Item 2 Non-Binding Advisory Vote on Compensation for Named Executive Officers
We are asking our shareholders to approve the compensation of our named executive officers (“NEOs”) as disclosed in this Proxy Statement.
While this vote is advisory, and not binding on our Company, it will provide information to our Board and the MDCC regarding investor sentiment about our executive compensation philosophy, policies and practices. Our Board and the MDCC value the opinions of our shareholders and, to the extent there is any significant vote against the compensation of NEOs as disclosed in this Proxy Statement, we will consider our shareholders’ concerns and the MDCC will evaluate whether any actions are necessary to address those concerns.
Before You Vote
In considering your vote, we encourage shareholders to review the information on BlackRock’s compensation policies and decisions regarding the NEOs presented in the discussion regarding the MDCC on page 46, as well as “Compensation Discussion and Analysis” beginning on page 47.
Our pay-for-performance compensation philosophy is structured to align management’s interests with our shareholders’ interests. A significant portion of total compensation for executives is closely linked to BlackRock’s financial and operational performance as well as BlackRock’s common stock price performance. BlackRock has adopted strong governance practices for its employment and compensation programs. Compensation programs are reviewed annually to ensure that they do not promote excessive risk taking.
The Board of Directors recommends you vote “FOR” the approval of the compensation of our NEOs.
Management Development and Compensation Committee Report
Management Development and Compensation Committee Report on Executive Compensation for Fiscal Year 2016
The MDCC has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
MEMBERS OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
Murry S. Gerber, Chair
David H. Komansky
Sir Deryck Maughan
Cheryl D. Mills
Gordon M. Nixon
Compensation Discussion and Analysis
BlackRock’s executive compensation program is designed to align management incentives with the long-term interests of our shareholders. Our total annual compensation structure embodies our commitment to align pay with performance. This Compensation Discussion and Analysis (“CD&A”) provides shareholders with information about BlackRock’s business and 2016 financial performance, our disciplined compensation approach and 2016 compensation decisions for our NEOs, listed below.
|Laurence D. Fink
Chairman and Chief Executive Officer (“CEO”)
|Robert S. Kapito
|Robert L. Goldstein
Chief Operating Officer (“COO”)
|J. Richard Kushel
Head of Multi-Asset Strategies Group
|Gary S. Shedlin
Chief Financial Officer (“CFO”)
Table of Contents
Shareholder Engagement on Executive Compensation
Our Board recognizes the importance of executive compensation decisions to our shareholders. The annual say-on-pay advisory vote provides our shareholders with the opportunity to:
- evaluate our executive compensation philosophy, policies and practices;
- evaluate the alignment of the compensation of BlackRock’s NEOs with BlackRock’s results; and
- cast an advisory vote to approve the compensation of BlackRock’s NEOs.
At the 2016 Annual Meeting of Shareholders, the say-on-pay advisory vote received majority support, with 91% of the votes cast in favor of our executive compensation. Our Board encourages an open and constructive dialogue with shareholders on compensation to ensure alignment on policies and practices.
The MDCC considered shareholder input when it designed the CEO and President compensation framework as well as the BlackRock Performance Incentive Plan (“BPIP”) awards and this year’s annual frequency of the say-on-pay advisory vote.
As in prior years, we engaged shareholders in advance of this year’s annual meeting to incorporate their views as we continue to enhance our compensation programs.
BlackRock Shareholder Value Framework
BlackRock is committed to delivering long-term shareholder value. While our financial results can, at times, be affected by global capital market conditions that are beyond our control, management has the ability to influence key drivers of shareholder value.
As described below, BlackRock’s framework for long-term value creation is based on our ability to:
- generate differentiated organic growth;
- enhance our scale to deliver operating leverage; and
- return capital to shareholders on a consistent and predictable basis.
BlackRock’s commitment to delivering shareholder value is aligned with the way we manage our business. By putting clients’ interests first and delivering investment solutions, risk management and technology to help them meet their objectives, we are able to build our business organically, adding new assets under management (“AUM”) and growing risk management and technology offerings, in turn, driving Organic Revenue growth¹.
Scale is an important driver of operating leverage that benefits our operating margin and clients. We take advantage of scale in numerous areas of our business including through our index-based investment strategies, brand spend and technology platform, including our Aladdin business.
BlackRock’s diversified platform, in terms of styles, products, client types and geographies, generates more stable cash flows through market cycles, positioning BlackRock to first invest for future growth, while prudently managing discretionary expenses and then to return capital to our shareholders. For more details, refer to “Business Outlook” on page 32 of our 2016 Form 10-K.
During 2016, we returned $2.7 billion to our shareholders through a combination of share repurchases and dividends.
1 Organic Revenue growth is a measure of the expected annual revenue impact of BlackRock’s net new business, including net new Aladdin revenue, excluding the subsequent effect of market appreciation/(depreciation) and foreign exchange. Organic Revenue is not directly correlated with the actual revenue earned in the current year.
BlackRock 2016 Performance¹
BlackRock’s 2016 results reflect our continued commitment to optimize the growth of our diverse investment, technology and risk management capabilities in the most efficient manner possible. Full-year results reflected industry-leading organic growth, continued operating margin expansion and consistent capital management. Investment performance results across our active and index strategies as of December 31, 2016 are included in Item 1 of our 2016 Form 10-K.
Differentiated Organic Growth
Organic asset growth of 4% in 2016 contributed to positive Organic Revenue growth²:
- Long-term net inflows of $181 billion reflected positive net inflows across asset classes and benefitted from significant inflows into iShares;
- Flows contributed to long-term annual organic asset growth of 13% in iShares, 2% in Institutional and (2)% in Retail;
- BlackRock Solutions achieved 11% revenue growth; and
- Total revenue declined 2% from 2015 to $11,155 million driven by a decline in performance fees.
Operating income, as adjusted, was flat versus 2015. Continued margin expansion was driven by realizing the benefits of scale and expense discipline:
- As adjusted operating income of $4,674 million was flat versus 2015, despite a 2% decline in revenue;
- As adjusted compensation and benefits expense-to-revenue ratio was 34.5%, representing a decrease of 40 basis points (“bps”) from 2015;
- G&A expense of $1.3 billion was 6% below 2015 levels despite the impact of acquisitions, reflecting expense awareness in a volatile market environment; and
- Operating Margin, as adjusted, of 43.7% was up 80 bps from 2015.
Consistent Capital Return
$2.7 billion was returned to shareholders in 2016:
- Annual dividend of $9.16 per share, reflected an increase of 5% from $8.72 in 2015; and
- $1.1 billion of outstanding shares were repurchased in 2016, driving a reduction in net share count of 2.5 million shares.
As adjusted diluted earnings per share (“EPS”) of $19.29 declined 2% versus 2015:
- Despite organic growth, operating margin expansion and share repurchases in 2016, EPS declined versus 2015 due to lower non-operating income and a higher tax rate in 2016.
