James P. Gorman    

April 5, 2019

Dear fellow shareholders,

I cordially invite you to attend Morgan Stanley’s 2019 annual meeting of shareholders that will be held on Thursday, May 23, 2019, at our offices at 2000 Westchester Avenue, Purchase, New York. I hope that you will be able to attend, and, if not, I encourage you to vote by proxy. Your vote is very important.

Morgan Stanley’s business and financial results in 2018 were the best in our history. Our mix of businesses not only provided earnings stability but also earnings growth. We will continue to grow our business by executing our strategy, and investing in our people and culture. While a robust strategy can cause a company to be successful at any point in time, a strong culture ensures enduring success over decades.

Morgan Stanley reported record revenues, pretax profit* and net income* for 2018. While we experienced a weaker fourth quarter as the market deteriorated near year end, firmwide net revenues were over $40 billion for the year. Each of our businesses delivered a strong performance, with Investment Banking and Wealth Management reporting their best revenues ever. Return on equity of 11.5%* was in the range we outlined at the beginning of the year.

Our Board of Directors and management value the views of our shareholders and we have engaged in discussions on a broad range of topics, including our strategy, financial performance, executive compensation, corporate governance and environmental and social goals. Based on your feedback, the Board in recent years has amended our bylaws to implement proxy access and enhanced disclosure of Board evaluations, director orientation and education, succession planning, Environmental, Social and Governance matters and alignment of compensation and performance. The Board is also responsible for overseeing the Firm’s practices and procedures relating to culture, values and conduct and receives regular reporting on these matters.

In 2018, Mary Schapiro was elected to your Board. She brings extensive finance, risk management and regulatory expertise to the Firm. This brings the proportion of women Directors to nearly a third, and underscores our commitment to diverse talent and leadership across all levels of Morgan Stanley. Ryosuke Tamakoshi is stepping down from our Board after eight years. I thank him for his dedicated service and many contributions to the Board. We are nominating Takeshi Ogasawara to replace him as an MUFG director and know we will benefit from Mr. Ogasawara’s many years of financial services experience.

As we do each year, the Board of Directors and executive management team evaluate our strategy and refine our goals and priorities to ensure we are working for the long-term benefit of our shareholders. Last year, we established clear strategic objectives for 2018 and 2019, almost all of which have been accomplished in the full year 2018. With a strong and diverse global franchise in place, our management team will continue to drive forward our strategic objective of generating sustained higher returns. We will do this by expanding our competitive leadership and making appropriate investments in our businesses, while managing expenses and capital.

In addition to the right strategy, long-term and enduring success lies in having a strong culture and talented employees who live our values. At Morgan Stanley, our culture guides our employees, and our values inform everything we do.

A diverse employee base and a talented leadership pipeline are critical to delivering the best of the Firm to our clients. We are committed to an inclusive work environment where all employees can thrive. Our commitment to diversity is expressed as belonging as much as inclusion, and we have numerous initiatives aimed at providing our employees opportunities for leadership roles and empowering them to achieve the visibility and recognition they deserve.

Our long-term success will also be driven by the depth of talent and leadership across our Firm. We have an experienced management team and our businesses have a deep bench of talent. I have great confidence in our senior leaders and we are excited about the future.

2018’s record year demonstrates the strength of the Firm. We are focused on supporting our clients and are prepared to respond to market environments appropriately. Over the long-term, we are excited about the growth opportunities across the global economy.

I hope you will read my Letter to Shareholders where I discuss our achievements and opportunities for the future in greater detail. I look forward to meeting you at the Annual Meeting next month.

Thank you for your support of Morgan Stanley.

Very truly yours,

James P. Gorman

Chairman and Chief Executive Officer

^*  See page 61 for the “Notes to the Compensation Discussion and Analysis,” which provide additional information regarding the metrics referenced and non-GAAP measures.

Item 1

Item 2

Item 3

Item 4

Item 1

Key Statistics on Board Succession

5

New directors since 2016 (upon election at the annual meeting)

4.7 years

Average tenure of Board upon
election at the annual meeting

64

Average age of Board upon election at the annual meeting

Combine a broad spectrum of experience and expertise with a reputation for integrity;

Have experience in positions with a high degree of responsibility;

Are leaders in the companies or institutions with which they are affiliated;

Can make contributions to the Board and management;

Represent the interests of shareholders; and

Possess a willingness to appropriately challenge management in a constructive manner.

