
| Did Not Disclose Demographic Background |
0 | |||||||
Directors who are diverse with respect to gender, race, or ethnicity serve in a majority of our Board leadership positions. Chuck Chaplin, who is Black/African American, serves as:
| • | Chairman of the Board (the “Chairman”); and |
| • | Chair of the Finance and Risk Committee. |
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| 10 | Proxy Summary |
Women, including one who is Asian, serve as chairs of the following committees:
| • | Compensation and Human Capital Committee; |
| • | Investment Committee; and |
| • | Nominating and Corporate Governance Committee. |
Stockholder Engagement Highlights
In 2021-2022, we continued our robust stockholder engagement program. Our Chairman is available to engage with stockholders, and he has met with a number of stockholders in recent years. This year we reached out to 28 stockholders representing approximately 60% of our Shares (at that time) and met with seven stockholders representing approximately 31% of our Shares (at that time). Discussions during our engagements focused on our sustainability program, human capital management, DE&I, response to the COVID-19 pandemic, Board composition, governance practices, and executive compensation program. For additional information about our stockholder engagement program, see “Stockholder Engagement.”
Corporate Governance Highlights
Brighthouse Financial is committed to good governance practices that are intended to protect and promote the long-term value of the Company for our stockholders. The Board regularly reviews our governance profile to ensure that it reflects the evolving governance landscape and appropriately supports and serves the best interests of the Company and our stockholders.
| Independent Oversight |
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Independent Chairman of the Board | ||||
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Majority of our Board is independent (eight of nine Directors) | |||||
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All committees of the Board (other than the Executive Committee) (each a “Committee” and collectively, the “Committees”) are composed solely of Independent Directors (as defined below, see “Director Independence”) | |||||
| Board Effectiveness |
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Directors possess a deep and diverse set of skills and experience relevant to oversight of our business strategy | ||||
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Proactive assessment of Director skills and commitment to Director refreshment to ensure the Board continues to meet the Company’s evolving oversight needs | |||||
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Robust risk oversight framework to assess and manage risks | |||||
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Comprehensive annual self-assessment of the Board and Committees, including an action plan to implement Directors’ suggestions | |||||
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Commitment to Board diversity of perspective, gender, and race or ethnicity | |||||
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Regular executive sessions of the Independent Directors | |||||
| Responsiveness and Accountability |
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Robust stockholder engagement program, with the participation of our Chairman, to share our perspectives and solicit feedback | ||||
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Our majority voting policy for Director elections requires Director nominees who do not receive a majority of the votes cast to tender their resignation | |||||
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Development and regular review of succession plans for the Chief Executive Officer (the “CEO”) and other members of senior management | |||||
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Annual assessment of Committee charters and the Board’s Corporate Governance Principles | |||||
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Annual election of Directors | |||||
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We believe that sustainability is inherent in Brighthouse Financial’s mission to help people achieve financial security and that strengthening our approach to ESG integration across our organization and culture will better position us to deliver sustainable, long-term value for our stockholders and keep our promises to our consumers. To inform our sustainability strategy, the Company’s Chief Sustainability Officer and members of the Office of Sustainability conduct ongoing stakeholder engagement, enabling the Board and management to consider the expectations and interests of various stakeholders, including stockholders, employees, community partners, policymakers, and our distribution partners and their clients. In 2021, the Office of Sustainability used feedback from its engagement to complete a thorough assessment of the sustainability and ESG factors that have the most significant impact on our Company and our business. The results of this assessment were used to guide our first comprehensive disclosure of our sustainability practices, which is available at www.brighthousefinancial.com/about-us/corporate-responsibility. We are currently working to build on this progress and enhance our disclosures in Brighthouse Financial’s inaugural corporate sustainability report, which we plan to publish by the third quarter of 2022. The corporate sustainability report will include data that is aligned with the Sustainability Accounting Standards Board (“SASB”) and Taskforce for Climate-related Financial Disclosure (“TCFD”) frameworks. Our Chief Sustainability Officer reports regularly to the Board and to the Nominating and Corporate Governance Committee on our sustainability program, including our development of a comprehensive sustainability strategy, assessment and management of ESG factors, and our disclosure plans.
Board and Committee Oversight. The Board has delegated to the Nominating and Corporate Governance Committee broad oversight of our sustainability program, including activities related to environmental stewardship and corporate social responsibility. Our other Committees also oversee aspects of Brighthouse Financial’s sustainability program, as follows:
| • | Compensation and Human Capital Committee – oversees Brighthouse Financial’s human capital matters, including pay equity, DE&I, leadership development, culture, and succession planning for the CEO and other executives. |
| • | Audit Committee – oversees Brighthouse Financial’s regulatory compliance and cybersecurity program. |
| • | Finance and Risk Committee – oversees Brighthouse Financial’s enterprise risk program, including climate risk and its related impacts on the Company’s risk profile. |
| • | Investment Committee – oversees Brighthouse Financial’s investment portfolio, including assessment of our exposures to ESG risk and consideration of ESG factors in our asset management program. |
The full Board continues to be engaged on certain ESG issues, including the Company’s culture; human capital management; vendor and supplier diversity; and the Company’s ESG and DE&I initiatives in our communities and educational institutions.
Incorporation of DE&I Factors into Our Executive Compensation Program. In recognition of the importance of DE&I to the Company’s strategy and ability to deliver sustainable growth, beginning in 2021 the Compensation and Human Capital Committee considered the achievements of each Named Executive Officer (“NEO”) with respect to DE&I as part of its assessment of each NEO’s individual performance and approval of their short-term incentive (“STI”) awards. For more information, see the “Compensation Discussion and Analysis.”
Executive Compensation Program Overview
Executive Compensation Philosophy
The Compensation and Human Capital Committee has established an executive compensation program rooted in a pay-for-performance philosophy and guided by the following general principles and objectives:
| • | Paying for performance: the majority of executive compensation is in the form of variable elements based on individual performance and Company performance results that drive increases in stockholder value; |
| • | Providing competitive Target Total Direct Compensation (“Target TDC”) opportunities (defined as base salary plus STI and long-term incentive (“LTI”) compensation opportunities): we aim to offer compensation that enables |
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| Brighthouse Financial to attract, motivate, and retain high-performing executives; |
| • | Aligning executives’ interests with stockholders’ interests: a majority of our CEO’s Target TDC and a significant portion of our other NEOs’ Target TDC is delivered in the form of stock-based incentives; |
| • | Encouraging long-term decision-making: our long-term incentive compensation program includes awards with multiyear, overlapping performance or restriction periods; |
| • | Avoiding problematic pay practices: we do not provide excessive perquisites, excessive change-of-control severance pay, or excise tax gross-ups, and we will not reprice stock options without stockholder approval; and |
| • | Reinforcing strong risk management: our compensation program is designed to avoid providing our executives with incentives to take excessive risks. |
2021 Executive Compensation Program
The Compensation and Human Capital Committee considered stockholder feedback and the result of our 2020 Say-on-Pay vote in designing our 2021 executive compensation program. Our program is guided by our pay-for-performance philosophy and aligns our NEOs’ compensation opportunities with achievement of the Company’s short- and long-term business goals, as approved by the Board as part of its annual review of Brighthouse Financial’s strategy. Our 2021 executive compensation program remained largely consistent with our 2020 program. Changes to the program are described in the “Compensation Discussion and Analysis.”
Key Components of Our 2021 Executive Compensation Program
| Base Salary | • Fixed compensation for service during the year. | |||
| Short-Term Incentive Awards | • Annual cash award based on Company and individual performance.
• Performance metrics measure our achievement of three strategically important corporate goals for the 2021 performance period (weighting):
• Expense Target (40%) – aligns with our strategic goal of adopting and maintaining an operating model that reduces our run-rate expenses.
• Sales (40%) – key driver of growth and franchise stability.
• Normalized Statutory Earnings (20%) – important indicator of financial strength that is used by management to measure our insurance companies’ ability to pay future distributions and is reflective of whether our hedging program functions as intended.
• DE&I achievements are factored into individual qualitative performance assessments. | |||
| Long-Term Incentive Awards | • LTI vehicle mix is weighted more toward performance-based compensation – 70% Performance Share Units (“PSUs”) and 30% Restricted Stock Units (“RSUs”) for the CEO; 60% PSUs and 40% RSUs for our other NEOs.
• PSU metrics measure our achievement of two strategic goals over the 2022-2024 performance period (weighting):
• Statutory Expense Ratio (60%) – measures both expense management and sales growth, two of our key strategic drivers.
• Net Cash Flow to the Holding Company (40%) – net capital distributions from Brighthouse Financial’s operating companies, which strengthens our holding company balance sheet and provides management with flexibility to deploy our capital for various purposes, including return of capital to stockholders. | |||
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Executive Compensation Practices
We are committed to building a compensation program with strong governance features that reflect best practices in the market and are responsive to stockholder feedback. The table below provides a summary of our executive compensation governance practices.
| What We Do |
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Pay-for-Performance. A substantial portion of our NEOs’ Target TDC is in the form of variable, at-risk elements that reward our executives only if we achieve performance goals that we believe are linked to long-term value creation. | ||||
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Stock Ownership Guidelines. We have established stock ownership and retention guidelines that require our NEOs to maintain significant stock ownership, thereby aligning their interests with those of our stockholders. | |||||
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Clawback Policy. We adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct. | |||||
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Minimum Vesting Periods. Equity awards that are subject to achievement of performance goals or that vest based solely on continued service generally have three-year vesting periods (the latter at a rate not greater than one-third per year). | |||||
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Stockholder Engagement. We actively engage with our stockholders on various topics, including our executive compensation program. We recognize the importance of our stockholders’ perspectives in the compensation-setting process and consider their feedback in the design of our compensation program. | |||||
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Independent Compensation Consultant. Our Compensation and Human Capital Committee has retained Semler Brossy Consulting Group (“SBCG”) as its independent compensation consultant to advise it on our executive compensation program. | |||||
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Double-Trigger Vesting of Equity Awards Upon a Change of Control. Outstanding awards that are substituted or assumed in a change of control only vest if the NEO is terminated or resigns with good reason.
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| What We Don’t Do |
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Gross-ups on Excise Taxes. We do not provide tax gross-up benefits in connection with payments upon a change of control. | ||||
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Reprice Stock Options. Our equity incentive plans prohibit us from repricing stock options or stock appreciation rights without stockholder approval. | |||||
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Excessive Perquisites. We provide limited perquisites to our executive officers. | |||||
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Hedging and Pledging. Our insider trading policy prohibits all employees and Directors from engaging in hedging or pledging transactions in Brighthouse Financial securities. | |||||
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Election of nine (9) Directors to serve a one-year term ending at the 2023 Annual Meeting of Stockholders
Our Board has been carefully and thoughtfully built with a diverse mix of individuals who possess the necessary skills and experience to effectively oversee our business. The Board has nominated the following nine currently serving Directors for election at the Annual Meeting: Irene Chang Britt; C. Edward Chaplin; Stephen C. Hooley; Carol D. Juel; Eileen A. Mallesch; Diane E. Offereins; Patrick J. Shouvlin; Eric T. Steigerwalt; and Paul M. Wetzel.
Biographical information for each nominee, including a description of each Director’s skills and qualifications, follows this proposal. For information about our policies and practices related to our Board, see “Board and Corporate Governance Practices.” All nominees serving at the time of our 2021 annual meeting of stockholders attended that meeting.
If elected, all nominees will serve one-year terms that expire at the next annual meeting of stockholders. Unless otherwise instructed, the proxyholders will vote proxies “FOR” the nominees of the Board. Each nominee has consented to being named in this Proxy Statement and agreed to serve if elected. The Board has no reason to believe that any of its nominees will be unable or unwilling to serve if elected. However, if any of the Board’s nominees is unable to serve as Director at any point prior to the Annual Meeting or any adjournment or postponement thereof, the Board may reduce the size of the Board or nominate another candidate for election. If the Board nominates a new candidate, unless otherwise provided, the form of proxy attached to this Proxy Statement permits the proxyholders to use their discretion to vote for that candidate.
The Board recommends that you vote “FOR” the election of each of the Director nominees.
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Nominees for Election as Directors for Terms Expiring in 2023
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Age: 59 Director since: 2017 Committees: • Compensation and Human Capital • Investment • Nominating and Corporate Governance (Chair) |
Irene Chang Britt
Independent Director
Skills and Qualifications Ms. Chang Britt is qualified to serve on our Board on the basis of her brand and marketing expertise, corporate governance expertise, and her experience leading multibillion-dollar divisions of Fortune 500 companies.
Career Highlights • Campbell Soup Company, a food and beverage company (2005 – 2015) • President, Pepperidge Farm Inc. and Senior Vice President, Global Baking and Snacking (2012 – 2015) • Global Chief Strategy Officer (2010 – 2012) • President, North America Foodservice; General Manager, Sauces and Beverages; and other senior positions in multiple brand divisions (2005 – 2010) • Kraft Foods and Kraft/Nabisco, a food and beverage company (1999 – 2005) • Kimberly-Clark, a consumer products company (1986 – 1999)
Other Public Company Directorships • Transformational CPG Acquisition Corp., a blank check company (2021 – present) • Victoria’s Secret & Co., a specialty retail company (2021 – present)
Past Public Company Directorships • Dunkin’ Brands Group, Inc. (2014 – 2020) • Tailored Brands, Inc. (2015 – 2020) • TerraVia Holdings, Inc. (2016 – 2018) (non-executive chairperson from 2017)
Other Experience and Service • National Association of Corporate Directors, (“NACD”) Board Leadership Fellow • Peloton Capital Management, Limited Partner and member of the Advisory Board • MikMak, Member, Board of Directors (2021 – present) • Center for Higher Ambition Leadership, Member, Board of Directors (2021 – present) • W.O.M.E.N. in America, Member, Board of Directors (2022 – present)
Education • BA, University of Toronto • MBA, Ivey Business School – Western University, University of Western Ontario |
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Age: 65 Director since: 2017 Committees: • Audit • Executive • Finance and Risk (Chair) |
C. Edward (“Chuck”) Chaplin
Chairman of the Board Independent Director
Skills and Qualifications Mr. Chaplin is qualified to serve on our Board on the basis of his leadership skills, financial expertise, and deep experience in the insurance industry.
Career Highlights • MBIA, Inc., a provider of financial guarantee insurance (2006 – 2017) • President, Chief Financial Officer, and Chief Administrative Officer (2008 – 2016) • Vice President and Chief Financial Officer (2006 – 2008) • Prudential Financial, Inc., a global insurance and financial services firm (1983 – 2006) • Positions of increasing responsibility, culminating with Senior Vice President and Treasurer
Other Public Company Directorships • MGIC Investment Corp. (2014 – present)
Past Public Company Directorships None
Other Experience and Service • Rutgers University Foundation, Vice Chair, Board of Directors • Executive Leadership Council, Member
Education • BA, Rutgers College • Master of City and Regional Planning, Harvard University |
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Age: 59 Director since: 2020 Committees: • Audit • Investment |
Stephen C. (“Steve”) Hooley
Independent Director
Skills and Qualifications Mr. Hooley is qualified to serve on our Board on the basis of his experience as a chief executive officer, expertise in technology and financial services, and public company board experience.
Career Highlights • DST Systems, Inc., a provider of information processing software and services (2009 – 2018) • Chairman, Chief Executive Officer and President (2014 – 2018) • President and Chief Executive Officer (2012 – 2014) • President, Chief Operating Officer (2009 – 2012) • State Street Corporation, a financial services company (1992 – 2009) • Various leadership positions, culminating as Chief Executive Officer and President, Boston Financial Data Services Corporation, a financial services company which was a joint venture between State Street Corporation and DST Systems (2004 – 2009)
Other Public Company Directorships • Q2 Holdings, Inc. (2020 – present) • Stericycle Inc. (2019 – present)
Past Public Company Directorships • Legg Mason Inc. (2019 – 2020) • DST Systems, Inc. (2012 – 2018)
Education • BS, Mechanical Engineering, Worcester Polytechnic Institute, USA |
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Age: 49 Director since: 2021 Committees: • Audit • Finance and Risk |
Carol D. Juel
Independent Director
Skills and Qualifications Ms. Juel is qualified to serve on our Board on the basis of her experience as a senior technology and operations executive with deep technology and financial services experience.
Career Highlights • Synchrony Financial, a financial services company (2014 – present) • Executive Vice President, Chief Technology and Operating Officer (2021 – present) • Executive Vice President, Chief Information Officer (2014 – 2021) • General Electric Company, a multinational conglomerate (2004 – 2014) • Chief Information Officer, GE Capital Retail Finance (2011 – 2014) • Vice President, Information Technology, GE Money (2004 – 2011) • Accenture, a professional services and consulting company (1995 – 2004) • Senior Manager, Financial Services
Other Public Company Directorships None
Past Public Company Directorships None
Other Experience and Service • Girls Who Code, Member, Board of Directors
Education • BA, College of the Holy Cross |
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Age: 66 Director since: 2018 Committees: • Compensation and Human Capital • Investment (Chair) • Nominating and Corporate Governance |
Eileen A. Mallesch
Independent Director
Skills and Qualifications Ms. Mallesch is qualified to serve on our Board on the basis of her financial expertise, experience in the insurance industry, and public company board experience.
Career Highlights • Nationwide Mutual Insurance Company, a U.S. insurance and financial services company (2005 – 2009) • Senior Vice President and Chief Financial Officer of property and casualty insurance business • General Electric, a multinational conglomerate (1998 – 2005) • Senior Vice President and Chief Financial Officer of Genworth Financial Life Insurance Company (2003 – 2005) • Vice President and Chief Financial Officer of GE Financial Employer Services Group (2000 – 2003) • Controller, GE Americom (1998 – 2000) • Asea Brown Boveri, Inc., a multinational power and automation technologies company (1993 – 1998) • International Business Area Controller, Energy Ventures • PepsiCo, Inc., a multinational food and beverage company (1988 – 1993) • Arthur Andersen, a professional services firm (1985 – 1988)
Other Public Company Directorships • Arch Capital Group Ltd. (2021 – present) • Fifth Third Bancorp (2016 – present)
Past Public Company Directorships • State Auto Financial Corporation (2010 – 2021) • Libbey Inc. (2016 – 2020) • Bob Evans Farms, Inc. (2008 – 2018)
Other Experience and Service • Certified Public Accountant (“CPA”) • American Institute of Certified Public Accounts (“AICPA”), Member
Education • BS, Accounting, City University of New York (CUNY) |
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Age: 64 Director since: 2017 Committees: • Compensation and Human Capital (Chair) • Finance and Risk • Nominating and Corporate Governance |
Diane E. Offereins
Independent Director
Skills and Qualifications Ms. Offereins is qualified to serve on our Board on the basis of her financial services industry experience and her information technology and cybersecurity expertise.