1 Amounts in this section, where noted, are shown on an “as adjusted” basis. For a reconciliation with generally accepted accounting principles in the United States, please see Annex A.
2 Organic Revenue growth is a measure of the expected annual revenue impact of BlackRock’s net new business, including net new Aladdin revenue, excluding the subsequent effect of market appreciation/ (depreciation) and foreign exchange. Organic Revenue is not directly correlated with the actual revenue earned in the current year.
Pay-for-Performance Compensation Structure for NEOs
Our total annual compensation structure embodies our commitment to align pay with performance. More than 90% of our executive compensation is performance based and “at risk.” Compensation mix percentages shown below are based on 2016 year-end compensation decisions for individual NEOs by the MDCC.
1 All grants of BlackRock equity (including the portion of the annual incentive awards granted in RSUs and BlackRock Performance Incentive Plan (“BPIP”) awards) are approved by the MDCC under the Second Amended and Restated 1999 Stock Award and Incentive Plan (the “Stock Plan”), which has been previously approved by shareholders. The Stock Plan allows multiple types of awards to be granted.
2 The value of the 2016 long-term incentive BPIP awards and the value of the equity portion of the bonus for 2016 annual incentive awards was converted into RSUs by dividing the award value by $375.22, which represented the average of the high and low prices per share of common stock of BlackRock on January 17, 2017.
3 For NEOs other than the CEO and President, higher annual incentive awards are subject to higher deferral percentages, in accordance with the Companywide deferral policy, as detailed on page 54.
NEO Total Annual Compensation Summary
Following a review of full-year business and individual NEO performance, the MDCC determined 2016 total annual compensation outcomes for each NEO, as outlined in the table below.
The amounts listed above as “2016 Annual Incentive Award: Deferred Equity” and “Long-Term Incentive Award (“BPIP”)” were granted in January 2017 in the form of equity and are separate from the cash award amounts listed above as “2016 Annual Incentive Award: Cash.” In conformance with SEC requirements, the 2016 Summary Compensation Table on page 67 reports equity in the year granted, but cash in the year earned.
Compensation Program Objectives
Our compensation program is designed to:
- appropriately balance BlackRock’s financial results between shareholders and employees;
- determine overall compensation based on a combination of firm, business area and individual employee performance;
- align the interests of our senior-level employees, including NEOs, with those of shareholders through the use of long-term performance-based equity awards and accumulation of meaningful share ownership positions;
- discourage excessive risk-taking; and
- attract, motivate and retain high-performing employees.
(1) For 2016 deferred equity, the award value was converted into a number of RSUs by dividing the award value by $375.22, which represented the average of the high and low prices per share of BlackRock common stock on January 17, 2017.
(2) For 2016 long-term incentive BPIP awards, the award value was converted into a number of RSUs by dividing the award value by $375.22, which represented the average of the high and low prices per share of common stock of BlackRock on January 17, 2017.
BlackRock Performance Incentive Plan (“BPIP”)
BlackRock believes in aligning the interests of our senior-level employees, including our NEOs, with those of our shareholders, and in closely aligning compensation with long-term performance.
In January 2015, with the advice of the MDCC’s independent compensation consultant, Semler Brossy, the MDCC approved a new form of performance-based equity awards, referred to as BPIP awards, following a comprehensive review of future performance goals and expectations, potential pay outcomes for employees, shareholder input and market trends. BPIP was designed to further align compensation with management’s long-term creation of shareholder value.
Each NEO was granted a BPIP award in January 2015 and January 2016 as part of his or her incentive compensation for their 2014 and 2015 performance, respectively. Similarly, a portion of each NEO’s incentive compensation for 2016 was in the form of a BPIP award granted in January 2017. In addition to recognizing an NEO’s performance in the prior year, the BPIP awards are intended to incentivize continued performance and long-term focus over a multi-year period. The January 2017 BPIP grants are described in further detail below.
BlackRock is focused on achieving the right balance of investing in our business to drive growth in Organic Revenue, and the impact those investments have on our expense base and Operating Margin, as adjusted. For purposes of BPIP awards granted prior to 2017, Organic Revenue did not include fees generated from BlackRock’s cash management business. In recognition of the increasing strategic importance of this business in a potential rising interest rate environment, Organic Revenue for purposes of BPIP awards granted in 2017 includes fees generated from cash management.
BPIP awards are granted in the form of RSUs that vest after three years. The number of shares vesting under BPIP is based on the attainment of specified levels of Organic Revenue and Operating Margin, as adjusted over a three-year performance period.
BPIP FINANCIAL METRICS
BPIP is tied to two key drivers of shareholder value – Organic Revenue and Operating Margin, as adjusted, over a three-year performance period – that are directly influenced by BlackRock’s senior-level employees across market cycles.
Similar to previous BPIP awards, the January 2017 BPIP awards have a three-year performance period that commenced on January 1, 2017 and ends on December 31, 2019. Each BPIP award consists of a “base” number of RSUs granted to the recipient. Distributions will be in the form of common stock.
BPIP AWARD DETERMINATION:
For all outstanding BPIP Awards, the number of shares that a recipient ultimately receives upon settlement will be equal to the base number of RSUs granted, multiplied by a percentage determined in accordance with the January 2017 BPIP Award Determination Matrix below. The percentage will be determined by BlackRock’s annual average Organic Revenue and Operating Margin, as adjusted, during the performance period; performance between two adjacent points on the matrix will be extrapolated.
A summary version of the matrix for the January 2017 BPIP Awards is set forth below.
JANUARY 2017 BPIP AWARD DETERMINATION MATRIX
If target level performance is achieved (i.e., during the three-year performance period, BlackRock has average annual Organic Revenue equal to $400 million and average annual Operating Margin, as adjusted, equal to 43.0%), a participant will receive a number of shares equal to 100% of the base number of units granted to the participant.
If during the three-year performance period, BlackRock has zero or negative average Organic Revenue and average Operating Margin, as adjusted, 37.0% or less, the participant will not be entitled to a distribution of any shares under their 2017 BPIP award.
If during the three-year performance period, BlackRock were to deliver average Organic Revenue of $600 million and average Operating Margin, as adjusted, of 43%, then a recipient receiving a BPIP award valued at $2.0 million in January 2017 would receive a distribution of 6,182 shares, or 116% of the base number of RSUs granted. Outlined below is an example of how this above-target level achievement would be calculated.
JANUARY 2017 BPIP GRANT: EXAMPLE
If maximum level performance is achieved, then a participant will receive the maximum number of shares (meaning that during the performance period, BlackRock delivered average Organic Revenue equal to or greater than $800 million and average Operating Margin, as adjusted, equal to or greater than 49%). The maximum number of shares a participant may receive under BPIP is equal to 165% of the base number of units.
Our Compensation Framework
Our compensation program for NEOs continues to include base salary, annual incentive awards (cash and deferred equity) and long-term performance-based incentive awards.
