UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

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OLD NATIONAL BANCORP

 

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OLD NATIONAL BANCORP

 

Notice of   Annual Meeting and   Proxy Statement

Annual Meeting of Shareholders

April 30, 2020

Old National Bancorp

One Main Street

Evansville, Indiana 47708

Notice of Annual Meeting of Shareholders

To Our Shareholders:

The 2020 Annual Meeting of Shareholders of Old National Bancorp (the “Company”) will be held in the Schlottman Auditorium at the Old National Bank headquarters located on the 4^th floor at One Main Street, Evansville, Indiana, on Thursday, April 30, 2020, at 9:00 a.m. Central Daylight Time for the following purposes:

 

(1)	Election of the Company’s Board of Directors consisting of thirteen Directors to serve for one year and until the election and qualification of their successors.

 

(2)	Approval of the Amendment to Article IV of the Articles of Incorporation to increase the number of authorized shares of capital stock of the Company from 302,000,000 to 330,000,000 and preferred stock from 2,000,000 to 30,000,000.

 

(3)	Approval of the Amendment to Article VIII of the Articles of Incorporation to Allow Shareholders to Amend the By-Laws of the Company.

 

(4)	Approval of a non-binding advisory proposal on Executive Compensation.

 

(5)	Ratification of the appointment of Crowe LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2020.

 

(6)	Transaction of such other matters as may properly come before the meeting or any adjournments and postponements thereof.

Common shareholders of record at the close of business on February 24, 2020 are entitled to notice of, and to vote at, the Annual Meeting.

By Order of the Board of Directors

Jeffrey L. Knight

Executive Vice President,

Chief Legal Counsel and

Corporate Secretary

March 9, 2020

IMPORTANT

Please submit your proxy promptly by mail or by Internet. In order that there may be proper representation at the meeting, you are urged to complete, sign, date and return the proxy card in the envelope provided to you or vote by Internet, whether or not you plan to attend the meeting. No postage is required if mailed in the United States.

Table of Contents

 

Section I – Corporate Governance at Old National Bancorp			5
Report of the Corporate Governance Committee and Other Board Matters			5
Board Leadership Structure and Function			5
Governance Committee Scope of Responsibilities			6
CEO Succession Planning			6
Attendance at Annual Meetings			6
Code of Conduct and Code of Ethics			6
Corporate Governance Guidelines			7
Communications from Shareholders to Directors			7
Policy regarding Consideration of Director Candidates Recommended by Shareholders			7
Determination with Respect to the Independence of Directors			8
Determination with Respect to Director Qualifications			9
Committees of Our Board			9
2019 Work of the Governance Committee			11
Environmental, Social and Governance			12
Availability of Corporate Governance Documents			14
Risk Oversight			15
Section II – Director Compensation and Election of Directors			16
Director Compensation Overview			16
2019 Director Compensation			17
Item 1: Election of Directors			19
Nominees for Directors to be Elected			20
Retiring Directors			29
Section III – Executive Compensation			30
Executive Officers of the Company			30
Talent Development and Compensation Committee Matters			32
Compensation Discussion and Analysis			34
Overview of Executive Compensation			34
Executive Summary			34
Executive Compensation in 2019			43
Executive Compensation in 2020			53
2019 Summary Compensation Table			55
CEO Pay Ratio			56
Grants of Plan-Based Awards During 2019			57
Outstanding Equity Awards at December 31, 2019			58
Option Exercises and Stock Vested in 2019			59
2019 Nonqualified Deferred Compensation			59
Potential Payments on Termination or Change in Control			60
Potential Payments on Termination of Employment and Change in Control			62
Section IV – Security Ownership			68
Common Stock Beneficially Owned by Directors and Executive Officers			68
Securities Owned by Certain Beneficial Owners			70
Delinquent Section 16(a) Reports			70

Section V – Amendment of the Articles of Incorporation to Increase Authorized Shares of Capital Stock and Preferred Stock			71
Item  2: Amendment to the Articles of Incorporation to Increase Authorized Shares of Capital Stock and Preferred Stock			71
Section VI – Amendment of the Articles of Incorporation to Allow Shareholders to Amend By-Laws			73
Item 3: Amendment to the Articles of Incorporation to Allow Shareholders to Amend By-Laws			73
Section VII – Approval of a Non-Binding Advisory Proposal on Executive Compensation			75
Item  4: Approval of a Non-Binding Advisory Proposal on Executive Compensation			75
Section VIII – Ratification of the Appointment of Independent Registered Public Accounting Firm			76
Item  5: Ratification of the Appointment of Independent Registered Public Accounting Firm			76
Section IX – Independent Public Accountants’ Fees			77
Section X – Report of the Audit Committee			79
Section XI – Other Business			82
Transactions with Management and Others			82
Shareholder Proposals and Director Nominations for the 2021 Annual Meeting			83
Annual Report			83
Other Matters			83

Old National Bancorp

2020 Proxy Statement – Summary

The following summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all the information you should consider. You should read the entire Proxy Statement carefully before voting.

 

 

GENERAL INFORMATION

(see pages 1 through 4)

 

Meeting: Annual Meeting of Shareholders		Date: Thursday, April 30, 2020		Time: 9:00 a.m. Central Daylight Time

Location: Old National Bank, One Main Street, Evansville, Indiana – Schlottman Auditorium 4^th Floor

Record Date: February 24, 2020

Voting: Shareholders as of the Record Date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals being voted on.

Admission: You must provide an admission ticket or proof of stock ownership to enter the meeting. Please see page 2 for further information.

Webcast: We will provide a live webcast of the Annual Meeting that can be accessed from the Investor Relations section of our website at www.oldnational.com.

 

 

PROPOSALS TO BE VOTED ON AND BOARD VOTING RECOMMENDATIONS

 

Proposals		Recommendation		Page Reference for more detail
•    Election of Directors		FOR Each Director Nominee		19
•    Approval of Amendment of the Articles of Incorporation to increase the number of authorized shares of capital stock of the Company from 302,000,000 to 330,000,000 and preferred stock from 2,000,000 to 30,000,000		FOR		71
•    Approval of Amendment VIII of the Articles of Incorporation to allow shareholders to amend the By-Laws of the company		FOR		73
•    Approval of a non-binding advisory proposal on Executive Compensation		FOR		75
•    Ratification of the appointment of Crowe LLP as independent accountants for 2020		FOR		76

 

 

DIRECTOR NOMINEES

(see pages 20 through 28)

 

Name		Age		Director Since		Occupation		Independent
Andrew E. Goebel		72		2000		Retired President & COO, Vectren Corporation		Yes
Jerome F. Henry, Jr.		69		2014		President, Midwest Pipe & Steel, Inc.		Yes
Daniel S. Hermann		62		*		Retired CEO, AmeriQual Group, LLC		Yes
Ryan C. Kitchell		46		2018		Former EVP & Chief Administrative Officer, Indiana University Health		Yes
Phelps L. Lambert		72		1990		Managing Partner, Lambert & Lambert Real Estate Development		Yes
Austin M. Ramirez		41		*		President & CEO, Husco International		Yes

Name		Age		Director Since		Occupation		Independent
James C. Ryan, III		48		2019		Chairman & CEO, Old National Bancorp		No
Thomas E. Salmon		56		2018		Chairman & CEO, Berry Global Group, Inc.		Yes
Randall T. Shepard		73		2012		Former Chief Justice, Indiana Supreme Court		Yes
Rebecca S. Skillman		69		2013		Chairman, Radius Indiana; Former Lt. Governor, State of Indiana		Yes
Derrick J. Stewart		42		2015		President & CEO, YMCA of Greater Indianapolis		Yes
Katherine E. White		53		2015		Professor of Law, Wayne State University Law School		Yes
Linda E. White		70		2008		CEO, Methodist Health; Executive Director, Deaconess Foundation		Yes

 

*	Nominated for initial term

2019 FINANCIAL HIGHLIGHTS

(see page 34)

In 2019, the Company delivered record operating results. Financial highlights for 2019 include:

 

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EPS $1.38

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Record Net Income $238.2 million

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ROE 8.57%

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ROA 1.19%

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Efficiency Ratio 60.35%

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Net Charge-Off (Recovery) Ratio 0.05%

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Provision Expense $4.7 million

 

 

EXECUTIVE COMPENSATION

Set forth below is the 2019 compensation for each Named Executive Officer (“NEO”) as determined under Securities and Exchange Commission (“SEC”) rules. See the notes accompanying the 2019 Summary Compensation Table on page 55 for additional information.

 

Name and Principal Position		Salary				Non-Equity Incentive Plan Compensation				Stock Awards				Change in Pension Value and Nonqualified Deferred Compensation Earnings				All Other Compensation				Total
Robert G. Jones			$725,000				$1,153,656				$864,128				$207,975				$78,533				$3,029,292
Executive Chairman/Former CEO
James C. Ryan, III			$646,154				$945,937				$925,588				$8,002				$50,107				$2,575,788
CEO
Brendon B. Falconer			$341,308				$282,415				$276,162				$2				$19,866				$919,753
Senor EVP and CFO
James A. Sandgren			$491,538				$438,010				$404,588				$5,551				$59,344				$1,399,031
President and Chief Operating Officer
Jeffrey L. Knight			$361,423				$230,046				$202,294				$596				$25,901				$820,260
EVP and Chief Legal Counsel
Todd C. Clark			$360,385				$229,385				$160,449				$3,190				$23,763				$819,017
EVP and Chief Information/Strategic Innovation Officer

Old National Bancorp

One Main Street

Evansville, Indiana 47708

Proxy Statement

For the Annual Meeting of Shareholders to be held on

April 30, 2020, at 9:00 a.m. Central Daylight Time at the

Old National Bank Headquarters

Schlottman Auditorium – 4^th Floor

One Main Street, Evansville, IN 47708

Important Notice Regarding the Availability of Proxy Materials

for the Shareholders’ Meeting to be held on April 30, 2020

The Proxy Statement and 2019 Annual Report to Shareholders are available at:

www.cstproxy.com/oldnational/2020

General Information about the Annual Meeting of Shareholders and Voting

This Proxy Statement relates to the Annual Meeting of Shareholders (“Annual Meeting”) of Old National Bancorp (the “Company” or “Old National”) to be held on April 30, 2020, at 9:00 a.m. Central Daylight Time. These proxy materials are being furnished by the Company in connection with a solicitation of proxies by the Company’s Board of Directors (the “Board”).

We are pleased to take advantage of the Securities and Exchange Commission (“SEC”) rule that permits companies to furnish proxy materials to shareholders over the Internet. On or about March 19, 2020 we will begin mailing Notice of Internet Availability of Proxy Materials (“Notice”). The Notice contains instructions on how to vote online, or in the alternative, request a paper copy of the proxy materials and a proxy card. By furnishing the Notice and providing access to our proxy materials by the Internet, we are lowering costs and reducing the environmental impact of our Annual Meeting.

Who can attend the Annual Meeting?

Only shareholders of the Company of record as of February 24, 2020 (the “Record Date”), their authorized representatives and guests of the Company, may attend the Annual Meeting. Admission will be by ticket only.

Who may vote at the Annual Meeting?

These proxy materials are provided to holders of the Company’s common stock who were holders of record on the Record Date. Only the Company’s common shareholders of record on the Record Date are entitled to vote at the Annual Meeting. As of the Record Date, 169,010,021 shares of the Company’s common stock were outstanding.

As of the Record Date, to the knowledge of the Company, no person or firm, other than BlackRock, Inc., The Vanguard Group, Inc., and Dimensional Fund Advisors, LP beneficially owned more than 5% of the common stock of the Company outstanding on that date. As of the Record Date, no individual Director, nominee or officer beneficially owned more than 5% of the common stock of the Company outstanding.

Voting and Proxy Procedures

Each share of the Company’s common stock outstanding on the Record Date will be entitled to one vote at the Annual Meeting. If you receive the Notice by mail, you will not receive a printed copy of the proxy materials unless you request the materials by following the instructions included in the Notice.

 

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If your shares are registered in your name, you may vote your shares by Internet, or by completing, signing, dating and returning the requested proxy card in the postage-paid envelope provided. Simply follow the easy instructions on the proxy card or Notice provided. You may also vote in person at the meeting. Execution of the proxy card or voting via Internet will not affect your right to attend the Annual Meeting. If your shares are held in “street name” through a broker, bank or other nominee, please follow the instructions provided by your nominee on the voting instruction form or Notice in order to vote your shares by Internet, or by signing, dating and returning the voting instruction form in the enclosed postage-paid envelope. If you desire to vote in person at the Annual Meeting, you must provide a legal proxy from your bank, broker or other nominee.

Shares of the Company’s common stock for which instructions are received will be voted in accordance with the shareholder’s instructions. If you send in your proxy card or use Internet voting, but do not specify how you want to vote your shares, the proxy holders will vote them FOR each of the items being proposed by the Board and in the discretion of the proxy holders as to any other business that may properly come before the Annual Meeting and any adjournment or postponement thereof.

Can I change my vote after I return the proxy card or after voting electronically?

If you are a shareholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted by one of the following methods:

 

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Submitting another proper proxy with a more recent date than that of the proxy first given by:

(1) following the Internet voting instructions, or

(2) completing, signing, dating and returning a proxy card to the Company’s Corporate Secretary.

 

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Sending written notice of revocation to the Company’s Corporate Secretary.

 

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Attending the Annual Meeting and voting by ballot (although attendance at the Annual Meeting will not, in and of itself, revoke a proxy).

If you hold your shares in “street name” through a broker, you may revoke your proxy by following instructions provided by your broker. No notice of revocation or later-dated proxy will be effective until received by the Company’s Corporate Secretary at or prior to the Annual Meeting.

How do I receive an admission ticket?

If you are a registered shareholder (your shares are held in your name) and plan to attend the meeting, your Annual Meeting admission ticket will be included in the Notice being mailed on or about March 19, 2020, or if you receive hard copies of the proxy material, the admission ticket can be detached from the top portion of the proxy card.

If your shares are held in “street name” (in the name of a bank, broker or other holder of record) and you plan to attend the meeting, you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the Record Date for admittance to the meeting.

No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the meeting.

Will the Annual Meeting be webcast?

Our Annual Meeting will be webcast on April 30, 2020. You are invited to visit www.oldnational.com at 9:00 a.m. Central Daylight Time on April 30, 2020, to access the webcast of the meeting. Registration for the webcast is not required. An archived copy of the webcast will also be available on our website through April 29, 2021.

 

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How many votes are needed to have the proposals pass?

Election of Directors.  Directors are elected by a plurality of the votes cast by shareholders entitled to vote, which means that nominees who receive the greatest number of votes will be elected, even if such amount is less than a majority of the votes cast.

Our Board has adopted a corporate governance policy regarding Director elections that is contained in our Corporate Governance Guidelines. The policy provides that in any uncontested election, any nominee for Director who receives a greater number of votes “withheld” for his or her election than votes “for” such election will tender his or her resignation as a Director promptly following the certification of the shareholder vote. The Corporate Governance and Nominating Committee, without participation by any Director so tendering his or her resignation, will consider the resignation offer and recommend to the Board whether to accept it. The Board, without participation by any Director so tendering his or her resignation, will act on the Corporate Governance and Nominating Committee’s recommendation no later than 90 days following the date of the Annual Meeting at which the election occurred. If the Board decides to accept the Director’s resignation, the Corporate Governance and Nominating Committee will recommend to the Board whether to fill the resulting vacancy or to reduce the size of the Board. We will promptly disclose the Board’s decision and the reasons for the decision in a broadly disseminated press release that will also be furnished to the SEC on Form 8-K.

Approval of the Amendment to Article IV of the Articles of Incorporation.  The affirmative vote of a majority of the shares present or by proxy is required to approve the Amendment to Article IV of the Articles of Incorporation.

Approval of the Amendment to Article VIII of the Articles of Incorporation.  The affirmative vote of a majority of the shares present or by proxy is required to approve the Amendment to Article VIII of the Articles of Incorporation.

Approval of Non-Binding Advisory Proposal on Executive Compensation.  The advisory vote on executive compensation will be determined by the vote of a majority of the shares present or by proxy. Because the vote is advisory, it will not be binding on the Board. The Board will review the voting results and take into consideration when making future decisions regarding executive compensation.

Ratification of Independent Registered Public Accounting Firm.  The affirmative vote of a majority of the shares present in person or by proxy is required for ratification of the appointment of Crowe LLP as the independent registered public accounting firm of the Company for fiscal year 2020.

What is “householding”?

We have adopted a procedure called “householding,” which has been approved by the SEC. Under this procedure, a single copy of the annual report and proxy statement will be sent to any household at which two or more shareholders reside if they appear to be members of the same family, unless one of the shareholders at that address notifies us that they wish to receive individual copies. This procedure reduces our printing costs and mailing fees.

Shareholders who participate in householding will continue to receive separate proxy cards.

Householding will not affect dividend check mailings in any way.

If a single copy of the annual report and proxy statement was delivered to an address that you share with another shareholder, we will promptly deliver a separate copy to you upon your written or oral request to the Company’s Transfer Agent, Continental Stock Transfer & Trust Company at 917-262-2373, at 1 State Street, New York, New York 10004-1561, or via email to proxy@continentalstock.com.

Shareholders sharing an address who are receiving multiple copies of the annual report and proxy statement may request a single copy by contacting the Company’s Transfer Agent, Continental Stock Transfer & Trust Company using the contact information set forth above.

 

3

A number of brokerage firms have instituted householding. If you hold your shares in “street name,” please contact your bank, broker, or other holder of record to request information about householding.

