The following table lists the elements of Moody’s 2023 executive compensation program and the primary purpose of each:
| Base Salary |
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| Form | Fixed Compensation in Cash |
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| Objectives and Basis | Base salary is intended to provide a degree of certainty with respect to compensation and is determined based on the level of pay that is appropriate given professional status, job content, market value, accomplishments and internal equity. |
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| MOODY’S 2024 PROXY STATEMENT | 49 |
| Annual Cash Incentives |
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| Form | At Risk Compensation in Cash |
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| Objectives and Basis | Annual cash incentives are intended to reward Company and individual performance and assist in motivation and retention of management. Award payouts are finalized at the Committee’s February meeting following the performance year in question; payouts primarily reflect: (i) the Company’s financial performance measured by (a) MIS operating income, (b) MA operating income and (c) Moody’s Analytics’ cumulative sales (including sales from entities acquired in acquisitions) (“MA Sales for Compensation Purposes”), with adjustments to exclude the effects of foreign exchange rate fluctuations, the cost of restructuring and other material non-recurring or unusual items applied to all three metrics and (ii) a qualitative assessment of certain strategic and operational metrics. Award payouts on occasion have been reduced or modestly increased based upon the outcome of an extensive review of each NEO’s performance against his or her annual objectives. Actual payouts are typically made at the beginning of March following the performance year in question. Awards customarily are made under the 2004 Moody’s Corporation Covered Employee Cash Incentive Plan, as amended (the “2004 Plan”), although the Committee retains discretion to pay cash incentives outside of the 2004 Plan when circumstances warrant. |
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| Long-Term Incentive Compensation |
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| Form | At Risk Compensation in Stock Options, Performance Shares and RSUs |
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| Objectives and Basis | To help balance the need to motivate the NEOs to drive long-term stockholder value, retain the NEOs, manage the number of shares used to deliver equity awards, and allow the Company to reward the achievement of a broader set of long-term goals, the Committee delivers equity incentive compensation through a combination of stock options, performance shares and RSUs. Stock options have a strike price of no less than 100% of the average of the high and the low market price of the Common Stock on the date of grant and vest based on continued service over four years in annual 25% increments, which means that executives: (i) will realize value from their awards only if the market price of the |
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| Company’s stock has appreciated above the options’ exercise price after the options have vested, and (ii) will be motivated to remain with the Company due to the multi-year vesting schedule. Stock options expire 10 years after the applicable grant date. Performance shares are earned following the completion of a three-year performance period only if pre-established performance goals are met or exceeded. For the 2023-2025 performance period, these performance goals are based on MCO EPS for Compensation Purposes (weighted at 50%), MIS Ratings Performance (weighted at 25%) and MA Cumulative Revenue (weighted at 25%). At the discretion of the Committee, the number of performance shares that vest and the corresponding number of shares actually issued to an employee as payout at the end of the three-year performance period may be less than the number determined by the performance goal formula. |
| 50 | MOODY’S 2024 PROXY STATEMENT |
RSUs vest equally in four annual installments, provided there is continued employment through each such vesting date. Such awards motivate executives to remain with the Company due to the multi-year vesting schedule and align executive and stockholder interests. In 2023, equity award grants were made three business days after the filing of the Company’s annual report on Form 10-K.