Annual Incentive Awards – Pay and Performance Alignment for CEO and President
Under this program, target annual cash incentive awards (“cash bonus”) have been established at $8.0 million and $6.5 million for our CEO and President, respectively. Actual cash bonuses can range from 0% up to a maximum of 125% of the target amount ($10.0 million and $8.125 million for the CEO and President, respectively). To determine the actual cash bonus amount, the MDCC used the framework below to assess individual performance. The MDCC created three categories and assigned a weighting factor to each, with 50% of the award opportunity dependent on BlackRock’s financial performance. To assess improvement in our business and organizational strengths, the MDCC uses internal BlackRock performance measures and may also consider peer group comparisons.
The MDCC maintains discretion in setting the final awards in order to determine the quality of the outcomes and to reflect the executives’ ability to adapt to the evolving business environment throughout the year.
How We Determine Annual Cash Bonus Amounts for our CEO and President
In addition to the annual cash incentive awards, the MDCC expects to continue to make annual equity awards to both Mr. Fink and Mr. Kapito, with at least half of such equity awards being long-term and contingent on future financial or other business performance requirements.
How We Determine Other NEO Compensation
DETERMINATION OF OTHER NEOs’ ANNUAL INCENTIVE COMPENSATION IS BASED ON:
- an assessment of the individual NEO’s contributions to overall Company results and individual business results throughout the year; and
- each NEO’s influence on setting long-term strategy and in executing long-term objectives.
INPUTS TO INDIVIDUAL NEO TOTAL ANNUAL COMPENSATION DECISIONS INCLUDE:
- Financial factors such as revenue, operating income, EPS, operating margin and compensation and profitability margins;
- Non-financial factors such as individual NEO performance, overall investment performance, client relationship strength and organizational discipline; and
- Other considerations such as external market conditions and market intelligence on competitive compensation. See “Competitive Pay Positioning – Market Data” on page 57.
The deferred equity component of each of our other NEOs’ annual incentive award is determined by a Company-wide deferral policy. Higher annual incentive awards are subject to higher deferral percentages. All long-term equity-based incentive awards granted under BPIP are funded and awarded separately from the total bonus pool and are determined on a subjective basis as part of the MDCC’s total annual compensation decision.
Compensation Decision Timeline and Process
The MDCC structures the timing and process for determining individual NEO compensation to ensure that compensation is appropriately aligned with the financial performance of BlackRock. This also ensures recognition of individual NEO leadership and operating contributions toward achieving our overall strategic priorities.
* Signifies Board meetings. Board topics include Financial, Business, Market, Talent Reviews and/or Committee updates.
At the beginning of each year, management reviews the annual budget with the MDCC. The MDCC and CEO establish financial and business goals and objectives. These goals and objectives provide the context for an evaluation of performance at year-end.
The MDCC regularly meets with the CFO to review YTD actual and projected financial information and reviews and certifies fullyear financial information after year-end. Throughout the year, all members of the Board review strategic plans, financial and business results, talent development and succession planning, as well as other areas relevant to BlackRock’s performance.
The MDCC also reviews other measures of our financial, investment and operating performance, market intelligence on compensation and information about market conditions. In December, management reports on absolute and/or relative performance metrics compared to major competitors, year-over-year and budget. These metrics include growth in revenues, operating income, net income, operating margin and net new inflows of AUM and other quantitative and strategic measures.
Our compensation consultant also provides an independent report on publicly disclosed financial information and provides compensation information for certain publicly traded asset management companies to understand performance and trends in compensation among public asset managers (as described in “Role of the Compensation Consultant and Competitive Benchmarking” below).
In December, during an executive session with the MDCC, the CEO reviews the performance of all individual NEOs against business goals and objectives. During an executive session that excludes all members of management, the non-management directors assess the performance of the CEO against business goals and objectives.
In January, the MDCC reviews and certifies year-end financial results and other performance metrics as well as external data for comparison. The MDCC then determines final total annual incentive award amounts for each of our NEOs. The MDCC determines annual cash incentive award amounts for the CEO and President utilizing the annual cash incentive award framework, based on financial performance, business strength and organizational strength, supported by performance measures.
The MDCC also determines equity awards made through BPIP, our long-term incentive award. This timing allows the MDCC to consider full-year individual NEO performance assessments along with full-year financial and non-financial results in its final determination of compensation. The MDCC also determines the Award Determination Matrix for the three-year BPIP performance cycle. In setting financial performance requirements for the BPIP, the MDCC considers BlackRock’s past performance and the current market environment. Compensation decisions are made on a total annual compensation basis, with consideration of each element of compensation, as described on pages 51 to 52.
Competitive Pay Positioning – Market Data
Management engages McLagan Partners (“McLagan”), a compensation consultant that specializes in conducting proprietary compensation surveys and interpreting compensation trends. Management used McLagan surveys to (1) evaluate BlackRock’s competitive position overall, as well as by functional business and by title and (2) make comparisons on an individual NEO basis, where survey data was available and appropriate. Survey results were analyzed to account for differences in the scale and scope between BlackRock and other survey participants.
Confidentiality obligations to McLagan and to its survey participants prevent BlackRock from disclosing the companies included in the surveys. Survey participants include stand-alone, publicly traded asset management companies as well as privately held or subsidiary asset management organizations for which publicly available compensation data is not available.
The MDCC reviews market data to understand compensation practices and trends in the broader marketplace. Individual NEO compensation decisions are primarily based on assessments of individual NEO and Company performance.
Role of the Compensation Consultant and Competitive Benchmarking
In 2016, the MDCC continued to engage Semler Brossy to provide objective advice on the compensation practices and the competitive landscape for the compensation of BlackRock’s executive officers.
Semler Brossy reports directly to the MDCC and interacts with BlackRock management when necessary and appropriate in carrying out assignments. Semler Brossy provides services only to the MDCC as an independent consultant and does not have any other consulting engagements with, or provide any other services to, BlackRock. The independence of Semler Brossy has been assessed according to factors stipulated by the SEC and the MDCC concluded that no conflict of interest exists that would prevent Semler Brossy from independently advising the MDCC.
A representative from Semler Brossy met with the MDCC in formal Committee meetings and at key points throughout the year to provide objective advice to the MDCC on existing and emerging compensation practices among financial services companies, as well as companies in the asset management sector. Semler Brossy reviewed publicly disclosed compensation information for certain publicly traded asset management companies to understand trends in compensation among public asset managers, including:
Affiliated Managers Group, Inc.
AllianceBernstein Holding L.P.
Ameriprise Financial, Inc.
Bank of New York Mellon Corp.
Eaton Vance Corp.
Federated Investors, Inc.
Franklin Resources, Inc.
Legg Mason, Inc.
Northern Trust Corp.
State Street Corp.
T. Rowe Price Group, Inc.
The broader suite of companies in the McLagan analyses, which include publicly traded companies as well as private companies, offers additional comparisons through which BlackRock can understand the competitiveness of its executive compensation programs overall, by functional business and by title/individual. Semler Brossy independently reviewed the results and the companies included in the McLagan analyses. BlackRock does not engage in formal benchmarking in setting executive compensation levels.