How are abstentions and broker non-votes treated?

An abstention from voting on a matter by a shareholder present in person or represented by proxy at the Annual Meeting will not affect the outcome of the election of directors. Abstentions will have the same effect as a vote against each of the other proposals to be voted on at the Annual Meeting.

If your shares are held in “street name” and you do not give your broker voting instructions, your broker will have discretion to vote your shares only for the proposal to ratify the appointment of the independent registered public accounting firm. or each of the other proposals to be voted on at the Annual Meeting, the votes associated with shares held in “street name” for which you do not give your broker voting instructions will be considered “broker non-votes,” which means your broker will not have discretion to vote your shares on those matters. Broker non-votes will not affect the outcome of the election of directors or the advisory vote on executive compensation. Broker non-votes will have same effect as a vote against the proposal to amend our Articles to allow shareholders to amend our By-Laws and the proposal to amend our Articles to increase the number of our authorized shares of capital and preferred stock.

How do I designate my proxy?

If you wish to give your proxy to someone other than the proxies identified on the proxy card, you may do so by crossing out all the names of the proxy members appearing on the proxy card and inserting the name of another person. The signed card must be presented at the Annual Meeting by the person you have designated on the proxy card.

Who will pay for the costs involved in the solicitation of proxies?

The Company will pay all costs of preparing, assembling, printing and distributing the proxy materials. In addition to solicitations by mail, Directors and Officers of the Company and its subsidiaries may solicit proxies personally, by telephone, telefax, electronic mail or in person, but such persons will not be specially compensated for their services. In addition, we have retained Laurel Hill Advisory Group, LLC to assist in the solicitation of proxies at the cost of approximately $8,500, plus reimbursement of certain expenses.

We will, upon request, reimburse brokerage firms and others for their reasonable expenses incurred for forwarding solicitation material to beneficial owners of stock.

Other Matters Related to the Meeting

Only matters brought before the Annual Meeting in accordance with the Company’s By-Laws will be considered. Aside from the items listed above in the Notice of Annual Meeting, the Company does not know of any other matters that will be presented at the Annual Meeting. However, if any other matters properly come before the Annual Meeting or any adjournment, the proxy holders will vote them in accordance with their best judgment.

Should any nominee for Director become unable or unwilling to accept nomination or election, the persons acting under the proxy intend to vote for the election of another person recommended by the Corporate Governance and Nominating Committee and nominated by the Board. The Company has no reason to believe that any of the nominees will be unable or unwilling to serve if elected to office.

 

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Section I – Corporate Governance at Old National Bancorp

Report of the Corporate Governance and

Nominating Committee and Other Board Matters

The Corporate Governance and Nominating Committee (“Governance Committee”) is primarily responsible for corporate governance matters affecting the Company and its subsidiaries. The Governance Committee operates under a written charter which conforms to the requirements of the SEC and the NASDAQ.

Board Leadership Structure and Function

The Board, which is elected by the shareholders, selects the Operating Group, which is the executive management team charged with the conduct of the Company’s business. Having selected the Operating Group, the Board acts as an advisor and counselor to management and ultimately monitors its performance. The Board has the responsibility for overseeing the affairs of the Company and, thus, an obligation to keep informed about the Company’s business. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise its decision-making authority on appropriate matters of importance to the Company. Acting as a full Board and through the Board’s seven standing committees, the Board oversees and approves the Company’s strategic plan. The Board regularly reviews the Company’s progress against its strategic plan and exercises oversight and decision-making authority regarding strategic areas of importance to the Company.

The Company’s Corporate Governance Guidelines provide for an independent Lead Director, currently Rebecca S. Skillman, who presides at all meetings of the Board at which the Chairman is not present; leads executive sessions of the Board; consults and meets with any or all outside Directors as required and represents such Directors in discussions with management of the Company on corporate governance issues and other matters; ensures that the Board, committees of the Board, individual Directors and management of the Company understand and discharge their duties and obligations under the Company’s system of corporate governance; mentors and counsels new members of the Board to assist them in becoming active and effective Directors; leads the Board in the annual evaluation of the Chairman and Chief Executive Officer’s (“CEO”) performance; acts in an advisory capacity to the Chairman and CEO in all matters concerning the interests of the Board and relationships between management and the Board; and performs such other duties and responsibilities as may be delegated to the Lead Director by the Board from time to time.

The Board appointed Robert G. Jones to serve as Chairman of the Board and appointed Rebecca S. Skillman to serve as Lead Director to be effective upon commencement of the Annual Meeting in 2016. Following Mr. Jones’ retirement in January of 2020, the Board appointed CEO James C. Ryan, III to serve as Chairman of the Board. The Board believes that it is in the best interests of the Company to have Mr. Ryan serve as Chairman as well as CEO. The Board believes the current governance structure is working effectively, especially in light of the fact that the Company has a strong Lead Director. The Board will annually review the effectiveness of this arrangement and believes this structure is in the best interest of shareholders and serves the Company well at this time.

Executive sessions, or meetings of outside Directors without management present, are held at regular intervals for both the Board and the Committees. Ms. Skillman, the current Lead Director of the Board, chaired the executive sessions of the Board in 2019. The Board meets in executive session a minimum of four times each year.

The Board met six times during 2019. Each Director attended 75% or more of Board meetings and meetings of Committees on which he or she served in 2019. Directors as a group attended an average of 97.28% of the Board meetings and meetings of Committees on which they served in 2019.

 

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Governance Committee Scope of Responsibilities

The Governance Committee has responsibility for recruiting and nominating new Directors, assessing the independence of non-management Directors, leading the Board in its annual performance evaluation, reviewing and assessing the adequacy of the Corporate Governance Guidelines and retaining outside advisors as needed to assist and advise the Board with respect to legal and other matters. The Governance Committee is also responsible for reviewing with the full Board, on an annual basis, the requisite skills and characteristics of Board members as well as the composition of the Board as a whole.

CEO Succession Planning

Among the Governance Committee’s responsibilities as described in its charter is to oversee CEO succession planning and leadership development for potential CEO candidates. The Board plans for succession of the CEO and annually reviews the succession strategy for an “unplanned” and “planned” event. As part of this process, the independent directors annually review the Governance Committee’s recommended candidates for consideration as the CEO under either a planned or unplanned scenario. The criteria used when assessing the qualifications of potential CEO successors include certain leadership, management and personal behaviors. The leadership behaviors include the ability to attract and develop talent, drive and execution, empowering others, shaping strategy and leading change. The management behaviors include communication and climate setting, establishing plans and priorities, managing and improving processes and performance monitoring and management. The personal behaviors important to the Governance Committee in evaluating potential CEO candidates include the following: embodies the values that make the Company’s culture distinctive, acts with honor and character, makes and maintains personal relationships with associates, clients and shareholders, demonstrates courage and serves as a champion of the Company’s culture. The individual must also possess the skill and talent to lead the organization in a positive manner with wisdom, enthusiasm and humility.

Attendance at Annual Meetings

The Company has not established a formal policy regarding Director attendance at its Annual Meeting, but it encourages all Directors to attend these meetings and reimburses expenses associated with attendance. The Chairman presides at the Annual Meeting. All the Directors attended the Annual Meeting in 2019.

Code of Conduct and Code of Ethics

The Board has adopted a Code of Business Conduct and Ethics that sets forth important Company policies and procedures in conducting our business in a legal, ethical and responsible manner. These standards are applicable to all our Directors and employees, including the Company’s CEO, CFO and Controller. In addition, the Board has adopted the Code of Ethics for CEO and Senior Financial Officers that supplements the Code of Business Conduct and Ethics by providing more specific requirements and guidance on certain topics. The Code of Ethics for CEO and Senior Financial Officers applies to the Company’s CEO, CFO and Controller. The Code of Business Conduct and Ethics and the Code of Ethics for CEO and Senior Financial Officers are available on our website at www.oldnational.com. We will post any material amendments to, or waivers from, our Code of Business Conduct and Ethics and Code of Ethics for Senior Financial Officers on our website within two days following the date of such amendment or waiver.

Employees are required to report any conduct they believe in good faith to be an actual or apparent violation of our Codes of Conduct. In addition, as required under the Sarbanes-Oxley Act of 2002, the Audit Committee has established confidential procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters.

The Code of Business Conduct and Ethics addresses, among other things, the following topics: responsibilities of every Old National associate; seeking answers and reporting violations; making ethical decisions; civility and respect for one another; preventing discrimination and harassment; preventing substance

 

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abuse and violence; protecting confidential information; guidelines for protecting private information; using company assets responsibly; reporting accurately and honestly; engaging in political activities; working with media; ethical handling of personal transactions; preventing conflicts of interest; serving on for-profit and non-profit boards; ethical handling of gifts, meals and entertainment; preventing fraud; prohibiting insider trading; competing fairly; and earning incentives.

Corporate Governance Guidelines

The Board has adopted the Corporate Governance Guidelines that, along with the Company’s corporate charter, By-Laws and charters of the various committees of the Board, provide the foundation for the Company’s governance. Among other things, our Corporate Governance Guidelines set forth the:

 

•

minimum qualifications for Directors;

 

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independence standards for Directors;

 

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responsibilities of Directors;

 

•

majority voting policy applicable to Director elections;

 

•

committees of the Board;

 

•

Directors’ compensation and expense reimbursement;

 

•

procedures for Director orientation and development;

 

•

procedures for an annual review of the CEO and management succession planning;

 

•

stock ownership guidelines for executives and Directors;

 

•

bonus recoupment or “clawback” policy;

 

•

procedures for an annual self-evaluation of the Board; and

 

•

content of the Company’s Code of Business Conduct and Ethics.

Communications from Shareholders to Directors

The Board believes that it is important that a direct and open line of communication exist between the Board and the Company’s shareholders and other interested parties. Consequently, the Board has adopted the procedures described in the following paragraph for communications to Directors.

Any shareholder or other interested party who desires to contact Old National’s Chairman or the other members of the Board may do so by writing to: Board of Directors, c/o Corporate Secretary, Old National Bancorp, P.O. Box 718, Evansville, IN 47705-0718. Communications received are distributed to the Lead Director or other members of the Board, as appropriate, depending on the facts and circumstances outlined in the communication received. For example, if any complaints regarding accounting, internal accounting controls and auditing matters are received, then the Corporate Secretary will forward them to the Chairman of the Audit Committee for review.

Policy Regarding Consideration of Director Candidates Recommended by Shareholders

The Company’s nomination procedures for Directors are governed by its By-Laws. Each year the Governance Committee makes a recommendation to the entire Board regarding nominees for election as Directors. The Governance Committee will review suggestions from shareholders regarding nominees for election as Directors. All such suggestions from shareholders must be submitted in writing to the Governance Committee at the Company’s principal executive office not less than 120 days in advance of the date of the annual or special meeting of shareholders at which Directors are to be elected. All written suggestions of shareholders must set forth:

 

•

the name and address of the shareholder making the suggestion;

 

•

the number and class of shares owned by such shareholder;

 

7

•

the name, address and age of the suggested nominee for election as Director;

 

•

the nominee’s principal occupation during the five years preceding the date of suggestion;

 

•

all other information concerning the nominee as would be required to be included in the proxy statement used to solicit proxies for the election of the suggested nominee; and

 

•

such other information as the Governance Committee may reasonably request.

Consent of the suggested nominee to serve as a Director of the Company, if elected, must also be included with the written suggestion.

In seeking individuals to serve as Directors, the Governance Committee seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise. Directors should have an active interest in the business of the Company, possess a willingness to represent the best interests of all shareholders, be able to objectively appraise management performance, possess the highest personal and professional ethics, integrity and values, and be able to comprehend and advise management on complicated issues that face the Company and Board. In addition, such nominees should not have any interest that would materially impair their ability to exercise independent judgment, or otherwise discharge the fiduciary duties owed as a Director to the Company and its shareholders.

Directors should also demonstrate achievement in one or more fields of business or professional, governmental, communal, scientific or educational endeavors. Directors are expected to have sound judgment, borne of management or policy making experience that demonstrates an ability to function effectively in an oversight role. In addition, Directors should have a general appreciation regarding major issues facing public companies of a size and operational scope similar to that of the Company. These issues include contemporary governance concerns, regulatory obligations of an SEC reporting financial holding company, strategic business planning and basic concepts of corporate finance.

The Company does not currently have a formal diversity policy. However, the Corporate Governance Guidelines state that the Board seeks members with diverse professional backgrounds. The Board also annually reviews the requisite skills and characteristics of Board members as well as the composition of the Board as a whole. The annual assessment includes a review of the skills, experience and diversity of the Board in the context of the needs of the Board.

Determination with Respect to the Independence of Directors

It is the policy of the Board that a majority of its members be independent from management, and the Board has adopted Director Independence Standards that meet the listing standards of the NASDAQ. The Independence Standards are incorporated in our Corporate Governance Guidelines which can be viewed under the Investor Relations/Corporate Governance link on the Company’s website at www.oldnational.com.

In accordance with our Corporate Governance Guidelines, the Board undertook its annual review of Director independence. During this review, the Board considered any and all commercial and charitable relationships of Directors, including transactions and relationships between each Director or any member of his or her immediate family and the Company and its subsidiaries. Following the review, the Board affirmatively determined, by applying the Director Independence Standards contained in the Corporate Governance Guidelines, that each of our Directors nominated for election at this Annual Meeting is independent of the Company and its management in that none has a direct or indirect material relationship with the Company, with the exception of James C. Ryan, III, Chairman and CEO.

The independent Directors of the Company are Alan W. Braun, Andrew E. Goebel, Jerome F. Henry, Jr., Phelps L. Lambert, Ryan C. Kitchell, Thomas E. Salmon, Randall T. Shepard, Rebecca S. Skillman, Derrick J. Stewart, Katherine E. White and Linda E. White. The only non-independent Directors in 2019 were CEO James C. Ryan, III and former CEO Robert G. Jones. Following Mr. Jones’ retirement in January 2020, Chairman and CEO James C. Ryan, III is currently the only non-independent Director.

 

8

In addition, all members of the Audit Committee, the Talent Development and Compensation Committee and the Governance Committee satisfy the standards of independence applicable to members of such committees established under applicable law, the listing requirements of the NASDAQ and the Director Independence Standards set forth in the Company’s Corporate Governance Guidelines.

Determination with respect to Director Qualifications

Members of the Board must possess certain basic personal and professional qualities in order to properly discharge their fiduciary duties to shareholders, provide effective oversight of the management of the Company and monitor the Company’s adherence to principles of sound corporate governance. In seeking individuals to serve as Directors, the Governance Committee seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise. The Directors of the Company have an active interest in the business of the Company and possess a willingness to represent the best interests of all shareholders without favoring or advancing any particular shareholder or other constituency of the Company. The Directors are able to objectively appraise management performance, and they possess the highest personal and professional ethics, integrity and values, and are able to comprehend and advise management on complicated issues that face the Company and Board.

In addition to the general skills stated above, the Directors do not have any interests that would materially impair their ability to exercise independent judgment, or otherwise discharge the fiduciary duties owed as a Director to the Company and its shareholders. As stated on pages 20 through 28, our Directors and Nominees have demonstrated significant achievement and generally have significant management experience in one or more fields of business, professional, governmental, communal, and educational endeavors. We believe that our Directors’ extensive management or policy-making experience provides them with the skills and judgment necessary to function effectively in an oversight role. Given the tenure of most of the Directors on our Board, they have a general appreciation regarding major issues facing public companies.

Committees of our Board

The following table lists the current membership of the Company’s standing Board Committees.

 

Director

Audit

Talent Development and Compensation

Corporate Governance and Nominating

Funds Manage- ment

Enterprise Risk

Culture, Community and Social Responsibility

Finance and Corporate Development

Alan W. Braun (1)

X

X

Chair

Andrew E. Goebel

Chair

X

X

X

Jerome F. Henry, Jr.

X

X

Ryan C. Kitchell

X

X

Phelps L. Lambert

X

X

Chair

X

James C. Ryan, III

Thomas E. Salmon

X

Randall T. Shepard

X

X

Chair

Rebecca S. Skillman

X

Chair

X

Derrick J. Stewart

Chair

X

X

Katherine E. White

X

X

X

Linda E. White

Chair

X

X

 

(1)	Mr. Braun will not stand for re-election at the Annual Meeting on April 30, 2020.

 

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The members of the Company’s Board are elected to various committees. The standing committees of the Board include an Audit Committee; a Talent Development and Compensation Committee; a Corporate Governance and Nominating Committee; a Funds Management Committee; an Enterprise Risk Committee; a Culture, Community and Social Responsibility Committee; and a Finance and Corporate Development Committee.

The current members of the Audit Committee are Andrew E. Goebel (Chair), Jerome F. Henry, Jr., Ryan C. Kitchell, and Phelps L. Lambert. The Audit Committee held eight meetings during 2019. The functions of the Audit Committee are described under ‘‘Report of the Audit Committee’’ on page 79. The Audit Committee has adopted a written charter which has been approved by the Board.

The current members of the Talent Development and Compensation Committee are Derrick J. Stewart (Chair), Thomas E. Salmon, Randall T. Shepard and Rebecca S. Skillman. The Talent Development and Compensation Committee met five times during 2019. The functions of the Talent Development and Compensation Committee are described under “Scope of Responsibilities” on page 32. The Talent Development and Compensation Committee has adopted a written charter which has been approved by the Board.