Leadership

(including strategic

planning)

(13)

International / Global

Perspective

(11)

Financial Services /

Market Experience

(10)

Financial / Accounting

Expertise

(11)

Risk Management

(10)

Operations /

Technology

(9)

Talent

(management

development and

succession)

(10)

Public Policy /

Sustainability

(6)

Public Company

Experience /

Corporate Governance

(10)

12

Non-management directors

9

Directors who are current or former CEOs

6

Directors born outside of the United States

31%

Female directors

Elizabeth Corley, 62

Independent Director

Director Since: 2018

Morgan Stanley Committees:

•  Nominating and Governance

Alistair Darling, 65

Independent Director

Director Since: 2016

Morgan Stanley Committees:

•  Audit

•  Risk

Qualifications, Attributes and Skills:

Qualifications, Attributes and Skills:

Ms. Corley’s leadership positions, including through her role as CEO of AllianzGI, bring to the Board extensive management experience as well as markets and financial services experience and international perspective.

Mr. Darling’s service as a former member of the British Parliament and as Chancellor of the Exchequer brings to the Board strong leadership, risk management and regulatory experience, as well as insight into both the global economy and the global financial system.

Thomas H. Glocer, 59

Independent Lead Director

Director Since: 2013

Morgan Stanley Committees:

•  CMDS

•  Operations and Technology

James P. Gorman, 60

Chairman

Director Since: 2010

Qualifications, Attributes and Skills:

Qualifications, Attributes and Skills:

Mr. Glocer’s leadership positions, including in his capacity as Independent Lead Director appointed by our independent directors and as CEO of Thomson Reuters Corporation, bring to the Board extensive management experience as well as operational and technology experience and international perspective.

As CEO of the Company, Mr. Gorman is a proven leader with an established record as a strategic thinker backed by strong operating, business development and execution skills and brings an extensive understanding of Morgan Stanley’s businesses and decades of financial services experience.

Robert H. Herz, 65

Independent Director

Director Since: 2012

Morgan Stanley Committees:

•  Audit (Chair)

•  Nominating and Governance

Nobuyuki Hirano, 67

Non-management Director

Director Since: 2015

Morgan Stanley Committees:

•  Risk

Qualifications, Attributes and Skills:

Qualifications, Attributes and Skills:

Mr. Herz brings to the Board extensive regulatory, public accounting, financial reporting, risk management and financial experience through his private and public roles, including as Chairman of the Financial Accounting Standards Board.

In his role as Chairman and former President and Group CEO at MUFG and its associated companies, Mr. Hirano brings to the Board global leadership as well as international banking, financial services, risk management and regulatory expertise.

Jami Miscik, 60

Independent Director

Director Since: 2014

Morgan Stanley Committees:

•  Operations and Technology (Chair)

•  Risk

Dennis M. Nally, 66

Independent Director

Director Since: 2016

Morgan Stanley Committees:

•  Audit

•  CMDS

Qualifications, Attributes and Skills:

Qualifications, Attributes and Skills:

Ms. Miscik brings to the Board extensive leadership in navigating geopolitical, macroeconomic and technology risks through her private and public roles, including as CEO and Vice Chair of Kissinger and her service with the Central Intelligence Agency.

Mr. Nally brings to the Board over 40 years of regulatory, public accounting and financial reporting experience, including through his role as Chairman of PricewaterhouseCoopers International Ltd., as well as extensive technology and management experience.

Takeshi Ogasawara, 65

Non-management Director

Director Nominee

Morgan Stanley Committees:

•  Operations and Technology

Hutham S. Olayan, 65

Independent Director

Director Since: 2006

Morgan Stanley Committees:

•  CMDS (Chair)

Qualifications, Attributes and Skills:

Qualifications, Attributes and Skills:

As an advisor and former Deputy President of MUFG Bank, Mr. Ogasawara brings to the Board over 35 years of banking experience and international, risk management, compliance and strategic expertise.

Ms. Olayan’s leadership positions, including as Chair of The Olayan Group’s board of directors and President and CEO of The Olayan Group’s U.S. operations, bring to the Board extensive management experience and her financial experience in the U.S. and internationally, including in the Middle East, strengthens the Board’s global perspective.

Mary L. Schapiro, 63

Independent Director

Director Since: 2018

Morgan Stanley Committees:

•  Operations and Technology

Perry M. Traquina, 62

Independent Director

Director Since: 2015

Morgan Stanley Committees:

•  Audit

•  Risk (Chair)

Qualifications, Attributes and Skills:

Qualifications, Attributes and Skills:

Ms. Schapiro’s leadership experience, including at the SEC, FINRA and the CFTC, brings to the Board extensive legal and regulatory compliance, finance, risk management, and public policy and government affairs experience as well as markets and financial services perspective.

Mr. Traquina brings to the Board extensive senior executive, regulatory and risk management experience, as well as investor perspective and market knowledge from his over 30 years at the global investment management firm Wellington.

Rayford Wilkins, Jr., 67

Independent Director

Director Since: 2013

Morgan Stanley Committees:

•  CMDS

•  Nominating and Governance (Chair)

Qualifications, Attributes and Skills:

Mr. Wilkins brings to the Board extensive management, technology and operational experience, as well as international perspective, through the various management positions he held at AT&T.