Risk Assessment of Compensation Plans
Our employee compensation program is structured to discourage excessive and unnecessary risk taking. The Board recognizes that potential risks to BlackRock may be inherent in compensation programs. The Board reviews BlackRock’s executive compensation program annually to ensure that it is structured so as not to unintentionally promote excessive risk taking. As a result of this annual review, we believe that the compensation plans are appropriately structured and do not pose risks that could have a materially adverse effect on BlackRock.
The MDCC considers the following when evaluating whether employee compensation plans and policies encourage BlackRock employees to take unreasonable risks:
- Performance goals that are reasonable in light of past performance and market conditions;
- Longer-term expectations for earnings and growth;
- The base salary component of compensation does not encourage risk taking because it is a fixed amount;
- A greater portion of annual compensation is deferred at higher annual incentive award levels; and
- Deferred compensation is delivered in the form of equity, vests over time, and the value is therefore dependent on the future performance of BlackRock.
Essential to the success of BlackRock’s business model is the ability to both understand and manage risk. These fundamentals are inherent in the design of our compensation programs, which reward employees for strong performance in their management of client assets and in managing risk within the risk profiles appropriate to each of BlackRock’s clients. As such, employees are not rewarded for engaging in high-risk transactions outside of established parameters.
Our compensation practices reinforce the fundamentals of BlackRock’s business model in that they:
- Do not provide undue incentives for short-term planning or action toward short-term financial rewards;
- Do not reward unreasonable risk; and
- Provide a reasonable balance between the risks that are inherent in the business of investment management, risk management and advisory services.
The Company’s operating income, on which compensation is primarily based, does not include net investment income or gains/losses on BlackRock’s seed or co-investments. While BlackRock may make seed or co-investments in its various funds alongside clients, it does not engage in proprietary trading.
Linking Pay and Performance
Here we provide 2016 compensation decisions for each NEO and a summary of his individual performance accomplishments relative to achieving BlackRock’s annual and long-term performance goals.
|Laurence D. |
Chairman and CEO
|(Thousands)||Mr. Fink develops and guides BlackRock’s long-term strategic direction to deliver value for clients and shareholders.
He is responsible for senior leadership development and succession planning, defining and reinforcing BlackRock’s vision and culture, and engaging with key strategic clients, industry leaders, regulators and policy makers.
|Annual Incentive Award - Cash||$8,000|
|Annual Incentive Award - Equity||$4,150|
|Long-Term Incentive Award||$12,450|
|Total Annual Compensation||$25,500|
|The MDCC determined Mr. Fink’s total annual compensation based on an assessment of performance in alignment with the compensation structure outlined on pages 51 to 52.||Based on BlackRock’s absolute and relative performance in 2016, the MDCC determined to award Mr. Fink $25.5 million in total compensation, modestly down from his 2015 compensation.||The Committee assessed Mr. Fink’s strategic leadership and partnership with the GEC and took into account the key performance factors outlined below.|
|2016 Key Accomplishments||FINANCIAL PERFORMANCE
|Robert S. |
|(Thousands)||Mr. Kapito is responsible for executing BlackRock’s strategic plans and overseeing the global business operations of the Company.
He ensures connectivity and coordination of operating processes across all groups in the organization, in part through his leadership, along with Mr. Goldstein, of the Global Operating Committee.
He is also responsible for spearheading initiatives to drive investment performance and the results within each of BlackRock’s businesses.
|Annual Incentive Award - Cash||$6,500|
|Annual Incentive Award - Equity||$3,209|
|Long-Term Incentive Award||$9,626|
|Total Annual Compensation||$20,085|
|The MDCC determined Mr. Kapito’s total annual compensation in alignment with the compensation structure on pages 51 to 52.||The MDCC awarded Mr. Kapito $20.085 million in total compensation for 2016, modestly up from his 2015 compensation.||The Committee assessed Mr. Kapito’s leadership and took into account the key performance factors outlined below.|
|2016 Key Accomplishments||FINANCIAL PERFORMANCE
|Robert L. |
|(Thousands)||As COO, Mr. Goldstein is responsible for ensuring that the organization’s investment, client, risk analytics and technology functions have the necessary connectivity, coordination and operating processes in place to succeed.
Mr. Goldstein also leads the BlackRock Solutions business, delivering risk analytics and capital markets expertise and insights to clients.
Along with Mr. Kapito, Mr. Goldstein co-chairs the BlackRock Global Operating Committee. With Mr. Shedlin, he also co-chairs the committee responsible for developing the firm’s budget, evaluating new initiatives aimed at driving growth and achieving strategic objectives of the firm.
|Annual Incentive Award - Cash||$2,850|
|Annual Incentive Award - Equity||$1,900|
|Long-Term Incentive Award||$2,100|
|Total Annual Compensation||$7,350|
|2016 Key Accomplishments||During 2016, Mr. Goldstein continued to coordinate a firm-wide budgeting process aimed at optimizing levels of investment spending, operational efficiency and expense discipline.
He also began implementing a long-term Technology vision for the firm. He showcased the firm’s vision for Aladdin, retail technology, and broader technology integration by launching the Tech 2020 strategy. This included:
During 2016, he continued to lead BlackRock Solutions, which achieved revenue of $714 million in 2016, an increase of 11% from $646 million in 2015.
In addition, he contributed meaningfully to talent planning among Company leaders, particularly as it pertained to technology leadership.
Head of Multi-Asset Strategies Group
|Thousands||Has served as the Global Head of the Multi-Asset Strategies (“MAS”) Group since February 2016. He is responsible for the firm’s multi-asset products, its asset allocation and model-portfolio capabilities, factor strategies, target-date funds and impact investing. He was previously Chief Product Officer and Global Head of Strategic Product Management from 2012 to 2016.
As head of MAS, Mr. Kushel oversees management of a variety of balanced funds and bespoke mandates for a diversified client base that leverages broad investment expertise in global equities, bonds, currencies and commodities and BlackRock’s extensive risk management capabilities.
|Annual Incentive Award - Cash||$2,490|
|Annual Incentive Award - Equity||$1,540|
|Long-Term Incentive Award||$1,970|
|Total Annual Compensation||$6,500|
|2016 Key Accomplishments||Mr. Kushel was appointed Head of the Multi-Asset Strategies Group in February 2016. In this role, he developed a vision for the MAS business, including an enhanced focus on institutional opportunities and restructuring the LifePath organization and product offerings.
He oversaw factor-based investments, a strategic focus area for BlackRock, which grew at an organic growth rate of nearly 20% in 2016, and the Model Portfolio & Solutions team, a key initiative for the firm.
He also identified talent for significant commercial and investment leadership roles for the MAS business.
|(Thousands)||As CFO, Mr. Shedlin is responsible for managing BlackRock’s overall financial condition, including capital allocation and expense discipline.
He is also responsible for overseeing all corporate finance functions, including financial planning and analysis, accounting, finance operations and controls, tax, treasury, investor relations and corporate development.