The current members of the Governance Committee are Rebecca S. Skillman (Chair), Phelps L. Lambert, Randall T. Shepard and Katherine E. White. The Governance Committee met four times in 2019. The functions of the Governance Committee are described under ‘‘Governance Committee Scope of Responsibilities” on page 6. The Governance Committee has adopted a written charter which has been approved by the Board.

The current members of the Enterprise Risk Committee are Linda E. White (Chair), Alan W. Braun, Andrew E. Goebel and Katherine E. White. The Enterprise Risk Committee met four times in 2019. The function of the Enterprise Risk Committee is to oversee the Company’s policies, procedures and practices relating to credit, operational, fraud, information technology/cyber and compliance risk. The Enterprise Risk Committee has retained an outside cyber security consultant. The Enterprise Risk Committee has adopted a written charter which has been approved by the Board.

The current members of the Culture, Community and Social Responsibility Committee are Randall T. Shepard (Chair), Derrick J. Stewart and Linda E. White. The Culture, Community and Social Responsibility Committee met four times in 2019. The Culture, Community and Social Responsibility Committee has the responsibility to review the Company’s compliance with the Community Reinvestment Act, Fair Lending Practices, associate commitment and diversity, supplier diversity and the Company’s Affirmative Action Plan. The Culture, Community and Social Responsibility Committee also monitors the activities of the Old National Bank Foundation through which major charitable gifts from the Company are funded. The Culture, Community and Social Responsibility Committee has adopted a written charter which has been approved by the Board.

The current members of the Funds Management Committee are Phelps L. Lambert (Chair), Alan W. Braun, Andrew E. Goebel, Jerome F. Henry, Jr., and Katherine E. White. The Funds Management Committee met four times during 2019. The function of the Funds Management Committee is to monitor the balance sheet risk profile of the Company, including credit, interest rate, liquidity and capital risks. The Funds Management Committee is also responsible for reviewing and approving the investment policy for the Company. The Funds Management Committee has adopted a written charter which has been approved by the Board.

The current members of the Finance and Corporate Development Committee are Alan W. Braun (Chair), Andrew E. Goebel, Phelps L. Lambert, Ryan C. Kitchell, Derrick J. Stewart, Rebecca S. Skillman and Linda E. White. The Committee met five times in 2019. The function of the Finance and Corporate Development Committee is to review management’s financial forecasts, goals and budget and to monitor and provide appropriate feedback concerning the financial performance of the Company, overseeing the mergers and acquisition activity, as well as other strategic corporate development opportunities of the Company. The Finance and Corporate Development Committee has adopted a written charter which has been approved by the Board.

 

10

2019 Work of the Governance Committee

During the year, the Governance Committee evaluated each Board member’s committee assignments in light of the applicable qualification requirements, including additional independence requirements of certain committees. Based upon this evaluation, the Governance Committee recommended that Randall T. Shepard be appointed to the Governance Committee. This was the only change made in 2019 to the committee composition and leadership.

As required by the Governance Committee’s Charter, which is posted on the Company’s website at www.oldnational.com, the Governance Committee conducted an annual review of the Corporate Governance Guidelines applicable to the full Board. Based upon that review, the Governance Committee concluded that only minor modifications were advisable. The current Corporate Governance Guidelines are posted on the Company’s website at www.oldnational.com.

At its January 24, 2019 meeting, the Chair of the Governance Committee and Lead Director administered the annual Board performance evaluation process pursuant to which the Board reviews its performance. The Board also reviewed the independence of Board members and determined that all the members of the Board were independent, with the exception of Robert G. Jones, who served as CEO until May 2, 2019 and Chairman until January 30, 2020, and James C. Ryan, III who became CEO and a Board member on May 2, 2019 and Chairman on January 30, 2020.

The Governance Committee continued its work in 2019 to oversee the CEO succession planning and the leadership development process for potential internal CEO candidates and continued to use Russell Reynolds Associates to assist in the development of candidates.

The Governance Committee also continued its work in 2019 to oversee the succession planning process for Directors who will retire at this annual meeting and who will retire in the next few years. In that regard, the Governance Committee engaged in a search process in the states of Indiana, Minnesota, and Wisconsin seeking to identify prospective candidates in those markets who meet the qualifications outlined in the Company’s Corporate Governance Guidelines, and who have the time and skills to serve on the board. The Company identified Daniel S. Hermann, founder and former CEO of AmeriQual Group, which is headquartered in Evansville, Indiana. The Company also identified Austin M. Ramirez, President and CEO of Husco International, which is headquartered in Waukesha, Wisconsin. Information concerning Mr. Hermann and Mr. Ramirez can be found on pages 21 and 22. The nominees standing for election, other than nominees who are executive officers, or directors standing for re-election, were identified by a committee comprised of independent directors, the CEO and other executive officers.

Decisions regarding our non-employee director compensation program are approved by our full board of directors based on recommendations by the Governance Committee. In making such recommendations, the Governance Committee takes into consideration the director compensation practices of peer companies and whether such recommendations align with the interests of our shareholders. The Governance Committee reviews the total compensation of our non-employee directors and each element of our director compensation program on a regular basis.

In anticipation of the retirement of Robert G. Jones as Chairman at the end of the January 30, 2020 Board meeting, the Governance Committee undertook in 2019 to evaluate the effectiveness of maintaining the combination of the Chairman and CEO roles which began in 2016. The Governance Committee evaluated current practices of peer group companies, reviewed academic and other professional publications and consulted with outside legal counsel concerning the appropriate governance structure. At the Company’s January 30, 2020 Board meeting, the Board of Directors, following discussion and evaluation of the Company’s current governance structure, determined to elect James C. Ryan III as the Chairman of the Company. The Board, in making this determination, took into consideration the fact that Rebecca S. Skillman has served the Company well as Lead Director and that combining the roles of Chairman and CEO in 2016 had served the Company well operationally and was in the best interests of shareholders.

 

11

The Governance Committee also engaged Willis Towers Watson (“WTW”), the compensation consultant retained by the Company’s Talent Development and Compensation Committee, to provide analysis and advice to the Committee and Board with respect to Director compensation. WTW noted that the Company has a higher number of committees than most peer companies (see peer companies listed on page 43) which require the Company’s directors to invest increased time and energy in serving on the Board and committees. WTW also noted that it is a challenge to recruit and retain highly-qualified directors who are willing to shoulder an escalating workload and the time commitment required for board service, particularly in a highly-regulated industry. It was because of these issues, and the fact that the average director pay at the Company was the lowest among Proxy peers, that WTW recommended enhancements to the director compensation structure at the Company.

At the January 30, 2020 meeting of the Board of Directors, the Directors voted to make changes to the annual retainer for Board members and changes to the Committee chair and Committee member retainers in order to align director compensation more competitively to the 50^th percentile of peers. The Board, in taking this action, also re-aligned the cash and equity portion of director compensation to be 45% equity and 55% cash, from what was previously 40% equity and 60% cash. This action was taken to align director compensation with shareholder interests and to align the Company’s director compensation with peer group practices. The following changes were also approved by the Board:

 

•

The annual Board cash retainer was increased from $40,000 to $45,000.

 

•

The annual Board equity grant value was increased from $40,000 to $60,000.

 

•

The Audit Committee chair retainer was increased from $15,000 to $17,500 and the Talent Development and Compensation Committee chair retainer was increased from $12,000 to $14,500.

 

•

The chair retainer for all other committees was increased from $10,000 to $12,500.

 

•

The Audit Committee member retainer was increased from $7,500 to $10,000 and the Talent Development and Compensation Committee and Enterprise Risk Committee member retainers were increased from $6,000 to $8,500.

 

•

The member retainer for all other committees was increased from $5,000 to $7,500.

 

•

A market-based one-year vesting period for the equity portion of the annual retainer was implemented.

In addition to the changes listed above, the Lead Director will continue to be paid a $25,000 premium over and above the fees paid to her for membership on committees on which she serves.

Environmental, Social and Governance

Our Company is committed to strengthening the communities we serve through associate volunteerism, corporate philanthropy as well as environmental responsibility and sustainability, serving as a cornerstone of the local community, and maintaining transparency in governance. Highlights of our environmental, social and governance initiatives are summarized below.

Our People

The Company is dedicated to being a financial industry leader in corporate governance and business ethics. Our Board of Directors is composed of Directors with diverse professional and business experience. All of our Directors, other than the CEO, are independent. They all share a commitment to fostering an effective risk environment coupled with a strong internal audit structure. Their unwavering commitment protects our clients, shareholders and reputation. Our Code of Ethics reflects the Company’s expectation for the conduct of our directors, officers and associates. Through recurring training and disclosures, as well as periodic communication

 

12

related to specific topics, the Company maintains the highest level of ethical conduct. We have been recognized by the Ethisphere Institute as one of the World’s Most Ethical Companies for the ninth straight year.

 

 

 

11% of our Associates represent diverse races & ethnic backgrounds		67% of our Associates are women		100% of our Associates participated in training

Diversity, Equity & Inclusion. Our Company respects, values and invites diversity in our workforce, customers, suppliers, marketplace and community. We seek to recognize the unique contribution each individual brings to our company, and we are fully committed to supporting a rich culture of diversity as a cornerstone to our success. As part of our commitment to maintaining a positive, welcoming and ethical workplace, we have an initiative called “Speak Up” that empowers a team of associates to be Cultural Champions to listen and serve as advocates for their fellow associates.

Women in Leadership. All three female members of the Company’s Board of Directors were recognized in the December 2019 issue of WomenInc. magazine, as part of the magazine’s list of “Most Influential Corporate Directors.”

Achieve Ability. At Old National, we focus on an individual’s talent and not their disability. We are committed to increasing representation of individuals with disabilities in all levels of our workforce and our recruitment efforts reflect this commitment. In addition to our internal efforts, we desire to assist individuals with disabilities in gaining successful employment through our community partnerships through Achieve Ability. The Achieve Ability mentoring program connects executive leaders and individuals with disabilities for a year-long mutually beneficial mentoring relationship. Since its inception in 2014, more than 40 mentees have taken part in this mentoring program.

Catalyst. Our Company provides professional development opportunities to associates and seeks to improve retention, development and job satisfaction of associates from diverse groups by providing career skills training, peer mentoring, and opportunities to interact with senior leaders. Since 2015, 98 associates have participated in this talent development program that engages associates from racial minority groups.

Competitive Benefits. We support our associates in all aspects of life. We offer competitive benefits for associates and their loved ones, as well as an environment to help them achieve a healthy balance between their work and personal life. We offer paid family-friendly leave, comprehensive retirement plans, reimbursements for education, and other health, wellness, and financial benefits.

Awards and Recognition. In 2019, our commitment to being an employer of choice earned us the following recognition and awards:

American Association of People with Disabilities “Best Places to Work for Disability Inclusion”

G.I. Jobs(R) “Military Friendly Employer (Silver)”

DiversityMBA Magazine “Best Companies for Women & Diverse Managers to Work”

National Organization on Disability “Leading Disability Employer”

Bloomberg “Leader in Gender Equality”

Ethisphere “World’s Most Ethical Companies”

 

13

Our Community

For 185 years, the Company has been focused on strengthening the communities we serve. We accomplish this through volunteerism, corporate sponsorships, foundation grants, non-profit board service by associates, donations of physical assets, and advancing financial literacy and education.

 

 

66,500+ hours volunteered by our associates in 2019		Over $6.7 million donated to nonprofits that help build economic opportunity in our communities		833 financial education sessions taught by our Associates in 2019

Economic Development. We promote economic development through investment in community-strengthening initiatives like historical real estate, affordable housing and alternative energy projects. The Company has financed projects that have created 151 affordable apartments. Throughout our footprint, we have invested over $251 million for the creation of new affordable housing, economic development, community revitalization and stabilization, and community services for low-to-moderate individuals and families, as well as the rehabilitation of historic buildings that have redeveloped in the communities we serve.

Grants and Sponsorships. Our Company donated more than $6.7 million through Old National Bank Foundation grants and sponsorships. We also donated more than $778,135 to the United Way through associate and corporate giving.

100 Men Who Cook. In 2019, in addition to other events at separate locations in the Company’s footprint, Old National raised over $215,000 for The Children’s Museum of Evansville at the Evansville “100 Men Who Cook” annual community fundraising event. Our Company has raised over $8.4 million in the past decade for local non-profit entities through this event across the Company’s footprint.

Financial Education. The Company’s commitment to the community extends to teaching financial literacy through programs such as Real-Life Finance, Bank On, VITA Tax Preparation, Junior Achievement, and 12 Steps to Financial Success. Old National reached 21,343 participants through financial education in 2019 which totaled more than 1,853 hours of teaching.

Environmental Awareness

Our Company supports environmental awareness and sustainability by encouraging and empowering recycling, responsible waste management practices and energy conservation throughout the organization. Old National’s Sustainability Committee or “Green Team” routinely evaluates our environmental-friendly practices and identifies strategies for improvement. We invested $1.9 million in solar arrays to produce renewable energy. In addition, we installed a solar array on our newest banking center in Darmstadt, Indiana that has produced approximately 28,858 kilowatts and avoided 22.5 tons of CO₂ emissions. In 2019, we invested approximately $1.6 million in LED lighting to reduce energy consumption. We continually evaluate opportunities to reduce energy dependence in areas such as facilities, equipment, operations, shipping and business travel.

Additional detail into the Company’s environmental initiatives will be included in future Community and Social Responsibility Reports. The Company’s Community and Social Responsibility may be found on our website at www.oldnational.com.

Availability of Corporate Governance Documents

The Company’s Corporate Governance Guidelines (including the Director Independence Standards), Board committee charters for the Audit Committee, Governance Committee, and the Talent Development and

 

14

Compensation Committee, as well as the Code of Business Conduct and Ethics, and the Code of Ethics for CEO and Senior Financial Officers can be viewed under the Investor Relations/Corporate Governance link on the Company’s website at www.oldnational.com. These documents, as well as charters for all the Company’s Board committees, are available in print to any interested party who requests them by writing to: Corporate Secretary, Old National Bancorp, P.O. Box 718, Evansville, IN 47705-0718.

Risk Oversight

The entire Board is involved in overseeing risk associated with the Company. The charters of certain committees of the Board assign oversight responsibility for particular areas of risk. The Board and its committees monitor risks associated with their respective principal areas of focus through regular meetings with management and representatives of outside advisors.

The following is a summary of oversight responsibility for particular areas of risk:

 

•

Audit Committee. Risks and exposures associated with accounting, financial reporting, tax and maintaining effective internal controls for financial reporting.

 

•

Enterprise Risk Committee. Credit, regulatory, operational, cybersecurity, enterprise and reputational risks, as well as litigation that may present material risk to the Company.

 

•

Governance Committee. Risks associated with CEO succession planning, as well as corporate governance, including compliance with listing standards, committee assignments, conflicts of interest and director succession planning.

 

•

Funds Management Committee. Liquidity, capital and interest rate risks.

 

•

Talent Development and Compensation Committee. Risks associated with the Company’s compensation programs and arrangements, including cash and equity incentive plans.

 

•

Culture, Community and Social Responsibility Committee. Risks associated with associate and customer commitment, the Community Reinvestment Act, fair lending, associate and supplier diversity and the Company’s Affirmative Action Plan.

 

•

Finance and Corporate Development Committee. Budgeting and forecasting oversight, management of budget risks and oversight of strategic acquisition opportunities of the Company.

 

15

Section II – Director Compensation and Election of Directors

Director Compensation Overview

The Governance Committee annually reviews and recommends the compensation for our non-employee Directors. No fees are paid to Directors who are also employees. As a starting point for its recommendations, the Governance Committee uses the peer group compensation data prepared for the Compensation Committee by the compensation consultant. The Committee seeks to establish Board compensation that is competitive with the market practices within the Company’s Peer Group and geographic footprint.

Retainers

For 2019, we paid each outside Director an annual retainer of $80,000 for serving as a Director. Of this amount, we paid $40,000 in cash and $40,000 in the form of our stock. We paid the cash compensation in four equal quarterly payments and the stock retainer was paid in two equal installments in May and November. In addition, the Lead Director of the Board was paid an additional $25,000 retainer for her duties as Lead Director.

For 2019, we paid the Audit Committee Chairman an additional retainer of $15,000, the Talent Development and Compensation Committee Chairman an additional $12,000, and all other committee chairpersons an additional retainer of $10,000. In 2019, committee members of the Audit Committee received an additional retainer of $7,500. Committee members of the Talent Development and Compensation Committee and the Enterprise Risk Committee received retainers of $6,000 and all other committee members received retainers of $5,000. Robert G. Jones, former Chairman, received no compensation for his Directorship. James C. Ryan, III, Chairman and CEO, is now the only inside Director on the Board and receives no compensation for his Directorship.

Deferred Compensation Plan

We maintain a nonqualified deferred compensation plan, known as the “Directors’ Deferred Compensation Plan,” for our non-employee Directors. A Director may defer 25%, 50%, 75%, or 100% of his or her cash compensation pursuant to the plan. We credit a Director’s plan account with earnings based on the hypothetical earnings of an investment fund consisting of Company stock, the return on a recognized market index selected by the Talent Development and Compensation Committee, or a combination of the two, as elected by the Director. For the market index fund, we use a Bloomberg index, which approximates the risk and return associated with a diversified high-quality corporate bond fund.

All amounts paid under the plan are paid from our general assets and are subject to the claims of our creditors. In most circumstances, deferred amounts are not distributed to the Director until after termination of his or her service. In general, the Director may elect to receive his or her plan benefits in a lump sum or in annual installments over two to ten years.

 

16

The following table shows all outside Director compensation paid for 2019.