Career Highlights • Discover Financial Services, a direct banking and payment services company (1998 –present) • Executive Vice President and President, Payment Services (2010 – present) • Executive Vice President, Payment Services (2008 – 2010) • Executive Vice President and Chief Technology Officer (1998 – 2008)
Other Public Company Directorships None
Past Public Company Directorships • West Corporation (2015 – 2017)
Other Experience and Service • The Chicago Network, Former Chair • Children’s Home + Aid, Member, Board of Trustees
Education • BBA, Loyola University, New Orleans |
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Age: 71 Director since: 2017 Committees: • Audit (Chair) • Executive • Investment |
Patrick J. (“Pat”) Shouvlin
Independent Director
Skills and Qualifications Mr. Shouvlin is qualified to serve on our Board on the basis of his extensive accounting and auditing experience, as well as his knowledge of the insurance industry.
Career Highlights • PricewaterhouseCoopers LLP (“PwC”), an accounting and professional services firm (1977 – 2012) • Global Engagement Partner for large, global insurance and financial services companies • U.S. Board of Partners, Finance Committee Chair (2005 – 2011) • Member of Governance Committee (2005 – 2011) • U.S. Insurance Group leader (1996 – 2003)
Other Public Company Directorships None
Past Public Company Directorships None
Other Experience and Service • Certified Public Accountant (“CPA”), retired • American Institute of Certified Public Accountants (“AICPA”), Member • L&F Holdings Limited and L&F Indemnity Limited (PwC’s global captive reinsurance companies) (2015 – present) • Member, Investment Advisory Committee (2019 – present) • Chairman, Board of Directors; Chair, Governance, Nominations and Remuneration Committee; and Member, Investment Advisory Committee (2015 – 2019) • Cunningham Lindsey, Member, Board of Directors and Chair, Audit Committee (2013 – 2018)
Education • BA, History, Denison University • MBA, Accounting and Finance, Wharton School of the University of Pennsylvania |
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Age: 60 Director since: 2016 Committees: • Executive (Chair) |
Eric T. Steigerwalt
President and Chief Executive Officer
Skills and Qualifications Mr. Steigerwalt is qualified to serve on our Board on the basis of his deep knowledge of our business, extensive experience in the insurance industry, leadership skills, and broad knowledge of corporate strategy, finance, and investments.
Career Highlights • Brighthouse Financial, Inc. (2016 – present) • President and Chief Executive Officer • MetLife, Inc., a global insurance and financial services company (1998 – 2017) • Executive Vice President, U.S. Retail (2012 – 2017) • Executive Vice President and Interim Chief Financial Officer (2011 – 2012) • Executive Vice President, Chief Financial Officer of U.S. Business (2010 – 2011) • Senior Vice President and Chief Financial Officer of U.S. Business (2009 – 2010) • Senior Vice President and Treasurer (2007 – 2009) • Senior Vice President and Chief Financial Officer of Individual Business (2003 – 2007) • Vice President, Financial Management (1998 – 2003) • AXA S.A., a financial services and insurance company (1993 – 1998)
Other Public Company Directorships None
Past Public Company Directorships None
Other Experience and Service • American Council of Life Insurers (2018 – 2021) • Member, Board of Directors • Member, Consumer and Tax Steering Committees • Wells Fargo Championship, Member, Board of Directors (2017 – present)
Education • BA, Drew University |
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Age: 62 Director since: 2017 Committees: • Compensation and Human Capital • Finance and Risk • Nominating and Corporate Governance |
Paul M. Wetzel
Independent Director
Skills and Qualifications Mr. Wetzel is qualified to serve on our Board on the basis of his extensive experience advising financial services firms and knowledge of investment banking and corporate strategy.
Career Highlights • Deutsche Bank Securities Inc., a subsidiary of global investment bank and financial services firm Deutsche Bank AG (“Deutsche Bank”) (2009 – 2016) • Chairman, Global Financial Institutions Group (2013 – 2016) • Head of the Japan Investment Banking Coverage and Advisory Group (2011 – 2013) • Other positions of increasing responsibility at Deutsche Bank or its subsidiaries • Merrill Lynch & Co., Inc., a global investment bank and financial services firm (1992 –2009) • Positions of increasing responsibility in investment banking with a focus on financial institutions
Other Public Company Directorships None
Past Public Company Directorships None
Other Experience and Service • Eleven Canterbury, Consultant (2021 – present) • Rockefeller Capital Management, Consultant (2018 – present) • National Association of Corporate Directors (“NACD”), Board Leadership Fellow
Education • BS, Business Administration, State University of New York at Buffalo • MBA, Finance and Accounting, University of Chicago Graduate School of Business |
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| 24 | Board and Corporate Governance Practices — Investor Stewardship Group Principles |
Board and Corporate Governance Practices
We believe effective corporate governance policies and practices will help Brighthouse Financial deliver sustainable, long-term value for our stockholders.
These policies and practices are contained in our governance documents, including our Amended and Restated Certificate of Incorporation (the “Charter”), Amended and Restated Bylaws (the “Bylaws”), Corporate Governance Principles, and Committee charters. This section describes the key features of our Board practices and corporate governance program. The Board believes a balanced governance profile will help the Company deliver sustainable long-term value for our stockholders. The Board continually assesses our governance profile to ensure that it remains appropriate as we continue to evolve over time.
Investor Stewardship Group Principles
Brighthouse Financial’s practices align with the Investor Stewardship Group’s (“ISG”) corporate governance framework for U.S.-listed companies, as described below.
| ISG Principle |
Brighthouse Financial Practice | |
| Principle 1: Boards are accountable to shareholders |
• All Directors are elected annually for one-year terms. • Our majority voting policy for Director elections requires Director nominees who do not receive a majority of the votes cast to tender their resignation. • The Company has not adopted a shareholder rights plan (“poison pill”). • The Chairman’s letter to stockholders provides our stockholders with insight into Board strategy and oversight objectives. | |
| Principle 2: Shareholders should be entitled to voting rights in proportion to their economic interest |
• We have one class of common stock, and all stockholders have one vote per Share. | |
| Principle 3: Boards should be responsive to shareholders and be proactive in order to understand their perspectives |
• Management and the Chairman invited stockholders representing approximately 60% of our Shares (at that time) to engage with us, meeting with stockholders representing 31% of our Shares (at that time) (see “Stockholder Engagement”). • Engagement topics included Brighthouse Financial’s strategy, sustainability program, human capital management, DE&I, response to the COVID-19 pandemic, Board composition, governance practices, and executive compensation program. • The Board considers stockholder feedback as part of its annual review of our governance and executive compensation policies and practices. | |
| Principle 4: Boards should have a strong, independent leadership structure |
• Our Board is led by an independent Chairman, with robust and clearly defined duties and responsibilities (see “Board Leadership Structure”). • All Committees (other than the Executive Committee) are chaired by Independent Directors. • The Board evaluates and considers the appropriateness of its leadership structure as Brighthouse Financial evolves over time. | |
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| ISG Principle |
Brighthouse Financial Practice | |
| Principle 5: Boards should adopt structures and practices that enhance their effectiveness |
• Directors possess a deep and diverse set of skills and experience relevant to oversight of our strategy. • Eight of our nine currently serving Directors (all except our President and CEO) are independent. • Five of our eight currently serving Independent Directors are diverse, including four women and two Directors who are racially or ethnically diverse (one of whom is also a woman). • All Committees have written charters that set forth robust and clearly defined oversight responsibilities, and all (except for the Executive Committee) are composed solely of Independent Directors. • Our Board overboarding policy helps ensure that all Directors are able to commit the time necessary to meet their duties and responsibilities (see “– Building Our Board of Directors – Director Criteria and Nomination Process – Other Directorships”). • Proactive assessment of Director skills, mandatory retirement policy, and a commitment to Director refreshment to ensure that the Board meets the Company’s evolving oversight needs. • The Board conducts an annual self-assessment process that considers the effectiveness of the Board (collectively), each Committee, and each individual Director. • In 2021, each Director attended at least 75% of the meetings of the Board and the Committees on which he or she served.
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| Principle 6: Boards should develop management incentive structures that are aligned with the long-term strategy of the company |
• Our Say-on-Pay proposal received approximately 94% stockholder support in 2021. • The Compensation and Human Capital Committee annually reviews and approves our incentive program design, goals, and objectives for alignment with compensation and business strategies. • Our incentive compensation performance metrics are directly tied to, and derived from, our financial plan. • Our compensation program is rooted in a pay-for-performance philosophy that incentivizes and rewards our management for achievement of performance metrics that are aligned with key strategic goals (see “Compensation Discussion and Analysis”). • Short- and long-term incentive programs are designed to reward financial and operational performance that supports our strategic objectives. | |
Building Our Board of Directors
Our stockholders rely on the Board to oversee Brighthouse Financial on their behalf. The Board has adopted the following key policies and practices to guide it in building a skilled and well-qualified body that we believe is able to effectively fulfill its duties and responsibilities to our stockholders.
Director Criteria and Nomination Process
| • | Board Membership Criteria – The Nominating and Corporate Governance Committee leads the search for, and recommends, candidates to serve on the Board based on their business and professional experience, judgment, diversity, age, skills, and background. All candidates must possess high integrity and be able to meet the demands of serving on our Board. |
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| • | Director Qualifications – In seeking qualified director candidates, the Nominating and Corporate Governance Committee, in consultation with the Chairman, the CEO, and the other members of the Board, seeks individuals who possess the skills, experience, and background appropriate for overseeing the development and execution of Brighthouse Financial’s business strategies. The Board has identified the following qualifications, among others, in considering director candidates: financial services or insurance industry experience; senior management leadership experience; accounting and financial literacy; information technology and cybersecurity expertise; brand management and marketing experience; public company board experience; risk management expertise, including in the areas of market, liquidity, and cybersecurity risk; investments expertise, including oversight of strategic asset allocation and portfolio construction; experience in human capital management and compensation; legal and regulatory expertise; commitment to Brighthouse Financial’s values; and diversity, including gender and racial or ethnic diversity. |
| • | Director Independence – At least a majority of the Board must be Directors who satisfy applicable independence standards. To determine independence, the Nominating and Corporate Governance Committee and the Board consider independence requirements under Nasdaq listing rules, applicable rules promulgated by the U.S. Securities and Exchange Commission (“SEC”), as well as other factors that contribute to effective oversight and decision-making by the Board. |
| • | Other Directorships – Directors must confirm the absence of, or disclose, any material actual or potential conflict of interest and receive the consent of the Chair of the Nominating and Corporate Governance Committee before accepting an invitation to serve on the board or committee of another public company. Directors are also required to inform the Chair of the Nominating and Corporate Governance Committee before joining the board of a private, non-profit, or other type of organization. To ensure that Directors have requisite time to devote sufficient attention to their duties and responsibilities, the Board believes that: (1) Directors should not serve on more than three other public company boards; (2) Independent Directors who serve as chief executive officer of another public company and also serve on that company’s board of directors should not serve on any additional public company board other than our Board; and (3) Directors who serve on more than three public company audit committees should not serve on our Audit Committee if their ability to effectively serve on our Audit Committee is impaired, as determined by the Chair of the Nominating and Corporate Governance Committee and the Board. |
| • | Director Nomination Process – Nominations for election as a Director at our annual meetings may be made by our Board in the Company’s notice of meeting or any supplement thereto, or by a stockholder or stockholders in compliance with the stockholder nomination requirements set forth in our Bylaws. Our Board nominates Director nominees upon the recommendation of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee and the Board may identify potential nominees through a variety of means, including recommendations and referrals from current Directors, management, and stockholders. The Nominating and Corporate Governance Committee also uses professional search firms to help identify and assess potential nominees. In recommending candidates for nomination by the Board, the Nominating and Corporate Governance Committee takes into consideration the candidate’s skills and qualifications, the Nasdaq listing requirements, the ability of candidates to enhance the diversity of our Board as a whole, and any other criteria the Board may establish from time to time. The Nominating and Governance Committee will consider candidates recommended by stockholders, and our stockholders may bring Director nominations before an annual meeting of our stockholders by following the procedures described in our Bylaws. For more information on how and when to submit a nomination for future annual meetings, see “Other stockholder proposals and director nominations.” |
Board Composition, Refreshment, and Ongoing Education
| • | Board Diversity – The Board believes a diverse board is better able to effectively oversee the Company’s management and strategy and better position Brighthouse Financial to deliver long-term value for our stockholders. The Board seeks Directors who possess a broad range of skills, experience, and perspectives, and who contribute to the gender and racial or ethnic diversity of our Board. While the Company does not have a formal Board diversity policy, our Corporate Governance Principles place an emphasis on diversity. The Nominating and Corporate Governance Committee and the Board consider diversity when recruiting and nominating directors for election and |
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| when assessing the effectiveness of the Board. We believe the current composition of the Board reflects those efforts and the importance of diversity to the Board. |
| • | Board Refreshment – The Board recognizes it must refresh its composition to address Brighthouse Financial’s oversight needs as the Company evolves over time. The Nominating and Corporate Governance Committee and Board annually review the skills and experience the Board needs to best oversee Brighthouse Financial’s strategy. The Nominating and Corporate Governance Committee leads a Director self-evaluation process in which each Director ranks his or her expertise and experience in a number of key skill areas that are relevant to service on our Board. The Nominating and Corporate Governance Committee considers the Directors’ self-evaluations in analyzing the aggregate representation of skills on the Board. We added two new Directors in 2018, one new Director in 2020, and one new Director in 2021. In accordance with our mandatory retirement policy, one Director retired from the Board as of the 2020 annual meeting. |
| • | Assessing the Board’s Performance – The Board views its annual self-assessment as an important tool for candid evaluation of its composition, performance, and proper functioning, as well as an important component of our Board refreshment strategy. The Nominating and Corporate Governance Committee oversees the assessment process, including the topics and areas to be addressed during the assessment. For 2021, each Director completed assessments of the Board’s and each Committee’s effectiveness, including with respect to Board and Committee composition; the quality of meeting materials and discussions during Board and Committee meetings; appropriateness of meeting agenda topics; the Board’s performance in the COVID-19 pandemic; and interactions with management. Each Director also provided feedback on the other Directors. The Nominating and Corporate Governance Committee reviewed and reported the results of the assessments to the full Board and to management. The Board continues to address any issues and implement constructive suggestions raised in the self-assessments to further enhance its effectiveness. |
| • | Mandatory Retirement Age – Our Corporate Governance Principles state that Directors may not stand for reelection or be appointed to the Board after reaching the age of 72. The Board may approve exceptions to this policy. We have not adopted term limits for our Directors. |
| • | Director Orientation and Continuing Education – The Board views orientation and continuing education as vital tools for building an effective Board. We provide all new Directors with an orientation program when they join the Board. The orientation consists of presentations by our senior management to familiarize the Directors with our business, operations, financial condition, risk management, and governance, as well as Directors’ legal duties and requirements. We also encourage, and will provide funding for, both new and longer-serving Directors to attend continuing education programs delivered by third parties to develop and enhance their skills and knowledge. We also incorporate continuing education into our regular Board and Committee meetings from time to time. |
| • | Attendance at Meetings – Directors are expected to regularly attend meetings of the Board and the Committees of which they are members, and to spend the time needed outside of meetings to keep themselves informed about Brighthouse Financial’s business and operations. In 2021, the Board held six meetings and the Committees held a total of 35 meetings. Each Director attended at least 75% of the meetings of the Board and the Committees on which he or she served. |
The Board has determined that having an independent Chairman leading the Board is the best board leadership structure for Brighthouse Financial at this time. This structure enhances the Board’s ability to exercise independent oversight of Brighthouse Financial’s management on behalf of its stockholders. Separating the roles of the Chairman and the CEO allows each to focus on their respective duties.
The Board has elected Mr. Chaplin to serve as Chairman on the basis of his independence from management; experience as president, chief financial officer, and chief administrative officer of a major financial services company; experience as a director of a public company; leadership skills; and ability to devote the time and effort to effectively oversee Brighthouse Financial.
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| 28 | Board and Corporate Governance Practices — Director Independence; Executive Sessions |
Mr. Steigerwalt, Brighthouse Financial’s President and CEO, also serves as a Director. Mr. Steigerwalt works closely with the Chairman to help focus the Board on matters of strategic importance for Brighthouse Financial.
The Board believes it is important to retain its flexibility to allocate the responsibilities of the Chairman and will continue to evaluate the best leadership structure for Brighthouse Financial as it evolves.
Our Chairman’s duties and responsibilities focus on promoting sound corporate governance practices, fostering a culture of effective oversight on behalf of our stockholders, and overseeing management’s development and execution of the Company’s business strategies. These duties include:
| • | providing thought leadership for the Board through understanding the views of our Directors, stockholders, and management; |
| • | representing the Board in engagements with our stockholders; |
| • | setting the agenda for Board meetings with input from the CEO; |
| • | presiding over Board meetings and executive sessions of the Independent Directors; |
| • | promoting effective communication and serving as the primary conduit among the Board as well as the CEO and other members of management; |
| • | setting the tone of Board discussions to promote a Board culture of the highest level of integrity, active engagement, open communication, constructive debate, and effective decision making; |
| • | establishing a close relationship of trust with the CEO by providing support and advice while respecting the executive responsibility of the CEO; |
| • | consulting with the Compensation and Human Capital Committee in its oversight of CEO and management succession planning; and |
| • | together with the Chair of the Nominating and Corporate Governance Committee, reviewing Committee and Committee chair assignments, leading recruitment of Director candidates, and overseeing annual evaluations for the Board and its Committees. |
Our Board annually considers whether our Directors are independent in accordance with applicable Nasdaq and SEC rules. An “Independent Director” is a Director whom the Board has affirmatively determined (i) is independent of management and free from any material relationship with the Company and its subsidiaries (either directly or as a partner, stockholder, or officer of an organization that has a relationship with the Company or its subsidiaries) that would interfere with the exercise of the Director’s independent judgment as a member of the Board and (ii) meets the independence standards for directors set forth in the Nasdaq listing standards and applicable SEC rules. Our Board has determined that all our Directors, except for Mr. Steigerwalt, our President and CEO, are Independent Directors. In making this determination, the Board considers relevant information provided by the Directors about their and their family members’ business and professional relationships with Brighthouse Financial and with entities that have business interactions with Brighthouse Financial.