Directors may not stand for election if they will be 72 years old at the time of election.

Our Board conducts an ongoing review of Board composition and succession planning, resulting in substantial refreshment of the Board and a diversity of skills, attributes and perspectives on the Board.

Upon election at the annual meeting, the average tenure of the members of the Board will be approximately 4.7 years.

Our Board has a majority of independent directors. Our Chairman is the only member of management who serves as a director.

Our Independent Lead Director is selected from and by the independent directors and has expansive duties set forth in our Corporate Governance Policies. The Independent Lead Director chairs regularly scheduled executive sessions without the Chairman present. See “Board Leadership Structure and Role in Risk Oversight.”

Mr. Wilkins was appointed a member of CMDS Committee and concluded service on the Operations and Technology Committee.

Ms. Corley was appointed a member of the Nominating and Governance Committee.

Ms. Schapiro was appointed a member of the Operations and Technology Committee.

Mr. Ogasawara will be appointed a member of the Operations and Technology Committee upon his election at the annual meeting.

Conducts an annual strategy offsite with the CEO, Operating Committee and senior management to review the Company’s long-term strategy.

Receives regular reporting regarding strategy at Board meetings as well as by the CEO and Operating Committee outside of regularly scheduled meetings.

Reviews the Company’s annual strategic presentation to shareholders, which summarizes the Company’s progress on the prior year’s strategic plan, provides an overview of long-term strategic priorities and includes specific financial and non-financial goals. The Company’s 2019 strategic presentation is available at www.morganstanley.com/about-us-ir.

Board members meet with local management and independent control functions throughout the world and have visited several of our global offices.

The Independent Lead Director and committee chairs meet with management between regularly scheduled meetings for discussion of key items and to develop Board and committee agendas and provide feedback regarding information reported to the Board and on other topics to be reviewed.

The Company’s Chief Financial Officer (CFO), Chief Legal Officer (CLO) and Chief Risk Officer (CRO), as well as the heads of the Company’s operating units and other officers, regularly attend Board meetings and maintain an ongoing dialogue with Board members between Board meetings.

The CMDS Committee, in conjunction with the entire Board, annually reviews succession plans for the CEO and senior executives.

The CMDS Committee oversees CEO and senior management succession and development planning, which covers unexpected as well as planned events and is formally reviewed, in conjunction with the entire Board, at least annually.

Our CEO and our Chief Human Resources Officer review recommendations and evaluations of potential internal CEO and senior management successors, and review their qualifications, skills, accomplishments and developmental areas.

Potential internal CEO and senior management successors regularly attend Board meetings and engage with Board members periodically between Board meetings, including during preparatory meetings, client-related events and visits to our offices around the world. These interactions provide the Board with the knowledge of the Company’s executive talent that is critical to the Company’s succession planning.

Duties and Responsibilities

Board Structure and Composition,
including Board Succession
Planning

Culture

Process

Information and Resources

Execution

Key Strengths/Areas for

Improvement

Areas of Focus

Our Corporate Governance Policies are consistent with the Investor Stewardship Group Corporate Governance Principles for U.S. listed companies.

All directors are elected annually; in uncontested director elections, directors are elected by a majority of votes cast.

Proxy access permits up to 20 shareholders owning 3% or more of our stock continuously for at least three years to nominate the greater of two directors or up to 20% of our Board and include those nominees in our proxy materials.

Our Board has an Independent Lead Director with expansive duties. See “Board Leadership Structure and Role in Risk Oversight — Independent Lead Director.”

Shareholders who own at least 25% of common stock have the ability to call a special meeting of shareholders.

There are no supermajority vote requirements in our charter or bylaws.

We do not have a “poison pill” in effect.

Shareholders and other interested parties may contact any of our Company’s directors.

Prohibits Morgan Stanley from making U.S. political contributions.

Provides that Morgan Stanley informs its principal U.S. trade associations not to use payments made by Morgan Stanley for election-related activity at the federal, state or local levels.

Provides that principal U.S. trade association memberships and expenditures relating to such memberships are reviewed annually with the Government Relations Department and the Nominating and Governance Committee.

Provides a link to examples of principal U.S. trade associations that the Company belongs to on the Company’s website.

Addresses oversight of lobbying activities, as well as expenditures related thereto, by the Vice Chairman of the Company who reports to the Chairman and CEO, and oversight of significant lobbying priorities and expenditures by the Nominating and Governance Committee.

Confirms that Morgan Stanley discloses publicly all U.S. federal lobbying costs as required by law, including dues attributable to lobbying by U.S. trade associations.

Provides that the Nominating and Governance Committee oversees the Corporate Political Activities Policy Statement and the activities addressed by it.