2019 Director Compensation

 

Name		Fees Earned or Paid in Cash ($)				Stock Awards (1) ($)				Change in Pension Value and Nonqualified Deferred Compensation Earnings (2) ($)				Total ($)
(a)		(b)				(c)				(f)				(h)
Rebecca S. Skillman, Lead Director			86,000	(3)			39,989								125,989
Alan W. Braun			61,000	(4)			39,989								100,989
Andrew E. Goebel			71,000	(5)			39,989								110,989
Jerome F. Henry, Jr.			52,500	(6)			39,989								92,489
Ryan C. Kitchell			52,500	(7)			39,989				16,146				108,635
Phelps L. Lambert			67,500	(8)			39,989				79,575				187,064
Thomas E. Salmon			46,000	(9)			39,989				11,415				97,404
Randall T. Shepard			56,000	(10)			39,989								95,989
Kelly N. Stanley			15,625	(11)			13,329				15,524				44,478
Derrick J. Stewart			62,000	(12)			39,989				8,950				110,939
Katherine E. White			54,500	(13)			39,989				24,202				118,691
Linda E. White			60,000	(14)			39,989				193,288				293,277

(1) On May 3, 2019, Alan W. Braun, Andrew E. Goebel, Jerome F. Henry, Jr., Ryan Kitchell, Phelps L. Lambert, Thomas E. Salmon, Randall T. Shepard, Rebecca S. Skillman, Derrick J. Stewart, Katherine E. White and Linda E. White each received 1,188 shares of Company stock at a stock price of $16.83 per share with a Grant Date Fair Value of $19,994.04 and Kelly N. Stanley received 792 shares of Company stock at a stock price of $16.83 per share with a Grant Date Fair Value of $13,329.36. On November 1, 2019, Alan W. Braun, Andrew E. Goebel, Jerome F. Henry, Jr., Ryan Kitchell, Phelps L. Lambert, Thomas E. Salmon, Randall T. Shepard, Rebecca S. Skillman, Derrick J. Stewart, Katherine E. White and Linda E. White each received 1,109 shares of Company stock at a stock price of $18.03 with a Grant Date Fair Value of $19,995.27.

(2) The amounts specified in Column (f) are attributable entirely to earnings credits under our Directors Deferred Compensation Plan in excess of the applicable federal long-term rate, with compounding (as described by Section 1274(d) of the Internal Revenue Code).

(3) Includes $40,000 cash retainer, $10,000 Governance Committee Chair retainer, $6,000 Talent Development and Compensation Committee member retainer, $5,000 retainer for membership on the Finance and Corporate Development Committee, and a $25,000 retainer for serving as Lead Director.

(4) Includes $40,000 cash retainer, $10,000 Finance and Corporate Development Committee Chair retainer and $11,000 retainer for membership on the Enterprise Risk Committee and Funds Management Committee.

(5) Includes $40,000 cash retainer, $15,000 Audit Committee Chair retainer, and $16,000 retainer for membership on the Enterprise Risk Committee, Funds Management Committee and Finance and Corporate Development Committee.

(6) Includes $40,000 cash retainer, $7,500 for Audit Committee membership, and $5,000 for Funds Management Committee membership.

(7) Includes 40,000 cash retainer, $7,500 for Audit Committee membership, and $5,000 for Finance and Corporate Development Committee membership.

 

17

(8) Includes $40,000 cash retainer, $10,000 Funds Management Committee Chair retainer, $7,500 retainer for Audit Committee membership, and $10,000 retainer for membership on the Governance Committee and Finance and Corporate Development Committee.

(9) Includes $40,000 cash retainer and $6,000 retainer for membership on the Talent Development and Compensation Committee.

(10) Includes $40,000 cash retainer, $6,000 retainer for membership on the Talent Development and Compensation Committee, and $10,000 retainer for membership on the Culture, Community & Social Responsibility Committee and the Governance Committee.

(11) Includes $10,000 cash retainer, $2,500 Culture, Community & Social Responsibility Committee Chair retainer, $1,875 Audit Committee member retainer, and $1,250 Governance Committee member retainer. Mr. Stanley retired from the Board on May 2, 2019.

(12) Includes $40,000 cash retainer, $12,000 Talent Development and Compensation Committee Chair retainer, and $10,000 retainer for membership on the Culture, Community & Social Responsibility Committee and the Finance and Corporate Development Committee.

(13) Includes $40,000 cash retainer, $6,000 retainer for membership on the Enterprise Risk Committee, $8,500 retainer for membership on the Funds Management Committee and Governance Committee.

(14) Includes $40,000 cash retainer, $10,000 Enterprise Risk Committee Chair retainer, and $10,000 retainer for membership on the Culture, Community & Social Responsibility Committee and Finance and Corporate Development Committee.

 

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Election of Directors

(Item 1 on Proxy Card)

The first item to be acted upon at the Annual Meeting is the election of thirteen Directors to the Board of the Company. Each of the persons elected will serve a term of one year and until the election and qualification of his or her successor.

If any Director nominee named in this proxy statement shall become unable or decline to serve (an event which the Board does not anticipate), the persons named as proxies will have discretionary authority to vote for a substitute nominee named by the Board, if the Board determines to fill such nominee’s position. Unless authorization is withheld, the proxy, when properly validated, will be voted ‘‘FOR’’ the election as Directors of all the nominees listed in this proxy statement.

Size and Tenure of Directors

The By-Laws of the Company currently provide for the Board to be comprised of 15 Directors. The Board currently contemplates taking action to either reduce the size of the Board to 13 persons or to fill the remaining vacancies. The proxies may not be voted for a greater number of persons than are presently nominated as Directors. Approximately 63% of our non-executive directors have a tenure of nine years or less. Additionally, 16% of our Board of Directors represents an ethnic minority demographic.

Retirement Policy

A Director of the Company shall no longer qualify to serve as a Director effective as of the end of the term during which the Director becomes seventy-five (75) years of age.

Nominees for Election

Pages 20 through 28 contain the following information with respect to each Director nominee of the Company: name; principal occupation or business experience for the last five years; skills and other qualifications to serve on the Board; age; and the year in which the nominee or incumbent Director first became a Director of the Company. The number of shares of common stock of the Company beneficially owned by the nominee or incumbent Director as of February 24, 2020 and the percentage that the shares beneficially owned represent of the total outstanding shares of the Company as of February 24, 2020 can be found on page 68. The nominees standing for election, other than nominees who are executive officers or directors standing for re-election, were identified by a committee comprised of independent directors, the CEO and other executive officers. The number of shares of common stock of the Company shown as being beneficially owned by each Director nominee or incumbent Director includes those over which he or she has either sole or shared voting or investment power.

Board Qualifications and Experience

The Corporate Governance & Nominating Committee actively seeks individuals qualified to become board members for recommendation to the Board and regularly reviews the qualifications of board members.

Listed below is certain biographical information of each of the nominees for election including his or her principal occupation and other business affiliations.

 

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Nominees for Directors to be Elected

 

Andrew E. Goebel		Mr. Goebel, 72, was elected to the Board in 2000. He is Chairman of the Audit Committee and is an “Audit Committee Financial Expert” as defined by the SEC. He is a member of the Funds Management Committee, the Finance and Corporate Development Committee and the Enterprise Risk Committee. Mr. Goebel has served as a financial and management consultant since 2003.   Mr. Goebel brings to the Board, among other skills and qualifications, a 34-year career in the energy industry where he served in various capacities including President and Chief Operating Officer of Vectren Corporation from where he retired in 2003. He also has significant experience as a senior executive of a large public company and significant experience in finance.   Mr. Goebel holds a BSBA and an MBA from the University of Evansville. He serves as a director of two privately-held companies headquartered in Southwest Indiana, including South Central, Inc. and Community Natural Gas Company, Inc. He also serves as a director of Indiana-American Water Company, headquartered in Greenwood, Indiana, a wholly-owned subsidiary of American Water Works Company, the largest publicly traded water utility in the country. He is a member of the Board of Trustees of the University of Evansville and serves in leadership positions for several other nonprofit and civic organizations.
Director Since: 2000 Age: 72   Committees:   Audit   Enterprise Risk   Funds Management   Finance and Corporate Development
Jerome F. Henry, Jr.		Mr. Henry, 69, was elected to the Board in 2014. He is a member of the Audit Committee and the Funds Management Committee. Mr. Henry is owner and President of Midwest Pipe & Steel, Inc., a company he founded in 1972 which specializes in steel sales and service, industrial scrap and steel brokerage. He served as a member of the former Tower Bank & Trust Board of Directors from 1999 to 2014. He is a life-long entrepreneur with ownership interests in numerous business enterprises including start-ups and recent turnarounds. Mr. Henry is also president of Paragon Tube Corporation, a manufacturer of steel tubing, headquartered in Fort Wayne, Indiana. He also serves as President of Hartzell Realty Corporation.   Mr. Henry brings to the Board, among other skills and qualifications, extensive experience in management and finance as well as 15 years serving on the Board of Directors of Tower Bank & Trust.   Mr. Henry has been active throughout his business career in various philanthropic activities and has served on the boards of numerous non-profit organizations. He is currently active with Bishop Luers High School, St. Anne Home, St. Joseph Community Health Foundation, Big Brothers Big Sisters and the Fort Wayne Urban Enterprise Association Board.
Director Since: 2014 Age: 69   Committees:   Audit   Funds Management

 

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Daniel S. Hermann		Mr. Hermann, 62, was nominated for election to the Board on January 30, 2020. He is the founding partner of Lechwe Holdings LLC, a family company involved in the startup and investing in companies. He is also a founder of AmeriQual Group, LLC, where he served as CEO from 2005 to 2015.   Mr. Hermann brings to the Board, among other skills and qualifications, over 20 years of management experience with Black Beauty Coal Company. During his years at Black Beauty, he held various titles, including President and CEO. He also has experience in public accounting and is a licensed Certified Public Accountant. Mr. Hermann is deemed to be an “Audit Committee Financial Expert” as defined by the SEC.   Mr. Hermann holds a Bachelor of Science Degree from Indiana State University. He currently serves as Chairman of the Board of Directors of Deaconess Health System. In addition, he serves as a director of Foresight Energy, General Signals, Hermann Family Foundation, and Foundation for Youth. He is also a director Emeritus of the Boys and Girls Club of Southern Indiana as well as past Chairman of the Evansville Catholic Foundation.
Initial Nominee Age: 62
Ryan C. Kitchell		Mr. Kitchell, 46, was elected to the Board in 2018. He is a member of the Audit Committee and the Finance and Corporate Development Committee. Until the end of 2019, he served as Executive Vice President and Chief Administrative Officer of Indiana University Health where he previously served as Chief Financial Officer from 2012 to 2016. He served as President of IU Health Plans from 2011 to 2012 and Treasurer of Indiana University Health from 2010 to 2011. Prior to joining Indiana University Health, he worked for Indiana Governor Mitch Daniels. He had previously served in corporate treasury and controllership roles at Eli Lilly and Company.   Mr. Kitchell brings to the Board, among other skills and qualifications, more than 5 years of service to former Indiana Governor Mitch Daniels, first as Public Finance Director and then as Director of the Office of Management and Budget. In addition, he has over nine years of service with the largest health care provider in the state of Indiana. Mr. Kitchell is deemed to be an “Audit Committee Financial Expert” as defined by the SEC.   Mr. Kitchell holds an economics degree from Indiana University, an MBA from the Tuck School of Business at Dartmouth and has earned the Chartered Financial Analyst (CFA) designation. He serves on several boards including the Indiana Sports Corporation, Mitch Daniels Leadership Foundation, Boy Scouts of America Crossroads Council, the Indiana Motorsports Commission, the Indiana State Chamber of Commerce PAC, and the 2021 NBA All-Star Game Board of Directors.
Director Since: 2018   Age: 46   Committees:   Audit   Finance and Corporate Development

 

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Phelps L. Lambert		Mr. Lambert, 72, was elected to the Board in 1990. He is Chairman of the Funds Management Committee and a member of the Audit Committee, the Governance Committee, and the Finance and Corporate Development Committee. Since 1992, Mr. Lambert has served as Managing Partner of Lambert and Lambert, an investment partnership.   Mr. Lambert brings to the Board, among other skills and qualifications, financial and legal expertise as well as 14+ years serving as COO/CEO of Farmers Bank & Trust Company in Henderson, Kentucky.   Mr. Lambert holds a BA in Political Science from Brown University and a Juris Doctorate from the University of Kentucky. He is a member of the Kentucky Bar Association.
Director Since: 1990 Age: 72   Committees:   Audit   Corporate Governance and Nominating   Funds Management   Finance and Corporate Development
Austin M. Ramirez		Mr. Ramirez, 41, was nominated for election to the Board on January 30, 2020. He is the President and CEO of Husco International, a global engineering and manufacturing company headquartered in Waukesha, Wisconsin.   Mr. Ramirez brings to the Board, among other skills and qualifications, management experience in the engineering and manufacturing business. He has also served as a White House Fellow on the National Economic Council in Washington D.C.   Mr. Ramirez graduated from the University of Virginia with degrees in Systems Engineering and Economics. He also holds an MBA from Stanford Graduate School of Business. He has volunteered on a number of education-focused boards including Teach for America, the Boys and Girls Clubs, the YMCA and the United Performing Arts Fund. He is a co-founder and board member of St. Augustine Preparatory Academy and a founding member of City Reformed Church. Austin has also served as a director of the Greater Milwaukee Committee, Metropolitan Milwaukee Chamber of Commerce and the National Association of Manufacturers.
Initial Nominee Age: 41

 

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James C. Ryan, III		Mr. Ryan, 48, was elected to the Board on May 2, 2019 when he became CEO of the Company. Mr. Ryan was elected Charmain of the Board on January 30, 2020. Prior to beginning his role as CEO, Mr. Ryan was Senior Executive Vice President and CFO of the Company. He has also served the Company as Director of Corporate Development and Mortgage Banking, Integrations Executive and Treasurer. Prior to joining Old National in 2005, Mr. Ryan held senior finance positions at Wells Fargo Home Mortgage and Old Kent Financial Corp.   Mr. Ryan brings to the Board, among other skills and qualifications, extensive bank management experience derived from working over 25 years in the banking industry. Mr. Ryan’s leadership skills, extensive banking experience and knowledge of the Company and its products and services is tremendously valuable to the Board. Mr. Ryan also brings to the Board his ability to develop long-term strategies and find effective and efficient means to implement and communicate those strategies.   Mr. Ryan holds a BA in Business Administration from Grand Valley State University in Allendale, Michigan. He is currently Chair of the Economic Development Coalition of Southwest Indiana, Secretary and Treasurer of the Southwest Indiana Regional Development Authority, a board member for Deaconess Hospital, Inc. and Deaconess Health Systems, Inc., a member of the Central Indiana Corporate Partnership, Inc., advisory board member for the Old National Bank Center for Closely Held Business, and an advisory board member of the University of Evansville’s Schroeder Family School of Business Administration.
Director Since: 2019 Age: 48
Thomas E. Salmon		Mr. Salmon, 56, was elected to the Board in 2018. He is a member of the Talent Development and Compensation Committee. Mr. Salmon currently serves as Chairman and CEO of Berry Global, Inc. where he was appointed to the Board of Directors in February 2017. He previously served as Berry Global’s President and Chief Operating Officer since October 2016, served as President of Berry’s Consumer Packaging Division from November 2015 to October 2016, served as President of Berry’s Rigid Closed Top Division from November 2014 to November 2015, and served as President of Berry’s Engineered Materials Division from 2003 to November 2014. He was General Manager for Honeywell Plastics from 2001 to 2003 and Global Sales Director for Allied Signal’s Engineering Plastics and Films from 1999 to 2001. Prior to joining Honeywell/Allied Signal, Mr. Salmon held several positions at GE Plastics and GE Lighting, divisions of General Electric.   Mr. Salmon brings to the Board, among other skills and qualifications, over 20 years in manufacturing which has provided him with extensive experience in management, accounting and finance.   Mr. Salmon holds a Bachelor of Business Administration from Saint Bonaventure University in Western New York. He serves on several boards including the Evansville Regional Business Committee, Golf Gives Back and Signature School.
Director Since: 2018 Age: 56   Committees:   Talent Development and Compensation

 

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Randall T. Shepard		Mr. Shepard, 73, was elected to the Board in 2012. He is a member of the Talent Development and Compensation Committee, the Corporate Governance and Nominating Committee, and the chair of the Culture, Community and Social Responsibility Committee. He served twenty-five years as Chief Justice of the Indiana Supreme Court, until his departure in 2012. He brings to the Board the experiences of a career in public sector management, as well as extensive leadership in the non-profit world. Mr. Shepard served as Executive in Residence at the Public Policy Institute of Indiana University’s School of Public and Environmental Affairs from 2012 to 2014. He currently serves as a Senior Judge in the Indiana Court of Appeals.   During 2014-2015, Mr. Shepard was Interim General Counsel of CFA Institute, which educates and tests professionals in investment and finance, conferring the world’s leading credential in those fields. During his judicial career, Judge Shepard served as President of the Conference of Chief Justices and as Chairman of the National Center for State Courts. He was also President of the Appellate Judges Conference, representing seven hundred state and federal judges in the American Bar Association.   Mr. Shepard’s leading avocation has been historic preservation. He was a trustee of the National Trust for Historic Preservation for eleven years and served as Chairman of Indiana Landmarks, Inc. In each of these and other roles, he has acquired some experience in the field of real estate. He has likewise served on many other non-profit boards, including terms as President of The Lampion Center, a family counseling organization based in Evansville. Mr. Shepard earned an A.B. degree cum laude from Princeton University, his J.D. from the Yale Law School, and an LL.M. from the University of Virginia School of Law.
Director Since: 2012 Age: 73   Committees:   Talent Development and Compensation   Culture, Community and Social Responsibility   Corporate Governance and Nominating