| Perquisites |
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| Form | Limited |
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| Objectives and Basis | Moody’s generally does not provide perquisites or other personal benefits with an aggregate incremental cost to the Company of more than $10,000 to any of its NEOs, other than one benefit described in the Summary Compensation Table. |
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| Retirement Benefits |
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| Form | Broad-based Tax-qualified and Non-tax Qualified Plans |
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| Objectives and Basis | Defined Contribution Plans. Moody’s offers its U.S. employees, including the NEOs, the opportunity to participate in a tax-qualified defined contribution plan, the Profit Participation Plan, and offers highly compensated senior management, including the NEOs who reside in the U.S., a voluntary deferred compensation plan (the “Moody’s Corporation Deferred Compensation Plan” or “DCP”). The primary purpose of the DCP is to allow certain employees to make pre-tax deferrals into a non-qualified plan and to receive the maximum company match on compensation without regard to Internal Revenue Service (“IRS”) limits that apply to the Profit Participation Plan. The Company match only applies to deferrals in excess of the IRS limit on compensation that can be taken into account under a tax-qualified defined contribution plan. In addition, the Company will credit to the DCP employer contributions that would have been made to the Profit Participation Plan but for the application of the IRS total contribution limit. Additional information regarding the DCP is found beginning on page 77. Defined Benefit Plans. Certain NEOs based in the U.S. participate in the tax-qualified Moody’s Corporation Retirement Account (the “Retirement Account”) and the non-qualified Pension Benefit Equalization Plan (“PBEP”) which restores benefits that cannot be delivered through the Retirement Account due to IRS qualified plan limits. Moody’s also maintains the non-qualified Supplemental Executive Benefit Plan (“SEBP”); however, with the retirement of Mr. Goggins in 2023, there are no remaining |
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| SEBP obligations to NEOs. All three of these defined benefit pension plans have been closed to new participants since 2008. More details regarding the Retirement Account, the PBEP and the SEBP are provided in the narrative following the Pension Benefits Table for 2023 on page 74. |
| MOODY’S 2024 PROXY STATEMENT | 51 |
WEIGHTING OF ELEMENTS—FIXED VERSUS “AT RISK” COMPENSATION
The Committee, based on the recommendations of the CEO (excluding with respect to his own pay) and the Committee’s independent compensation consultant, Meridian, determined that the large majority of an NEO’s total direct compensation package (which includes salary, long-term incentive compensation and target annual cash incentive compensation) should be “at risk,” meaning the amounts that may ultimately be realized by an executive can vary based on performance. The “at risk” elements of an NEO’s direct compensation are delivered in the form of annual cash incentives and long-term equity awards consisting of stock options, RSUs and performance shares. A larger portion, 93%, of our CEO’s 2023 total direct compensation is “at risk,” as compared to only 7% that is fixed. For the other NEOs (excluding Mr. Steele and Ms Sullivan, as explained below), the Committee concluded that approximately 16% to 24% of target total direct compensation should be fixed and approximately 76% to 84% should be in the form of “at risk” compensation for 2023 as illustrated below. All percentages are based on salary and target cash incentive and equity award figures as of December 31, 2023.
| Chief Executive Officer Mix of Pay Elements | Other Named Executive Officers Average Mix of Pay Elements1 |
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| (1) | This chart excludes the pay mix of Mr. Steele, whose pay mix is primarily representative of the first eight months of 2023 prior to his promotion to Senior Vice President, General Counsel. This chart also excludes the pay mix of Ms Sullivan, whose pay mix is representative of her roles as Chief Accounting Officer and Controller. As such, the pay mix data for Mr. Steele and Ms Sullivan are not representative of the NEO group in 2023. |
| Total Target Direct Compensation (1) |
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| Name | % that isBase Salary | % that is TargetAnnual Incentive | % that isTarget Equity | % that isAt Risk (2) |
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| Robert Fauber | 7% | 14% | 79% | 93% |
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| Mark Kaye | 17% | 22% | 61% | 83% |
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| Caroline Sullivan | 35% | 22% | 43% | 65% |
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| John J. Goggins | 24% | 22% | 54% | 76% |
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| Richard Steele | 40% | 37% | 22% | 60% |
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| Stephen Tulenko | 16% | 25% | 59% | 84% |
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| Michael West | 16% | 28% | 56% | 84% |
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| (1) | Total Target Direct Compensation is the sum of the base salary, target annual cash incentive and grant date fair value of equity awards. Percentages for the NEOs at year-end 2023 are based on salary and target annual cash incentive figures as of December 31, 2023, and for Mr. Goggins and Mr. Kaye are based on annualized base salary and target annual cash incentive figures as of their respective departure dates in September 2023. |
| (2) | Includes annual cash incentive target award amount and grant date fair value of equity awards. |
| 52 | MOODY’S 2024 PROXY STATEMENT |