As part of our Board meetings, the Independent Directors meet regularly (and at least twice annually) in executive session without management present. The Chairman presides over these executive sessions. In addition, each Committee typically holds an executive session as part of its regular meeting, which is presided over by the Committee Chair.
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| Board and Corporate Governance Practices — Stockholder Engagement | 29 |
Management has worked with our Board, and our Nominating and Corporate Governance Committee in particular, to develop a robust and proactive stockholder engagement program. Our Chairman is available to engage with stockholders and has met with several stockholders in recent years. In our engagements, we aim to foster constructive dialogue in which we communicate the perspectives of management and the Board on the issues that are important to our stockholders and solicit our stockholders’ insights and feedback, which the Board considers in developing our governance and compensation practices. Our stockholder engagement program comprises a year-round cycle of communication, feedback, and action, which is described in the following diagram.
|
|
Stage 1 Assessment |
• Our Board and Committees review the outcome of votes on proposals during our annual meeting, as well as feedback received from our stockholders.
• Our Board and Committees review governance and compensation trends at peer and other comparable companies.
• The Board and Committees discuss our stockholder engagement plan, including topics for discussion and areas for stockholder feedback. | ||||||
| Stage 2 Engagement |
• We invite stockholders and proxy advisory firms to engage with us and with our Chairman.
• During our meetings, we discuss and solicit feedback on our strategy, governance, executive compensation, sustainability program, and other areas of importance to our stockholders. | |||||||
| Stage 3 Review Feedback |
• The Board and Committees consider stockholder feedback as part of their annual review of our governance and compensation policies and practices, as well as their oversight of our strategy, sustainability program, and other areas that are important to our stockholders. Potential changes are discussed and may be implemented.
• We aim to enhance our sustainability disclosures to communicate our activities in areas that are most significant to our Company and to address stockholder feedback. | |||||||
| Stage 4 Proxy Statement |
• We draft our proxy statement to disclose and communicate our governance and compensation practices, elect Directors, and seek stockholder approval of certain matters. | |||||||
2021-2022 Engagement – During the fourth quarter of 2021 and the first quarter of 2022, we invited 28 of our stockholders, representing approximately 60% of our Shares (at that time), to engage with us, and met with seven of those stockholders, representing approximately 31% of our Shares (at that time). We also met with Glass Lewis and Institutional Shareholder Services, Inc., two major proxy advisory firms. In each engagement, we discussed and solicited feedback on our strategy, response to the COVID-19 pandemic, Board composition, governance practices, and executive compensation program. We also discussed our sustainability journey, including how we are assessing the areas that are most significant to our Company and our plans to enhance our sustainability disclosures, particularly in the areas of human capital management and DE&I.
The following table highlights feedback we received from our stockholders, which our Corporate Secretary and other members of management discussed with the Board, the Nominating and Corporate Governance Committee, and the Compensation and Human Capital Committee, and how we have addressed it (for a detailed discussion of stockholder
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feedback regarding our executive compensation program, see “Compensation Discussion and Analysis – Section 4 – 2020 Compensation Program Overview”).
| Topic | What we heard | What we’re doing | ||||||
| Sustainability and ESG | • Brighthouse Financial has made meaningful progress on its sustainability journey, including substantive disclosures in important areas. • Brighthouse Financial should continue to enhance its sustainability program and enhance disclosures in areas that are most significant to the Company and in line with stakeholder expectations, particularly in the areas of human capital management, DE&I, and climate risk. |
• We have enhanced our disclosures relating to human capital management, DE&I, and climate risk in our 2021 Annual Report and on our Corporate Responsibility website located at www.brighthousefinancial.com/about-us/corporate-responsibility. • Our inaugural corporate sustainability report, which we plan to publish by the third quarter of 2022, will include more comprehensive information about our sustainability program and will be aligned with SASB and TCFD frameworks (see “Proxy Summary – Our Sustainability Journey”). | ||||||
| Board Composition | • Our Board composition reflects our strong focus on diversity, including an appropriate mix of skills, experiences, backgrounds, and demographic diversity traits, which support generating diversity of thought. • Our Directors do not appear to have excessive commitments that may impact their ability to focus on Brighthouse Financial. |
• We continue to recruit Directors whose skills align with Brighthouse Financial’s strategy and who add to the overall diversity of our Board (see “– Building Our Board of Directors”). • We actively monitor our Directors’ commitments to ensure they can exercise appropriate oversight of the Company. | ||||||
| Governance |
• Brighthouse Financial has a reasonable and balanced governance profile, given its position as a recently independent, public company. • Brighthouse Financial should regularly assess its governance practices to ensure that they remain appropriate over time. |
• Our Board regularly reviews our governance practices and considers whether to adopt any changes. • See also “2021 Vote Results and Our Response” below. | ||||||
| Virtual Stockholder Meetings |
• Brighthouse Financial should continue to conduct virtual annual stockholder meetings in a way that ensures stockholders’ ability to participate fully. |
• At our Annual Meeting, we will continue our practices that protect stockholders’ ability to participate (see “The Annual Meeting, Voting and Other Information – Attending the Annual Meeting”). |
2021 Vote Results and Our Response. While all of our Directors continued to receive strong support, support for our Directors serving on the Nominating and Corporate Governance Committee (78% on average) lagged the level of support received for our other Directors (96% on average). We believe this lower level of support to be due to our supermajority voting provisions that require 662⁄3% of outstanding Shares to amend certain sections of our Charter and Bylaws. This type of provision is common for newly public companies. The Nominating and Corporate Governance Committee has assessed the appropriateness of these provisions for the Company, along with other corporate governance provisions, as part of its annual review of our governance profile. In performing its assessment, the Nominating and Corporate Governance Committee was advised by internal and external counsel. The Nominating
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| Board and Corporate Governance Practices — Succession Planning and Talent Management; Risk Oversight | 31 |
and Corporate Governance Committee considered, among other factors, the views of its stockholders, the totality of our governance practices, and market conditions. Following a comprehensive review, the Nominating and Corporate Governance Committee determined that it is in the best interests of the Company to maintain the supermajority voting provisions and recommended the same to the Board. The Board affirmed the Nominating and Corporate Governance Committee’s determination and agreed to maintain the supermajority voting provisions. The Nominating and Corporate Governance Committee and the Board will continue to engage with our stockholders and consider their feedback in their regular assessment of our governance practices.
Succession Planning and Talent Management
Succession planning and oversight of our talent management practices, including our actions to advance diversity at all levels of the organization, are central to the Board’s responsibilities. The Compensation and Human Capital Committee oversees the Company’s succession plans for the CEO and other members of senior management, including management’s development of a strong, diverse pipeline of potential successors for leadership positions. The full Board discusses, at least annually, the Company’s succession plans for the CEO and other key executives, including identifying potential candidates to succeed the CEO, both in cases of orderly succession and in the event of an emergency or unexpected departure. To support talent development and allow the Board to meet and assess potential successors, non-executive officers and mid-level management regularly participate and make presentations in Board and Committee meetings. The Board also meets in executive session to discuss whether the Company has the managerial talent to replace current executives should the need arise.
We believe effective risk oversight is fundamental to our strategy to deliver sustainable, long-term value to our stockholders. Our Board, with the assistance of the Committees, oversees the development and execution of our business strategies to help ensure that risks are appropriately assessed and mitigated, and that our business plans align with our risk appetite. The Board and the Committees review and approve our risk appetite statement, review our significant risk policies, and regularly discuss with management our performance against risk targets and limits.
The Board and Committees share oversight of certain risks, including the following:
| • | Strategic Risk – in connection with its annual review of our strategy and ongoing oversight of our performance against such strategy, the Board oversees the management of strategic risks. In its discussions with the Board, senior management, including the CEO, Chief Financial Officer (“CFO”), Chief Investment Officer, Chief Risk Officer (“CRO”), and Chief Distribution and Marketing Officer, reviews the key risks relating to the execution of our strategy and describes management’s activities to identify, assess, and mitigate such risks. |
| • | Enterprise Risk – in connection with each regular meeting of the Board and the Committees, the CRO prepares an enterprise risk report that communicates our risk profile and our performance against targets and limits in key risk areas, including macro, credit, market, liquidity, operational, model, information technology and cybersecurity, third-party, and emerging risks. The CRO, or the CRO’s designee, also periodically reports to the Board on key risks and to the Committees on risk topics within the scope of the Committees’ respective responsibilities. |
| • | Cybersecurity Risk – the Audit Committee is primarily responsible for overseeing information technology and cybersecurity risks (as part of its oversight of operational risk), and the Board also continues to be actively engaged with respect to these risks. The Audit Committee and the Board regularly meet with our Chief Technology Officer (“CTO”) and Chief Information Security Officer (“CISO”) to review our information technology and cybersecurity risk profile and to discuss our activities to manage those risks. Our CTO has overall responsibility for our information technology program, which includes the cybersecurity program. Our CISO is directly responsible for the Company’s cybersecurity program, which is designed to protect and preserve the integrity, confidentiality, and continued availability of the information owned by, or in the care of, the Company. The Company’s cybersecurity program also establishes procedures that are designed to enable us to effectively identify, evaluate, and respond to events that have the potential to negatively impact our operations. In addition, our Chief Compliance Officer regularly reports to |
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| 32 | Board and Corporate Governance Practices — Information About Our Board Committees |
| the Audit Committee and the Board regarding the Company’s compliance with applicable regulations relating to information technology and cybersecurity. |
| • | Human Capital Management – the Board recognizes the importance of maintaining a highly skilled and engaged workforce, guided by a strong corporate culture and set of values. As described in its charter, the Compensation and Human Capital Committee has broad oversight of the Company’s human capital matters, including DE&I, pay equity, leadership development, culture, and succession planning. At least annually, the Board discusses human capital issues with our Human Resources organization, including succession planning for the CEO and certain executive positions, and key human capital metrics. The Board and Committees discuss with management its activities to attract, motivate, and retain high-performing employees. The Board and Committees also assess employee engagement, turnover, and workloads to help ensure that the Company has adequate resources to execute its strategy. |
| • | Climate Risk – the Board recognizes that climate risk could pose a systemic risk to the financial system and could have direct and indirect impacts on our Company. In addition to the Finance and Risk Committee’s oversight of climate risk, the Investment Committee oversees climate risk related to our investment portfolio. |
The Board has delegated oversight of certain risk areas to the Committees, as follows:
| • | Audit Committee – risks relating to financial statements, financial systems, financial reporting processes, internal control over financial reporting, compliance, and auditing; operational risks, including third-party risk management, cybersecurity, and information technology risk; legal risk; regulatory compliance risk; and risks relating to Brighthouse Financial’s public disclosures. |
| • | Compensation and Human Capital Committee – broad oversight of human capital management matters, including the design and operation of Brighthouse Financial’s compensation arrangements to confirm that incentive compensation does not encourage unnecessary risk taking, as well as the relationship between risk management policies and practices, corporate strategy, and the compensation of senior executives. |
| • | Finance and Risk Committee – broad oversight of capital and risk management, including regular review of the CRO’s report on Brighthouse Financial’s risk profile, which includes macro risk, credit risk, market risk, liquidity risk, operational risk, model risk, information technology and cybersecurity risk, third-party risk, and emerging risks; climate risk; approval of Brighthouse Financial’s risk appetite statement; and coordination with the Compensation and Human Capital Committee Chair to oversee compensation-related risk matters. |
| • | Investment Committee – risks associated with our investment portfolio, including credit risk, portfolio allocation and diversification risk, counterparty risk, and ESG and climate risk, as well as risks associated with our investments operating model and the selection and monitoring of our external asset managers. |
| • | Nominating and Corporate Governance Committee – risks relating to Brighthouse Financial’s governance, our sustainability program (including environmental stewardship and corporate social responsibility), related person transaction policy, government relations, and the development and implementation of Brighthouse Financial’s codes of conduct. |
Information About Our Board Committees
The Board has established six standing Committees to assist it in carrying out its duties: Audit; Compensation and Human Capital; Executive; Finance and Risk; Investment; and Nominating and Corporate Governance. Each Committee has a Board-approved, written charter that describes such Committee’s roles and responsibilities. Copies of the charters of the Audit, Compensation and Human Capital, and Nominating and Corporate Governance Committees are posted on Brighthouse Financial’s website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview. The Audit, Compensation and Human Capital, and Nominating and Corporate Governance Committees all comply with applicable of SEC and Nasdaq requirements, and are chaired by, and consist solely of, Independent Directors. The Committee Chairs approve the meeting agendas for their respective Committees.
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Each Committee regularly reports on the matters discussed during its meetings to the full Board and presents recommendations on actions requiring Board approval. On an annual basis, each Committee conducts an evaluation of its performance and reviews the adequacy of, and proposes changes to, its charter for Board approval. Each Committee has full authority to retain, at Brighthouse Financial’s expense, independent advisors or consultants.
Additional information about our Committees follows, including their composition, the number of meetings they held in 2021, and their primary roles and responsibilities.
| Committee |
Members in 2021 | Description | ||
| Audit Committee (1)
Meetings held in 2021: 10 |
Pat Shouvlin (Chair) Chuck Chaplin Steve Hooley Carol Juel (4) |
The Audit Committee oversees the Company’s accounting and financial reporting processes; internal control over financial reporting and disclosure and controls procedures; and the work of internal audit and the independent auditor, including their respective audit plans and results. The Audit Committee also oversees the engagement and continued independence of the Company’s independent auditor, assesses its performance, and approves its compensation. The Audit Committee oversees our legal and regulatory compliance processes and programs; information technology, data privacy, and cybersecurity; and issues relating to the integrity of management and compliance with the Company’s codes of conduct. | ||
| Compensation and Human Capital Committee (2)
Meetings held in 2021: 7 |
Diane Offereins (Chair) Irene Chang Britt Eileen Mallesch Paul Wetzel |
The Compensation and Human Capital Committee oversees the Company’s compensation and benefits policies and programs for our executives, including equity and non-equity incentive compensation plans and arrangements, awards under such plans, severance benefits, stock ownership guidelines, and hedging, pledging, and clawback policies. The Compensation and Human Capital Committee also oversees human capital matters, including pay equity; DE&I; leadership development; culture; and succession planning for the CEO and other executives. For additional information on the responsibilities and activities of the Compensation and Human Capital Committee, including the Committee’s processes for determining executive compensation, see “Compensation Discussion and Analysis.” | ||
| Executive Committee
Meetings held in 2021: None |
Eric Steigerwalt (Chair) Chuck Chaplin Pat Shouvlin |
The Executive Committee acts on behalf of the entire Board with respect to certain exigent matters between meetings of the Board. | ||
| Finance and Risk Committee (3)
Meetings held in 2021: 7 |
Chuck Chaplin (Chair) Carol Juel (4) Diane Offereins Paul Wetzel |
The Finance and Risk Committee oversees Brighthouse Financial’s financial plan, policies, and strategies (including capital and liquidity management strategies, the capitalization of Brighthouse Financial and its subsidiaries, and our hedging strategy) and measures Brighthouse Financial’s performance against its business and financial plans. The Finance and Risk Committee oversees and approves actions and policies relating to equity and debt issuances, share repurchase programs, dividends, and mergers and acquisitions. | ||
| Investment Committee (3)
Meetings held in 2021: 5 |
Eileen Mallesch (Chair) Irene Chang Britt Steve Hooley Pat Shouvlin |
The Investment Committee oversees, on a consolidated basis, the activities and performance of Brighthouse Financial and its subsidiaries’ general accounts and consolidated separate accounts. The Investment Committee also oversees the enterprise investment strategy, including the review and approval of Enterprise Investment Authorities (“EIAs”) relating to our general accounts and consolidated separate accounts, and the compliance of our investments with our EIAs. In addition, the Investment Committee also oversees the execution of our investments operating model, which includes oversight of our engagement of external asset managers. | ||
| Nominating and Corporate Governance Committee (3)
Meetings held in 2021: 6 |
Irene Chang Britt (Chair) Eileen Mallesch Diane Offereins Paul Wetzel |
The Nominating and Corporate Governance Committee oversees Brighthouse Financial’s corporate governance policies and practices, including the Board and Committees’ structure and composition, recruitment and recommendation of Director nominees, Committee assignments, and determinations of Director independence. The Nominating and Corporate Governance Committee develops and oversees the annual self-evaluations for the Board and Committees, as well as the Director orientation process and continuing education programs. The Nominating and Corporate Governance Committee also oversees Brighthouse Financial’s codes of conduct, related person transaction policy (coordinating with the Audit Committee where appropriate), our government relations activities, and our sustainability program, including our activities related to environmental stewardship and corporate social responsibility. | ||
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| 34 | Board and Corporate Governance Practices — Director Compensation |
| (1) | All Audit Committee members are independent under applicable SEC and Nasdaq rules and are “financially literate.” The Board has determined that Pat Shouvlin, the Committee’s Chair, and Chuck Chaplin each qualifies as an “audit committee financial expert” under applicable SEC rules. |
| (2) | All Compensation and Human Capital Committee members are independent under applicable SEC and Nasdaq rules and are “non-employee directors” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). |
| (3) | All Finance and Risk Committee, Investment Committee, and Nominating and Corporate Governance Committee members are independent under applicable SEC and Nasdaq rules. |
| (4) | Carol Juel was elected to the Board on November 1, 2021, and assigned to the Audit Committee and the Finance and Risk Committee. |
Our director compensation program is designed in a manner intended to fairly compensate our non-management Directors for their work as members of the Board and to align their interests with those of our stockholders by delivering half of the annual retainer in the form of equity-based awards. In designing the Director compensation program, compensation was targeted at the median of the same comparator group we used for our NEOs (see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – Role of the Compensation Committee and Others in Determining Compensation – Establishing a Compensation Comparator Group”). The Nominating and Corporate Governance Committee regularly reviews director compensation and recommends changes to the Board as necessary. In June 2021, on the recommendation of the Nominating and Corporate Governance Committee, the Board approved certain adjustments to the director compensation program (adjustments to cash payments were effective as of the third quarter of 2021; adjustments to equity awards were effective as of the 2021 annual meeting). The following table sets forth the compensation program for our non-management Directors.
| 1Q and 2Q 2021 | 3Q and 4Q 2021 | |||||||
|
Description
|
Amount
|
Form
|
Amount
|
Form
| ||||
| Pay for Board Service |
||||||||
| Annual retainer |
$240,000 | 50% cash and 50% equity | $285,000 | $120,000 cash and $165,000 equity | ||||
| Additional Pay for Service as Chairman or Committee Chair |
||||||||
| Chairman of the Board |
$200,000 | 50% cash and 50% equity | $200,000 | 50% cash and 50% equity | ||||
| Audit Committee Chair |
$ 22,500 | 100% cash | $ 35,000 | 100% cash | ||||
| Other Committee Chairs (Compensation and Human Capital; Nominating and Corporate Governance; Finance and Risk; Investment) |
$ 17,500 | 100% cash | $ 22,000 | 100% cash | ||||
Annual Equity Awards
The Board approved annual RSU awards as part of our director compensation program. Annual awards to non-management Directors generally vest on the earlier of the one-year anniversary of the grant date or the date of the next annual meeting of stockholders. The number of RSUs to be granted to each non-management Director is determined by dividing the intended value of the equity award by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number of RSUs. The RSU grants are made pursuant to the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan (the “Director Plan”), which was approved by stockholders at the 2018 Annual Meeting.