 

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Rebecca S. Skillman		Ms. Skillman, 69, was elected to the Board in 2013 and serves as the Company’s Lead Director. She is Chairperson of the Governance Committee and is a member of the Talent Development and Compensation Committee and the Finance and Corporate Development Committee. Ms. Skillman currently serves as Chairman of the Board for Radius Indiana, an economic development regional partnership which represents Crawford, Daviess, Dubois, Greene, Lawrence, Martin, Orange, and Washington Counties in South Central Indiana. She previously served as Senior Advisor of Radius Indiana from July 2016 to December 2016 and she served as CEO of Radius Indiana from February 2013 to July 2016. She serves as an advisor for Bowen Center for Public Affairs, Ball State University, and an advisor for Indiana University’s Center for Rural Engagement.   Ms. Skillman served as the 49th Lieutenant Governor of the State of Indiana from 2005 to 2013 where in addition to her legislative duties as President of the Indiana Senate, she was responsible for leading the Office of Tourism Development, Energy Group and Indiana Housing and Community Development Authority. She chaired the Indiana Counter Terrorism and Security Council, the intergovernmental entity responsible for homeland security. She also served as the Secretary of Agriculture and Rural Development under the state’s Department of Agriculture and Office of Rural Affairs.   Ms. Skillman has enjoyed a lifelong career in public service, having served in the Indiana Senate from 1992 to 2004. She brings to the board expertise and leadership in economic development, administration, community involvement, governmental and political affairs and civil service. Ms. Skillman earned an Associate’s degree/business concentration from Indiana Wesleyan University.
Director Since: 2013 Age: 69   Committees: Corporate Governance and Nominating   Talent Development and Compensation   Finance and Corporate Development

 

25

Derrick J. Stewart		Derrick J. Stewart, 42, was elected to the Board in 2015. He is Chairman of the Talent Development and Compensation Committee and a member of the Culture, Community and Social Responsibility Committee and the Finance and Corporate Development Committee. Mr. Stewart is President and CEO of the YMCA of Greater Indianapolis. He served as CEO of the YMCA of Southwestern Indiana from 2009 to 2019, and in various other capacities, including Chief Development Officer and Chief Operating Officer, from 2005 to 2009.   Mr. Stewart brings to the Board, among other skills and qualifications, prior banking experience as a loan officer of the Company and extensive experience in managing a nonprofit entity in one of the Company’s largest markets. Mr. Stewart is deeply committed to supporting and encouraging the development of a healthier and more vibrant community and providing opportunities for young people from all walks of life to achieve their potential. Mr. Stewart is a past member of the YMCA of the USA National Board of Directors, where he served on the Financial Development Committee and the International Committee and is past chair of the YMCA of the USA Small and Midsize YMCA Cabinet. He is past President of the Board of the Evansville Regional Airport Authority, and the Public Education Foundation of Evansville, Inc., past Vice President of the Evansville Christian School Board, and a past member of the Region Board of Trustees of Ivy Tech Community College. He is a member of the YMCA Employee Benefits Board. Mr. Stewart worked as a commercial loan officer for Old National Bank from 2004 to 2005.   Mr. Stewart is a graduate of the Indiana University Kelley School of Business with a degree in Business and Finance.
Director Since: 2015 Age: 42   Committees: Talent Development and Compensation   Culture, Community and Social Responsibility   Finance and Corporate Development

 

26

Katherine E. White		Katherine E. White, 53, was elected to the Board in 2015. She is a member of the Governance Committee, the Funds Management Committee and Enterprise Risk Committee. Ms. White is a Brigadier General in the U.S. Army, currently serving in the Michigan Army National Guard as the Deputy Commanding General of the 46th Military Police Command in Lansing, Michigan, since September 2019. She is also currently a Professor of Law at Wayne State University Law School in Detroit, Michigan, where she has taught full-time since 1996. Ms. White is also a Regent with the University of Michigan Board of Regents, and she has served in that capacity since 1998.   Ms. White brings to the Board, among other skills and qualifications, extensive experience in law, education, government and military affairs. From 1995 to 1996, Ms. White was a Judicial Law Clerk to the Honorable Randall R. Rader, Circuit Judge U.S. Court of Appeals for the Federal Circuit. From 2000 to 2002, she was appointed by the Secretary of Commerce to serve on the United States Patent and Trademark Office Patent Public Advisory Committee. She was also appointed by the Secretary of Agriculture to the U.S. Department of Agriculture’s Plant Variety Protection Office Advisory Board serving from 2004 to 2008, 2010 to 2012 and 2015 to 2020. From 2003 to 2014, she was a market board member at United Bank and Trust in Ann Arbor, MI. She is a current board member of Alta Equipment Group, Inc. (a public company).   Ms. White received her B.S.E. Degree in Electrical Engineering and Computer Science from Princeton University, a J.D. Degree from the University of Washington, a LL.M. Degree from the George Washington University Law School, and a Master’s Degree in Strategic Studies from the U.S. Army War College. In addition, Ms. White is a Fulbright Senior Scholar, a White House Fellow 2001 to 2002, and a Registered Patent Attorney.
Director Since: 2015 Age: 53   Committees: Corporate Governance and Nominating   Funds Management   Enterprise Risk

 

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Linda E. White		Ms. White, 70, was elected to the Board in 2008. She is Chairperson of the Enterprise Risk Committee and is a member of the Culture, Community and Social Responsibility Committee and the Finance and Corporate Development Committee. Ms. White serves as the Chief Executive Officer of Methodist Health in Henderson, KY. Previously, she served as an administrator at Deaconess Hospital for 32 years. From 2004 through June 30, 2017, she served as President and CEO for Deaconess Health System, Inc. which includes six acute care hospitals in southwest Indiana. Upon her June 30, 2017 retirement she became President Emerita for Deaconess Health System, Inc. and serves as the Director of Deaconess Foundation in conjunction with an Interim Director.   Ms. White brings to the Board, among other skills and qualifications, extensive experience in management and leadership in the healthcare industry.   Ms. White holds a BS in Nursing and an MBA from the University of Evansville, and a BS in Applied Mathematics from Indiana State University. She is a fellow in the American College of Healthcare Executives. She previously served on the board of Deaconess Hospital and Deaconess Health System. She is past Chairman of the Board of Indiana Hospital Association and VHA Central. She has served on the board of the Boys and Girls Club and is currently a member of the Board of Trustees of the University of Evansville and Rose-Hulman Institute of Technology.
Director Since: 2008 Age: 70   Committees: Enterprise Risk   Culture, Community and Social Responsibility   Finance and Corporate Development

The Board unanimously recommends that you vote “FOR” the election of the thirteen candidates for Director.

 

28

Retiring Directors

 

Alan W. Braun		Mr. Braun, 75, was elected to the Board in 1988. In accordance with the Company’s mandatory retirement age policy, he will not be standing for reelection at the 2020 Annual Meeting of Shareholders.   He is a member of the Funds Management Committee, Enterprise Risk Committee, and serves as Chairman of the Finance and Corporate Development Committee.   Mr. Braun brings to the Board, among other skills and qualifications, 45+ years as a construction executive with Industrial Contractors, Inc., a Top 400 Contractor, where he served as Chairman and CEO from 2009 to 2011, and Chairman, President and CEO from 2003 to 2009. On December 28, 2011, Industrial Contractors, Inc. was acquired by Skanska USA, and Mr. Braun then served as Chairman Emeritus of Industrial Contractors Skanska until his retirement in 2013. Mr. Braun is currently serving as Managing Partner, Braun Partnership and Braun Realty. Mr. Braun also has management experience and an in-depth knowledge of finance, as well as banking, due to his lengthy tenure on the Company’s Board.   Mr. Braun holds a BBA in Accounting from the University of Notre Dame. Mr. Braun is a director of Koch Enterprises, Inc. He served as Chairman of the Board of Trustees of the University of Evansville, and he has served in leadership positions for numerous nonprofit and civic organizations.
Robert G. Jones		Mr. Jones, 63, was elected to the Board in 2004 when he became President and CEO of the Company. Mr. Jones was elected as Chairman of the Board effective May 12, 2016. On January 16, 2019 Mr. Jones notified the Board of his decision to retire as Chief Executive Officer of the Company effective as of the commencement of the Company’s May 2, 2019 Annual Meeting of Shareholders. Mr. Jones continued to serve as the Company’s Chairman of the Board through January 2020. Prior to joining Old National, Mr. Jones served for 25 years at KeyCorp, with his last assignment as CEO of McDonald Investments Inc., the KeyCorp business unit that provides brokerage, capital markets, insurance, investment banking, and asset management services.   Mr. Jones brought to the Board, among other skills and qualifications, 35+ years of experience in the banking industry. Mr. Jones also brought to the Board a broad strategic vision for the Company, which was extremely valuable in developing and implementing the Company’s strategic growth initiatives.   Mr. Jones holds a BA in Political Science and Business Administration from Ashland University. He served two three-year terms on the Federal Reserve Bank of St. Louis Board of Directors from 2008 to 2013.   He currently serves as a member of the Board of Trustees of the University of Evansville. Mr. Jones also serves in leadership positions for numerous other nonprofit and civic organizations.

 

29

Section III – Executive Compensation

Executive Officers of the Company

The executive officers of the Company are listed in the table below. Each officer serves a term of office of one year and until the election and qualification of his or her successor.

 

Name		Age				Office and Business Experience
James C. Ryan, III			48			CEO of the Company since May 2, 2019, Chairman since January 30, 2020. Previously, Senior Executive Vice President and CFO of the Company from May 2016 to May 2019. Executive Vice President and Director of Corporate Development and Mortgage Banking of the Company from February 2015 to May 2016. Executive Vice President and Director of Corporate Development of the Company from July 2009 to February 2015. Senior Vice President and Integration Executive of the Company from December 2006 to July 2009. Senior Vice President and Treasurer of the Company from March 2005 to December 2006.
Brendon B. Falconer			44			Senior Executive Vice President and CFO of the Company since May 2019. Previously, Treasurer of the Company from November 2016 to May 2019. Senior Vice President and Director of Credit Operations from March 2013 to November 2016. Loss Share President from January 2012 to March 2013. Vice President and Bank Controller from April 2009 to January 2012.
James A. Sandgren			53			President and Chief Operating Officer of the Company since May 2016. Previously, Executive Vice President and Chief Banking Officer of the Company from April 2014 to May 2016. Executive Vice President and Regional CEO of the Company from May 2007 to April 2014. Executive Vice President and Southern Division Chief Credit Officer from January 2004 to May 2007.
Todd C. Clark			50			CEO Community Banking of the Company since January 2020. Executive Vice President and Chief Information & Strategic Innovation Officer from May 2017 to January 2020. Region CEO of the Company from February 2015 to May 2017. Region President of the Company from July 2014 to February 2015. Previously, President of United Bank & Trust from April 2013 to July 2014.
Scott J. Evernham			42			Executive Vice President and Chief Risk Officer of the Company since August 2019. Previously, Executive Vice President, Wealth Management, of the Company from May 2016 to August 2019. President of Old National Insurance from December 2014 to May 2016. Senior Vice President, Assistant General Counsel from October 2012 to December 2014.
Paul S. Kilroy			47			Executive Vice President and Chief Information Officer of the Company since February 2020. Previously, Segment Chief Information Officer in Architecture and Information Management from October 2018 to January 2019 and Segment Chief Information Officer in Consumer Lending at Huntington National Bank. Managing Director and Chief Development Officer of Mortgage Bank at JPMorgan Chase & Co from January 2017 to April 2017. Managing Director and CTO of Chase Auto Finance at JPMorgan Chase & Co from March 2015 to January 2017. Managing Director and Infrastructure CTO of Mortgage Bank at JPMorgan Chase & Co from June 2011 to March 2015.

 

30

Jeffrey L. Knight			60			Executive Vice President and Chief Legal Counsel of the Company since December 2004, and Senior Vice President of the Company from 2001 to 2004. Corporate Secretary of the Company since 1994 and General Counsel of the Company from 1993 to 2004.
Daryl D. Moore			62			Senior Executive Vice President and Chief Credit Executive of the Company since May 2016. Previously, Executive Vice President and Chief Credit Officer of the Company from 2001 to 2016, and Senior Vice President of the Company from 1996 to 2001.
Kendra L. Vanzo			53			Executive Vice President, Chief Administrative Officer of the Company since January 2020. Executive Vice President and Chief People Officer from May 2018 to January 2020. Executive Vice President, Associate Engagement and Integrations Officer from June 2014 to May 2018. Executive Vice President and Chief Human Resources Officer from January 2010 to June 2014. Senior Vice President and Chief Human Resources Officer from March 2007 to January 2010.

 

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Talent Development and Compensation Committee Matters

The Board appoints the members of the Talent Development and Compensation Committee (“Compensation Committee”). The Compensation Committee is currently composed of four non-employee Directors, each of whom is independent from management and the Company (as independence is currently defined in the NASDAQ listing requirements and in the Company’s Corporate Governance Guidelines). No member is eligible to participate in any management compensation program.

Compensation Committee Charter

The Compensation Committee operates pursuant to a written charter. A copy of the Compensation Committee’s charter is available on our website, www.oldnational.com, under the Investor Relations/Corporate Governance link. As required by the charter, the Compensation Committee reviews its charter annually and conducts an annual performance evaluation, the results of which are discussed with the Compensation Committee members and shared with the Company’s Governance Committee.

Compensation Consultant

The Compensation Committee has the sole authority to hire outside compensation consultants to advise it on the structure and amount of compensation of the executive officers and Board of Directors. From May 2010 through September 2019, the Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) to serve as independent compensation consultant to advise the Committee on matters related to executive and director compensation.

Pearl Meyer provided guidance to the Committee regarding executive compensation decisions for 2019, as described further in this report. The Pearl Meyer consultant who performed these services reported directly to the Committee Chairman. With consent of the Compensation Committee Chairman, Pearl Meyer could, from time to time, contact the Company’s executive officers for information necessary to fulfill its assignments and may make reports and presentations to and on behalf of the Compensation Committee that the executive officers also receive. All of the decisions with respect to determining the amount or form of executive compensation under the Company’s executive compensation programs are made by the Compensation Committee and may reflect factors and considerations other than the information and advice provided by Pearl Meyer. To the extent that the outside consultant’s work involves Director compensation, that work is shared with the Governance Committee, which is responsible for reviewing and making recommendations to the Board regarding Director compensation and benefits.

In September of 2019, the Committee concluded its relationship with Pearl Meyer and engaged Willis Towers Watson (“WTW”) to serve as independent compensation consultant for the remainder of 2019 and for fiscal year 2020 compensation decisions. The engagement of WTW as the Compensation Committee’s new advisor is structured in the same manner.

Scope of Responsibilities

The Compensation Committee is responsible for approving and evaluating the Company’s employee compensation and benefit programs, ensuring the competitiveness of those programs, and advising the Board regarding the talent development and succession management of key executives of the Company. The Compensation Committee is responsible for annually reviewing, approving, and recommending to the Board for its approval all elements of the compensation of the CEO and other executive officers who report directly to the CEO. The Compensation Committee is also responsible for determining awards to employees of stock or stock options pursuant to the Company’s Amended and Restated 2008 Incentive Compensation Plan.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee is or was formerly an officer or employee of the Company within the last three years. No executive officer of the Company currently serves or in the past year has served as

 

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a member of the compensation committee or board of directors of another company of which an executive officer serves on the Compensation Committee. Nor does any executive officer of the Company serve or has in the past year served as a member of the compensation committee of another company of which an executive officer serves as a Director of the Company.

Assessing Risk in Compensation

Our compensation programs do not use highly leveraged incentives that drive risky short-term behavior. Our compensation programs are designed to reward our executives for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. With the balance of compensation distributed among annual salary, short-term incentive and long-term equity awards, no particular element of compensation is excessively weighted versus other elements. In addition, the use of multiple Performance Measures in the short-term and long-term incentive plans ensures that executives must excel in a number of areas – rather than simply maximizing performance on a single performance measure – in order to earn their variable compensation.

In addition, we operate stock ownership requirements and a Bonus Recoupment Policy that provide a strong incentive to ensure the Company is managed with a long-term view and helps to ensure that Company management avoids excessive risk taking in the short-term.

Our Compensation Committee reviewed the relationship between our risk management policies and practices and the incentive compensation provided to the NEOs at its April 18, 2019 meeting. After review with the Company’s Chief Risk Officer and representatives of Pearl Meyer, the Compensation Committee determined that our incentive compensation programs do not encourage unnecessary and excessive risk taking.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by,

Members of the Compensation Committee

Derrick J. Stewart, Chairman

Thomas E. Salmon

Randall T. Shepard

Rebecca S. Skillman

 

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Compensation Discussion and Analysis

Overview

This Compensation Discussion and Analysis describes the key principles and approaches used to determine the compensation earned by our Executive Chairman, CEO, CFO, and our other executive officers employed at the end of 2019 who were most highly compensated for 2019. Detailed information regarding the compensation of these executive officers, who are referred to as “Named Executive Officers” or “NEOs”, appears in the tables following this Compensation Discussion and Analysis. This discussion should be read in conjunction with those tables.