Mr. Shedlin also co-chairs, along with Mr. Goldstein, the committee responsible for developing the firm’s budget, evaluating new initiatives aimed at driving growth and achieving strategic objectives of the firm.
|Annual Incentive Award - Cash||$2,350|
|Annual Incentive Award - Equity||$1,400|
|Long-Term Incentive Award||$1,850|
|Total Annual Compensation||$6,100|
|2016 Key Accomplishments||During 2016, Mr. Shedlin continued to develop BlackRock’s outreach with key investors and financing counterparties.
He also oversaw the acquisition of the Bank of America Merrill Lynch cash management business and the sale of BlackRock’s UK Defined Contribution business.
With Mr. Goldstein, Mr. Shedlin led the effort to develop plans for a future new global headquarters in New York’s Hudson Yards development.
Mr. Shedlin continued to optimize BlackRock’s capital management strategy by executing a consistent and predictable dividend and share repurchase policy.
He also continued to guide BlackRock’s priorities and resource deployment to enable disciplined growth, while leveraging the benefits of BlackRock’s scale to achieve a 3.4% expense reduction.
Summary of Executive Compensation Practices
Our compensation program reflects our commitment to responsible financial and risk management and is exemplified by the following policies and practices:
|What We Do|
|✔||Review pay and performance alignment;|
|✔||Balance short and long-term incentives, cash and equity and fixed and variable pay elements;|
|✔||Maintain a clawback policy that allows for the recoupment of annual and long-term performance-based compensation in the event that financial results are restated due to the actions of an employee;|
|✔||Apply a one-year minimum vesting requirement to awards granted under our stock incentive plan, subject to limited exceptions;|
|✔||Maintain robust stock ownership and retention guidelines;|
|✔||Maintain robust stock ownership and retention guidelines;
|✔||Assess and mitigate risk in compensation plans, as described in “Risk Assessment of Compensation Plans” on page 58;|
|✔||Hold an advisory vote on executive compensation on an annual basis in order to provide shareholders with a frequent opportunity to give feedback on compensation programs; and|
|✔||Review the independence of the Management Development and Compensation Committee’s (“MDCC”) independent compensation consultant on an annual basis.|
|What We Don't Do|
|✗||No ongoing employment agreements or guaranteed compensation arrangements with our NEOs;|
|✗||No arrangements with our NEOs providing for automatic single trigger vesting of equity awards upon a change-in-control or transaction bonus payments upon a change-in-control;|
|✗||No dividends or dividend equivalents on unearned RS or RSUs; no dividend equivalents on stock options or stock appreciation rights;|
|✗||No repricing of stock options;|
|✗||No cash buyouts of underwater stock options;|
|✗||No tax reimbursements for perquisites or tax gross-ups for excise taxes incurred due to the application of Section 280G of the Internal Revenue Code;|
|✗||No supplemental retirement benefit arrangements with our NEOs; and|
|✗||No supplemental severance benefit arrangements with our NEOs outside of the standard severance benefits under BlackRock’s Severance Pay Plan (the “Severance Plan”).|
Stock Ownership Guidelines
Our stock ownership guidelines require the Company’s GEC members to own and maintain a target number of shares (i.e., shares owned outright, not including unvested shares or unexercised stock options), the dollar amount of which is set out below. Until these stock ownership guidelines are met, GEC members must retain 50% of the net (after-tax) shares delivered from BlackRock equity awards. The MDCC monitors the progress made by our NEOs in achieving their stock ownership guidelines and, if circumstances warrant, may modify the guidelines and/or time frames for one or more of our NEOs.
As of December 31, 2016, all of our NEOs exceeded the stated stock ownership guidelines.
- $10 million for the CEO;
- $5 million for the President; and
- $2 million for all other GEC members.
All performance-based compensation (including annual and long-term incentive awards and all equity compensation) is subject to BlackRock’s Clawback Policy and is subject to recoupment if an employee is found to have engaged in fraud or willful misconduct that caused the need for a significant restatement of BlackRock’s financial statements.
BlackRock provides medical, dental, life and disability benefits and retirement savings vehicles in which all eligible employees participate. BlackRock makes contributions to 401(k) accounts of its NEOs on a basis consistent with other employees. None of our NEOs participate in any Company-sponsored defined benefit pension program.
Other benefits include voluntary deferrals of all or a portion of the cash element of the NEO’s annual incentive awards pursuant to the BlackRock, Inc. Voluntary Deferred Compensation Plan (the “VDCP”).
NEOs are eligible for standard severance benefits under the Severance Plan in the event of involuntary termination of employment without cause (as defined under the Severance Plan) by BlackRock. The Severance Plan provides a lump sum cash payment equal to two weeks of salary per year of service, with a minimum of 12 weeks and a maximum of 54 weeks, to all U.S.-based employees who are involuntarily terminated without cause in conjunction with a reduction in force or position elimination.
Perquisites and other benefits available to NEOs, such as financial planning, investment opportunity and personal use of travel services are considered a reasonable part of the executive compensation program. A financial planning perquisite is offered to NEOs. In addition, investment offerings may be provided without charging management or performance fees consistent with the terms offered to other employees who meet the same applicable legal requirements.
Messrs. Fink and Kapito are required by the Board to utilize private airplane services for all business and personal travel in the interest of protecting their personal security. NEOs reimburse BlackRock for a portion of the cost of personal airplane services.
Transportation services are provided by BlackRock and/or third-party suppliers and are made available to our NEOs for business and personal use. The compensation attributed to each of our NEOs for 2016 for perquisites is described in footnote (3) to the “2016 Summary Compensation Table” on page 67.
BlackRock did not provide tax reimbursements for any perquisites or other compensation paid to our NEOs.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of compensation to any “covered employee” of a public company to $1.0 million during any fiscal year unless such compensation qualifies as “performance-based.” In general, the Company intends to structure its incentive compensation arrangements in a manner that would comply with these tax rules. However, the MDCC maintains the flexibility to pay non-deductible incentive compensation if it determines it is in the best interest of the Company and its shareholders.
The MDCC establishes the method for calculating the Section 162(m) compliant aggregate cap (the “Aggregate 162(m) Cap”) for annual incentive awards to each of our NEOs pursuant to the shareholder-approved Amended and Restated BlackRock, Inc. 1999 Annual Incentive Performance Plan (the “Performance Plan”). The Aggregate 162(m) Cap, as well as each NEO’s maximum allocable portion of the overall Aggregate 162(m) Cap (the “Individual 162(m) Caps”), are calculated each year in accordance with the requirements of Section 162(m) of the Internal Revenue Code. Neither the Aggregate 162(m) Cap nor the Individual 162(m) Caps serve as a basis for the MDCC’s compensation decisions for our NEOs; instead, these caps serve to establish a ceiling on the amount of annual incentive awards which the MDCC can award to the NEOs on a tax deductible basis. In determining final awards for each NEO, the MDCC ensures that such awards do not exceed the NEO’s Individual 162(m) Cap.