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| Board and Corporate Governance Practices — 2021 Director Compensation Table |
35 |
Compensation paid to our non-management Directors in 2021 is presented in the following table.
2021 Director Compensation Table
| Name
|
Fees Earned or
|
Stock Awards (2)
|
Total
| ||||||||||||
| Irene Chang Britt |
$139,750 |
$164,989 |
$304,739 | ||||||||||||
| Chuck Chaplin |
$239,750 |
$264,986 |
$504,736 | ||||||||||||
| Steve Hooley |
$120,000 |
$164,989 |
$284,989 | ||||||||||||
| Carol Juel |
$ 30,000 |
$ 96,248 |
$126,248 | ||||||||||||
| Eileen Mallesch |
$139,750 |
$164,989 |
$304,739 | ||||||||||||
| Meg McCarthy (3) |
$ 60,000 |
$ 0 |
$ 60,000 | ||||||||||||
| Diane Offereins |
$139,750 |
$164,989 |
$304,739 | ||||||||||||
| Pat Shouvlin |
$148,750 |
$164,989 |
$313,739 | ||||||||||||
| Paul Wetzel |
$120,000 |
$164,989 |
$284,989 | ||||||||||||
| (1) | Fees Earned or Paid in Cash. Each non-management Director is entitled to receive an annual cash retainer of $120,000, or a prorated amount for a shorter period of service. We provide additional retainers to the Chairman and to each Director who serves as the Chair of a standing Committee, the amounts of which are set forth above under the heading “Director Compensation.” All cash retainers are paid in quarterly installments, unless deferred. Following Ms. Juel’s election to the Board on November 1, 2021, she received a prorated portion of the annual cash retainer. |
| (2) | Stock Awards. As part of their annual retainers for 2021, each non-management Director (other than Ms. Juel) was granted an equity award of 3,615 RSUs on June 10, 2021, with an aggregate grant date fair value equal to $164,989. Following Ms. Juel’s election to the Board on November 1, 2021, she received a prorated portion of the annual equity award of 1,791 RSUs, with an aggregate grant date fair value equal to $96,248. For his service as Chairman, Mr. Chaplin was granted an additional equity award of 2,191 RSUs on June 10, 2021, with an aggregate grant date fair value equal to $99,997. The Directors’ awards will vest on the earlier of the one-year anniversary of the grant date or the date of the next annual meeting of stockholders. Amounts in this column represent the aggregate grant date fair value of each applicable award of RSUs, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. For a description of the methodology and assumptions made in determining the aggregate grant date fair value of Share awards, see Note 10 of the Notes to the Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”). As of December 31, 2021, the Directors listed in the above table held the following number of outstanding, unvested RSUs: Britt (3,615); Chaplin (5,806); Hooley (3,615); Juel (1,791); Mallesch (3,615); Offereins (3,615); Shouvlin (3,615); and Wetzel (3,615). |
| (3) | Ms. McCarthy served as a Director until June 10, 2021. |
Deferred Compensation Plan
The Board adopted the Brighthouse Services, LLC Deferred Compensation Plan for Non-Management Directors (the “Director Deferred Compensation Plan”), effective December 1, 2019. The purpose of the Director Deferred Compensation Plan is to provide Directors with the opportunity to defer receipt of all or a portion of their cash or equity compensation to a later date, at which time payment of the compensation will be made after adjustment for the simulated investment experience of such compensation. Directors were able to make their initial deferral elections in 2019 with respect to compensation earned in 2020 and later years. Some Non-Management Directors have chosen to defer the receipt of all or part of their annual retainer fees under the Director Deferred Compensation Plan.
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| 36 | Board and Corporate Governance Practices — Director Stock Ownership Guidelines; Compensation Committee Interlocks and Insider Participation; Codes of Conduct |
Director Stock Ownership Guidelines
In February 2018, the Board, on the recommendation of the Nominating and Corporate Governance Committee, established stock ownership and retention guidelines for Independent Directors. Pursuant to these guidelines, each Independent Director is expected to acquire a number of Shares equal to at least four times the equity portion of the Director’s annual retainer. For Mr. Chaplin this includes the portion of his annual retainer for service as Chairman that is paid in the form of RSUs. Directors are expected to achieve the applicable ownership level within five years from the later of the date the guidelines became effective (January 1, 2018) or the date the Director commences service. For Directors who have elected to participate in the Director Deferred Compensation Plan, deferred Shares count toward the applicable ownership level. Directors are required to retain at least 50% of the net shares acquired upon vesting of equity awards until the ownership guidelines are satisfied. All Directors are currently in compliance with the Company’s stock ownership and retention guidelines, and as of the Record Date no Director has sold any vested equity.
Compensation Committee Interlocks and Insider Participation
There are no interlocking relationships between any member of our Compensation and Human Capital Committee and any of our executive officers that require disclosure under applicable rules.
Brighthouse Financial’s strength depends on the trust of our employees, distribution partners, customers, and stockholders. We strive to adhere to the highest standards of business conduct at all times, and put honesty, fairness, and trustworthiness at the center of all that we do. We have adopted three codes of conduct that reflect these values and enshrine them in our corporate culture: the Code of Conduct for Financial Management, which is a “code of ethics” (as defined under SEC rules) that applies to Brighthouse Financial’s CEO, CFO, Chief Accounting Officer, Chief Auditor, Corporate Controller, and all other Brighthouse Financial employees who perform similar functions or who may obtain access to any financial records covered by the Code of Conduct for Financial Management; the Code of Conduct for Employees, which applies to all Brighthouse Financial officers and employees; and the Code of Conduct for Directors, which applies to members of the Board. Current versions of these codes of conduct are available on Brighthouse Financial’s website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview.
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| Proposal 2 – Ratification of the appointment of independent registered public accounting firm |
37 |
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse Financial’s independent registered public accounting firm for fiscal year 2022
The Audit Committee is responsible for the appointment, compensation, retention, and oversight of our independent registered public accounting firm (“independent auditor”). To execute this responsibility, the Audit Committee annually evaluates the independent auditor’s qualifications, performance, and independence. In considering the appointment of the independent auditor, the Audit Committee annually evaluates the independent auditor’s performance relative to various qualifications, including (i) the quality of services and sufficiency of resources provided by the independent auditor firm and engagement team, (ii) communication and interaction with the independent auditor, and (iii) the independent auditor’s independence, objectivity, and professional skepticism.
The Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2022. Deloitte’s background knowledge of Brighthouse Financial and its subsidiaries, combined with its industry expertise, has enabled it to carry out its audits of the Company’s consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting with effectiveness and efficiency. The members of the Audit Committee believe that the continued retention of Deloitte as the Company’s independent auditor is in the best interest of the Company and its stockholders.
In addition, the Audit Committee is involved in the selection of the lead audit partner and ensures that the lead partner’s engagement is limited to no more than five consecutive years of service (in accordance with SEC rules). In 2022, pursuant to the mandated rotation, a new lead engagement partner assumed responsibilities with respect to the Company’s financial statements and other services provided to the Company, and he is eligible to serve in that capacity through the end of the 2026 audit. The prior lead Deloitte partner’s engagement began with the 2017 audit, and he served in that capacity through the end of the 2021 audit. The process for selecting the Company’s new lead audit partner included vetting of the independent auditor’s candidates by management and the Audit Committee Chair, including one-on-one meetings with the lead engagement partner candidate prior to the final selection.
We request that our stockholders ratify the appointment of Deloitte as the Company’s independent auditor for fiscal year 2022. If the stockholders do not ratify such appointment, the Audit Committee will take note and may reconsider its retention of Deloitte. If such appointment is ratified, the Audit Committee will still have the discretion to replace Deloitte at any time during the year. Representatives of Deloitte are expected to be present at the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to questions from stockholders regarding their audit of our consolidated financial statements for fiscal year 2021.
The Board of Directors recommends that stockholders vote “FOR” the ratification of the appointment of Deloitte as our independent registered public accounting firm for fiscal year 2022.
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| 38 | Proposal 2 – Ratification of the appointment of independent registered public accounting firm — Audit Committee Pre-Approval Policy |
Fees Paid to Deloitte & Touche LLP
The following table shows the fees incurred by the Company for professional services rendered by Deloitte for the fiscal years ended December 31, 2021, and December 31, 2020. All services provided to the Company were approved by the Audit Committee.
| Fees (in thousands) | 2021 | 2020 | ||||||||
| Audit Fees (1) |
$11,856 | $12,563 | ||||||||
|
Audit-Related Fees (2) |
$ 367 | $ 285 | ||||||||
| Tax Fees (3) |
$ 61 | $ 181 | ||||||||
| All Other Fees (4) |
$ 2 | $ 2 | ||||||||
|
Total |
$12,286 | $13,031 | ||||||||
| (1) | Audit Fees. Fees billed for professional services for the integrated audit of the consolidated financial statements of the Company and its subsidiaries (as required), including the annual financial statement audit, the reviews of the interim financial statements included in quarterly reports on Form 10-Q for the Company and its subsidiaries (as required), statutory audits or other financial statement audits of subsidiaries, the audit of the effectiveness of our internal control over financial reporting, assistance with and review of documents filed with the SEC, and other services that enable the independent auditor to form an opinion of the consolidated financial statements of the Company and its subsidiaries (as required). |
| (2) | Audit-Related Fees. Fees billed for assurance and related services that are reasonably related to the audit or review of the financial statements of the Company and its subsidiaries (as required) and for other services that are traditionally performed by the independent auditor. Such services consist of fees for employee benefit plan audits, assessments and testing of internal controls, and accounting consultations not directly associated with the annual audit or quarterly reviews. |
| (3) | Tax Fees. Fees billed for permitted tax services, including tax compliance, tax advice, and tax planning. |
| (4) | All Other Fees. Fees billed for this category primarily represent accounting research subscription fees. |
Audit Committee Pre-Approval Policy
The Audit Committee has established a policy requiring its pre-approval of all audit and non-audit services provided by the independent auditor, and this policy is designed to ensure that the independent auditor’s independence is not impaired. In considering whether to pre-approve the provision of non-audit services by the independent auditor, the Audit Committee will consider whether the services are compatible with the maintenance of the independent auditor’s independence.
The pre-approval policy provides for the Audit Committee’s general pre-approval, on an annual basis, of audit, audit-related, and permissible non-audit services up to amounts reasonably determined by the Audit Committee to be appropriate. The Audit Committee must specifically pre-approve (i) any proposed services that exceed such general pre-approval limits, (ii) tax services, and (iii) any additional services that have not been generally pre-approved by the Audit Committee. The independent auditor is required to periodically report to the Audit Committee the extent of the services that it has provided to the Company and the fees for the services performed to date. The Audit Committee annually reviews the policy to ensure its continued appropriateness and compliance with applicable laws and Nasdaq listing standards.
The policy delegates to the Audit Committee Chair the authority to pre-approve audit, audit-related, or non-audit services between meetings for individual projects up to $250,000 (up to a total annual maximum of $750,000) if management deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit
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| Proposal 2 – Ratification of the appointment of independent registered public accounting firm — Audit Committee Report | 39 |
Committee. The Audit Committee Chair must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
The Audit Committee currently consists of four Independent Directors and operates under a written charter adopted by the Board. The Board has determined that Pat Shouvlin and Chuck Chaplin each have the requisite experience to be designated an audit committee financial expert as such term is defined under Item 407(d)(5) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), and the applicable Nasdaq standards.
Management is responsible for the preparation and presentation of the Company’s financial statements, the reporting process, the accounting policies and procedures, and the establishment of effective internal controls and procedures.
The primary duties of the Audit Committee are to assist the Board in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s internal controls regarding finance, accounting, legal compliance, and ethics, (iv) the independence and qualifications of the Company’s independent auditor, (v) the Company’s operational risks, including information technology and cybersecurity risks, and (vi) the performance of the Company’s internal audit function and independent auditor. As part of its meetings, the Audit Committee regularly meets in executive session without management present. Prior to the filing of each quarterly report on Form 10-Q, annual report on Form 10-K, and earnings press release, the Audit Committee discusses such documents with management, the Company’s Chief Auditor, and the Company’s independent auditor. The Audit Committee also discusses the Company’s combined statutory financial results and reviews the Company’s internal control over financial reporting.
The Chief Auditor regularly attends meetings of the Audit Committee and reports directly to the Audit Committee Chair, which supports her independence from management and the objectivity of her work. The Audit Committee regularly discusses with the Chief Auditor, both in general session and executive session, the adequacy and effectiveness of the Company’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, as well as the performance of the internal audit function.
The independent auditor is responsible for performing an independent audit of our financial statements and, as required, of our internal control over financial reporting, in each case, in accordance with standards established by the Public Company Accounting Oversight Board (“PCAOB”), and the independent auditor issues a report with respect to each of the foregoing items. The independent auditor must also express an opinion as to the conformity of the Company’s financial statements with generally accepted accounting principles (which includes the critical audit matters required to be reported and communicated to the Audit Committee) and the effectiveness of its internal control over financial reporting. The independent auditor regularly affirms to the Audit Committee that it remains independent from the Company. The Audit Committee regularly meets with the independent auditor, both in general session and in executive session, to discuss the Company’s financial reporting processes, internal control over financial reporting, disclosure controls and procedures, required communications to the Audit Committee, fraud risks, and any other matters that the Audit Committee or the independent auditor deem appropriate.
More information on the Audit Committee and its responsibilities is included in the Audit Committee Charter, which is available on our website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview. In accordance with the requirements set forth in the Audit Committee Charter, the Audit Committee has (i) reviewed the Audit Committee Charter, (ii) approved the charter governing the internal audit function, and (iii) established the procedures for the confidential submission of complaints to the Audit Committee regarding accounting, internal control over financial reporting, or audit matters (the “Audit Committee Complaint Procedures”). A copy of the Audit Committee Complaint Procedures is also available on our website.
In the performance of its oversight function, the Audit Committee has reviewed and discussed the audited consolidated financial statements for fiscal year 2021 with each of management and the independent auditor. The
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| 40 | Proposal 2 – Ratification of the appointment of independent registered public accounting firm — Audit Committee Report |
Audit Committee and the independent auditor have also discussed the matters required to be discussed by them under the applicable PCAOB rules.
The Audit Committee has received from the independent auditor the written disclosures and the letters required by the applicable PCAOB rules, as currently in effect, regarding the firm’s communications with the Audit Committee relating to independence, and has discussed the independent auditor’s independence with the independent auditor.
Based on the review and discussions described in this Audit Committee Report, the Audit Committee recommended to the Board of Directors that the audited financial statements for fiscal year 2021 be included in our 2021 Form 10-K, for filing with the SEC.
Audit Committee
Pat Shouvlin (Chair)
Chuck Chaplin
Steve Hooley
Carol Juel
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| Proposal 3 – Advisory vote to approve NEO compensation |
41 |
Advisory vote to approve the compensation paid to Brighthouse Financial’s Named Executive Officers
In accordance with the requirements of Section 14A of the Exchange Act, we are providing our stockholders with an advisory (non-binding) vote (a “Say-on-Pay” vote) on the compensation paid to our named executive officers (the “NEOs”). Our compensation approach is described in the “Compensation Discussion and Analysis”, including the compensation tables and accompanying narrative discussion contained therein.
The Compensation Discussion and Analysis summarizes our executive compensation program. Our Board and the Compensation and Human Capital Committee have implemented an executive compensation program that is intended to align the interests of our executive officers with those of our stockholders. The vast majority of our NEOs’ compensation is in the form of variable, at-risk compensation and utilizes metrics in our short- and long-term incentive programs that are tied to strategic goals that we believe will enhance stockholder value.
We have engaged our stockholders in discussions about our executive compensation program, philosophy, and objectives. In late 2021, we solicited feedback from stockholders on our 2020 executive compensation program and on our 2021 executive compensation program that we previewed in our 2021 proxy statement. The feedback we received was generally positive, and the Board and the Compensation and Human Capital Committee considered that feedback in designing our 2022 compensation program.
We are asking stockholders to approve the following resolution:
RESOLVED, that the compensation paid to Brighthouse Financial’s NEOs, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative disclosure, is hereby APPROVED.
Although this vote is advisory, the Board and the Compensation and Human Capital Committee intend to consider the results of the vote, as well as other relevant factors, as we continue to develop our executive compensation program. At our 2018 annual meeting of stockholders, a majority of stockholders voted to have an annual advisory Say-on-Pay vote. The Board has considered the stockholder vote on Say-on-Pay frequency and has determined to conduct an advisory Say-on-Pay vote annually at least until the next stockholder advisory vote on Say-on-Pay frequency, which will take place no later than our 2024 annual meeting of stockholders.
The Board of Directors recommends that stockholders vote “FOR” the approval of the compensation of our Named Executive Officers, as disclosed in this Proxy Statement.