This Compensation Discussion and Analysis consists of the following parts:

 

•

Executive Summary

•

Review of 2019 Advisory Vote on Executive Compensation

•

Responsibility for Executive Compensation Decisions

•

Compensation Philosophy and Objectives

•

Role of Executive Officers in Compensation Decisions

•

Compensation Committee Procedures

•

Setting Executive Compensation for 2019

•

Changes in Executive Compensation in 2020

Executive Summary

Pay for Performance in 2019.  We seek to closely align the interests of our NEOs with the interests of our shareholders. Our compensation programs are designed to reward our NEOs for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. Our NEOs’ total compensation is comprised of a mix of base salary, annual cash incentive awards and long-term incentive awards paid in equity. These compensation components, combined with our stock ownership guidelines and recoupment policy, extend the time horizon beyond the vesting and/or performance periods and provide balance.

The Company’s financial performance remained strong in 2019. As more fully described in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K, the Company took certain actions in 2019 to position the Company for future growth.

In May of 2019, the Company launched The ONB Way, starting with a performance improvement diagnostic to define our go-forward strategy and identify revenue and efficiency opportunities across the Company. In August of 2019, Management set out to build a strategic plan that was to deliver on three key objectives:

 

•

transform the Company into a leading commercially oriented regional bank with a distinctive client-centric value proposition delivered through a client segment-focused organization;

 

•

lay the foundation to be a top performing independent bank by streamlining our operating model and strengthening risk and credit processes to provide a seamless client experience; and

 

•

improve our operating leverage, invest in our operational and IT infrastructure to meet our clients “where they are” and ensure that we keep pace with technology and client digital expectations, through a balanced portfolio of revenue and cost initiatives, to help us deliver a top-quartile performance.

The Company entered the Implementation Phase of the ONB Way in early 2020 to capture the value identified in the Design Phase. The ONB Way progress in 2019, along with other management initiatives focused

 

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on organic growth and other efficiency efforts, resulted in record results in 2019, as evidenced by the following 2019 highlights:

 

•

highest commercial loan production year in our history with a strong pipeline that continues to build;

 

•

record net income of $238.2 million;

 

•

record mortgage production and capital markets revenue;

 

•

disciplined approach to credit risk management reflected in our strong credit quality metrics, with low net charge-offs to average loans of 0.05%;

 

•

good progress in expense management, achieving an Efficiency Ratio of 60.35%;

 

•

achieved diluted earnings per share of $1.38, compared to $1.22 in 2018; and

 

•

net interest income, which comprised approximately 75% of 2019 revenue and is the most significant component of the Company’s earnings, increased to $604.3 million, a $66.7 million increase from the $537.6 million in 2018.

These strong financial results in 2019 contributed to the Company’s Total Shareholder Return (“TSR”), outpacing other U.S. Banks in the Company’s Peer Group, with Old National performing at 10.1% and peers performing at 1.0% for the three years ending December 31, 2019.

This record 2019 performance that translated into strong returns for our shareholders, is reflected in variable compensation outcomes for the year, demonstrating our commitment to pay for performance:

 

•

Short-term incentives were earned at 127.3% of target, out of maximum opportunity of 150% of target, driven by above target performance in EPS, return on average tangible common equity (“ROATCE”) and Efficiency Ratio. See Annual Incentive Compensation beginning at the bottom of page 45 for additional details.

 

•

Performance-based restricted stock units granted in 2017 with a three-year performance period ending on December 31, 2019, were earned at 150% of target, the maximum opportunity available, driven by TSR and ROATCE performance that exceeded the maximum performance goals set. See Performance-Based Restricted Stock Units beginning on page 48 for additional details.

 

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Key Activities in 2019.  The other key area of focus for the Compensation Committee was changes to the compensation of Messrs. Jones, Ryan and Falconer in association with the changes to their respective roles during 2019:

 

Named Executive Officer		Role Change		Compensation Implications
Robert G. Jones		January 1, 2019 – May 1, 2019: Chairman and CEO May 2, 2019 – December 31, 2019: Executive Chairman January 30, 2020: Retired		•  Continued participation in incentive plans during 2019, compensating for leadership prior to handing off the CEO responsibilities to Mr. Ryan and reward him for his service as Executive Chairman of the Board for the entire year. •  Reflects importance of facilitating the transition to his successor, being available for consultations, and for spending time introducing Mr. Ryan to key business and governmental leaders throughout the Company’s footprint. •  No increase to short-term or long-term incentive compensation opportunities. •  Base salary maintained at $725,000.
James C. Ryan, III		January 1, 2019 – May 1, 2019: CFO May 2, 2019 – January 30, 2020: CEO January 30, 2020 – Current: Chairman and CEO		•  Compensation package revised effective May 2, reflecting promotion to CEO. •  Salary increased to $750,000. •  Target short-term incentive opportunity established at 115% of salary •  70,000 Restricted Stock Shares awarded.
Brendon B. Falconer		January 1, 2019 – May 1, 2019: Treasurer May 2, 2019 – Current: CFO		•  Compensation package revised effective May 2, reflecting promotion to CFO. •  Salary increased to $390,000. •  Target short-term incentive opportunity established at 65% of salary. •  20,000 Restricted Stock Shares awarded.

 

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Executive Compensation Framework in 2019.  There are three core elements of our executive compensation framework reflecting short and long-term performance horizons:

 

Compensation Element and Purpose		Key Features
Base Salary Fixed compensation for performing the responsibilities associated with an executive’s position		•  Set with reference to market data, role scope, changes in duties, individual performance and experience •  Informed by market data for similar positions at other peer group companies, generally targeted at median •  Reviewed annually with changes effective April
Annual Incentive Compensation Reward short-term financial and operational performance		•  Variable cash incentive •  Target value aligned to similarly situated executives within peer group •  Capped at 150% of target; 50% of target paid for threshold performance •  Target opportunities expressed as a percentage of salary as follows:
				NEO		2019 Target
				Executive Chairman		125%
				CEO		115%
				CFO		65%
				Chief Operating Officer		70%
				All other NEOs		50%
		•  2019 awards based on EPS (60%), ROATCE (20%) and Efficiency Ratio (20%) •  Subject to recoupment policy

 

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Compensation Element and Purpose

Key Features

Long-Term Incentive Compensation Align executive interests with those of our shareholders over the long-term, incentivize sustainable share price growth and retain talent

•  Variable equity incentive •  Awarded as a combination of Performance-Based Restricted Stock Units and Service-Based Restricted Stock Units:

NEO

2019 Equity Mix

Performance

Service

Executive Chairman

100%

0%

All other NEOs

75%

25%

•  Target value aligned to market median within peer group •  Capped at 150% of target; 25% of target paid for threshold performance •  Target opportunities expressed as a number of shares as follows:

NEO

Target

Executive Chairman

68,500

CEO

70,000

CFO

20,000

Chief Operating Officer

30,000

All other NEOs

15,000

•  Dividends paid on vested and earned shares •  Performance-Based Restricted Stock Units based on three-year ROATCE (50%) and three-year TSR relative to our Peer Group (50%) •  Service-Based Restricted Stock Units vest in three approximately equal installments over three years •  Subject to recoupment policy

Performance metrics are selected given their alignment to long-term value creation and our areas of strategic focus.

 

Measure		Why it Matters
One-Year Performance Measures
EPS		Indicates the overall profitability of the company.
Return on average tangible common equity (ROATCE)		ROATCE is a key factor to long-term profitable growth due to the strong correlation of higher ROATCE to higher market price-to-tangible book value valuations for common stock of publicly traded bank holding companies.
Efficiency Ratio		Provides focus on expense management.
Diversity and inclusion progress		Greater diversity correlated with increased profitability, stronger governance and higher performance.

 

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Measure		Why it Matters
Three-Year Performance Measures
ROATCE		Operational performance measure with clear line of sight to participants, while also being aligned with long-term shareholder value creation. Measuring over a three-year period assesses our success of sustaining multi-year performance.
Relative TSR		Clear alignment with shareholder interests and our ability in delivering strong relative value creation.

We believe that our compensation program builds upon the Company’s compensation governance framework and our overall pay-for-performance philosophy, which are demonstrated by the following:

 

We encourage you to read this Compensation Discussion and Analysis for a detailed discussion and analysis of our executive compensation program, including information about the fiscal 2019 compensation of the NEOs.

 

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Review of 2019 Advisory Vote on Executive Compensation

At our 2019 Annual Meeting, our shareholders had the opportunity to provide an advisory vote on the compensation paid to our NEOs, or a “say-on-pay” vote. Ninety-seven percent of the votes cast by our shareholders were in favor of the compensation provided to our NEOs. This result affirmed majority shareholder support of our approach to executive officer compensation, and informed the Compensation Committee’s discussions during the year, which resulted in no significant change.

In addition, in recognition of the Board’s and shareholders’ majority preference expressed at the 2017 meeting, the Compensation Committee recommended, and the Board approved, an annual non-binding “say-on-pay” vote to occur at the meeting (see page 75), so that any shareholder concerns about executive pay can be acknowledged and considered in the timeliest manner. The Compensation Committee will continue to consider the results from this year and future advisory votes on executive compensation and any related feedback received from our shareholders via other channels.

Responsibility for Executive Compensation Program

Subject to full Board approval, the Compensation Committee of our Board is responsible for establishing and implementing our general executive compensation philosophy and determining the compensation for all of our executive officers reporting directly to the Chairman and CEO, including our NEOs. The Compensation Committee’s charter permits the Compensation Committee to delegate authority to subcommittees. In 2019, the Compensation Committee made no delegation of its authority over compensation matters relating to our NEOs.

Compensation Philosophy and Objectives

Through our compensation program for executive officers, we strive to attract and retain superior executives in a highly competitive environment and provide financial incentives that align our executive officers’ interests with those of our shareholders. This philosophy and its objectives are generally consistent over time, accommodating modifications as economic and business conditions change to ensure continued alignment.

The Compensation Committee believes that the primary components of each executive officer’s compensation should be a competitive base salary and incentive compensation that rewards the achievement of annual and long-term objective performance goals. The Compensation Committee also believes stock ownership is important because it aligns our executives’ interests with those of our shareholders. Thus, equity compensation represents a significant element of each executive officer’s potential compensation.

The Board intends to continue to reward management performance with cash and equity compensation based on a philosophy and belief that the strong operating fundamentals in the Company will be reflected in earnings growth and eventual stock price appreciation. It is in this context that certain actions were taken by the Board to reward executive management for 2019 performance and to establish incentive goals for 2020.

Role of Executive Officers in Compensation Decisions

The Compensation Committee reviews, approves, and recommends to our full Board each element of compensation for the executive officers reporting directly to the CEO, including all NEOs. The Compensation Committee considers the recommendations of the CEO in determining the base salary, annual incentive compensation and long-term incentive awards for each of the executive officers of the Company other than the CEO, but ultimately the Committee makes all determinations in its discretion as to final pay outcomes. Together with the Compensation Committee, our CEO annually reviews the performance of each of our other executive officers, the compensation of each executive officer, including base salary, annual incentive compensation and long-term incentive awards and makes recommendations to the Compensation Committee regarding the compensation of those officers for the following year. The Compensation Committee Chairman annually reviews

 

40

our CEO’s compensation with representatives from the compensation consultant (in conjunction with an annual performance review led by the Company’s non-executive Chairman or Lead Director) and makes recommendations to the Compensation Committee regarding the CEO’s compensation for the following year. The CEO is not involved in the final determination regarding his own compensation, and all decisions with respect to the CEO’s compensation are made in executive session of the Compensation Committee, without the CEO present.

Committee Procedures

The Compensation Committee considers the information provided by its independent advisor, including compensation reports and recommended best practices as a baseline for establishing targeted total compensation, principal compensation components, and determining the allocation of total potential compensation components for each NEO and other executives in the Company. The Company seeks to establish total compensation, base salaries, annual incentive compensation, and long-term equity incentive compensation for each position at the median for the peer group, if targeted performance is achieved, and at or near the 75^th percentile of the peer group, if exceptional performance is achieved. The Compensation Committee also seeks to allocate potential total compensation among base salary, annual incentive compensation, and longer-term incentive compensation in proportions that reflect peer group practices.

Since 2010, the Compensation Committee engaged Pearl Meyer to assist it in evaluating our executive compensation program. However, the Compensation Committee requested proposals from various firms in 2019 and elected to retain WTW to assist the Compensation Committee in evaluating the executive compensation program for 2020. During the year ending December 31, 2019, Pearl Meyer’s services to the Company were limited to those provided to the Compensation Committee in connection with its decisions concerning executive compensation. The Compensation Committee reviewed its relationship with Pearl Meyer and concluded that Pearl Meyer was independent and free of any conflicts of interest in regard to the advice it provided the Compensation and Governance Committees.

The following is a description of the services Pearl Meyer provided to the Compensation Committee to assist it in establishing compensation for the NEOs and other members of management for 2019:

 

•

assessed the competitiveness of our compensation packages for executive officers;

 

•

analyzed our business performance over one-year and three-year periods; and

 

•

evaluated the relationship between executive officer pay and our performance.

In examining our business performance, Pearl Meyer focused on:

 

•  net interest margin •  net income growth •  earnings per share growth •  efficiency ratio •  operating leverage •  return on equity •  return on assets •  return on average tangible common equity •  asset growth •  deposit growth •  non-interest income growth •  revenue growth		•  revenue per share growth •  net charge-off ratio •  non-performing assets •  financial measures unweighted average •  book value growth •  book value per share growth •  earnings per share •  total shareholder return •  stock price/tangible book value per share •  shareholder return unweighted average •  overall unweighted average

In evaluating the competitiveness of our compensation levels for NEOs and other members of management, Pearl Meyer gathers pay and performance data from a peer group of publicly-traded financial

 

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services companies that includes a broad representation of regional banks within the Company’s region of operation and which are similar in asset size to the Company. Pearl Meyer selects the peer group with input from the Compensation Committee. The Compensation Committee considers the peer group data when evaluating the compensation for all of the NEOs. The composition of the peer group may be amended from year to year to take account of mergers, acquisitions, and other changes that make a company more or less appropriate for inclusion. The Compensation Committee has at times in the past removed companies from the peer group because the companies’ asset sizes were deemed by the Compensation Committee to not be representative of the other companies in the group and in excess of the Company’s asset size. For 2019, Pearl Meyer recommended that the Company use the Peer Group as discussed below.

Under SEC disclosure rules, companies generally limit executive compensation disclosure to their most highly compensated executive officers. To determine competitive pay for these positions, Pearl Meyer uses data from publicly filed documents as well as data from its proprietary market surveys. For the remaining executives, Pearl Meyer uses data from its proprietary market surveys only. The market surveys include a broader range of companies and do not provide company-specific information. The survey data is used as a general reference and is one of a number of factors considered in determining where pay is actually set.

For 2019 compensation decisions, our publicly traded peer group consisted of the following 22 bank holding companies which had asset sizes ranging from $11.8 billion to $33.4 billion, with a median asset size of $22.1 billion:

 

Associated Banc-Corp		First Midwest Bancorp, Inc.		TCF Financial Corporation
BancorpSouth, Inc.		Fulton Financial Corporation		Trustmark Corporation
Bank of Hawaii Corporation		Great Western Bancorp, Inc.		UMB Financial Corporation
Bank OZK		Hancock Holding Company		United Bankshares, Inc.
Chemical Financial Corporation		IBERIABANK Corporation		Valley National Bancorp
Commerce Bancshares, Inc.		International Bancshares Corporation		Western Alliance Bancorporation
Cullen/Frost Bankers, Inc.		Prosperity Bancshares, Inc.		Wintrust Financial Corporation
F.N.B. Corp.

In making its recommendations to the Compensation Committee regarding executive officer compensation in 2019, Pearl Meyer reviewed the compensation practices and performance of the peer companies and discussed our performance and strategic objectives with our Executive Chairman, CEO, CFO, Chief People Officer, and Chief Risk Officer. Before the beginning of 2019, Pearl Meyer provided the Compensation Committee with a detailed written report regarding our executive compensation structure, its competitiveness relative to the peer group companies, and the alignment of our executive pay with the Company’s performance. Over periods of one year and three years, the Company ranked slightly below median on the basket of performance metrics considered. Target compensation levels were also positioned below median, although more so than performance.

 

 

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As a result of this review the Compensation Committee approved changes to base salary as described on page 53.

Following the appointment of WTW, the Compensation Committee undertook a review of the compensation peer group to be used for 2020 compensation decisions. Based on an agreed set of revised factors for assessing peer relevance, namely size, product scope, geographic scope, and competition for talent, and a recommendation from WTW, an adjusted 19-company peer group was approved.

 

Retained Peer Companies				New Peer Companies
Associated Banc-Corp		Hancock Holding Company		First Financial Bancorp
BancorpSouth, Inc.		IBERIABANK Corporation
Bank OZK		TCF Financial Corporation		Removed Companies
Commerce Bancshares, Inc.		Trustmark Corporation		Bank of Hawaii Corporation
Cullen/Frost Bankers, Inc.		UMB Financial Corporation		Chemical Financial Corporation
F.N.B. Corp.		United Bankshares, Inc.		International Bancshares Corporation
First Midwest Bancorp, Inc.		Valley National Bancorp		Prosperity Bancshares, Inc.
Fulton Financial Corporation		Western Alliance Bancorporation
Great Western Bancorp, Inc.		Wintrust Financial Corporation

Executive Compensation in 2019

Pay Mix.  In establishing the 2019 compensation for our executive officers, the Compensation Committee:

 

•

analyzed the compensation levels of comparable executive officers in the peer group;

 

•

determined a mix of base salary and cash incentive opportunity, along with an equity position to align our executive officers’ compensation with our performance and leadership accomplishments;

 

•

assessed our executive officers’ performance; and

 

•

assessed our financial and business results relative to other companies within the banking industry as well as to our own past performance and financial goals.