Sustainable Finance and Investing

Morgan Stanley is committed to harnessing the power of capital markets to create sustainable, long-term value for clients and stakeholders.

• We announced a public commitment to mobilize $250 billion to support low-carbon solutions by 2030, and deployed nearly $30 billion in the first year.

• Morgan Stanley Wealth Management Investing with Impact assets reached approximately $25 billion, more than double our five-year goal of raising $10 billion from 2013 to 2018.

• Morgan Stanley Sustainability Research published thematic client-facing research reports on plastic, data privacy and governance.

• Morgan Stanley Investment Management, a signatory to the UN’s Principles for Responsible Investment, through its corporate governance team engaged with over 100 companies on ESG issues ranging from climate change to the opioid epidemic.

Established in 2013, the Institute focuses on accelerating the adoption of sustainable investing strategies. Chaired by Morgan Stanley’s Chairman and CEO, an Advisory Board of prominent leaders from business, academia and leading non-governmental organizations guide the Institute’s work and strategic priorities.

• We expanded the Morgan Stanley Sustainable Investing Fellowship to our London office, with the goal of developing the next generation of sustainable investing professionals.

• The Institute also continued to publish content for investors focused on the integration of ESG into investment decisions, including a paper entitled Weathering the Storm: Integrating Climate Resilience into Real Assets Investing, which provides investors with a framework for understanding climate risk in the investment life cycle.

Environmental and Social Risk Management

Environmental and social risk management is a priority for Morgan Stanley. The Company’s due diligence and risk management processes are designed to identify, analyze and address potentially significant environmental and social issues that may confront us or our clients. Our processes include monitoring for emerging environmental and social risks and related trends, as well as engaging with clients and other stakeholders as appropriate.

• We met with leaders of indigenous tribes to discuss issues impacting their communities.

• We also participated in a roundtable with environmental non-governmental organizations to discuss how financial institutions are addressing climate change.

Corporate Sustainability

Morgan Stanley is committed to responsible corporate citizenship, and views strong sustainability performance as a means to reduce risk and enhance value for key stakeholders.

• We announced a five-year carbon neutrality goal, committing to source 100% of our global energy needs from renewable energy by 2022, and in 2018 created a Corporate Services Global Sustainability Council to execute on our operational sustainability strategy, which focuses on resource efficiency, renewable energy and identifying innovative ways to shrink the environmental impacts of our operations globally.

• We also developed a Supplier Code of Conduct which outlines Morgan Stanley’s expectations and requirements for vendors on sustainability and human rights issues.

Volunteering

Giving

Community Development

• Employees logged over 488,000 volunteer hours for charities around the world in 2018.

• During the 2018 Global Volunteer Month in June, including the collective efforts from Feeding Kids Around the Clock, over 48,000 employees logged over 262,000 volunteer hours in 36 countries.

• Since inception in 2009, the Morgan Stanley Strategy Challenge has provided 128 nonprofit organizations with more than 95,000 hours of pro bono services valued at over $14.6 million.

• In 2018, employees, together with the Company, the Morgan Stanley Foundation and the Morgan Stanley International Foundation, donated over $106 million.

• The Morgan Stanley Foundation granted over $5.2 million in 2018 to charities within the children’s health space focused on the fundamentals for children’s health including: wellness, nutrition and play.

• Since 2010, we have committed $18.02 billion in community development loans and investments, funding more than 99,000 affordable housing units and helping to create or retain more than 103,000 jobs.

• Since 2010, we have made 211 small-business loans and investments totaling $261.7 million across the U.S., including $56.6 million in 2018.

•  Bylaws and Certificate of  Incorporation

•  Corporate Political Activities Policy Statement

•  Code of Ethics and Business  Conduct

•  Operating Committee Equity  Ownership Commitment

•  Policy Regarding Shareholder  Rights Plan

•  Charters for Board Committees

•  Environmental and Social Policies

•  Information Regarding the Integrity Hotline

A. Current

Relationships

A director will not be independent if:

(i) the director is a current partner or current employee of Morgan Stanley’s internal or external auditor;

(ii) an immediate family member of the director is a current partner of Morgan Stanley’s internal or external auditor;

(iii) an immediate family member of the director (a) is a current employee of Morgan Stanley’s internal or external auditor and (b) personally works on Morgan Stanley’s audit;
(iv) the director is a current employee, or an immediate family member of the director is a current executive officer, of an entity that has made payments to, or received payments from, Morgan Stanley for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues; or

(v) the director’s spouse, parent, sibling or child is currently employed by Morgan Stanley.