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| 42 | Compensation Discussion and Analysis — Section 1 – Executive Summary |
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy, policies, practices, and objectives in the context of our compensation decisions for our NEOs for 2021.
For 2021, our NEOs are our CEO, CFO, and next three most highly compensated executive officers as of the end of 2021.
| Name | Title | |
| Eric Steigerwalt |
President and Chief Executive Officer | |
| Ed Spehar |
Executive Vice President and Chief Financial Officer | |
| Christine DeBiase |
Executive Vice President, Chief Administrative Officer and General Counsel | |
| Conor Murphy (1) |
Executive Vice President and Chief Operating Officer | |
| John Rosenthal |
Executive Vice President and Chief Investment Officer | |
| (1) | Mr. Murphy ceased serving as Chief Operating Officer effective March 18, 2022. |
The CD&A is organized into four sections:
| • | Section 1 – Executive Summary |
| • | Section 2 – Our 2021 Executive Compensation Program |
| • | Section 3 – Additional Compensation Practices and Policies |
| • | Section 4 – 2022 Compensation Program Overview |
The Brighthouse Financial Story
Who We Are. Brighthouse Financial is one of the largest providers of annuities and life insurance in the United States. Brighthouse Financial became an independent, publicly traded company in August 2017, following the Separation and the listing of our common stock on Nasdaq.
Our Purpose. We are on a mission to help people achieve financial security. We specialize in products that are designed to help people protect what they have earned and ensure it lasts. We are built on a foundation of experience and knowledge, which allows us to keep our promises and provide value to our distribution partners and the clients they serve.
Our Strategy. We believe our focused strategy will generate long-term stockholder value. Our strategy consists of the following core elements, which are fully aligned with our risk appetite and our approach to managing our business:
| • | Offering a targeted set of annuity and life insurance solutions that are simpler, more transparent, and provide value to our distributors and the clients they serve. We aim to continue to shift our business mix profile over time, with the addition of more cash flow-generating and less capital-intensive new business, along with the runoff of less profitable business. |
| • | Selling our products through a diverse, well-established network of distribution partners, continuing to build strategic distribution relationships, and entering new channels as we expand our distribution footprint in the United States. |
| • | Effectively managing our expenses by adopting and maintaining an operating model designed to drive our statutory expense ratio down over time. |
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| Compensation Discussion and Analysis — Section 1 – Executive Summary | 43 |
2021 Highlights – Executing Our Strategy in a Challenging Year
Brighthouse Financial had a strong 2021, as we continued to execute our strategy and delivered solid results despite the challenges resulting from the COVID-19 pandemic. We remain focused on our mission and confident in our strategy, which we continue to believe will enable us to generate long-term value for our stockholders.
|
|
Financial and Capital Strength
Prudent Financial Management – we continue to manage the Company using a multiyear, multiscenario framework to evaluate capital, liquidity, and subsidiary dividend plans.
Normalized Statutory Earnings – generating normalized statutory earnings remains a focus of our financial management strategy. Normalized statutory earnings is used by management to measure our insurance companies’ ability to pay future distributions and is reflective of whether our hedging program functions as intended. For the full year 2021, we had a normalized statutory loss(1) of $264 million, as strong core performance in the VA business was more than offset by weaker results in non-VA business.
Capital Return – we repurchased approximately $499 million of our common stock in 2021, representing approximately 12% of Shares outstanding relative to year-end 2020. We also achieved our target of returning $1.5 billion to our stockholders by year-end 2021, and reduced Shares outstanding by 35% relative to the time we became an independent, public company in 2017.
Capital Management – we ended 2021 with holding company liquid assets of $1.6 billion. We continued to optimize statutory capital to further strengthen our balance sheet. During 2021, we opportunistically extended debt maturities and added permanent equity capital to our balance sheet. We have no debt maturities until 2027.
Statutory Capital – we ended 2021 with $9.5 billion of combined statutory total adjusted capital (an increase of approximately $900 million from year-end 2020) and with a combined RBC ratio of approximately 500% (above our target of 400-450% in normal market conditions). RBC is a method of measuring an insurance company’s capital, taking into consideration its relative size and risk profile, to ensure compliance with minimum regulatory capital requirements.
Institutional Spread Margin Business – we launched our institutional spread margin business, which we expect will enhance and diversify our earnings profile over time.
Ratings – we maintained our operating companies’ strong financial strength ratings.
| |
|
|
Products and Sales
Annuity Sales – we achieved annuity sales of approximately $9.15 billion, exceeding our 2021 target and an increase of approximately 1% over 2020.
Life Insurance Sales – our life insurance sales were approximately $111 million, exceeding our 2021 target and an increase of approximately 98% over 2020.
Expanded Distribution – we expanded our distribution network, including by adding new distribution partners to our existing channels and entering into new channels, such as the SIMON marketplace and the BGA distribution channel. We also continued to enhance the way we support financial professionals and the clients they serve.
Product Enhancements – we rolled out enhancements to our Brighthouse Shield® Level Annuities and Brighthouse SmartCare® products.
| |
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| 44 | Compensation Discussion and Analysis — Section 1 – Executive Summary |
|
|
Expenses
Corporate Expenses – our run-rate corporate expenses were $890 million. While 2021 expenses were higher than target, we achieved almost 90% of our run-rate expense reduction target relative to our first year post-Separation while simultaneously making strategic investments to launch our institutional spread margin business and to fund future growth. Some of these investments allowed us to provide better support to our distributors and their financial professionals, as well as our policyholders and contract holders.
| |
|
|
Technology
Future State Platform – we made significant progress, including a major platform conversion, in our multiyear effort to implement our future state operations and technology platform, which is foundational to our ability to grow our sales in the future.
| |
| (1) We use the term “normalized statutory loss” throughout this Proxy Statement to refer to negative normalized statutory earnings. | ||
Human Capital Management
Our culture is rooted in three core values, which guide how we work together and deliver on our mission – collaboration, adaptability and passion. We believe these values help us build an organization where talented people from all backgrounds can make meaningful contributions to our success while growing their careers. Our success also depends on the trust of our employees, distribution partners, customers and stockholders. We strive to adhere to the highest standards of business conduct at all times, and put honesty, fairness and trustworthiness at the center of all that we do. For more about our human capital management practices and policies, please refer to the 2021 Form 10-K and our Corporate Responsibility webpage. We also plan to include more information about our human capital management in our inaugural corporate sustainability report which we plan to publish by the third quarter of 2022.
Impact of the COVID-19 Pandemic on Our Executive Compensation Program
We are proud of our ability to shift our operations to a fully remote environment with a high level of continuity and the strong results we have continued to deliver despite the significant challenges presented by the COVID-19 pandemic. As a result, the Compensation and Human Capital Committee did not make any changes to our executive compensation program in response to the pandemic. For information about our response to the pandemic, see “Proxy Summary – Our Response to the COVID-19 Pandemic.”
The Compensation and Human Capital Committee has established a compensation program rooted in a pay-for-performance philosophy and guided by the following general principles and objectives:
| • | Paying for performance: a majority of executive compensation is in the form of variable elements that are based on individual and Company performance results that drive increases in stockholder value; |
| • | Providing competitive Target TDC opportunities (defined as base salary plus STI and LTI compensation opportunities): we aim to offer compensation that enables Brighthouse Financial to attract, motivate, and retain high-performing employees; |
| • | Aligning executives’ interests with stockholders’ interests: a majority of our CEO’s Target TDC and a significant portion of our NEOs’ Target TDC is delivered in the form of stock-based incentives; |
| • | Encouraging long-term decision-making: our long-term incentive compensation program includes awards with multiyear, overlapping performance or restriction periods; |
| • | Avoiding problematic pay practices: we do not provide excessive perquisites, excessive change-of-control severance pay, or excise tax gross-ups, and we will not reprice stock options without stockholder approval; and |
| • | Reinforcing strong risk management: our compensation program is designed to avoid providing our employees with incentives to take excessive risks. |
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| Compensation Discussion and Analysis — Section 1 – Executive Summary | 45 |
What’s New With Our 2021 Compensation Program
We made two important changes to our 2021 executive compensation program, as follows:
Incorporation of DE&I Factors. As part of its assessment of each NEO’s individual performance in approving STI awards, the Compensation and Human Capital Committee considers each NEO’s achievements with respect to DE&I, including increasing representation of underrepresented populations among officers and those in the succession pipeline; developing diverse employees; fostering an inclusive environment; and other actions to support and advance Brighthouse Financial’s DE&I strategy.
Changes to STI Metrics – Definition of Expense Target. For our 2021 STI program, the Compensation and Human Capital Committee excluded “establishment costs” from the definition of Expense Target. Based on the Compensation and Human Capital Committee’s experience in 2020, the Committee determined that excluding establishment costs results in both a better measure of the Company’s expense discipline and stronger incentives for desired management behaviors.
Other than the above changes, our 2021 compensation program is substantially the same as our 2020 compensation program, as described in the table below.
| STI Program | ||||
| STI Metric
|
Weighting
|
Performance Link
| ||
| Expense Target |
40% | Effectively managing our expenses by adopting and maintaining an operating model that reduces our run-rate expenses is a core element of our strategy. | ||
| Sales |
40% | Key driver of revenues and an important indicator of our growth prospects and franchise stability. | ||
| Normalized Statutory Earnings |
20% | Key metric used by management to measure our insurance companies’ ability to pay future distributions and is reflective of whether our hedging program functions as intended. | ||
| LTI Program | ||||
| LTI Metric
|
Weighting
|
Performance Link
| ||
| Statutory Expense Ratio |
60% | Reflects the ratio of statutory expenses to statutory premiums and fee income; measures our performance in key strategic areas of expense management and top-line growth. | ||
| Net Cash Flow to the Holding Company |
40% | Measures net capital distributions from Brighthouse Financial’s operating companies, which strengthens our holding company balance sheet and provides management with flexibility to deploy our capital for various purposes, including return of capital to stockholders. | ||
STI Awards and LTI Awards were issued under the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan, as amended (the “Employee Plan”), and its subplans. For more information about our 2021 Compensation Program, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program.”
2021 Say-on-Pay Vote and Stockholder Engagement
Our stockholders have expressed strong support for our compensation program during our engagement meetings and through their strong approval of our 2021 Say-on-Pay proposal (approximately 94% of votes in favor). The Compensation and Human Capital Committee considered stockholder feedback and the Say-on-Pay vote results in reviewing our 2021 executive compensation program and making compensation decisions for our NEOs.
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2021 STI Awards. The table below presents our 2021 metrics for STI Awards (“STI Metrics”), which measure our performance in the areas that are critical to meeting our strategic goals for the year. Brighthouse Financial performance in 2021 resulted in an aggregate Company Performance Factor of 99%. For additional information about our STI Awards, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – Elements of 2021 Compensation” and “– 2021 STI Awards for Our NEOs.” STI Awards are made under the Amended and Restated Brighthouse Services, LLC Short-Term Incentive Plan (the “STI Plan”).
| 2021 STI Metrics
|
Results
|
Payout Percentage (1)
| ||||
| Expense Target (40%) |
$ | 890M | 87% | |||
| Sales (40%) |
114% | |||||
| Annuity (75%) |
$ | 9.152B | 104% | |||
| Life (25%) |
$ | 111M | 145% | |||
| Normalized Statutory Earnings (20%) |
($ | 264M | ) | 89% | ||
| 2021 Company Performance Factor |
99% | |||||
| (1) | Rounded up to the nearest whole number. |
2021 LTI Awards. In February 2021, the Independent Directors (with respect to the CEO) and the Compensation and Human Capital Committee (with respect to the other NEOs) awarded LTI awards to each of the NEOs at their respective Target LTI levels. The 2021 LTI Awards were a mix of RSUs and PSUs. The 2021 PSUs will reward our NEOs for Brighthouse Financial’s performance over the 2021-2023 performance period. The number of Shares issued, if any, at the end of the performance period will depend on the Company’s performance. For information about our 2021 LTI, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – Elements of 2021 Compensation – 2021 LTI Awards.”
2019 PSU Payouts. In February 2022, the NEOs received payouts with respect to PSUs granted as part of the 2019 LTI program. The value of these PSUs was based on the Company’s performance for the 2019-2021 performance period against PSU metrics approved by the Compensation and Human Capital Committee and described below. For information about our 2019 PSU Payouts, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – Elements of 2021 Compensation – 2019 PSU Payouts.”
| 2019 PSU Metrics (weighting)
|
Results
|
Payout Percentage (1)
| ||||
| Statutory Expense Ratio (60%) |
8.88 | % | 102% | |||
| Capital Return (40%) |
$1.4B | 100% | ||||
| 2019 PSU Payout |
102% | |||||
| (1) | Rounded up to the nearest whole number. |
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| Compensation Discussion and Analysis — Section 2 – Our 2021 Executive Compensation Program | 47 |
2021 Target TDC. Mr. Steigerwalt’s 2021 Target TDC (which was unchanged from his 2020 Target TDC), as approved by the Independent Directors on the recommendation of the Compensation and Human Capital Committee, is presented in the following table.
| Name | Base Salary | Target STI (as % of Base Salary) |
Target LTI (as % of Base Salary) |
Target TDC | ||||
| Eric Steigerwalt |
$925,000 | 200% | 530% | $7,677,500 |
2021 STI Award. Mr. Steigerwalt’s individual goals for 2021 were a mix of strategic and operational objectives that measured his performance in leading Brighthouse Financial, developing and executing Brighthouse Financial’s strategy, and delivering positive financial results. In setting the STI payout percentage at the Company Performance Factor of 99%, the Independent Directors considered Brighthouse Financial’s performance against the 2021 STI Metrics and Mr. Steigerwalt’s achievements against his 2021 goals. The following table highlights Mr. Steigerwalt’s 2021 STI Award for performance in 2021, as approved by the Independent Directors in January 2022.
| Name | 2021 STI Target | 2021 STI Payout Percentage |
2021 STI Award | |||
| Eric Steigerwalt |
$1,850,000 | 99% | $1,831,500 |
2021 LTI Award. In January 2021, the Independent Directors approved a 2021 LTI Award for Mr. Steigerwalt at his LTI target of $4,902,500, consisting of 70% PSUs and 30% RSUs. The number of PSUs issued will depend on Brighthouse Financial’s performance against the 2021 PSU Metrics over the 2021-2023 performance period. Additional information about Mr. Steigerwalt’s STI and LTI Awards is presented in “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program” and “2021 Compensation Tables.”
We have committed to a regular review of our compensation program to help ensure that it evolves with our maturing organization and continues to motivate and reward our employees for performance that supports our strategic goals. To this end, and in consideration of stockholder feedback, the Compensation and Human Capital Committee has approved changes to our compensation program, including a change to the definition of Normalized Statutory Earnings (which is described in our 2021 Form 10-K) and adjustments to certain NEOs’ Target TDC. These are described in detail in “Section 4 – 2022 Compensation Program Overview.”
Section 2 – Our 2021 Executive Compensation Program
2021 Compensation Planning Process
Benchmarking Process. Our Human Resources organization (“HR”) led our 2021 market benchmarking process. We use benchmarking to provide context for the 2021 compensation recommendations for our Senior Leadership Management Group (the “SLMG”), which includes our NEOs and other members of our senior management team. In developing its recommendations, HR consulted with Willis Towers Watson (“WTW”), which serves as management’s compensation consultant.
In setting Target TDC for the members of the SLMG, we have adopted a pay positioning strategy that generally seeks to align Target TDC with market median. We modify the pay positioning of individual SLMG members due to a variety of factors, including criticality of role, performance, experience, and retention. We also review the positioning of discrete elements of SLMG members’ compensation, including base salary, target STI, total cash compensation (base salary plus target STI), and LTI. To determine pay positioning, we primarily use WTW’s proprietary database of executive compensation at large diversified insurers (“DIS”), which we supplement with a select compensation comparator group, as described below.
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Compensation Comparator Group. For compensation benchmarking purposes, we also used a group of peer companies within our industry that are similar to us in terms of assets and revenues and with which we compete for executive talent (the “Comparator Group”). HR, with input from WTW, constructed the Comparator Group and used the companies in the Comparator Group as a second market reference for benchmarking and setting context for pay recommendations for our NEOs and other members of the SLMG. In constructing the Comparator Group, we aimed to select the most appropriate companies against which Brighthouse Financial’s compensation-related performance should be measured. The Comparator Group consists of thirteen publicly traded companies in the insurance industry with assets and/or revenues between approximately 0.5 to 2.0 times those of Brighthouse Financial. As Brighthouse Financial exclusively sells individual life and annuities products in the U.S., comparably sized insurers with a meaningfully different business mix or with significant global operations were excluded from the Comparator Group.
Applying these criteria, in August 2021, the Compensation and Human Capital Committee, in consultation with Semler Brossy Consulting Group (“SBCG”), determined not to make changes to our Comparator Group, which consists of the following companies:
| • American Equity Investment Life Holding Company • Ameriprise Financial, Inc. • Assurant, Inc. • Athene Holding Ltd. • CNO Financial Group, Inc. • Equitable Holdings, Inc. |
• Globe Life Inc. • Lincoln National Corporation • Principal Financial Group, Inc. • Reinsurance Group of America, Incorporated • Sun Life Financial Inc. • Unum Group • Voya Financial, Inc. |
The Compensation and Human Capital Committee will continue to annually review the Comparator Group to include companies of a similar size and business mix and with which Brighthouse Financial competes in the talent market.
Role of the Compensation and Human Capital Committee and Others in Determining Compensation
Management’s Role. As discussed above, HR, in consultation with WTW, is primarily responsible for preparing Target TDC recommendations for our SLMG. As part of our year-end compensation planning process, our CEO led the review of each SLMG member’s performance during 2021, participated in developing recommendations for all elements of pay for the members of the SLMG (other than himself), and discussed these recommendations with the Compensation and Human Capital Committee. Based on the CEO’s assessment of each SLMG member’s performance, HR prepared compensation recommendations for each SLMG member (other than the CEO) and presented them for Compensation and Human Capital Committee approval. With respect to CEO compensation, the Compensation and Human Capital Committee and the Independent Directors reviewed the Company’s and Mr. Steigerwalt’s performance, as well as Mr. Steigerwalt’s self-assessment of his performance. The Compensation and Human Capital Committee recommended the CEO’s compensation, including Target TDC and STI and LTI awards, for approval by the Independent Directors.