The principal components of each executive officer’s compensation used by the Compensation Committee to reward, align and retain our named executives are:

 

•

base salary;

 

•

annual incentive compensation; and

 

•

long-term equity incentive compensation.

 

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In general, we strive to target the percentage that each of these components bears to the total compensation for our executive officer group as a whole, assuming the achievement of targeted performance, to approximately the corresponding percentages for the peer group. Based on the advice of our independent advisor, our pay mix is more performance-oriented than our peers.

In structuring our long-term incentive awards to our Executive Chairman, CEO and the other NEOs, we emphasize the use of performance-based equity awards. In fact, 100% of the Executive Chairman’s long-term incentive awards are performance-based, and 75% of the long-term incentive awards for the other NEO’s are performance-based. The actual mix of these components for each individual executive officer varies, depending on our evaluation of the executive officer’s responsibilities, the percentage of the executive officer’s compensation that should be at risk, and the reasonable potential compensation in light of that risk.

2019 Leadership Changes.  During 2019 there were several leadership changes which impacted compensation decisions for the year.

 

Named Executive Officer		Role Change		Compensation Implications
Robert G. Jones		January 1, 2019 – May 1, 2019: Chairman and CEO May 2, 2019 – December 31, 2019: Executive Chairman January 30, 2020: Retired		•  Continued participation in incentive plans during 2019, compensating for leadership prior to handing off the CEO responsibilities to Mr. Ryan and reward him for his service as Executive Chairman of the Board for the entire year. •  Reflects importance of facilitating the transition to his successor, being available for consultations, and for spending time introducing Mr. Ryan to key business and governmental leaders throughout the Company’s footprint. •  No increase to short-term or long-term incentive compensation opportunities. •  Base salary maintained at 725,000.
James C. Ryan, III		January 1, 2019 – May 1, 2019: CFO May 2, 2019 – January 30, 2020: CEO January 30, 2020 – Current: Chairman and CEO		•  Compensation package revised effective May 2, reflecting promotion to CEO •  Salary increased to $750,000. •  Target short-term incentive opportunity established at 115% of salary. •  70,000 Restricted Stock Shares awarded.
Brendon B. Falconer		January 1, 2019 – May 1, 2019: Treasurer May 2, 2019 – Current: CFO		•  Compensation package revised effective May 2, reflecting promotion to CFO •  Salary increased to $390,000 •  Target short-term incentive opportunity established at 65% of salary •  20,000 Restricted Stock Shares awarded.

 

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2019 Cash Compensation.  The only elements of our executive officers’ compensation that we pay in cash are base salary and annual incentive compensation. For 2019, we paid the following cash compensation to our NEOs:

2019 Executive Officers’ Cash Compensation

 

Names		Base Salary ($)				Non-Equity Incentive Plan Compensation (1) ($)				Total Cash Compensation ($)
Robert G. Jones Executive Chairman and Former CEO			725,000				1,153,656				1,878,656
James C. Ryan, III CEO			646,154				945,937				1,592,091
Brendon B. Falconer Senior EVP and CFO			341,308				282,415				623,723
James A. Sandgren President and Chief Operating Officer			491,538				438,010				929,548
Jeffrey L. Knight EVP and Chief Legal Counsel			361,423				230,046				591,469
Todd C. Clark EVP and Chief Information/ Strategic Innovation Officer			360,385				229,385				589,770

 

(1)

The Bonus was awarded based on 2019 performance and will be paid on March 13, 2020

Base Salary. Base salary is the only component of compensation that is not subject to the achievement of performance or vesting criteria. Base salary is designed to provide a fixed level of cash compensation for performing the responsibilities associated with an executive’s position. We establish base salary ranges for each position based on the ranges for similar positions at other peer group companies. In general, we target base salary ranges at the median for the peer group. We review base salaries annually and we adjust them in April of each year to take into account such factors as market changes, changes in duties, individual performance, and experience.

The Compensation Committee adjusted salaries for Messrs. Ryan and Falconer as set forth on page 44 under the title 2019 Leadership Changes. In assessing the performance of Messrs. Sandgren, Knight and Clark, Messrs. Ryan and Jones subjectively evaluated their contributions to the strategic, operational and financial performance of the Company in 2018. Messrs. Sandgren, Knight and Clark met or exceeded their subjective performance expectations in 2018 and based on their recommendations, the Compensation Committee increased their base salaries in 2019. With respect Messrs. Ryan and Falconer, the Compensation Committee considered similar factors as well as the changes to their roles in approving 2019 base salaries.

 

Named Executive Officer		2019 Base Salary		Effective Date
James A. Sandgren President and Chief Operating Officer		495,000		First payroll April 2019
Jeffrey L. Knight EVP and Chief Legal Counsel		363,500		First payroll April 2019
Todd C. Clark EVP and Chief Information and Strategic Innovation Officer		362,000		First payroll April 2019

Annual Incentive Compensation.  Our practice is to award cash incentive awards based on our achievement of pre-established objective performance goals. The objective of awarding annual incentive

 

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compensation is to reward short-term financial and operational performance. The Amended and Restated 2008 Incentive Compensation Plan, which includes the Short-Term Incentive Compensation Plan or “STIP”, and which was approved by shareholders in 2017, is intended to be our primary vehicle for awarding such incentives. The STIP does not preclude us from making discretionary bonus payments or special awards to STIP participants outside of the STIP. In establishing performance goals for 2019, the Compensation Committee made a determination at the beginning of 2019 to exclude one-time charges associated with acquisitions and branch closings that occurred in 2019. The Compensation Committee also made a determination to exclude charges incurred as a result of any non-recurring charges under GAAP and certain severance charges.

The amount of cash incentive payments under the STIP is based entirely on target incentive potentials and the achievement of the performance goals established by the Compensation Committee at the beginning of the year. Actual payout levels are determined by the Compensation Committee after evaluating performance through the end of the year and reviewing peer and survey data provided by Pearl Meyer. The percentage payout levels are consistent with the payout levels paid to similarly situated executives within the Company’s peer group.

The 2019 STIP contains targeted annual incentives and provides an opportunity for participants, including the NEOs, to earn between 50% and 150% of their target opportunities provided certain performance thresholds are met. The Compensation Committee believes having a payout range helps to ensure that pay varies with performance and aligns it with market. No payouts under the STIP will be made for performance below minimum required performance. If threshold is achieved, an incentive payout equal to 50% of targeted incentive level for each of the NEOs will be paid. If the targeted profitability measures are achieved, each of the NEOs will receive 100% of the target incentive payout.

In practice, the Compensation Committee makes recommendations that the Board then approves or adjusts. The Performance Measures, as well as the weighting given to the measures, for the 2019 STIP for Messrs. Jones, Ryan, Falconer, Sandgren, Knight and Clark included the following:

 

The Compensation Committee adopted the performance measures of ROATCE and EPS growth as part of the STIP performance measures for 2019 because of their correlation with creating shareholder value. The Compensation Committee elected to keep Efficiency Ratio as part of the STIP design to ensure management focuses on managing expenses within the Company. The achievement of certain diversity and inclusion targets for 2019 were also adopted as part of the plan as a negative modifier to the final results.

The Compensation Committee established the 2019 potential payouts to each NEO. Under the STIP, the target incentive payout for the Executive Chairman was established at 125% of base salary. The target incentive payout for the CEO was established at 115% of base salary. The target incentive payout for the President and Chief Operating Officer was established at 70% of base salary, the target incentive payout for the CFO was

 

46

established at 65% of base salary, and the target incentive payout for the other NEOs was established at 50% of base salary. The maximum payout under the STIP is 150% of the target incentive payout and is earned only when actual performance significantly exceeds the target.

The 2019 STIP performance and payout results for Messrs. Jones, Ryan, Falconer, Sandgren, Knight and Clark were as follows, resulting in a bonus payout of 127.3% of target:

 

Percentage amounts under the caption “Performance Factor” in the tables above reflect the overall percentage of annual incentive compensation earned with respect to each metric after giving effect to the weighting factor applied to the metric and the performance level achieved for that metric. The “Total Percentage Earned” is the sum of the Performance Factors for all metrics.

For 2019, the STIP final award earned was subject to a negative adjustment by up to 10% based on whether executive management achieved certain employee diversity objectives during the year. Messrs. Ryan and Jones reviewed the achievements of the Company in making progress toward establishing a more diverse work force in 2019 with the Compensation Committee. Based on these achievements, Messrs. Ryan and Jones recommended, and the Compensation Committee accepted, that no negative adjustment be made to the STIP earned award for 2019.

Long-Term Incentive Compensation.  We believe that stock ownership by our executive officers is an important tool for aligning their interests with those of our shareholders over the long-term. Therefore, our long-term incentive compensation consists entirely of equity compensation awards. The Amended and Restated 2008 Incentive Compensation Plan, which was again approved by shareholders in 2017, is our primary vehicle for providing equity compensation.

In 2019, the award mix for the Executive Chairman was entirely performance-based (i.e., 100% of the value awarded consisted of performance-based restricted stock units), as illustrated below:

 

 

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The awards for the other NEOs consisted of a combination of Performance-based Restricted Stock Units and Service-based Restricted Stock. The majority of the value awarded (75%) consisted of Performance-based Restricted Stock Units, as illustrated below:

 

Each of these forms of award encourages executives to use their best efforts to increase the value of our stock, since the value of the awards increases with the value of our stock. In addition, because an executive officer’s right to an award generally vests over time, such awards provide a valuable retention tool.

Our practice is to determine the dollar amount of equity compensation that we want to provide, based on consultation with the compensation consultant who advises the Compensation Committee concerning current market practices. In general, we seek to pay equity incentive compensation that approximates the median for our peer group, if targeted performance is achieved and the 75^th percentile for our peer group, if maximum performance is achieved. The Compensation Committee typically makes recommendations regarding equity compensation awards at its first meeting in January, depending upon the availability of the financial results for the preceding year. Typically, these awards are then approved or adjusted by the Board at its next meeting. We make the awards as early as practicable in the year and communicate them to executive officers so that the incentives will be known as early as practicable, thereby maximizing their potential impact. We make equity awards after financial data for the preceding year is available, because this information enables us to refine our expectations for the current year. The proximity of any awards to earnings announcements or other market events is coincidental. Under special circumstances, such as the employment of a new executive or substantial promotion of an existing executive, the Compensation Committee may award equity compensation at other times during the year.

Awards were made on January 24, 2019, pursuant to our Amended and Restated 2008 Incentive Compensation Plan. These awards are reflected on the Table on page 57 entitled “Grants of Plan-Based Awards During 2019.” The Compensation Committee and Board, in order to align the Executive Chairman’s incentive compensation directly with shareholder interests and to place 100% of his equity compensation at risk, determined that his equity compensation should consist of performance-based restricted stock units with no service-based component.

Performance-Based Restricted Stock Units.  The Compensation Committee continued the use of performance-based restricted stock units in 2019 because their use simplifies the administration of the performance awards, as shares are not actually granted until the end of the performance period and dividends are not paid on the units until the units vest into earned shares. In general, our executive officers will not earn performance-based restricted stock units unless we meet pre-established objective performance criteria for the performance period, and the executive officer remains employed throughout the performance period and any required service period.

The Committee allocated 50% of the award based on a measure of relative total shareholder return to ensure the Executive Chairman’s interests were closely aligned with shareholders. The Committee believes

 

48

ROATCE is a key factor to long-term profitable growth and returns. There is a strong correlation of higher ROATCE to higher market price-to-tangible book value (P/TBV) valuations for the common stock of publicly-traded bank holding companies.

In general, the NEOs must be employed by the Company through the distribution date in order to receive a distribution of any 2019 performance-based restricted stock unit awards earned for the performance measures. However, if the executive officer terminates employment on account of disability or retirement, he or she will be treated the same as if he or she had continued employment.

For each restricted stock unit award, we have established minimum, target and maximum performance levels. The actual performance level at the end of the performance period will determine the percentage of units earned. No units will be earned if results are less than the required minimum performance. If target is achieved, all of the units awarded will be earned. If maximum performance is achieved, the number of units earned will multiply by 1.5. Earned units are converted to shares after the performance period has ended and actual results have been evaluated relative to the established minimum, target and maximum performance levels. The following performance goals were approved for 2019 awards:

 

Measure		Threshold		Target		Maximum
Three-Year ROATCE (50%)		14.91%		15.7%		16.33%
Relative TSR (50%)		25th percentile		50th percentile		80th percentile
Associated Payout		25% of target		100% of target		150% of target

Total shareholder return is calculated as the three-month average stock price for the period ending December 31, 2018 compared to the three-month average stock price for the period ending December 31, 2021 for the Company and the Peer Group. The three-month average stock price will be determined by averaging the closing stock price of each trading day during the three months ending on the applicable December 31, including adjustments for cash and stock dividends. TSR is compared relative to our Peer Group used for compensation purposes as defined on page 42.

Shares received from any earned performance-based restricted stock units must be held until the stock ownership guidelines are met. Dividends earned on vested shares accumulated during the performance period, are paid in stock after the end of the performance period and are subject to the holding requirement.

If an executive officer’s employment is terminated on account of death, the target performance criteria will be deemed satisfied, and restrictions on the shares will lapse. If the executive officer terminates employment on account of disability or retirement, the executive officer will be treated the same as if he or she had continued employment through the end of the performance period. For the 2019 awards, if there is a Change in Control and the NEO is terminated, then performance-based restricted stock awarded to the NEO will be paid as if Targeted performance had been achieved.

Service-Based Restricted Stock.  We grant service-based restricted stock for various reasons: these stock awards create ownership, which aligns the executive’s interests with those of other shareholders; these awards contribute to the retention of key employees, whose future service is deemed essential to the ongoing success of the Company. In general, with the exception of dividends, an executive officer will not realize value for service-based restricted stock, unless the executive officer remains employed during the required service period. If an executive officer terminates employment on account of death or terminates without cause or with good reason following a Change in Control of the Company, restrictions on the stock will lapse. If the executive officer terminates employment on account of disability or retirement, the executive officer will be treated the same as if he or she had continued employment. The service-based restricted stock granted in 2019 will vest in three approximately equal annual installments over a three-year period ending on February 1, 2022. We pay cash dividends on service-based restricted stock to our executive officers during the restricted period. The service-based restricted stock must be held by the NEO until the stock ownership guidelines are met even if the restrictions have lapsed.

 

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In 2019, the Compensation Committee granted service-based restricted stock to NEOs other than the Executive Chairman in order to encourage ownership of Company stock, align the Company with peer group practices and to ensure the retention of key executive officers in the Company. Twenty-five percent of the total equity award for the NEOs other than the Executive Chairman was in the form of service-based stock in 2019. As noted previously, the Executive Chairman’s long-term incentive awards are entirely performance-based and do not include any service-based restricted stock.

Retirement Plans.  Until December 31, 2005, we maintained a traditional qualified defined benefit pension plan, known as the Old National Bancorp Employees’ Retirement Plan (“Retirement Plan”). We froze the Retirement Plan as of December 31, 2001, except for employees who were at least age 50 or who had 20 years of credited service as of December 31, 2001. As of December 31, 2005, we froze the Retirement Plan for all remaining employees. We also maintained a nonqualified retirement plan to replace any reduction in benefits under the Retirement Plan due to limitations on benefits under the Internal Revenue Code (“Supplemental Plan”). We also froze the Supplemental Plan as of December 31, 2005. No executive officer will earn further benefits under the Retirement Plan or the Supplemental Plan after 2005, although benefits as of December 31, 2005, are preserved.

In 2016, the Board terminated the Retirement Plan and paid out the proceeds to former and current employees on October 21, 2016. The Supplemental Plan was not terminated.

We continue to maintain a tax-qualified defined contribution plan, known as the Old National Bancorp Employee Stock Ownership and Savings Plan (“Savings Plan”), for eligible employees. The Savings Plan allows employees to make pre-tax and Roth 401(k) contributions. Subject to the conditions and limitations of the Savings Plan, new hires are automatically enrolled in the Savings Plan with an automatic deferral of 6%, unless participation is changed or declined. All active participants receive a Company match of 75 cents on the dollar of the first 4% contributed into the Savings Plan, and 50 cents on the dollar of the next 4% of eligible compensation that is contributed to the Savings Plan. We may also make profit sharing contributions, in our discretion. To receive profit sharing contributions for a year, an employee must have (i) completed at least 1,000 hours of service during the year and (ii) been employed on the last day of the year or retired on or after age 65, died, or became disabled during the year.

We also maintain a nonqualified deferred compensation plan, known as the “Executive Deferred Compensation Plan,” for a select group of management employees designated by the Compensation Committee. All executive officers are eligible to participate in the plan. An executive officer may elect to defer up to 25% of his or her regular compensation, and up to 75% of his or her annual bonus under the STIP, in which case the deferral amount will be credited to his or her plan account. The Executive Deferred Compensation Plan applies the same matching formula that is used for the Savings Plan. We provide matching contribution credits under the plan, reduced by any matching contributions under the Savings Plan. In addition, we may provide discretionary contribution credits to make up for any reduction in discretionary profit-sharing contributions under the Savings Plan due to Internal Revenue Code contribution limits applicable to tax-qualified retirement plans. We did not provide discretionary credits for 2019.