Summary of Executive Compensation Tables
The following 2016 Summary Compensation Table sets forth information concerning compensation provided by BlackRock for the years indicated to the NEOs. Pursuant to SEC rules, the below compensation table includes only those equity-based awards granted in a particular year and not any awards granted after year-end, even if awarded for services in that year. It additionally discloses any cash compensation earned in a particular year, even if such payments are made after year-end.
2016 Summary Compensation Table
(1) These amounts represent the cash portion of discretionary annual bonuses for the respective periods awarded pursuant to the Performance Plan. To secure the deductibility of annual incentive awards (including cash bonuses) awarded to the NEOs, each NEO’s total incentive award is awarded under the Performance Plan, which permits deductibility of compensation paid to the NEOs under Section 162(m) of the Internal Revenue Code. Satisfaction of the performance criteria under the Performance Plan determines only the maximum amount of incentive compensation that may be awarded to NEOs for the fiscal year. The amount of incentive compensation awarded to each NEO in January 2017 (for fiscal year 2016) was based on subjective criteria, as more fully described on pages 54 to 55 of the “Compensation Discussion and Analysis”.
As described on page 50 of the “Compensation Discussion and Analysis”, on January 17, 2017, Messrs. Fink, Kapito, Goldstein, Kushel and Shedlin were awarded RSUs as part of their discretionary annual bonuses for the 2016 fiscal year. In accordance with FASB ASC Topic 718, these awards had grant date values of $4,150,000, $3,209,000, $1,900,000, $1,540,000 and $1,400,000, respectively, based on the average of the high and low prices per share of BlackRock common stock on January 17, 2017, which was calculated to be $375.22. Additionally, Messrs. Fink, Kapito, Goldstein, Kushel and Shedlin received discretionary BPIP awards consisting of performance-based RSU awards with grant date values of $12,450,000, $9,626,000, $2,100,000, $1,970,000 and $1,850,000, respectively. The base number of units granted pursuant to BPIP awards was determined by dividing the individual’s award value by the average of the high and low prices per share of BlackRock common stock on January 17, 2017.
(2) Reflects the grant date fair value of awards made during each calendar year as determined pursuant to FASB ASC Topic 718. For complete valuation assumptions of the awards, see Note 14 to the consolidated financial statements in our 2016 Form 10-K. The amount included with respect to the BPIP awards granted in January 2016 is based on the grant date fair value assuming target level of performance. If maximum level of performance had been assumed, the grant date fair value of the BPIP awards would have been (i) $20,269,710 for Mr. Fink, (ii) $15,034,901 for Mr. Kapito, (iii) $3,299,961 for Mr. Goldstein, (iv) $3,118,144 for Mr. Kushel, and (v) $2,886,874 for Mr. Shedlin.
(3) For each of the NEOs, $18,250 was attributable to contributions made by BlackRock under its tax-qualified defined contribution (401(k)) plan in 2016. For Messrs. Fink, Kapito, Goldstein, Kushel and Shedlin, $0, $31,175, $31,175, $31,175 and $0, respectively, was attributable to financial planning services. In 2016, $175,000 was attributable to personal use by each of Messrs. Fink and Kapito, of Company-provided aircraft services. These amounts reflect the incremental cost to BlackRock to provide the aircraft services. Aircraft incremental cost is based on, as applicable, (i) variable operating cost per flight hour for the BlackRock corporate aircraft (including fuel and variable maintenance expenses) plus any trip-specific incremental costs (such as crew expenses, catering expenses and fees associated with landing, parking and flight planning) or (ii) actual charter cost, in each case, less reimbursement received from the NEO. Messrs. Fink and Kapito are required by the Board to utilize these airplane services for all business and personal travel in the interest of protecting their personal security. For more information regarding perquisites, see “– Compensation Discussion and Analysis – Compensation Policies and Practices.” No nonqualified deferred compensation earnings were determined to be above-market. None of the NEOs participate in any BlackRock-sponsored defined benefit pension plans.
(4) Mr. Kushel was not an NEO in 2014.
2016 Grants of Plan-Based Awards
The following table sets forth information concerning equity incentive plan-based compensation provided by BlackRock in 2016 to our NEOs.
(1) Grant date is the date on which approved award values were converted to a number of RS or RSUs based on the average of the high and low prices of BlackRock common stock on that date.
(2) These January 19, 2016 awards represent grants of RS/RSUs awarded to Messrs. Fink, Kapito, Goldstein, Kushel and Shedlin as part of their 2015 bonus awards and represent the stock portion of such annual bonuses. These awards vest one-third on each of the first three anniversaries of January 31, 2016. At the time of vesting, the NEOs are entitled to payment of accrued dividends with respect to the shares underlying the vested RS/RSUs.
(3) These January 19, 2016 awards represent BPIP awards granted to Messrs. Fink, Kapito, Goldstein, Kushel and Shedlin in respect of services performed in 2015. To determine the base number of RSUs comprising each BPIP award, the award value was divided by the grant price ($296.12). The grant price represents an average of the high and low price of BlackRock common stock on January 19, 2016 (the second trading day following the earnings release for the fourth quarter of 2015). The BPIP awards will be eligible to vest on January 31, 2019, subject to the Company’s attainment of the applicable financial targets during the three-year performance period commencing on January 1, 2016 and ending on December 31, 2018. The number of shares of common stock each NEO will receive upon settlement of the award will be equal to the base number of RSUs, multiplied by a percentage determined by application of the award determination matrix set forth in the award agreement. The percentage multiplier is determined by the Company’s average annual Operating Margin, as adjusted, and Organic Revenue during the performance period. If performance is below the minimum set forth on the award determination matrix for both performance metrics, the award payout will be zero. If the Company attains the maximum (or greater) level of performance for both performance metrics, the award payout will be equal to 165% of the base number. Performance at target would result in the NEO receiving 100% of the base number.
(4) Reflects the grant date fair value of awards as determined pursuant to FASB ASC Topic 718. For complete valuation assumptions of the awards, see Note 14 to the consolidated financial statements in our 2016 Form 10-K. The amount included with respect to the BPIP awards is based on the grant date fair value assuming target level of performance.
2016 Outstanding Equity Awards at Fiscal Year-End
(1) Amounts reflect the year-end value of RS, RSUs, Challenge Awards and BPIP Awards, based on the closing price of $380.54 per share of BlackRock common stock on December 30, 2016.
(2) These Challenge Award RSUs require that separate 15%, 25% and 35% stock price targets (based on the grant price) be achieved during the six-year term of the awards in order for each respective tranche to be delivered. The stock price targets may be met at any time during the award term, but the vesting of shares may occur only on the fourth, fifth or sixth anniversary of January 31 of the year of grant, provided that, the price on the vesting date meets the lowest stock price target. Any tranche of the award that has not met the applicable stock price target will be forfeited on the sixth anniversary of January 31 of the year of grant. As of December 31, 2016, all three of the stock price targets related to the Challenge Awards granted on January 18, 2013 had been met. As of December 31, 2016, one of the three stock price targets related to the Challenge Awards granted on January 17, 2014 had been met. The Challenge Awards granted on January 18, 2013 became fully vested on January 31, 2017 and have been settled. See “Potential Payments Upon Termination of Employment or a Change in Control” beginning on page 72 for additional details regarding these awards.