Compensation and Human Capital Committee’s Role. The Compensation and Human Capital Committee is responsible for establishing and implementing our executive compensation philosophy and structure. Pursuant to its written charter, the Compensation and Human Capital Committee:
| • | assisted the Board in fulfilling its responsibility to oversee the development and administration of compensation programs for our executives and other employees; |
| • | approved the goals and objectives relevant to our CEO’s compensation, evaluated our CEO’s performance in light of such goals and objectives, and recommended, for approval by the Independent Directors, the CEO’s annual compensation based on such evaluation; |
| • | reviewed the compensation of Brighthouse Financial’s other executive officers; |
| • | reviewed and approved our equity and non-equity incentive compensation plans and arrangements and, where appropriate or required, recommended such plans and arrangements for approval by the Board and/or our stockholders; and |
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| • | reviewed our incentive compensation arrangements to confirm that incentive pay does not encourage our executive officers to take unnecessary risks, as well as reviewed and discussed the relationship between our risk management policies and practices, corporate strategy, and senior executive compensation. |
Compensation Consultants’ Role. Under its written charter, the Compensation and Human Capital Committee has the authority to retain advisers to assist in the discharge of its duties. The Compensation and Human Capital Committee has retained SBCG as its independent compensation consultant since November 2017. The Compensation and Human Capital Committee annually assesses SBCG’s independence in accordance with SEC standards and has determined that no conflicts of interest or independence concerns exist. SBCG reports directly to the Compensation and Human Capital Committee, and the Compensation and Human Capital Committee has the sole authority to approve the fees and other terms of the retention of SBCG as its independent compensation consultant. SBCG generally attends all Compensation and Human Capital Committee meetings. SBCG advises the Compensation and Human Capital Committee on all aspects of the Company’s executive compensation program, including our compensation philosophy, policies, and practices; the form, mix, and amount of Target TDC; our STI and LTI programs, including the STI and LTI metrics for 2021 and the forms of equity-based incentives awarded to members of the SLMG in 2021; and trends and best practices relating to executive compensation.
| Component |
Form | Purpose | ||
| Base Salary | Cash (Fixed) | Base salary provides a fixed amount of compensation for service during the year. Base salary is determined based upon a variety of factors, including scope of responsibilities, individual performance, and market data. In line with our pay-for-performance philosophy, Target TDC has been structured so that base salary is the smallest component of pay for our NEOs. | ||
| Short-Term Incentive (STI) Awards | Cash (Variable) | STI awards are annual cash incentive awards that reward NEOs for their performance in 2021. Payout amounts were based both upon the Company’s performance against the 2021 STI Metrics approved by the Compensation and Human Capital Committee and upon the NEO’s individual performance. | ||
| Long-Term Incentive (LTI) Awards | Equity (Variable) | LTI awards are stock-based awards that reward NEOs for their contributions to Brighthouse’s long-term success. 2021 LTI awards consisted of PSUs, which will be paid out at the end of a three-year performance period based on Brighthouse Financial’s performance against quantitative goals, and RSUs, which vest annually in thirds. For the CEO, the LTI Award mix is 70% PSUs and 30% RSUs. For all other NEOs, the LTI Award mix is 60% PSUs and 40% RSUs. | ||
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2021 Target Total Direct Compensation
In January 2021, as part of the annual compensation planning process, the Independent Directors (in the case of the CEO) and the Compensation and Human Capital Committee (in the case of the other NEOs) approved the Target TDC for all NEOs, effective March 6, 2021. 2021 Target TDC for our NEOs is described in the following table.
| Name | Base Salary | Target STI (as % of Base Salary) |
Target LTI (as % of Base Salary) |
Target TDC | ||||
| Eric Steigerwalt |
$925,000 | 200% | 530% | $7,677,500 | ||||
| Ed Spehar (1) |
$600,000 | 150% | 225% | $2,850,000 | ||||
| Conor Murphy |
$600,000 | 145% | 190% | $2,610,000 | ||||
| John Rosenthal |
$550,000 | 195% | 250% | $2,997,500 | ||||
| Christine DeBiase |
$600,000 | 140% | 175% | $2,490,000 | ||||
| (1) | Changes from Mr. Spehar’s 2020 Target TDC included (i) an increase to Target STI from 140% to 150% of base salary and (ii) an increase to Target LTI from 175% to 225% of base salary, resulting in an increase in Target TDC from $2,490,000 to $2,850,000. |
As shown in the following graphs, our CEO’s and other NEOs’ Target TDC, on average, is heavily weighted toward variable, at-risk elements.
2021 STI Metrics. The Compensation and Human Capital Committee established metrics for the 2021 STI Awards that are linked to Brighthouse Financial’s strategic goals. This is consistent with our pay-for-performance philosophy and helps ensure that the NEOs are compensated for their contributions to the Company’s achievement of the business goals set forth in the strategic plan. In establishing the STI metrics, the Compensation and Human Capital Committee was guided by the following principles:
| • | metrics should consist of operational or financial drivers of financial performance that are aligned with Brighthouse Financial’s long-term strategy; |
| • | metrics should be objective and measurable; |
| • | executive officers should have the ability to directly impact Brighthouse Financial’s performance; and |
| • | metrics should not incent management to engage in inappropriately risky behavior. |
For each STI Metric, the Compensation and Human Capital Committee approved a payout curve that includes threshold (payout of 50% of target value), target (100% of target value), and maximum (150% of target value) performance levels based on its evaluation of the likelihood of management achieving those performance levels. STI Awards are based upon the Company’s achievement of these metrics, as well as qualitative factors the Compensation and Human Capital Committee deemed appropriate, including each NEO’s performance and accomplishments during
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2021. For each STI metric, there will be a 0% payout if the Company does not achieve the threshold performance level. The Compensation and Human Capital Committee retains discretion to adjust payout levels upward or downward if such adjustment is aligned with the Company’s strategic goals. The discretion to make any such adjustment is expected to be exercised infrequently. The Compensation and Human Capital Committee’s authority to make positive adjustments to payout amounts is limited, as follows: if threshold performance level is not achieved, then the payout can only be adjusted up to 55% of a metric’s target; if threshold performance is achieved, then the payout can only be adjusted up to 20% above the Company’s actual performance against that metric. The Compensation and Human Capital Committee made no such discretionary adjustments to payouts for fiscal 2021 performance. The Compensation and Human Capital Committee believes the underlying goals for each STI metric were appropriately rigorous and represented a significant challenge for management to achieve. A summary of our 2021 STI Metrics and the rationale for their selection follows.
| STI Metric |
Weighting | Definition | Performance Link | |||
| Expense Target | 40% | Corporate expenses includes functional department expenses, public company expenses, certain investment expenses, retirement funding, and incentive compensation; establishment costs are excluded. | Effectively managing our expenses is a core element of our strategy. Key challenges to meeting our expense target included prudently exiting a number of our transition services agreements with MetLife and transitioning to new service providers. | |||
| Sales | 40% | Annuity sales (75%) – measured as total deposits for annuity products.
Life sales (25%) – includes annualized new premium for term life; first-year paid premium for whole life, universal life, and variable universal life; and total paid premium for indexed universal life. |
Annuities represent the greatest portion of our business. Since our establishment, annuity sales have been a key driver of our revenues and value. We view growth of life insurance sales as important to Brighthouse Financial’s growth prospects and franchise stability. Meeting our sales goals involved achievement by organizations across the Company. Key challenges to achieving our sales goals included the impact of the COVID-19 pandemic on our wholesalers’ ability to expand our distribution relationships. | |||
| Normalized Statutory Earnings | 20% | As described in our quarterly financial supplement, this metric is calculated as follows: statutory pre-tax net gain (loss) from operations adjusted for the favorable or unfavorable impacts of (i) net realized capital gains (losses), (ii) the change in total asset requirement at CTE95, net of the change in our variable annuity reserves, and (iii) unrealized gains (losses) associated with our variable annuities risk management strategy. Normalized statutory earnings (loss) may be further adjusted for certain unanticipated items that impacted our results in order to help management and investors better understand, evaluate, and forecast those results. | Normalized Statutory Earnings is a key metric used by management to measure our insurance companies’ ability to pay future distributions and is reflective of whether our hedging program functions as intended. It also reflects factors that a broad population of STI participants directly impact and influence. This metric is the product of performance across key aspects of management’s strategy, including sales, capital, and expenses. In the long term, normalized statutory earnings contribute to our capacity to generate free cash flow from our operating companies to the parent holding company. Key challenges to achieving our normalized statutory earnings goals included managing the volatility of market performance and interest rates, prudently managing our hedging strategy, and corporate expenses. | |||
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The Compensation and Human Capital Committee reviewed Brighthouse Financial’s actual performance to confirm that Brighthouse Financial’s actions to achieve these results were appropriate and did not create unwarranted risk for the Company. In addition, our Internal Audit department reviewed and certified the Company’s actual performance results for each metric and the 2021 Company Performance Factor. The following table reflects the Company’s performance against each STI metric (payout percentages were rounded to the nearest whole number) and the 2021 Company Performance Factor approved by the Compensation and Human Capital Committee.
| Performance Level | ||||||||||
| STI Metrics (weighting) |
Threshold (50% Payout) |
Target (100% Payout) |
Maximum (150% Payout) |
Actual Results | Payout Percentage (1) | |||||
| Expense Target (40%) |
$925M | $871M | $820M | $ 890M | 87% | |||||
| Sales (40%) |
114% | |||||||||
| Annuity (75%) |
$ 7B | $8.73B | $11.5B | $9.152B | 104% | |||||
| Life (25%) |
$ 55M | $ 75M | $115M | $ 111M | 145% | |||||
| Normalized Statutory Earnings (20%) |
($900M) | $100M | $ 1B | ($ 264M) | 89% | |||||
| 2021 Company Performance Factor |
99% | |||||||||
| (1) | Rounded up to the nearest whole number. |
2021 Short-Term Incentive Awards
CEO Compensation. Mr. Steigerwalt, with input from organizations including HR and Finance, developed corporate performance goals (“CEO Goals”), which consisted of a mix of strategic and operational objectives, that would be used to assess his performance during 2021. In February 2021, the Compensation and Human Capital Committee reviewed the quantitative and qualitative metrics to measure the CEO’s performance and approved the CEO Goals. In January 2022, the Compensation and Human Capital Committee and the Independent Directors considered the Company’s performance overall, Mr. Steigerwalt’s performance against the CEO Goals, his other accomplishments in 2021, and Mr. Steigerwalt’s self-assessment of his performance. The following table describes the 2021 CEO Goals and Mr. Steigerwalt’s key accomplishments.
| CEO Goal |
2021 Accomplishments | |
| Reduce corporate expenses |
• Managed corporate expenses of $890 million, achieving almost 90% of our corporate expense reduction target relative to our first year post-Separation. Expenses above target were driven by duplicate transition-related expenses; strategic investment in enhancing the experience of financial professionals and their clients; and additional expenses related to the establishment and implementation of our new institutional spread margin business. | |
| Increase annuity and life insurance sales |
• Generated approximately $9.2 billion in annuity sales, exceeding our target. • Generated approximately $111 million in life insurance sales, exceeding our target. • Continued to drive wholesaler productivity despite challenges created by the COVID-19 pandemic. | |
| Deliver normalized statutory earnings and EPS growth |
• Delivered normalized statutory loss of $264 million, which was below target. Our strong core performance in our VA business was more than offset by weaker results in our non-VA business. • Delivered $21.50 in adjusted earnings, less notable items per common share, representing 111% growth from 2020 (for information regarding this non-GAAP financial measure and a reconciliation to the most directly comparable GAAP measure, see “Non-GAAP and Other Financial Disclosures”). | |
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| CEO Goal |
2021 Accomplishments | |
| Achieve significant progress toward future state platform |
• Oversaw critical projects to move Brighthouse Financial toward its future state platform, including multiple outsourcing projects and technological transitions, while maintaining business continuity. • Delivered significant growth capabilities to support product development, solutions, and distribution on schedule and within budget. | |
| Continue Focus on Developing and Implementing Sustainability Program |
• Engaged with stakeholders and ESG organizations to understand expectations and obtained feedback regarding sustainability-related activities and disclosures. • Enhanced sustainability disclosures, including the launch of a corporate responsibility section of our corporate website, which includes disclosures and data in key areas identified in our engagement and materiality mapping activities. • Drove sustainability focus across Brighthouse Financial organizations by assessing and addressing ESG-related risks and opportunities, including institution of companywide training on ESG landscape, establishment of cross-functional working groups, and internal processes to identify, manage, and disclose climate-related risks. | |
| Maintain strong culture and talent management |
• Completed succession plans for all SLMG members and critical roles, including a focus on diversity in succession pipelines, and implemented and monitored development plans for successors. • Drove significant progress in meeting aspirational goals of increasing representation of underrepresented groups across the Company. • Drove DE&I initiatives, including numerous programs to foster our inclusive culture. • Drove strong engagement among employees, as demonstrated through the results of the Company’s employee engagement survey. • Conducted executive coaching and leadership training for senior leaders and foundational manager training for all new managers. | |
| Continue to shift the business portfolio |
• Continually assessed potential strategic transactions to drive value creation. • Achieved significant progress on implementation of BlackRock LifePath PaycheckTM, including securing certain required regulatory approvals. • Established and grew our institutional spread margin business, which achieved $5.8 billion of outstanding liabilities at year-end 2021. | |
| Other accomplishments |
• Successfully managed the Company through the continuing COVID-19 pandemic, including enhancing the remote-work environment and preparing the organization for a future flexible, hybrid work model. | |
Mr. Steigerwalt delivered meaningful achievements against all 2021 CEO Goals despite significant challenges resulting from the pandemic. Based on the Company’s performance and Mr. Steigerwalt’s accomplishments, the Compensation and Human Capital Committee recommended, and the Independent Directors approved, the following STI Award to Mr. Steigerwalt.
| Name |
2021 STI Target | 2021 STI Payout Percentage |
2021 STI Award | |||
| Eric Steigerwalt |
$1,850,000 | 99% | $1,831,500 | |||
Compensation of the Other NEOs. In February 2022, the Compensation and Human Capital Committee considered each NEO’s overall performance and achievements in 2021 in relation to Brighthouse Financial’s goals. Mr. Steigerwalt also provided the Compensation and Human Capital Committee with his assessment of the NEOs’ 2021 performance. As part of its assessment of each NEO’s individual performance, the Compensation and Human Capital Committee considered each NEO’s achievements with respect to DE&I, including increasing representation among officers and in
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the succession pipeline; developing diverse employees; fostering an inclusive environment; and other actions to support and advance Brighthouse Financial’s DE&I strategy.
While each NEO’s performance was assessed on an individual basis against goals established early in 2021, the Compensation and Human Capital Committee generally aims to recognize that Brighthouse Financial’s performance is the result of the SLMG’s collective efforts to drive performance. Our NEOs’ 2021 performance highlights are summarized below.
Ed Spehar, Executive Vice President and Chief Financial Officer
| • | Drove financial strategy, focusing on maintaining strong holding company cash and operating company capital positions, which supported stock repurchases of $499 million to achieve our target of $1.5 billion of capital return to stockholders by year-end 2021. This resulted in a 35% reduction of Shares outstanding since the Separation. |
| • | Achieved combined RBC ratio of approximately 500% (above our target of 400-450% in normal market conditions). |
| • | Achieved $594 million of subsidiary ordinary dividends paid to the holding company (above 2021 plan of $330 million) and unlocked $600 million of capital through an extraordinary dividend from Brighthouse Reinsurance Company of Delaware to Brighthouse Life Insurance Company. |
| • | Led issuances of senior debt and preferred stock at attractive rates, extending our maturities and using proceeds to reduce outstanding debt. |
| • | Led continued progress in Finance organization expense optimization, while simultaneously expanding the organization’s capabilities. |
| • | DE&I Achievements: increased diverse representation of employees and officers in the Finance organization; strengthened diverse pipeline through implementation of targeted programs and partnerships with diverse associations and affinity organizations. |
Christine DeBiase, Executive Vice President, Chief Administrative Officer and General Counsel
| • | Successfully managed employee health and safety and company risk and liability in connection with the COVID-19 pandemic and supported Brighthouse Financial in becoming a flexible-first, 50-state employer. |
| • | Supported the execution of critical transactions to strengthen the Company’s capital structure and support Brighthouse Financial’s commitment to return capital to its stockholders, including establishing and launching the institutional spread margin business. |
| • | Delivered high-quality counsel and regulatory advocacy to advance the Company’s product and distribution strategy and key initiatives. |
| • | Supported, through timely advice and collaboration, delivery of future state platform, establishment of new administrative platforms, and TSA exits. |
| • | Further refined CAO target operating model, increasing organizational efficiencies and delivering desired business outcomes. |
| • | DE&I Achievements: oversaw launch of Brighthouse Financial’s corporate responsibility section of our corporate website; increased diverse representation of employees and officers in the CAO organization; sponsored DE&I Council; led advocacy efforts, including relevant pro-bono work and companywide educational events. |
Conor Murphy, Executive Vice President and Chief Operating Officer
| • | Led the Company’s product strategy, development, and pricing in its core and adjacent markets. |
| • | Oversaw the delivery and market launch of enhancements to key products including Brighthouse SmartCare®, Brighthouse Shield® Level Annuities, and Brighthouse SecureAdvantage® 6-Year Fixed Index Annuity. |
| • | Led operations for the Company’s transformation and operating model initiatives. |
| • | Drove development of data-driven service delivery and operational quality improvements for customers and financial professionals. |
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| • | Developed and led the Company’s strategic growth sessions with the Board. |
| • | DE&I Achievements: expanded diverse recruiting in the Actuarial Development Program; hosted cultural action committee sessions; strengthened diverse pipeline for succession planning. |
John Rosenthal, Executive Vice President and Chief Investment Officer
| • | Achieved full year adjusted net investment income of $4.9 billion, significantly above target. |
| • | Oversaw the development and launch of the institutional spread margin business. |
| • | Realized credit losses that were considerably below plan. |
| • | Increased private asset production by 2.6x year-over-year, aligning with the strategy to increase exposure to this sector. |
| • | Advanced integration of ESG into investment strategy, including adoption of ESG investment policy. |
| • | DE&I Achievements: increased diverse representation of employees and officers in the Investments organization; launched Women in Investments resource group; increased investments in women- and diverse-owned business. |
The Compensation and Human Capital Committee considered the foregoing accomplishments and, based on Mr. Steigerwalt’s recommendations, approved the following STI Awards to our other NEOs (STI Payout Percentage may be rounded to the nearest whole number).
| Name |
STI Payout Percentage | 2021 STI Award | ||
| Ed Spehar |
99% | $ 891,000 | ||
| Christine DeBiase |
99% | $ 831,600 | ||
| Conor Murphy |
93% | $ 811,300 | ||
| John Rosenthal |
99% | $1,061,775 | ||
The 2021 STI amounts paid to all of our NEOs are reported in the “Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.”