B. Relationships

within Preceding

Three Years

A director will not be independent if, within the preceding three years:

(i) the director is or was an employee of Morgan Stanley;

(ii) an immediate family member of the director is or was an executive officer of Morgan Stanley;

(iii) the director or an immediate family member of the director (a) was a partner or employee of Morgan Stanley’s internal or external auditor and (b) personally worked on Morgan Stanley’s audit within that time;

(iv) the director or an immediate family member of the director received more than $120,000 in direct compensation in any 12-month period from Morgan Stanley, other than (a) director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service) and (b) compensation paid to an immediate family member of the director who is an employee (other than an executive officer) of Morgan Stanley; or

(v) a present Morgan Stanley executive officer is or was on the compensation committee of the board of directors of a company that concurrently employed the Morgan Stanley director or an immediate family member of the director as an executive officer.

A. Equity Ownership

A relationship arising solely from a director’s ownership of an equity or limited partnership interest in a party that engages in a transaction with Morgan Stanley, so long as such director’s ownership interest does not exceed 5% of the total equity or partnership interests in that other party.

B. Other Directorships

A relationship arising solely from a director’s position as

(i) director or advisory director (or similar position) of another company or for-profit corporation or organization or

(ii) director or trustee (or similar position) of a tax-exempt organization.

C. Ordinary Course

Business

A relationship arising solely from transactions, including financial services transactions such as underwriting, banking, lending or trading in securities, commodities or derivatives, or from other transactions for products or services, between Morgan Stanley and a company of which a director is an executive officer, employee or owner of 5% or more of the equity of that company, if such transactions are made in the ordinary course of business and on terms and conditions and under circumstances (including, if applicable, credit or underwriting standards) that are substantially similar to those prevailing at the time for comparable transactions, products or services for or with unaffiliated third parties.

D. Contributions

A relationship arising solely from a director’s status as an executive officer of a tax-exempt organization, and the contributions by Morgan Stanley (directly or through the Morgan Stanley Foundation or any similar organization established by Morgan Stanley) to the organization are less than the greater of $1,000,000 or 2% of the organization’s consolidated gross revenues during the organization’s preceding fiscal year (matching of employee charitable contributions is not included in Morgan Stanley’s contributions for this purpose).

E. Products and

Services

A relationship arising solely from a director utilizing products or services of Morgan Stanley in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable products or services provided to unaffiliated third parties.

F. Professional,

Social and Religious

Organizations

and Educational

Institutions

G. Family Members

Any relationship or transaction between an immediate family member of a director and Morgan Stanley shall not be deemed a material relationship or transaction that would cause the director not to be independent if the standards in this Section 2 would permit the relationship or transaction to occur between the director and Morgan Stanley.

Commercial relationships (such as financial services offered by the Company to clients in the ordinary course of the Company’s business) in the last three years between Morgan Stanley and entities where the directors are employees or executive officers, or their immediate family members are executive officers (Mr. Bowles and Mss. Corley, Olayan and Schapiro). In each case the fees the Company received were in compliance with the Director Independence Standards and the NYSE rules, and did not exceed the greater of $1 million or 2% of such other entity’s consolidated gross revenues in any of the last three years and were considered immaterial to director independence.

Director’s utilization of Morgan Stanley products and services offered by the Company as a client of the Company (such as Wealth Management brokerage accounts and investments in funds sponsored by the Company) in the ordinary course of the Company’s business on terms and conditions substantially similar to those provided to unaffiliated third parties (Messrs. Glocer and Herz, Ms. Miscik, Mr. Nally, Ms. Olayan and Messrs. Owens, Traquina and Wilkins). In each case the provision of such products and services was in compliance with the Director Independence Standards and the NYSE rules and was considered immaterial to director independence.

All members of the Audit Committee, the CMDS Committee and the Nominating and Governance Committee satisfy the standards of independence applicable to members of such committees, including NYSE listing standards.

Each member of the CMDS Committee is a “non-employee director” as defined in Section 16 of the Securities Exchange Act of 1934.

The Board has determined that all members of the Audit Committee are independent and “financially literate” within the meaning of the NYSE listing standards and a majority of the members of the Audit Committee, including the Chair, Robert H. Herz, are “audit committee financial experts” within the meaning of the SEC rules.

All members of the Risk Committee and the Operations and Technology Committee are non-employee directors and a majority of the members of such committees satisfy the independence requirements of the Company and the NYSE, and the Risk Committee membership satisfies other applicable legal and regulatory criteria.

AUDIT COMMITTEE

Current Members

Robert H. Herz (Chair)

Alistair Darling

Dennis M. Nally

Perry M. Traquina

19 Meetings Held in 2018

Primary Responsibilities

•  Oversees the integrity of the Company’s consolidated financial statements and system of internal controls.

•  Oversees risk management and risk assessment guidelines in coordination with the Board, Operations and Technology Committee and Risk Committee.

•  Reviews the major legal and compliance risk exposures of the Company and the steps management has taken to monitor and control such exposures.