(3) These RS/RSUs vest one-third on January 31 of each of the first three years after the year in which the grant date occurs.
(4) These BPIP Awards vest subject to the Company’s attainment of certain financial targets during the three-year performance period commencing with the year of grant. The number of units shown reflects the number of shares that the NEO would receive upon settlement of the award assuming actual performance relative to the performance targets through December 31, 2016 and target-level performance for the remainder of the performance period (which equals 101% of target for the BPIP Awards granted on January 16, 2015 and 95% of target for the BPIP Awards granted January 19, 2016). See “Potential Payments Upon Termination of Employment or a Change in Control” on page 72 for additional details regarding these awards.
2016 Option Exercises and Stock Vested
The following table sets forth information concerning the number of shares acquired and the value realized by our NEOs during the fiscal year ended December 31, 2016 on the exercise of options or the vesting and/or settlement of RS and RSUs.
(1) Value realized reflects (i) the fair market value per share of BlackRock common stock at the time of exercise, less the exercise price per share, multiplied by (ii) the number of shares subject to the option that were exercised.
(2) Value realized reflects (i) the closing price per share of BlackRock common stock on the day prior to the vesting date, multiplied by (ii) the number of RS or RSUs that vested.
2016 Nonqualified Deferred Compensation
(1) Includes earnings on balances in the VDCP (as defined below), none of which were determined to be above-market.
Voluntary Deferred Compensation Plan
BlackRock maintains the Amended and Restated BlackRock, Inc. Voluntary Deferred Compensation Plan (“VDCP”), which allows participants to elect to defer between 1% and 100% of the cash element of their annual incentive compensation that is not mandatorily deferred under another arrangement. The participants must specify a deferral period of up to 10 years and distributions may be in up to 10 installments. The benchmark investments available for the NEOs are the same as those for all other participants. Deferred amounts and any benchmark returns are vested at the time of deferral or crediting, as applicable, under the VDCP.
Potential Payments Upon Termination or Change in Control
As described previously, the NEOs do not have individual employment, severance or change in control agreements with BlackRock.
Pursuant to the terms of the applicable equity award agreements, an NEO whose employment is terminated may be entitled to accelerated vesting and payment (or continued eligibility for vesting and payment) with respect to such NEO’s outstanding awards. In addition, upon a termination of employment by the Company without cause, an NEO may be eligible to receive severance benefits under the Severance Plan. The applicable terms and estimated payment amounts with respect to the foregoing are set forth in the tables on pages 72 to 73, in each case assuming a termination of employment of the NEO on December 30, 2016.
Upon a change in control of BlackRock or a termination of an NEO’s employment for any reason, such NEO’s VDCP balance would be paid out. All outstanding VDCP balances were fully vested as of December 31, 2016. Accordingly, no amounts have been included in the table on page 72 below with respect to VDCP balances. For additional information, please refer to the “2016 Nonqualified Deferred Compensation” table above.
Treatment of Outstanding Equity Awards Upon Termination of Employment or a Change in Control
|Type of Award||Voluntary Resignation||Termination For Cause||Involuntary Termination Without Cause(1)||Qualified Retirement / Disability||Death|
|RS/RSUs Granted as Part of Annual Incentive Awards (“Year-End Awards”)||Unvested awards are forfeited.||Unvested awards are forfeited.||Awards will continue to vest in accordance with their schedule following termination. Any portion of the award that remains unvested on the one-year anniversary of termination will become fully vested on that date. With respect to awards granted after 2015, if such termination occurs within the one-year period following a change in control of BlackRock, the awards will vest at the time of termination.||Awards will continue to vest in accordance with their schedule following termination. Any portion of the award that remains unvested on the one-year anniversary of termination will become fully vested on that date.||Immediate vesting and settlement.|
|RSUs Granted as Challenge Awards||Unvested awards are forfeited.||Unvested awards are forfeited.||Any portion of the award that has achieved its stock price target remains eligible for vesting and settlement (subject to attainment of the minimum stock price target on the fourth, fifth or sixth anniversary of the grant date); a pro rata portion of the award that has not attained its stock price target will remain outstanding and eligible to vest; the remainder of the award will be forfeited.||Awards will continue to be eligible to vest and be settled in accordance with their terms, subject to attainment of the applicable stock price targets.||Awards will continue to be eligible to vest and be settled in accordance with their terms, subject to attainment of the applicable stock price targets.|
|RSUs Granted as BPIP Awards||Unvested awards are forfeited.||Unvested awards are forfeited.||Awards granted prior to 2016 will continue to be eligible to fully vest following the end of the performance period, subject to attainment of the applicable performance targets. Awards granted after 2015 will be eligible to vest on a pro rata basis (based on length of service during the performance period), subject to attainment of the applicable performance targets. If such termination occurs within the 12-month period following a change in control, awards granted after 2015 will fully vest at target level.||Awards will continue to be eligible to fully vest following the end of the performance period, subject to attainment of the applicable performance targets.||Awards will continue to be eligible to fully vest following the end of the performance period, subject to attainment of the applicable performance targets.|
(1) Treatment described in the event of a termination without cause following a change in control applies if outstanding awards are assumed or substituted by the acquiror. If outstanding awards are not assumed or substituted, such awards would become vested at the time of the change in control (at target level for performance-based awards).
Potential Payments Upon Termination of Employment or a Change in Control
The amounts in the table below reflect an assumed termination of employment on December 30, 2016 and are based on the closing price of BlackRock common stock on December 30, 2016, which was $380.54. Any amounts payable upon or due to an NEO’s termination by BlackRock other than for cause, due to the NEO’s disability or upon a qualified retirement (as such terms are defined in the applicable award agreements) are subject to the NEO’s (i) execution of a release of claims against BlackRock and (ii) continued compliance with covenants restricting the NEO’s solicitation of clients or employees of BlackRock for the one-year period following termination.
(1) This reflects an amount equal to (i) the number of unvested RS/RSUs awarded as Year-End Awards outstanding as of December 31, 2016, multiplied by (ii) $380.54 (the closing price of BlackRock common stock on December 30, 2016). For additional detail on the Year-End Awards, please refer to the “2016 Outstanding Equity Awards at Fiscal Year-End” table on page 69 and the “Treatment of Outstanding Equity Awards Upon Termination of Employment or a Change in Control” table on page 71.