2021 Long-Term Incentive Awards
In early 2021, the Independent Directors, on the recommendation of the Compensation and Human Capital Committee, approved an LTI Award for Mr. Steigerwalt, and the Compensation and Human Capital Committee approved LTI awards for our other NEOs. The following table shows the breakdown of award vehicles chosen for the 2021 LTI Awards.
|
Type of Award |
|
Percentage of LTI Award |
|
Vesting Schedule | ||||
| Performance Share Units (PSUs) |
CEO: 70% Other NEOs: 60% |
Cliff vest after year 3; the number of Shares issued, if any, is subject to achievement of preestablished performance goals over the 2021-2023 performance period
| ||||||
| Restricted Stock Units (RSUs) |
CEO: 30% Other NEOs: 40% |
Ratable vesting over 3 years (1/3rd vests at each anniversary)
| ||||||
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Our 2021 LTI Awards were issued on March 1, 2021 (the “Grant Date”). The number of RSUs and PSUs awarded were determined by multiplying the dollar amount of the 2021 LTI Award by (1) 70% in the case of PSUs for the CEO or 60% for other NEOs or (2) 30% in the case of RSUs for the CEO or 40% for other NEOs, and then dividing each product by the closing price of a Share on the Grant Date (rounded down to the nearest whole share). The following table shows each NEO’s target 2021 LTI Award based on the value (rounded) of the LTI Award on the Grant Date.
| Name |
LTI Award Value |
Number of PSUs |
Number of RSUs | |||
| Eric Steigerwalt |
$4,902,500 | 83,173 | 35,645 | |||
| Ed Spehar |
$1,350,000 | 19,631 | 13,087 | |||
| Christine DeBiase |
$1,050,000 | 15,269 | 10,179 | |||
| Conor Murphy |
$1,140,000 | 16,577 | 11,051 | |||
| John Rosenthal |
$1,375,000 | 19,995 | 13,330 | |||
Detailed information on the 2021 LTI Awards for each NEO is reported in the “Grants of Plan-Based Awards” table.
The 2021 PSUs will reward our NEOs for Brighthouse Financial’s performance over the 2021-2023 performance period. The number of Shares issued, if any, at the end of the performance period will depend on the Company’s performance. This is consistent with our pay-for-performance philosophy and helps ensure that the NEOs are compensated for their contributions to the Company’s achievement of the business goals set forth in the strategic plan. In establishing the PSU compensation metrics (“PSU Metrics”), the Compensation and Human Capital Committee was guided by the following principles:
| • | metrics should consist of key results-oriented financial measures that reflect the success of Brighthouse Financial’s long-term strategy; |
| • | metrics should be objective and measurable; |
| • | executive officers should have the ability to directly impact Brighthouse Financial’s performance; and |
| • | metrics should not incent management to engage in inappropriately risky behavior. |
Each PSU Metric has a payout curve that includes threshold (payout of 50% of target value), target (100% of target value), and maximum (150% of target value) performance levels. For each PSU metric, there will be a 0% payout if the Company does not achieve the threshold performance level. The Compensation and Human Capital Committee retains discretion to adjust payouts only where performance has been impacted by a significant, non-recurring event and such adjustment is aligned with the Company’s strategic goals. Any such adjustment is expected to be exercised infrequently. The Compensation and Human Capital Committee believes the underlying goals for each PSU Metric are appropriately rigorous and represent a significant challenge for management to achieve. The following table presents a summary of our PSU Metrics.
|
2021 PSU Metrics |
|
Weighting |
|
Definition |
|
Performance Link | ||||||
| Statutory Expense Ratio |
60% | Statutory expense ratio is calculated by dividing expenses by direct premiums, assumed premiums (from sales of our fixed indexed annuities sold by MassMutual), and fee income. | Measures both expense management and sales growth, two of our key strategic drivers, as presented in our statutory financial statements. | |||||||||
| Net Cash Flow to the Holding Company |
40% | Net cash flow to the holding company measures capital distributions from Brighthouse Financial’s operating companies. | Key metric that measures our cash flow, which strengthens our balance sheet and provides management with flexibility to deploy our capital for various purposes, including return of capital to stockholders. | |||||||||
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The treatment of outstanding equity awards upon a termination of employment or a change of control is described below under the heading “Potential Payments Upon Termination or Change in Control.”
In March 2022, the NEOs received payouts with respect to PSUs granted as part of the 2019 LTI program. The value of these PSUs was based on the Company’s performance for the 2019-2021 performance period against PSU metrics approved by the Compensation and Human Capital Committee, as described below. The Compensation and Human Capital Committee made no discretionary adjustments to the payouts of the 2019 PSU awards.
| 2019 PSU Metric (weighting) |
Performance Level | Actual Results |
Payout Percentage (1) | |||||||||||||
| Threshold (50% |
Target (100% |
Maximum (150% | ||||||||||||||
| Statutory Expense Ratio (60%) |
11% | 9% | 7% | 8.88% | 102% | |||||||||||
| Capital Return (40%) |
|
$0.3B | $1.4B | $1.8B |
|
$1.4B |
|
100% | ||||||||
| 2019 PSU Payout |
|
|
|
|
|
|
|
102% | ||||||||
| (1) | Rounded up to the nearest whole number. |
Section 3 – Additional Compensation Practices and Policies
Stock Ownership and Retention Guidelines
We amended our stock ownership and retention guidelines for all members of the SLMG, which includes our NEOs, effective June 10, 2021. The guidelines are intended to align the interests of SLMG members with those of our stockholders by requiring SLMG members to achieve and maintain significant ownership in our stock. The ownership guidelines were set as a multiple of the officer’s current base salary. SLMG members must achieve their ownership levels within five years of becoming an SLMG member. For purposes of calculating the value of an SLMG member’s current ownership, the value of a Share is based on the unweighted average of the closing prices of our common stock over the prior twelve-month period. Ownership includes Shares owned outright (or jointly with a spouse or in a trust over which an executive has investment control), Shares received through any Company award (e.g., option exercises, RSUs, and PSUs), unvested RSUs, and Shares purchased through the Brighthouse Employee Stock Purchase Plan. PSUs are not included in determining an officer’s ownership level until they are converted to Shares based on the Company’s performance at the end of the applicable performance period. SLMG members must retain at least 50% of the net after-tax Shares acquired from settlement or exercise of stock-based awards until the applicable ownership level is achieved. All of our NEOs are in compliance with the Company’s stock ownership and retention guidelines, and no currently serving NEO has sold any Shares since becoming a member of the SLMG. The ownership guidelines applicable to our current NEOs are described in the following table.
| Name (1) |
Ownership Guideline | Status | ||||
| Multiple of Base Salary | Ownership Level (2) | |||||
| Eric Steigerwalt |
6x | $6,000,000 | Achieved | |||
| Ed Spehar |
3x | $1,800,000 | On Track | |||
| Christine DeBiase |
3x | $1,800,000 | Achieved | |||
| John Rosenthal |
3x | $1,650,000 | Achieved | |||
| (1) | Because Mr. Murphy ceased serving as Chief Operating Officer effective March 18, 2022, he is no longer a member of the SLMG subject to the guidelines and has been omitted from this table. |
| (2) | Based on base salary in effect April 1, 2022. |
| (3) | Ownership is as of April 11, 2022. |
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| 58 | Compensation Discussion and Analysis — Section 3 – Additional Compensation Practices and Policies |
Brighthouse Savings Plan and Auxiliary Savings Plan. Our employees, including our NEOs, are eligible to participate in the Brighthouse Services, LLC Savings Plan and Trust (the “Brighthouse Savings Plan”), which is a tax-qualified 401(k) plan. In addition, certain employees, including our NEOs, are eligible to participate in the Brighthouse Services, LLC Auxiliary Savings Plan (the “Auxiliary Plan”). Participants in the Auxiliary Plan receive Company matching and Company non-discretionary contributions that cannot be made to the Brighthouse Savings Plan because a participant’s compensation exceeds certain tax qualified plan contribution limits imposed under the Internal Revenue Code of 1986, as amended (the “Code”). For the Company matching and Company non-discretionary contributions under the Brighthouse Savings Plan and Auxiliary Plan earned in 2021, see the “All Other Compensation” column in the Summary Compensation Table. Company matching and Company non-discretionary contributions in the Brighthouse Savings Plan and the Auxiliary Plan become 100% vested after the participant completes two years of service. Under the Auxiliary Plan, in the event of a change of control, all participants will be fully vested in all contributions, including earnings, under the Auxiliary Plan. In addition, no amendments can be made to the Auxiliary Plan after a change of control that would decrease the value of benefits accrued to any participant under the Auxiliary Plan as of the date of the change of control or change the time or form of distribution under the Auxiliary Plan to eliminate lump sum distributions or further defer the timing of payment. See the narrative following the “Nonqualified Deferred Compensation in 2021” table for additional information about the Auxiliary Plan.
Voluntary Deferred Compensation Plan. The Brighthouse Services, LLC Voluntary Deferred Compensation Plan (“VDCP”), a nonqualified deferred compensation plan, allows a select group of highly compensated employees the opportunity to defer between 10% and 50% of eligible base salary and from 10% to 80% of STI awards. Amounts deferred are notionally invested in investment tracking funds selected by the participant. Participants can elect to have deferred compensation accounts paid, or begin to be paid, in a specific year, which cannot be earlier than May of the third calendar year following the year the compensation was earned and may elect to receive distributions in either a single lump sum or up to 15 annual installments. In the event of a participant’s death before distributions commence or are completed, the participant’s account balance will be paid in a single lump sum to the participant’s beneficiary. In the event of a change of control, no amendments can be made to the VDCP after a change of control that would decrease the amount in a participant’s deferred compensation account accrued under the VDCP as of the date of the change of control or modify the time or form of distributions under the VDCP.
Limited Death Benefit Plan. Brighthouse Services, LLC (“Brighthouse Services”), a Brighthouse Financial subsidiary, maintains the Brighthouse Services, LLC Limited Death Benefit Plan (the “Limited Death Benefit Plan”) to provide a benefit to the participants who die while employed by Brighthouse Services or its designated affiliates. The participants are employees of Brighthouse Financial who are entitled to a “traditional formula” benefit upon retirement under the MetLife, Inc. Auxiliary Retirement Plan (the “MetLife ARP”) and whose employment transferred from MetLife Group, Inc. to Brighthouse Services in connection with the Separation from MetLife, Inc. Under the MetLife ARP, participants are not entitled to a traditional formula benefit if they die while employed by Brighthouse Financial. The Limited Death Benefit Plan provides the participants with a benefit in the form of a final wage payment that approximates the MetLife ARP benefit that would be lost should they die while employed by Brighthouse Financial. The Limited Death Benefit Plan currently has 10 participants, of whom two, Christine M. DeBiase and John Rosenthal, are NEOs. The potential amount of the benefit to be paid to these NEOs is described in the “Potential Payments Upon Termination or Change in Control” table. As an offset to Brighthouse Services’ potential liabilities under the Limited Death Benefit Plan, Brighthouse Services maintains a company-owned life insurance (“COLI”) policy on the life of one participant. Brighthouse Services is the beneficiary under the policy and will receive the COLI proceeds upon the insured’s death.
Brighthouse Financial | 2022 Proxy Statement
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| Compensation Discussion and Analysis — Section 3 – Additional Compensation Practices and Policies | 59 |
Termination and Change of Control Benefits
The Brighthouse Services, LLC Executive Severance Pay Plan, as amended and restated in November 2019 (the “Severance Plan”), provides severance pay and related benefits to certain terminated executive officers in consideration of a release of employment-related claims and subject to compliance with a covenant not-to-compete and other restrictive covenants. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would be payable to our NEOs under the Severance Plan.
The Brighthouse Services, LLC Change of Control Severance Pay Plan (the “Change of Control Plan”) provides a means to help us retain our senior executive officers while a transaction is pending or during the two-year transition period following the close of a transaction and the alignment of their interests with those of our stockholders, promoting maximum stockholder value without impinging on Brighthouse’s flexibility to engage in or successfully transition after a transaction. Under the terms of the Change of Control Plan, a covered participant is eligible to receive severance payments if within two years following a change of control the participant is terminated involuntarily without cause or the participant discontinues employment for “good reason,” or if following the occurrence of a potential change of control the participant is terminated involuntarily without cause within six months prior to a change of control. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would be payable to our NEOs under the Change of Control Plan.
As of December 31, 2021, we had no employment agreements or offer letters with any of our NEOs that provide for individual severance or change of control benefits. On March 31, 2022, Mr. Murphy entered into a Separation Agreement, Waiver and General Release with Brighthouse Services in connection with his separation from Brighthouse Financial. Payments made pursuant to these individual agreements are described in detail following the “Potential Payments Upon Termination or Change in Control” table.
Equity awards held by our NEOs may vest and become payable in the event of termination or a change of control in accordance with the terms of the Employee Plan and the applicable award agreement (including the award agreement supplement).
In addition, certain amounts credited to our NEOs under the Employee Plan may vest and become payable in the event of the NEO’s death or termination on or following the NEO’s “Rule of 65 Date,” which is the date that the sum of a participant’s age plus years of service (which for Brighthouse Financial employees at the time of the Separation includes MetLife service) equals or exceeds 65, provided the participant has at least five years of service. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would be payable to our NEOs under the Employee Plan.
Stock-Based Award Timing Practices
Stock-based LTI awards are expected to be granted on an annual basis to our executive officers, including the NEOs, in connection with Board and Compensation and Human Capital Committee meetings occurring in the first quarter of each year, although stock-based awards may be granted from time to time in connection with the hiring or change of responsibilities of an executive officer.
Tax Deductibility of Executive Compensation
Section 162(m) of the Code generally provides that compensation payable to any of our NEOs in excess of $1 million will not be deductible, except to the extent paid pursuant to a grandfathered “performance-based compensation” arrangement in place as of November 2, 2017. While the Company and the Compensation and Human Capital Committee consider the availability of Section 162(m) deductions in the design of our executive compensation program, the Company and the Compensation and Human Capital Committee reserve the right to pay non-deductible compensation if necessary or appropriate to retain and incent key executives whose performance is important to our success. Notwithstanding the absence of the Section 162(m) exclusion for performance-based compensation, the Compensation and Human Capital Committee expects to continue to place performance conditions on our STI and LTI Awards granted to our NEOs consistent with our pay-for-performance compensation philosophy.
2022 Proxy Statement | Brighthouse Financial
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| 60 | Compensation Discussion and Analysis — Section 4 – 2022 Compensation Program Overview |
Hedging and Pledging Prohibition
Our insider trading policy prohibits all Directors and employees, including our NEOs, from engaging in speculative transactions, including short sales, hedging, and trading in put and call options, with respect to the Company’s securities. The insider trading policy also prohibits Directors and employees, including our NEOs, from pledging Company securities.
Our Board believes that it is in the best interests of the Company and its stockholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. In August 2018, the Board approved and adopted a compensation recoupment policy (the “Clawback Policy”) that allows Brighthouse Financial to seek recoupment of incentive compensation in the circumstances described in the following table. The Board delegated to the Compensation and Human Capital Committee authority to administer the Clawback Policy, including authority to determine in its judgment and sole discretion whether to seek recoupment of any compensation.
| Conduct or Event |
Covered Persons | Compensation Subject to Recoupment |
Covered Period | |||||||||
| Fraud or misconduct causing a material financial restatement |
CEO, CFO, Chief Accounting Officer, or any employee who materially contributed to the fraud or misconduct | Any incentive compensation | Three years prior to the date the Company determines a restatement is necessary | |||||||||
| Conduct, or failure to supervise, which results in material financial or reputational harm |
Any employee who engaged in the misconduct | Any incentive compensation | Period of misconduct | |||||||||
| Material inaccuracy in performance metrics |
Executive officers and any employee who materially contributed to, or failed to supervise with respect to, the material inaccuracy | Excess incentive compensation that was, or will be, paid based on the inaccurate metric | Three years prior to achievement of the performance metric | |||||||||
At the Compensation and Human Capital Committee’s March 2022 meeting, SBCG presented a compensation risk assessment report that it prepared and developed in consultation with Brighthouse Financial’s management, including our Chief Risk Officer, based on its review of our compensation programs. SBCG highlighted the compensation governance policies and Board-level controls in place to manage compensation-related risk and the risk-balancing and risk-mitigating features of our 2021 compensation program, including our strong Clawback Policy, balanced pay mix, caps on incentive payouts, and the Compensation and Human Capital Committee’s ability to exercise discretion. Following a discussion of SBCG’s assessment and findings, the Compensation and Human Capital Committee concluded that the risks arising from the Company’s compensation programs are not reasonably likely to have a material adverse impact on the Company.
Brighthouse Financial | 2022 Proxy Statement
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| Compensation Discussion and Analysis — Section 4 – 2022 Compensation Program Overview | 61 |
Section 4 – 2022 Compensation Program Overview
This section provides an overview of our 2022 executive compensation program, including changes we have made from our 2021 executive compensation program. The 2022 executive compensation program will be more fully discussed in next year’s proxy statement (in connection with our 2023 annual meeting of stockholders).