•  Selects, determines the compensation of, evaluates and, when appropriate, replaces the independent auditor.

•  Reviews and assesses the qualifications, independence and performance of the independent auditor, and pre-approves audit and permitted non-audit services.

•  Oversees the performance of the head of the Company’s Internal Audit Department (Global Audit Director), who reports functionally to the Audit Committee, and the internal audit function.

•  After review, recommends to the Board the acceptance and inclusion of the annual audited consolidated financial statements in the Company’s Annual Report on Form 10-K.

•  See also “Audit Matters.”

COMPENSATION, MANAGEMENT DEVELOPMENT AND SUCCESSION (CMDS) COMMITTEE⁽¹⁾

Current Members

Hutham S. Olayan (Chair)

Thomas H. Glocer

Dennis M. Nally

Rayford Wilkins, Jr.

8 Meetings Held in 2018

Primary Responsibilities

•  Annually reviews and approves the corporate goals and objectives relevant to the compensation of the CEO and evaluates his performance in light of these goals and objectives.

•  Determines the compensation of executive officers and other officers and employees as appropriate.

•  Administers the Company’s equity-based compensation plans and cash-based nonqualified deferred compensation plans.

•  Oversees plans for management development and succession.

•  Reviews and discusses the Compensation Discussion and Analysis with management and recommends to the Board its inclusion in the proxy statement.

•  Oversees the Company’s incentive compensation arrangements, including with appropriate input from the CRO, to help ensure that such arrangements are consistent with the safety and soundness of the Company and do not encourage excessive risk-taking, and are otherwise consistent with applicable related regulatory rules and guidance.

•  Reviews and approves the Company’s equity retention and ownership policies for executive officers and other officers and employees, as appropriate.

•  See also “Compensation Governance and Risk Management.”

NOMINATING AND GOVERNANCE COMMITTEE

Current Members

Rayford Wilkins, Jr. (Chair)

Elizabeth Corley

Robert H. Herz

4 Meetings Held in 2018

Primary Responsibilities

•  Oversees succession planning for the Board and Board leadership appointments.

•  Reviews the overall size and composition of the Board and its committees.

•  Identifies and recommends candidates for election to the Board.

•  Oversees the orientation program for newly elected directors.

•  Reviews annually the Corporate Governance Policies.

•  Oversees and approves the process and guidelines for the annual evaluation of performance and effectiveness of the Independent Lead Director, the Board and its committees.

•  Reviews and approves related person transactions in accordance with the Company’s Related Person Transactions Policy.

•  Reviews the director compensation program.

•  Reviews the Company’s Corporate Political Activities Policy Statement and oversees political activities, the Company’s significant lobbying priorities and expenditures attributable to lobbying in the U.S., and expenditures related to principal U.S. trade associations.

•  Oversees the Company’s philanthropic programs and social responsibility, environmental and sustainability matters.

OPERATIONS AND TECHNOLOGY COMMITTEE⁽²⁾

Current Members

Jami Miscik (Chair)

Thomas H. Glocer

Mary L. Schapiro

Ryosuke Tamakoshi

6 Meetings Held in 2018

Primary Responsibilities

•  Oversees the Company’s operations and technology strategy, including trends that may affect such strategy.

•  Reviews the major operations and technology risk exposures of the Company, including information security, fraud and cybersecurity risks, and the steps management has taken to monitor and control such exposures.

•  Reviews the operations and technology budget and significant operations and technology expenditures and investments.

•  Oversees risk management and risk assessment guidelines and policies regarding operations and technology risk.

•  Oversees the Company’s business continuity planning.

•  See also “Board Leadership Structure and Role in Risk Oversight — Board Oversight of Cybersecurity Risk.”

RISK COMMITTEE

Current Members

Perry M. Traquina (Chair)

Alistair Darling

Nobuyuki Hirano

Jami Miscik

8 Meetings Held in 2018

Primary Responsibilities

•  Oversees the Company’s global ERM framework.

•  Oversees the Company’s capital, liquidity and funding planning and strategy.

•  Oversees the major risk exposures of the Company, including market, credit, operational, model and liquidity risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures and reviews significant new product risk, emerging risks and regulatory matters.

•  Oversees the risk identification framework.

•  Oversees the Company’s risk appetite statement, including risk tolerance levels and limits, and the ongoing alignment of the Risk Appetite Statement with the Company’s strategy and capital plans.

•  Reviews the contingency funding plan, effectiveness of the Company’s Basel III advanced systems, Comprehensive Capital Analysis and Review, mid-cycle Dodd-Frank Act Stress Testing submissions and the Company’s Volcker Compliance Program, Title I Resolution Plan and Recovery Plan.

•  Oversees risk management and risk assessment policies and guidelines.

