STATE STREET CORP

The HRC is focused on aligning incentive compensation with risk management principles. We provide incentives that are designed not to encourage unnecessary or excessive risk-taking, and we maintain related process controls and oversight. These features include:

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HRC Interaction and Overlap with the Risk Committee (RC) and Examining and Audit Committee (E&A). Members of the HRC regularly communicate with the RC and the E&A to integrate input from these other committees into compensation decisions. The HRC Chair also serves on the E&A and another member of the HRC serves on the RC. In addition, our Lead Director, who serves as a member of the HRC, participates in meetings of the RC and the E&A as part of her leadership role on the Board.

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Corporate Risk Summary Review. The HRC periodically reviews an assessment of firm-wide risk, prepared by the CRO and confirmed by the RC.

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Annual Compensation Risk Review. The HRC annually meets with our Chief Human Resources Officer, CRO and Chief Compliance Officer to evaluate our compensation programs and review an assessment of the design and operation of State Street’s incentive compensation system in providing risk-taking incentives that are consistent with the organization’s safety and soundness, as described in more detail under the heading “Alignment of Incentive Compensation and Risk.”

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Risk-Based Adjustments to Incentive Compensation Awards. We use a two-pronged process for risk-based adjustments to incentive compensation awards for our NEOs. This process allows for, as appropriate, both: (1) adjustments at the time awards are made (“ex ante” adjustments) and (2) adjustments after the awards are made (“ex post” adjustments) through recoupment of incentive compensation that has already been awarded, where applicable, via forfeiture (before vesting and delivery) or clawback (after vesting and delivery). For more detail, see the discussion under “Other Elements of Compensation—Adjustment and Recourse Mechanisms.”

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Emphasis on Deferral and Equity-Based Compensation. We maintain significant levels of deferred and equity-based compensation for our executives to align each executive’s compensation with the risks and performance results experienced by our shareholders, and the proportion of our NEOs’ incentive compensation delivered in the form of deferred compensation continues to place a significant amount of compensation at risk forex post adjustments in specified circumstances.

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Metrics and Targets and Payout Levels for Performance-Based RSUs Designed to Drive Long-Term Strategy. We deliver a substantial proportion of equity compensation for our executives in performance-based RSUs, using metrics designed to drive our long-term strategy. Each year, we assess target and payout ranges for new performance-based RSU awards and set them at levels that the HRC believes are appropriate to incentivize our executives to achieve our strategic goals and enhance long-term shareholder value, while not creating incentives for excessive risk-taking. In setting targets and payout ranges, the HRC considers publicly-stated guidance and projections and current-year results, among other factors.

For more detail, see the discussion under “Alignment of Incentive Compensation and Risk.”