Our commitment to good corporate governance is reflected in our Governance Guidelines, which describe the Board’s views on a wide range of governance topics. These Governance Guidelines are reviewed annually by the Nominating and Governance Committee, and any changes deemed appropriate are submitted to the full Board for its consideration. Our Proxy Statement discusses our robust corporate governance practices, which are designed to support sustained value creation for our shareholders.
The Board works with management to set the short- and long-term strategic objectives of our company and to monitor progress on those objectives. Strategic topics are discussed at each Board meeting, and the Board and management participate in an annual strategy session. In setting and monitoring strategy, the Board, along with management, considers the risks and opportunities that impact the long-term sustainability of our business model and whether the strategy is consistent with our core values, culture and risk appetite. The Board regularly reviews our progress with respect to our strategic goals, the risks that could impact the long-term sustainability of our business and the related opportunities that could enhance our long-term sustainability.
The Board oversees these efforts in part through the following standing committees:
- Audit Committee.
- Compensation Committee.
- Investment and Capital Markets Committee.
- Nominating and Governance Committee.
- Risk Committee.
The Board of Directors, acting through its committees, is responsible for oversight of environmental, social and governance (ESG) factors that are likely to impact sustainable value creation. Each Board committee has a written charter, which contains specific responsibilities, including risk oversight functions. Rather than having a single committee responsible for all ESG matters, our Board committees share ESG oversight; each committee is assigned responsibility for oversight of matters most applicable to its charter responsibilities. We believe that allocating responsibility to a committee with relevant knowledge and experience improves the oversight of risks and opportunities. For example, the Nominating and Governance Committee oversees our workforce diversity and inclusion efforts, public policy initiatives and community relations; the Risk Committee oversees strategies pertaining to management of catastrophe exposure; and the Compensation Committee oversees implementation of our pay-for-performance philosophy and practices designed to ensure equitable pay across the organization. The Board and each of its committees evaluate and discuss the allocation of oversight responsibility every year, along with their respective performance and effectiveness. In addition, our ESG management committee — a multi-disciplinary committee consisting of senior company executives — drives the prioritization and management of, and reporting on, sustainability issues.
With a focus on continually improving the ability of the Board to provide informed oversight, the Nominating and Governance Committee oversees educational sessions for directors on matters relevant to our company, business plan and risk profile. Recent topics of those sessions focused, for example, on the role that corporate culture and board oversight played in the latest publicized lapses in corporate governance at other firms.
To learn more about the specific risk oversight functions delegated to each Board Committee and our Enterprise Risk Management activities, see the Capital & Risk Management section of this site, and view our Proxy Statement to see specific Board Committee responsibilities.
An effective and independent Board of Directors is critical to good corporate governance. All of our directors, other than our Chairman and CEO, are independent. All committees are comprised of independent directors, other than the Executive Committee on which our Chairman and CEO serves. Independent members of the Board and each of the committees regularly meet in executive session with no member of management present.
The Board has an independent Lead Director. This structure facilitates the continued strong communication and coordination between management and the Board. The independent Lead Director coordinates the efforts of the independent directors. Our Governance Guidelines provide that the Board must have either an independent Chair or, whenever the Chair is a member of management or not otherwise independent, an independent Lead Director.
The members of the Board have a broad range of skills, expertise, industry knowledge, diversity of opinion and contacts relevant to our business. The current members of our Board are also diverse in terms of gender and ethnicity. The Board and the Nominating and Governance Committee carefully consider the importance of diverse viewpoints, backgrounds and experiences and other demographics when selecting future director nominees.
Another factor considered in board composition is maintaining a balanced approach to board tenure and age. Our intent is to ensure an appropriate mix of long-serving and new directors.
Our director and executive compensation programs are designed to reinforce a long-term perspective and to align the long-term interests of our executives and directors with those of our shareholders.
- Under the director compensation program, non-management directors currently receive more than 50% of their annual compensation in the form of deferred stock units. The shares underlying these units are not distributed to a director until at least six months after the director leaves the Board, aligning director interests with those of long-term shareholders.
- Non-management directors are required to accumulate and retain a level of ownership of Travelers equity securities equal to four times the director’s most recent annual deferred stock award.
- Directors can elect to have their annual retainers and committee chair fees paid in common stock units that are credited to their deferred compensation account and distributed at a later date designated by the director.
With our pay-for-performance philosophy and compensation objectives as our guiding principles, we deliver annual executive compensation through the following elements:
|Element||Metrics||CEO Compensation Mix||Other NEOs|
|Performance-Based Cash||Annual Bonus||
|Performance-Based Equity||Long-term Incentives||
- Our executive compensation program links compensation to the achievement of our short- and long-term financial goals and strategic objectives.
- As part of our longstanding pay-for-performance philosophy, we utilize performance measures that are intended to align compensation with the creation of shareholder value and reinforce a long-term perspective.
- The Compensation Committee evaluates a broad range of financial and non-financial factors when awarding performance-based incentives each year.
- The Compensation Committee believes that the most senior executives, who are responsible for the development and execution of our strategic and financial plans, should have the largest portion of their compensation tied to performance-based compensation, including stock based compensation, the ultimate value of which is dependent on the performance of our stock price over time and our three-year core return on equity. Accordingly, the proportion of total compensation that is performance-based increases with successively higher levels of responsibility; our senior-most executives have the largest portion of their compensation tied to performance-based incentives, including long-term, stock-based incentives.
- Our executive compensation program reflects established and evolving corporate
governance standards, including:
- a robust share ownership requirement of the lesser of 150,000 shares or the equivalent value of five times base salary for the CEO, the lesser of 30,000 shares or the equivalent value of three times base salary for vice chairmen and executive vice presidents and the lesser of 5,000 shares or the equivalent of their base salary for senior vice presidents;
- a clawback policy with respect to cash and equity incentive awards to our executive officers;
- the prohibition of hedging transactions as specified in our securities trading policy; and
- the prohibition of pledging shares without the consent of Travelers (no pledges have been made).
- Annually Elected Directors: The annual election of directors reinforces the Board’s accountability to shareholders.
- Proxy Access: Shareholders may include director nominees in our Proxy Statement if certain conditions are met.
- Majority Vote Standard for Director Elections: In uncontested elections, a director who receives fewer votes ‘‘For’’ his or her election than ‘‘Against’’ must promptly tender his or her resignation to the Board.
- Single Voting Class: Travelers common stock is the only class of shares outstanding.
- No Poison Pill: Travelers does not have a poison pill plan.
- Right to Call a Special Meeting: Special meetings of the shareholders may be called at any time by a shareholder or shareholders holding 10% of voting power of all shares entitled to vote, 25% where the meeting relates to a business combination.