•  Oversees the performance of the CRO (who reports to the Risk Committee and the CEO) and the risk management function.

•  See also “Board Leadership Structure and Role in Risk Oversight — Board Role in Risk Oversight.”

The composition of the Board;

The role of the Company’s Independent Lead Director;

The Company’s strong corporate governance practices;

The CEO’s working relationship with the Board; and

The challenges specific to the Company.

Board Governance and Leadership

Advising the Chairman and CEO

Board Effectiveness and

Succession Planning

• Preside at all meetings of the Board at which the Chairman is not present

• Have the authority to call, and lead, non-management director sessions and independent director sessions

• Help facilitate communication among the Chairman, the CEO and the non-management and independent directors, including serving as liaison between the Chairman and the independent directors

• Approve the types and forms of information sent to the Board

• Solicit the non-management directors for advice on agenda items for meetings of the Board and executive sessions to help facilitate Board focus on key issues and topics of interest to the Board

• Be available, if requested, to meet with the Company’s primary regulators

• Be available, if requested by major shareholders, for consultation and direct communication in accordance with the Corporate Governance Policies

• Communicate with the Chairman and the CEO between meetings and act as a “sounding board” and advisor

• Advise the Chairman and the CEO of the Board’s informational needs

• Collaborate with the Chairman and the CEO in developing the agenda for meetings of the Board

• Approve Board meeting agendas
and the schedule of Board meetings to assure that there is sufficient time for discussion of all agenda items

• Have authority to request inclusion of additional agenda items

• Communicate with the Chairman and the CEO and other members of management, as appropriate, about decisions reached, suggestions and views expressed by non-management directors in executive sessions or outside of Board meetings

• Lead the annual evaluation of the performance and effectiveness of the Board including consultation with each non-management director regarding Board performance and effectiveness and, as necessary, individual director performance

• Help facilitate the efficient and effective functioning and performance of the Board

• Help facilitate discussion and open dialogue among non-management directors during Board meetings, executive sessions and outside of Board meetings

• Consult with the Chair of the Nominating and Governance Committee on Board succession planning and Board Committee appointments

• Coordinate with the Chair of the Nominating and Governance Committee on recruiting and interviewing candidates for the Board

• Consult with the Chair of the CMDS Committee on the annual evaluation of the performance of the CEO

The Board has a majority of independent and non-management directors. Ten of the 13 director nominees are independent as defined by the NYSE listing standards and the Company’s more stringent Director Independence Standards. Twelve of the 13 director nominees are non-management directors. All of the Company’s directors are elected annually.

The Board’s key standing committees are composed solely of non-management directors. The Audit Committee, the CMDS Committee and the Nominating and Governance Committee are each composed solely of independent directors. The Operations and Technology Committee and the Risk Committee are chaired by independent directors, consist of a majority of independent directors and include only non-management directors. The committees provide independent oversight of management.

The Board’s non-management directors meet regularly in executive session. The non-management directors meet regularly in executive session without management present and, consistent with the NYSE listing standards, at least annually, the independent directors meet in executive session. These sessions are chaired by the Independent Lead Director.

Retains an independent compensation consultant and evaluates the independence of such consultant and other advisors as required by any applicable law, regulation or listing standard. The CMDS Committee’s compensation consultant, Pay Governance, assists the CMDS Committee in collecting and evaluating external market data regarding executive compensation and performance and advises the CMDS Committee on developing trends and best practices in executive compensation and equity and incentive plan design. In performing these services, Pay Governance met regularly with the CMDS Committee, including without management present, and separately with the CMDS Committee Chair. Pay Governance does not provide any other services to the Company or its executive officers. The Company has affirmatively determined that no conflict of interest has arisen in connection with the work of Pay Governance as compensation consultant for the CMDS Committee.

Regularly reviews (i) Company performance with respect to execution of strategic objectives and evaluates executive performance in light of such performance; (ii) executive compensation strategy, including the competitive environment and the design and structure of the Company’s compensation programs to ensure that they are consistent with and support our compensation objectives; and (iii) market trends and legislative and regulatory developments affecting compensation in the U.S. and globally.

Together with the CRO, oversees the Company’s incentive compensation arrangements to help ensure that such arrangements are consistent with the safety and soundness of the Company and do not encourage excessive risk-taking, and are otherwise consistent with applicable related regulatory rules and guidance. The CRO attends CMDS Committee meetings at least annually, and on an as needed basis, and reviews the Company’s incentive compensation arrangements from a risk perspective. The CRO reported to the CMDS Committee his conclusion that the Company’s current compensation programs for 2018 do not incentivize employees to take unnecessary or excessive risk and that such programs do not create risks that are reasonably likely to have a material adverse effect on the Company.

Approves senior executive annual incentive compensation after a comprehensive review and evaluation of Company, business unit and individual performance for the year, and reviews these compensation decisions with our Board.