We credit an executive officer’s plan account with earnings based on the hypothetical earnings of an investment fund consisting of Company stock, the return on a recognized market index selected by the Compensation Committee, or a combination of the two, as elected by the executive officer. For the market index fund, we use a Bloomberg index, which approximates the risk and return associated with a diversified high-quality corporate bond fund. The earnings credited under the Executive Deferred Compensation Plan could be in excess of earnings that would have been credited using the applicable federal long-term rate. Any excess earnings are reported in column (h) of the Summary Compensation Table on page 55.

All amounts paid under the Executive Deferred Compensation plan are paid from our general assets and are subject to the claims of our creditors. Except in the case of financial emergency, an executive officer’s benefits under the plan may not be distributed until after termination of employment. In general, an executive officer may elect to receive plan benefits in a lump sum or in annual installments over two to ten years.

 

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Employment Arrangements.  We have entered into employment agreements with each of the NEOs (referred to collectively as “employment agreement(s)” or “agreements”). The employment agreements provide for:

No Gross-up on Severance Benefits—The Company has adopted a “best after-tax provision” whereby the executive receives the full 280G payment and has the responsibility for any excise tax, or the payment is reduced to the safe harbor amount, whichever will put the executive in the best after-tax position with the most compensation and income.

No Gross-up on Perquisites—There will be a continuation of benefit coverage to be provided by the Company for the requisite number of months. However, any tax resulting from these payments will be the executive’s responsibility.

No Walk Away Provision—The Company has eliminated the ability of the executive to voluntarily terminate his or her employment within 12 months of a Change in Control without good reason. The executive will continue to have the right to terminate employment within 24 months of a Change in Control with good reason and receive severance and other benefits.

The changes to these agreements were adopted after reviewing prevailing market and developing executive compensation best practices. Under each of their respective employment and severance agreements, the NEOs are entitled to a base salary, incentive compensation (both cash and equity) and other employee benefits as determined by the Board. Based on information provided by the Compensation Committee’s compensation consultant, the Committee determined that the benefits, including the various multiples of components of compensation, were within the market range for such payouts and benefits. The Committee regularly reviews the Company’s employment and severance agreement arrangements and uses peer data to determine whether these arrangements are consistent with prevailing market practices.

Pursuant to the employment agreements, we are generally obligated to pay certain non-change of control severance benefits to the NEO, if we terminate his or her employment without cause, or the executive resigns within 90 days after we have taken certain actions that adversely affect him or her. An NEO must satisfy the terms of the agreement, including its non-solicitation and non-compete provisions, to receive his or her severance benefits.

The employment and severance agreements also provide for change of control severance benefits for each NEO. The Company is required to pay change of control severance benefits if, within two years following a change of control (as defined in the agreements), we terminate the NEO’s employment for a reason other than “Cause” or the NEO’s disability, or if the executive resigns within two years after a change of control after we have taken certain actions detrimental to the NEO.

The Compensation Committee believes that the employment agreements, which include change of control severance benefits, assure the fair treatment of the NEOs in relation to their professional careers with the Company by assuring them of some financial security in the event of a change of control. The change of control provision also protects the shareholders of the Company by encouraging the NEOs to continue to devote their full attention to the Company without being distracted by the need to seek other employment following the change of control. The Compensation Committee established the change of control payouts to each of the NEOs after reviewing peer data and consulting with the compensation consultant.

In the Committee’s view, severance benefits, including in the event of a change-in-control, are contingent and operate as a form of insurance rather than a principal component of compensation strategy. In that regard, the Committee does not reduce or otherwise modify compensation elements on the basis of eligibility for severance benefits. The Potential Payments on Termination or Change-in-Control tables on pages 62 through 67 and the discussion of the employment agreements beginning on page 60 set forth the estimated values and details of the termination benefits under various scenarios for each of the NEOs.

 

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Perquisites and Other Compensation.  Detailed information regarding other compensation is provided in note 5 to the Summary Compensation Table on page 56. In general, we believe that perquisites should not constitute a consequential portion of any executive officer’s compensation. The Company makes available to the NEOs financial counseling services to assist them in obtaining financial planning advice. This benefit is provided to the executives, but the executives pay any tax due on the benefit.

James A. Sandgren received a country club membership allowance of $15,780 for business development purposes. No other executive received perquisites in excess of $10,000 in 2019. Moreover, certain of the perquisites provided to executive officers also provide a benefit to us. For example, executive physicals, which we require annually for the CEO and every other year for the other NEOs, help us to assure that our executive officers do not postpone addressing health issues that could result in great cost to us in lost productivity and covered treatment costs.

Stock Ownership Guidelines.  In 2010, the Compensation Committee and Board amended the previously established stock ownership guidelines for the Company’s executive officers, including the NEOs, to make the guidelines more consistent with market practices, and to ensure executives retain a specified percentage of stock of the Company until the target ownership level is achieved and to reduce the risk that stock price volatility could impact the achievement of the target ownership requirement. Under the guidelines, the NEOs are required to hold shares of our stock with a value which is the lesser of the following:

 

Position or Salary		Target Ownership Guidelines
Chief Executive Officer		5x salary in stock or 200,000 shares
Chief Operating Officer		4x salary in stock or 100,000 shares
Salary equal to or greater than $250,000		3x salary in stock or 50,000 shares
Salary below $250,000		2x salary in stock or 25,000 shares

As of the date of the Proxy Statement, each of the NEOs has met the stock ownership guideline requirement. For purposes of the guidelines, vested in-the-money options, unearned performance-based restricted stock units, unvested service-based restricted stock and phantom shares in the Nonqualified Deferred Compensation Plan are taken into account.

Recoupment Policy.  In 2010, the Board adopted a Bonus Recoupment, or “Clawback,” Policy that provides the Board with authority to recover a bonus or other incentive paid to any NEO or executive officer in appropriate circumstances where there has been a material restatement of the Company’s financial results. The Board believes that this Policy, along with a requirement that executive officers maintain a significant level of stock ownership in the Company while they are employees, provides significant incentives to help ensure the Company is managed with a long-term view.

Prohibition on Hedging and Pledging.  All directors, officers and employees (collectively “Company Personnel”), including family members and anyone designated to engage in securities transactions on behalf of Company Personnel, are prohibited at all times, even during the Open Window described below, from (a) holding any Company securities in a margin account, or borrowing against any account in which Company securities are held, or pledge Company securities as collateral for loan without the approval of the Chief Legal Counsel; (b) engaging in puts, calls or other derivative transactions relating to the Company’s securities; (c) short-selling securities of the Company; and (d) purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of any equity securities of the Company. The foregoing restrictions apply to all securities of the Company owned directly or indirectly by Company Personnel, including securities of the Company owned by family members where the Company Personnel is deemed to beneficially own such securities, and their respective designees. The foregoing restrictions shall not preclude any Company Personnel, their family members or their designees from engaging in general portfolio diversification or investing in broad-based index funds.

 

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Executive Compensation in 2020

In January 2020, based on results of a review by executive management of the compensation program, the Compensation Committee approved certain changes to the program which will be effective in 2020. In this review, the Compensation Committee considered the balance between short and long-term incentives, cash versus stock, revenue and risk metrics and absolute and relative Performance Measures and considered the time horizon of payments versus risks.

In approving these changes, the Compensation Committee and Board recognized the improvements in financial results in 2019 over 2018, and the fact that 2019 set a record for the Company’s financial performance. The Committee and Board also noted the misalignment of executive compensation with market, finding total cash compensation was positioned below the market median, and in some cases, below the 25^th percentile of the peer group driven by lower base salaries and target cash incentives positioned below the market median.

 

Compensation Element		Changes for 2020
Base Salary		•  Salaries have been reviewed for all NEOs, with changes effective first pay in April 2020 •  Revised salaries take into account the strong performance of the company, individual performance and the market competitiveness of base salary and total cash compensation •  Salaries for four of the five NEOs, including the CEO, were positioned below the market 25th percentile despite the strong performance of the Company versus the Peer Group and our size being broadly aligned to median •  The following salaries were approved:
				NEO		December 31, 2019				First Pay in April 2020
				James C. Ryan, III CEO			750,000				825,000
				Brendon B. Falconer Senior EVP and CFO			390,000				435,000
				James A. Sandgren President and Chief Operating Officer			495,000				550,000
				Jeffrey L. Knight EVP and Chief Legal Counsel			363,500				400,000
				Todd C. Clark EVP and Chief Information and Strategic Innovation Officer			362,000				375,000
Annual Incentive Compensation		•  The target opportunity for Mr. Falconer was increased from 65% to 75% of salary to better align with the peer median; the target opportunity for Mr. Sandgren was increased from 70% to 75% of salary to better align with the peer median; opportunities for the other NEOs were unchanged. •  For 2020 Awards will not be subject to a diversity and inclusion modifier, given progress made to date and a desire to focus participants on all aspects of the ONB Way strategic plan.

 

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Compensation Element

Changes for 2020

Long-Term Incentive Compensation

•  All NEOs will now receive awards as a combination of Performance-Based Restricted Stock Units and Service-Based Restricted Stock Units:

NEO

2020 Equity Mix

Performance

Service

All NEOs

75%

25%

•  This change ensures the majority of variable equity compensation remains performance-based, while better aligning the equity mix with market norms and enhancing the retention impact of our program •  The target opportunity for Mr. Ryan was increased from 70,000 shares to 80,000 shares to ensure better alignment to market. The target opportunity for Mr. Sandgren was increased from 30,000 shares to 35,000 shares to ensure better align to market.

Section 162(m) was amended in December 2017 by the Tax Cuts and Jobs Act to eliminate the exemption for performance-based compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017) and to expand the group of current and former executive officers who may be covered by the deduction limit under Section 162(m). The incentive plans were previously structured to provide that certain awards could be made in a manner intended to qualify for the performance-based compensation exemption, that exemption will no longer be available for future tax years (other than with respect to certain “grandfathered” arrangements as noted above). While the Company’s incentive plans no longer need to comply with Section 162(m)-related limitations or provisions or request shareholder approval, the Compensation Committee intends to continue the pay-for-performance approach to awarding executive pay. The Company will continue to seek shareholder approval of certain compensation plans as may be required by applicable law or regulation.

 

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2019 Summary Compensation Table

The table below provides information regarding compensation earned by our Executive Chairman, CEO, CFO, and the other three executive officers employed at the end of 2019 who were most highly compensated for 2019

 

Name and Principal Position		Year				Salary(1) ($)				Bonus ($)				Stock Awards(2) ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation(3) ($)				Change in Pension Value and Nonqualified Deferred Compensation Earnings (4) ($)				All Other Compensation (5) ($)				Total ($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
Robert G. Jones Executive Chairman and Former CEO			2019 2018 2017				725,000 719,231 694,231				0 0 0				864,128 932,628 1,116,893				0 0 0				1,153,656 1,317,092 728,943				207,975 0 0				78,533 32,666 40,832				3,029,292 3,001,617 2,580,899
James C. Ryan, III Current CEO			2019 2018 2017				646,154 409,038 392,308				0 0 0				925,588 364,656 334,825				0 0 0				945,937 389,056 247,154				8,002 0 152				47,503 20,918 19,720				2,573,184 1,184,118 994,159
Brendon B. Falconer Senior EVP and CFO			2019 2018 2017				341,308 230,192 210,532				0 0 0				276,162 87,518 66,965				0 0 0				282,415 101,170 68,744				2 0 0				19,866 9,766 8,962				919,753 428,646 355,203
James A. Sandgren President and Chief Operating Officer			2019 2018 2017				491,538 475,731 458,846				0 0 0				404,588 364,656 334,825				0 0 0				438,010 453,015 289,073				5,551 0 235				59,344 35,875 30,428				1,399,031 1,329,277 1,113,407
Jeffrey L. Knight EVP and Chief Legal Counsel			2019 2018 2017				361,423 352,423 343,538				0 0 0				202,294 189,621 217,636				0 0 0				230,046 258,150 162,322				596 404 404				25,901 21,652 16,070				820,260 822,250 739,970
Todd C. Clark EVP and Chief Information and Strategic Innovation Officer			2019 2018 2017				360,385 352,692 323,628				0 0 0				202,294 160,449 142,301				0 0 0				229,385 258,347 152,914				3,190 0 0				23,763 12,287 12,086				819,017 783,775 630,940

(1) Base salary increases for NEOs are effective in the first pay of April during the calendar year.

(2) Stock awards included in Column (e) consist entirely of service-based restricted stock and performance-based restricted stock units granted under our Amended and Restated 2008 Incentive Plan. The grant date value of the awards is as determined under FASB ASC Topic 718. For performance-based restricted stock, the grant date value is based on the number of units that would be earned at target levels of performance. The value of the award assuming the highest level of performance conditions are achieved for the 2017, 2018, and 2019 awards would be: Robert Jones ($1,675,339, $1,398,941, and $1,296,191); James Ryan ($457,113, $492,297, and $1,328,006); Brendon Falconer ($91,423, $118,151 and $372,696); James Sandgren ($457,113, $492,297, and $546,506); Jeffrey Knight ($297,123, $255,994, and $273,253) and Todd Clark ($194,273, $216,611, and $273,253). For the number of shares of service-based and performance-based restricted stock awarded in 2019, see the Grants of Plan-Based Awards Table.

(3) These amounts represent incentives that were earned under the Company’s STIP.

(4) This amount is the increase of the actuarial present value of the executive’s benefit under our frozen defined benefit plans, plus the amount of the executive’s earnings credit under our Executive Deferred Compensation Plan in excess of the earnings that would have been credited using the applicable federal long-term rate, with compounding (as described by Section 1274(d) of the Internal Revenue Code).

The 2019 Change in Pension Values and Non-Qualified Deferred Compensation “excess” earnings were: Robert Jones ($0 and $207,975); James Ryan ($0 and $8,002) ;Brendon Falconer ($0 and $2), James Sandgren ($0 and $5,551); Jeffrey Knight ($0 and $596), and Todd Clark ($0 and $3,190).

The 2018 Change in Pension Values and Non-Qualified Deferred Compensation “excess” earnings were: Robert Jones ($0 and $-126.081); James Ryan ($0 and $-3,826); Brendon Falconer ($0 and $0); James Sandgren ($0 and $-2,190); Jeffrey Knight ($0 and $404), and Todd Clark ($0 and $-381).

The 2017 Change in Pension Values and Non-Qualified Deferred Compensation “excess” earnings were: Robert Jones ($0 and $-33,718); James Ryan ($0 and $152); Brendon Falconer ($0 and $0); James Sandgren ($0 and $235); Jeffrey Knight ($0 and $404) and Todd Clark ($0 and $-124).

 

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(5) The amounts specified in Column (i) include the following: perquisites, company contributions to defined contribution plans, cash dividends on restricted stock, and life insurance premiums.

 

Name		Perquisites & Other Personal Benefits(a)				Company Contributions to Defined Contribution Plans(b)				Cash Dividends on Restricted Stock				Life Insurance Premiums(c)				Total
		($)				($)				($)				($)				($)
Robert G. Jones			0				77,909				0				624				78,533
James C. Ryan, III			7,812				32,133				6,934				624				47,503
Brendon B. Falconer			1,601				14,683				2,974				608				19,866
James A. Sandgren			15,780				36,006				6,934				624				59,344
Jeffrey L. Knight			0				21,693				3,641				567				25,901
Todd C. Clark			0				19,926				3,272				565				23,763

(a) James C. Ryan, III and James A Sandgren received country club membership allowances of $6,720 and $15,780, respectively, for business development purposes. Mr. Ryan received benefit of a company executive physical of $1,092.

(b) Company Contributions to Defined Contribution Plans include $19,250 and $58,659 to the Old National Bancorp Employee Stock Ownership and Savings Plan and the Old National Bancorp Executive Deferred Compensation Plan respectively, for Robert Jones; and $16,050 and $16,083 for James Ryan; and $14,444 and $239 for Brendon Falconer; and $15,586 and $20,420 for James Sandgren; and $18,046 and $3,647 for Jeff Knight; and $18,051 and $1,875 for Todd Clark; respectively to those same plans.

(c) The listed executive officers receive group life coverage equal to two times base salary, whereas most other employees receive coverage of one times base salary. The amounts in this column are the premiums for the executive officers’ coverage.

CEO Pay Ratio

We believe our executive compensation program must be internally consistent and equitable to motivate our employees to create shareholder value. Our Compensation Committee monitors the relationship between the compensation of our executive officers and our non-executive employees; however, the Compensation Committee does not view this ratio as a meaningful tool in evaluating the appropriateness of the CEO’s compensation, both on an internal and external basis.

For 2019, the ratio of Mr. Ryan’s Total Compensation to the median employee’s Total Compensation is as follows:

 

Median Employee Total Compensation		$	58,756
CEO’s Total Compensation		$	2,829,056
Ratio of CEO to Median Employee Compensation			48:1

In determining the median employee, a ranked list was prepared of all associates employed other than the CEO as of October 1, 2019 based on their compensation for 2019. The ranked list of all associates for 2019 had an even number of employees; therefore, the Company was unable to select one median employee. In order to arrive at the Median Employee Total Compensation, the Company averaged total compensation of the two employees nearest the median.

The Company had two CEOs during 2019. In order to arrive at the CEO’s Total Compensation, the Company used the annualized total compensation of the individual serving as CEO on the date the Company used to identify its Median Employee. The total compensation for the pay ratio has been annualized to reflect the amount the CEO would have earned if he had been the CEO for all of 2019.

The calculation of compensation for the median employee was determined in the same manner as the “Total Compensation” shown for our CEO in the Summary Compensation Table to arrive at the Median Employee Total Compensation.

 

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