2021 Say-on-Pay Vote and Stockholder Engagement
At our 2021 Annual Meeting, approximately 94% of the votes cast by our stockholders voted “FOR” our Say-on-Pay proposal to approve the compensation paid to our NEOs. The Compensation and Human Capital Committee considered the results of this vote in reviewing our 2021 executive compensation program and making compensation decisions for our NEOs. The Compensation and Human Capital Committee also considered stockholders’ views and feedback they shared during our 2021-2022 stockholder engagement program, as discussed above (see “Stockholder Engagement”). During our engagements, stockholders overwhelmingly expressed approval of our 2021 compensation program and the quality of our compensation-related disclosures. Our stockholders also expressed support for our 2021 executive compensation program, including our use of quantitative compensation metrics that are aligned with the Company’s strategy to drive long-term value creation. The following table describes the feedback we received related to our compensation program and how we have addressed it.
| What we heard |
What we’re doing | |||
| Stockholders did not identify any substantive or significant concerns with our compensation program or pay practices |
• The Compensation and Human Capital Committee values feedback from our stockholders and considers it in its oversight of our executive compensation program. We describe certain enhancements in this “Section 4.” | |||
| Disclosure about compensation practices was robust |
• It is important for us to be transparent and clear about our compensation program. We aim to provide robust and useful disclosure about our compensation practices. | |||
| Provide disclosure about threshold and maximum performance levels |
• Our STI Metrics and PSU Metrics disclosures have been enhanced to include threshold and maximum performance levels. See “Compensation Discussion and Analysis – Section 1 – Executive Summary – Responding to the COVID-19 Pandemic.” | |||
| Incentive compensation metrics are aligned with the Company’s strategy |
• The Compensation and Human Capital Committee annually reviews our incentive compensation metrics to ensure that they align with our strategy and incentivize behaviors that we believe will create long-term value for our stockholders. See “Proxy Summary – the Brighthouse Financial Story” and “Compensation Discussion and Analysis – Section 1 – Executive Summary.” | |||
| Provide disclosure about how ESG factors, including DE&I, have been incorporated into our compensation program |
• The Compensation and Human Capital Committee has incorporated DE&I factors into its assessment of each NEO’s performance. See “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – 2021 Short-Term Incentive Awards.” | |||
Our 2022 STI program is generally consistent with our 2021 program. The Compensation and Human Capital Committee continues to believe that our STI metrics are linked to Brighthouse Financial’s strategic goals and incentivize behaviors that drive the Company’s success. Our 2022 STI Metrics are unchanged from 2021, except for a change to the definition of one metric, as follows.
Changes to STI Metrics – Definition of Normalized Statutory Earnings. As described in our 2021 Form 10-K, beginning with the first quarter of 2022, the calculation of normalized statutory earnings has been revised to better align with VA reform and, therefore, our combined RBC ratio, where the relevant CTE measure is CTE98 rather than CTE95.
2022 Proxy Statement | Brighthouse Financial
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| 62 | Compensation Discussion and Analysis — Compensation Committee Report |
Our 2022 LTI program is unchanged from our 2021 program. 2022 LTI Awards consist of the same mix of PSUs and RSUs as our 2021 LTI Awards. Our 2022 PSU Metrics are unchanged from 2021. The Compensation and Human Capital Committee continues to believe that our PSU metrics are linked to Brighthouse Financial’s strategic goals and incentivize behaviors that drive long-term value creation. The 2022 PSU metrics measure Brighthouse Financial’s performance over the 2022-2024 performance period. The actual number of Shares issued pursuant to the PSUs, if any, at the end of the performance period will depend on the Company’s actual performance.
In January and February 2022, the Independent Directors (in the case of the CEO) and the Compensation and Human Capital Committee (in the case of the other NEOs) approved the Target TDC for each NEO, effective March 5, 2022, as described in the following table. (1)
| Name |
Base Salary |
Target STI (as % of Base Salary) |
Target LTI (as % of Base Salary) |
Target TDC | ||||
| Eric Steigerwalt (2) |
$1,000,000 | 200% | 600% | $9,000,000 | ||||
| Ed Spehar (3) |
$ 600,000 | 150% | 290% | $3,240,000 | ||||
| Christine DeBiase (4) |
$ 600,000 | 140% | 200% | $2,640,000 | ||||
| John Rosenthal |
$ 550,000 | 195% | 250% | $2,997,500 | ||||
| (1) | Mr. Murphy ceased serving as Chief Operating Officer effective March 18, 2022, and has been omitted from this table. |
| (2) | Changes from Mr. Steigerwalt’s 2021 Target TDC include: (i) Base Salary increase from $925,000 to $1,000,000 and (ii) Target LTI increase from 530% to 600% of base salary, resulting in an increase in Target TDC from $7,677,500 to $9,000,000. |
| (3) | Changes from Mr. Spehar’s 2021 Target TDC include an increase of Target LTI from 225% to 290% of base salary, resulting in an increase in Target TDC from $2,850,000 to $3,240,000. |
| (4) | Changes from Ms. DeBiase’s 2021 Target TDC include an increase to Target LTI from 190% to 200% of base salary, resulting in an increase in Target TDC from $2,610,000 to $2,640,000. |
The Compensation and Human Capital Committee has reviewed the CD&A and discussed the CD&A with management. Based on the Compensation and Human Capital Committee’s review and discussion with management, the Compensation and Human Capital Committee recommended to the Board that the CD&A be included in the Company’s Proxy Statement.
Compensation and Human Capital Committee
Diane Offereins (Chair)
Irene Chang Britt
Eileen Mallesch
Paul Wetzel
Brighthouse Financial | 2022 Proxy Statement
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| Compensation Tables — Summary Compensation Table for 2021 | 63 |
The Summary Compensation Table below presents information regarding compensation for each of our NEOs for each of the years they were so designated during 2021, 2020, and 2019. The accompanying footnotes and narrative provide important information regarding our NEOs’ compensation for those periods and describes, among other things, the manner in which the 2021 compensation for our NEOs was calculated.
Summary Compensation Table for 2021
| Name and Title |
Year | Salary (1) | Bonus | Stock Awards (2) |
Non-Equity Incentive Plan Compensation (3) |
All Other Compensation (4) |
Total | |||||||
| Eric Steigerwalt President and Chief Executive Officer |
2021 | $925,000 | $4,902,429 | $1,831,500 | $255,096 | $7,914,025 | ||||||||
| 2020 | $920,192 | $4,902,445 | $2,035,000 | $275,707 | $8,133,344 | |||||||||
| 2019 | $896,538 | $4,499,982 | $2,780,685 | $312,913 | $8,490,118 | |||||||||
| Ed Spehar Executive Vice President and Chief Financial Officer |
2021 | $600,000 | $1,349,944 | $ 891,000 | $135,617 | $2,976,561 | ||||||||
| 2020 | $600,000 | $1,049,968 | $ 924,000 | $383,243 | $2,957,211 | |||||||||
| 2019 | $253,846 | $597,900 | $ 527,260 | $ 546,000 | $ 79,212 | $2,004,218 | ||||||||
| Christine DeBiase Executive Vice President, Chief Administrative Officer and General Counsel |
2021 | $600,000 | $1,049,983 | $ 831,600 | $131,736 | $2,613,319 | ||||||||
| 2020 | $600,000 | $1,049,968 | $ 924,000 | $137,648 | $2,711,616 | |||||||||
| 2019 | $597,692 | $1,049,968 | $1,048,779 | $147,736 | $2,844,175 | |||||||||
| Conor Murphy (5) Executive Vice President and Chief Operating Officer |
2021 | $600,000 | $1,139,931 | $ 811,300 | $129,997 | $2,681,228 | ||||||||
| 2020 | $600,000 | $1,139,962 | $ 907,000 | $142,460 | $2,789,422 | |||||||||
| 2019 | $597,692 | $1,139,949 | $1,352,823 | $745,707 | $3,836,171 | |||||||||
| John Rosenthal Executive Vice President and Chief Investment Officer |
2021 | $550,000 | $1,374,988 | $1,061,775 | $149,585 | $3,136,348 | ||||||||
| 2020 | $550,000 | $1,374,929 | $1,179,750 | $163,721 | $3,268,400 | |||||||||
| 2019 | $547,885 | $1,099,966 | $1,672,140 | $190,811 | $3,510,802 | |||||||||
| (1) | Salary. Amounts reported in the Salary column reflect the actual amount of base salary paid to each NEO in that year for services to Brighthouse Financial and its subsidiaries. For the relationship of each NEO’s 2021 base salary earnings to that officer’s 2021 Target TDC, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – 2021 Target Total Direct Compensation.” |
| (2) | Stock Awards. Amounts reported in this column reflect the aggregate grant date fair value calculated in accordance with ASC Topic 718, modified to exclude the effect of estimated forfeitures, of the 2021 LTI awards granted as RSUs and PSUs under the Employee Plan. For a description of the methodology and assumptions made in determining the aggregate grant date fair value of Share awards, see Note 10 of the Notes to the Consolidated Financial Statements in our 2021 Form 10-K. |
| 2021 LTI Awards – For further discussion of the performance goals applicable to the PSU awards in 2021, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – 2021 Long-Term Incentive Awards.” The table below reports the grant date fair value of the RSUs and PSUs (at the target performance level) granted as part of the 2021 LTI Award. |
2022 Proxy Statement | Brighthouse Financial
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| 64 | Compensation Tables — Summary Compensation Table for 2021 |
The following table reports the grant date fair value of RSUs and PSUs (at the target performance level) granted to our NEOs.
| Name |
2021 RSUs | Grant Date Value of 2021 RSUs |
2021 PSUs |
Grant Date Value of 2021 PSUs | ||||
| Eric Steigerwalt |
35,645 | $1,470,712 | 83,173 | $3,431,717 | ||||
| Ed Spehar |
13,087 | $ 539,969 | 19,631 | $ 809,975 | ||||
| Christine DeBiase |
10,179 | $ 419,985 | 15,269 | $ 629,998 | ||||
| Conor Murphy |
11,051 | $ 455,964 | 16,577 | $ 683,967 | ||||
| John Rosenthal |
13,330 | $ 549,995 | 19,995 | $ 824,993 | ||||
The following table reports the hypothetical grant date fair value of the PSUs if maximum performance was achieved. Maximum payout of the PSUs is 150% of target.
| Name |
Grant Date Value of 2021 PSUs at Maximum Performance Level | |
| Eric Steigerwalt |
$5,147,556 | |
| Ed Spehar |
$1,214,942 | |
| Christine DeBiase |
$ 944,978 | |
| Conor Murphy |
$1,025,930 | |
| John Rosenthal |
$1,237,470 | |
| (3) | Non-Equity Incentive Plan Compensation. The amounts in this column represent each NEO’s 2021 STI Award earned in respect of service in 2021. The terms of the STI Award are summarized under “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – 2021 STI Metrics.” The table below shows the amount earned by each NEO in 2021 under the STI Award. |
| Name |
2021 STI Award | |
| Eric Steigerwalt |
$1,831,500 | |
| Ed Spehar |
$ 891,000 | |
| Christine DeBiase |
$ 831,600 | |
| Conor Murphy |
$ 811,300 | |
| John Rosenthal |
$1,061,775 | |
| (4) | All Other Compensation. This column includes Company contributions to each NEO in respect of 2021 to the Brighthouse Savings Plan and the Auxiliary Plan, in the following amounts. |
| Name |
Brighthouse Savings Plan |
Auxiliary Plan | ||
| Eric Steigerwalt |
$26,994 | $228,102 | ||
| Ed Spehar |
$26,994 | $108,623 | ||
| Christine DeBiase |
$26,997 | $104,739 | ||
| Conor Murphy |
$26,993 | $103,004 | ||
| John Rosenthal |
$26,994 | $122,591 | ||
| (5) | Mr. Murphy ceased serving as Chief Operating Officer effective March 18, 2022, and will depart Brighthouse Financial at a later date. |
Brighthouse Financial | 2022 Proxy Statement
Table of Contents
| Compensation Tables — Grants of Plan-Based Awards in 2021 | 65 |
Grants of Plan-Based Awards in 2021
The following table presents individual awards granted to each NEO for 2021. For information about these awards, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program.”
|
Name
|
Grant Type
|
Grant Date (1)
|
Approval
|
Estimated future payouts under non-equity incentive plan awards
|
Estimated future payouts under equity
|
All Other Awards: Number of Shares of
|
Grant Date Fair Value of Stock and Option
|
|||||||||||||||||||||||||||||||||||
|
Threshold (2)
|
Target
|
Maximum (2)
|
Threshold (2)
|
Target
|
Maximum (2)
|
|||||||||||||||||||||||||||||||||||||
| Eric |
Short-Term Incentive
|
$
|
925,000
|
|
$
|
1,850,000
|
|
$
|
2,775,000
|
|
||||||||||||||||||||||||||||||||
| Restricted Stock Units (4)
|
|
3/1/21
|
|
|
2/19/21
|
|
|
35,645
|
|
$
|
1,470,712
|
| ||||||||||||||||||||||||||||||
|
Performance Share
|
|
3/1/21
|
|
|
2/19/21
|
|
|
41,586
|
|
|
83,173
|
|
|
124,759
|
|
$
|
3,431,717
|
| ||||||||||||||||||||||||
| Ed Spehar |
Short-Term Incentive
|
$
|
450,000
|
|
$
|
900,000
|
|
$
|
1,350,000
|
|
||||||||||||||||||||||||||||||||
| Restricted Stock Units (4)
|
|
3/1/21
|
|
|
2/19/21
|
|
|
13,087
|
|
$
|
539,969
|
| ||||||||||||||||||||||||||||||
| Performance Share
|
|
3/1/21
|
|
|
2/19/21
|
|
|
9,815
|
|
|
19,631
|
|
|
29,446
|
|
$
|
809,975
|
| ||||||||||||||||||||||||
| Christine |
Short-Term Incentive
|
$
|
420,000
|
|
$
|
840,000
|
|
$
|
1,260,000
|
|
||||||||||||||||||||||||||||||||
| Restricted Stock Units (4)
|
|
3/1/21
|
|
|
2/19/21
|
|
|
10,179
|
|
$
|
419,985
|
| ||||||||||||||||||||||||||||||
| Performance
Share
|
|
3/1/21
|
|
|
2/19/21
|
|
|
7,634
|
|
|
15,269
|
|
|
22,903
|
|
$
|
629,998
|
| ||||||||||||||||||||||||
| Conor Murphy(6) |
Short-Term Incentive
|
$
|
435,000
|
|
$
|
870,000
|
|
$
|
1,305,000
|
|
||||||||||||||||||||||||||||||||
| Restricted Stock Units (4)
|
|
3/1/21
|
|
|
2/19/21
|
|
|
11,051
|
|
$
|
455,964
|
| ||||||||||||||||||||||||||||||
| Performance Share Units (5)
|
|
3/1/21
|
|
|
2/19/21
|
|
|
8,288
|
|
|
16,577
|
|
|
24,865
|
|
$
|
683,967
|
| ||||||||||||||||||||||||
| John |
Short-Term Incentive
|
$
|
536,250
|
|
$
|
1,072,500
|
|
$
|
1,608,750
|
|
||||||||||||||||||||||||||||||||
| Restricted Stock Units (4)
|
|
3/1/21
|
|
|
2/19/21
|
|
|
13,330
|
|
$
|
549,995
|
| ||||||||||||||||||||||||||||||
| Performance
Share
|
|
3/1/21
|
|
|
2/19/21
|
|
|
9,997
|
|
|
19,995
|
|
|
29,992
|
|
$
|
824,993
|
| ||||||||||||||||||||||||
| (1) | The 2021 LTI awards of PSUs and RSUs under the Employee Plan were approved by our Compensation and Human Capital Committee on February 19, 2021, and granted effective March 1, 2021. |
| (2) | For the STI and PSUs, the Threshold and Maximum reflect 50% and 150% of target, respectively. |
| (3) | Amounts reported in this column reflect the aggregate grant date fair value of all equity-based awards granted to the NEOs in 2021 calculated in accordance with ASC Topic 718, modified to exclude the effect of estimated forfeitures. For a description of the methodology and assumptions made in determining the aggregate grant date fair value of equity-based awards, see Note 10 of the Notes to the Consolidated Financial Statements in our 2021 Form 10-K. The aggregate grant date fair value of the PSUs reflects the probable outcome of the performance conditions on the grant date. |
2022 Proxy Statement | Brighthouse Financial
Table of Contents
| 66 | Compensation Tables — Grants of Plan-Based Awards in 2021 |
| (4) | The Compensation and Human Capital Committee awarded RSUs to our NEOs as part of their 2021 LTI Awards under the Employee Plan. RSUs are scheduled to ratably vest at a rate of one-third of the award on the first three anniversaries of the Grant Date listed. The value at vesting will depend on the price of a Share at the time of vesting. For additional information about the RSUs, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – 2021 Long-Term Incentive Awards.” |
| (5) | The Compensation and Human Capital Committee awarded PSUs to our NEOs as part of their 2021 LTI Awards under the Employee Plan. PSUs are scheduled to cliff vest on March 1, 2024. Whether any PSUs actually vest and the value at vesting will depend both on the price of a Share at the time of vesting and on Brighthouse Financial’s actual achievement of metrics approved by the Compensation and Human Capital Committee (Statutory Expense Ratio (60%) and Net Cash Flow to the Holding Company (40%)). Each PSU Metric has a threshold performance level (payout of 50% of target value), target performance level (100% of target value), and maximum performance level (150% of target value). For additional information about the PSUs, see “Compensation Discussion and Analysis – Section 2 – Our 2021 Executive Compensation Program – 2021 Long-Term Incentive Awards.” |
| (6) | Mr. Murphy ceased serving as Chief Operating Officer effective March 18, 2022, and will depart Brighthouse Financial at a later date. Following the termination of his employment, outstanding awards held by Mr. Murphy will be treated in accordance with the Employee Plan and the applicable award agreements. |
Brighthouse Financial | 2022 Proxy Statement
Table of Contents
| Compensation Tables — Outstanding Equity Awards at 2021 Fiscal Year End | 67 |
Outstanding Equity Awards at 2021 Fiscal Year End
The following table provides information concerning unexercised options and stock-based awards that have not vested for each NEO as of December 31, 2021.
| Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||||||||
| Name
|
Award
|
Number
of
|
Number
of
|
Option
|
Option
|
Number of
|
Market Value of
|
Equity
|
Equity
|
|||||||||||||||||||||||||
| Eric Steigerwalt |
5/23/2018 (NQSO) |
92,137 | 0 | $ | 53.47 | 2/29/2028 | ||||||||||||||||||||||||||||
| 3/1/19 (RSU) |
11,547 | $ | 598,135 | |||||||||||||||||||||||||||||||
| 3/1/19 (PSU) |
82,447 | $ | 4,270,755 | |||||||||||||||||||||||||||||||