Together with senior management, oversees the Company’s controls regarding the year-end compensation process, which have been designed to be consistent with our regulators’ principles for safety and soundness, including policies and procedures for compensation plan governance, funding and allocating the incentive compensation pool and the use of discretion in determining individual incentive compensation awards; processes for identifying “risk-taking” employees; and processes to administer incentive compensation clawback and cancellation features.

Director

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings

($)

Total

($)

Erskine B. Bowles*

Elizabeth Corley*

Alistair M. Darling

Thomas H. Glocer

Robert H. Herz

Jami Miscik

Dennis M. Nally

Hutham S. Olayan

James W. Owens*

Mary L. Schapiro*

Perry M. Traquina

Rayford Wilkins, Jr.

Position

Board Member

Independent Lead Director

Committee Chairs

Audit and Risk Committees

All Other Committees

Committee Members

Messrs. Bowles, Glocer, Owens and Traquina and Mss. Corley, Olayan and Schapiro deferred their cash retainers into Elective Units under DECAP. Elective Units in lieu of cash retainers earned for the second half of the 2017 service period were granted in arrears on May 24, 2018, and Elective Units in lieu of cash retainers earned for the first half of the 2018 service period were granted in arrears on December 1, 2018. The number of Elective Units granted on May 24, 2018 was based on $53.7395, the volume-weighted average price of the common stock on the grant date, and the number of Elective Units granted on December 1, 2018 was based on $44.273, the volume-weighted average price of the common stock on November 30, 2018 (the immediately preceding trading day).

⁽³⁾

Other than with respect to Mss. Corley and Schapiro, represents the aggregate grant date fair value of the annual stock unit award granted on May 24, 2018 for the 2018 service period. With respect to Ms. Corley, the amount also includes the prorated initial stock unit award granted on February 1, 2018 in connection with her election to the Board. With respect to Ms. Schapiro, the amount represents the prorated initial stock unit award granted on August 1, 2018 in connection with her election to the Board. The aggregate grant date fair value of the stock unit awards is based on the volume-weighted average prices of the common stock on the applicable grant dates as follows: $53.7395 for the annual stock unit awards; $50.4715 for Ms. Schapiro’s initial stock unit award; and $57.017 for Ms. Corley’s initial stock unit award. For further information on the valuation of these stock units, see notes 2 and 18 to the consolidated financial statements included in the 2018 Form 10-K.

Under DECAP, directors receive an equity award upon initial election to the Board (provided that they are elected to the Board no less than 60 days prior to the annual meeting and are not initially elected at the annual meeting) and an equity award annually thereafter on the first day of the month following the annual meeting of shareholders. Initial and annual equity awards are granted 50% in the form of stock units that do not become payable until the director concludes service on the Board (Career Units) and 50% in the form of stock units payable on the first anniversary of grant (Current Units). The grant date fair value of the initial equity award is $250,000, prorated for service until the annual meeting, and the award is fully vested upon grant. The grant date fair value of the annual equity award is $250,000 and the award is subject to monthly vesting until the one-year anniversary of the grant date. Directors may elect to extend deferral of their Career Units and Current Units beyond the scheduled payment date, subject to specified limitations.

Our Corporate Governance Policies include a director equity ownership requirement of five times the annual cash Board retainer.

⁽⁴⁾

The following table sets forth the aggregate number of shares underlying DECAP stock units outstanding at December 31, 2018.

Name

Erskine B. Bowles

Elizabeth Corley

Alistair M. Darling

Thomas H. Glocer

Robert H. Herz

Jami Miscik

Dennis M. Nally

Hutham S. Olayan

James W. Owens

Mary L. Schapiro

Perry M. Traquina

Rayford Wilkins, Jr.

⁽⁵⁾

At the conclusion of Mr. Bowles’ and Mr. Owens’ service on the Board, the Company donated $20,000 to the Erskine Bowles Carolina Works Fund of the University of North Carolina Foundation in honor of Mr. Bowles and $10,000 to the James and Kathrine Owens Fund of the North Carolina State University Alumni Association in honor of Mr. Owens. The Company also presented each director with a gift of nominal value.

Item 2

The results of management’s assessment that includes the results of a global management survey and interviews regarding overall historic and recent performance;

Deloitte & Touche’s independence from the Company, noting that Deloitte & Touche does not provide any non-audit services to the Company other than those deemed permissible, as described under “Independent Auditor Fees”;

Deloitte & Touche’s tenure as independent auditor, including the benefits of its institutional knowledge of the Company, and the controls and processes in place (such as the mandatory rotation of audit partners) that help ensure Deloitte & Touche’s continued independence from the Company;

The professional qualifications of Deloitte & Touche and that of the lead audit partner and other key engagement partners;