(2) Reflects an amount equal to (i) the number of outstanding unvested RSUs awarded as Challenge Awards held by the NEO for which the applicable stock price targets had been attained as of December 31, 2016, multiplied by (ii) $380.54 (the closing price of BlackRock common stock on December 30, 2016). As of December 31, 2016, all of the stock price targets had been attained for the Challenge Awards granted in January 2013 and one of the three stock price targets related to the Challenge Awards granted in January 2014 had been attained. Because the other two stock price targets applicable to the January 2014 Challenge Award grant had not been attained as of December 31, 2016, the table above does not include any amounts attributable to those portions of the award. As described in the “Treatment of Outstanding Equity Awards Upon Termination of Employment” table on page 71, a pro-rata amount of such portions of the January 2014 Challenge Award would remain outstanding and eligible to vest following certain terminations of employment. Vesting of shares relating to the Challenge Awards for which the stock price targets have been attained will occur only if the minimum stock price target applicable to the award is also attained on the fourth, fifth or sixth anniversary of January 31 of the year in which the grant date occurred. The January 2013 Challenge Awards fully vested on January 31, 2017 and have been settled. For additional detail on the Challenge Awards, please refer to the “2016 Outstanding Equity Awards at Fiscal Year-End” table on page 69 and the “Treatment of Outstanding Equity Awards Upon Termination of Employment or a Change in Control” table beginning on page 71.
(3) BPIP Awards upon an involuntary termination without cause (other than following a change in control): This row reflects the sum of the value attributable to the January 2015 BPIP Awards and the January 2016 BPIP Awards. For the January 2015 BPIP Awards, the value reflects an amount equal to (i) the number of shares that the NEO would receive upon settlement of the award, assuming actual performance relative to the performance targets through December 31, 2016 and target-level performance for the remainder of the applicable performance period, multiplied by (ii) $380.54 (the closing price of BlackRock common stock on December 30, 2016). For January 2016 BPIP Awards, the value reflects an amount equal to the product of (A) the number of shares that the NEO would receive upon settlement of the award, assuming actual performance relative to the performance targets through December 31, 2016 and target-level performance for the remainder of the applicable performance period, multiplied by $380.54, and (B), a fraction, the numerator of which is the number of completed months of service during the performance period as of December 30, 2016, and the denominator of which is the total number of months during the performance period. The actual number of shares that an NEO would receive following the end of the three-year performance period will be based on the Company’s actual performance over the duration of the performance period. For additional detail on the BPIP awards, please refer to the “2016 Grants of Plan-Based Awards” table on page 68, the “2016 Outstanding Equity Awards at Fiscal Year-End” table on page 69 and the “Treatment of Outstanding Equity Awards Upon Termination of Employment or a Change in Control” table on page 71.
(4) BPIP Awards upon an involuntary termination without cause within 12 months following a change in control: This row reflects the sum of the value attributable to the January 2015 BPIP Awards and the January 2016 BPIP Awards. For the January 2015 BPIP Awards, the value reflects an amount equal to (i) the number of shares that the NEO would receive upon settlement of the award, assuming actual performance relative to the performance targets through December 31, 2016 and target-level performance for the remainder of the applicable performance period, multiplied by (ii) $380.54. For the January 2016 BPIP Awards, the value reflects an amount equal to (A) the number of shares that the NEO would receive upon settlement of the award, assuming target-level performance throughout the performance period, multiplied by (B) $380.54.
(5) BPIP Awards upon a termination due to death, disability or qualified retirement: For both January 2015 BPIP Awards and January 2016 BPIP Awards, the value shown reflects an amount equal to (i) the number of shares that the NEO would receive upon settlement of the award, assuming actual performance relative to the performance targets through December 31, 2016 and target-level performance for the remainder of the applicable performance period, multiplied by (ii) $380.54.
(6) Reflects the amount that would have been payable to the NEO in a lump sum pursuant to the Severance Plan, assuming the NEO’s termination of employment by BlackRock other than for cause on December 30, 2016.
(7) Values for Year-End Awards, Challenge Awards, BPIP Awards and Severance are rounded to the nearest whole number and, as a result of such rounding, the sum of such amounts may differ slightly from the amounts set forth in the line item titled “Total”.
(8) In the event an NEO’s employment is terminated without cause within the 12-month period following a change in control of BlackRock, any unvested awards that were assumed or substituted by the acquiror and that were granted after 2015 would become fully vested (at target level for performance-based awards). The only awards for which this provision impacts the values shown in the table above are the January 2016 BPIP Awards. In the event awards granted after 2015 are not assumed or substituted by an acquirer, they would become vested upon the change in control (at target-level for performance-based awards).
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2016, relating to BlackRock equity compensation plans pursuant to which grants of options, restricted stock, restricted stock units or other rights to acquire shares of BlackRock common stock may be granted from time to time.
(1) Includes 4,344,605 shares subject to restricted stock units (including restricted stock units which are settled in cash) and BPIP awards (assuming payout at target levels). On December 31, 2016, 763,660 shares were available for contribution by PNC pursuant to the Share Surrender Agreement between BlackRock and PNC to settle awards outstanding under this Plan and for future BlackRock stock grants under any other plan in accordance with the terms of the share surrender agreement. Since February 2009, these shares were held by PNC as Series C Preferred stock. In February 2017, 517,138 shares were surrendered. As of March 1, 2017, 246,522 shares remain available for contribution by PNC. Pursuant to SEC guidance, unvested shares of restricted stock that were issued and outstanding on December 31, 2016 are not included in the first or third column of this table.
(2) The weighted-average exercise price of the RSUs identified in the first column is listed as N/A because such RSUs do not have an exercise price or purchase price. All outstanding options were exercised in 2016.
(3) Includes 570,352 shares remaining available for issuance under the ESPP, of which 6,793 were subject to purchase during the open offering period that included December 31, 2016.
Item 3 Non-Binding Advisory Vote on Frequency of Future Executive Compensation Advisory Votes
We are asking shareholders to recommend whether future non-binding shareholder votes to approve the compensation of our NEOs (that is, votes similar to the non-binding vote in Item 2 on page 45) should occur every one, two or three years.
Why we recommend that our shareholders select a frequency of one year.
After careful consideration, the Board has determined that future advisory votes on executive compensation that occur every year is most appropriate for our Company, and the Board recommends that you vote for a one-year interval for future advisory votes on executive compensation.
The Board believes that an annual advisory vote on executive compensation will allow our shareholders to provide us with their input on our compensation philosophy, policies and practices as disclosed in the Proxy Statement on a timely basis. Additionally, an annual advisory vote on executive compensation is consistent with our policy of seeking input from, and engaging in discussions with, our shareholders on corporate governance matters and our executive compensation philosophy, policies and practices. We understand that our shareholders may have different views as to what is the best approach for the Company, and we look forward to hearing from our shareholders on this proposal.
The option of one year, two years or three years that receives the greatest number of votes cast by shareholders will be the frequency for future advisory votes on executive compensation recommended by shareholders. However, this vote is advisory and non-binding. While the Board intends to follow the frequency receiving the greatest number of votes, it may decide that it is in the best interests of BlackRock and its shareholders to hold future advisory votes on executive compensation more or less frequently than the option recommended by shareholders.