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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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Soliciting Material under §240.14a-12

 

U.S. Bancorp

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Table of Contents

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Table of Contents


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PHOTO

 

A message from our CEO

Fellow shareholders:

This last year challenged our strength, resiliency and flexibility, but we persevered. I am proud of our employees and our ability to overcome the obstacles that were ahead of us. I appreciate the customers who relied on us to be their financial partner during an unprecedented time. I also am grateful for the way we helped more than 108,000 small businesses obtain Paycheck Protection Program loans, provided forbearance programs, and extended credit to companies when they needed it.

We frequently talk about our ability to deliver consistently solid results, steady approach to credit and risk management, financial discipline and intentionally diversified business portfolio. We know this allows us to create value and shareholder returns in any environment.

That success is due to our employees, our culture and approach to business. Our balanced strategy helped us weather the challenges of 2020, when tailwinds became headwinds and economies shut down due to the COVID-19 pandemic. Despite the obstacles we faced, we kept people healthy and safe. We served millions of customers and ran our business effectively — even with most of our employees working remotely. We reinforced our commitment to the communities where we do business, and we redoubled our efforts to help bridge social and economic gaps.

We reprioritized our efforts, invested in the areas that would accelerate our strategy, and made sure that we addressed short-term needs while ensuring long-term success. In the end, we continued to show that we are more than an essential service. We have been and continue to be ready, willing and able to serve our customers in the moments that matter most. Perhaps more importantly, we are an organization of people committed to each other, our communities and our shareholders. Relationships, trust and purpose are the heart of everything we do.

We expect to see signs of recovery throughout 2021, due in part to the possibility of additional economic stimulus efforts and greater availability of the COVID-19 vaccine. We are ready for a return to more of a normal state and expect to move quickly when that time comes. I am confident in our leadership, our strategy and our team to help us move forward and deliver results throughout the year.

As always, we appreciate the trust you place in us as shareholders of our company.


 

 

Sincerely,

 

 

SIGNATURE
    Andrew Cecere
Chairman, President and Chief Executive Officer

 

 

March 9, 2021

U.S. Bancorp 2021 Proxy Statement


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PHOTO   A message from our Lead Director

Fellow shareholders:

The year 2020 will long be remembered for its numerous challenges. Our company was faced with determining how to deliver essential financial services in a pandemic, examining how to better facilitate and accelerate racial equity and inclusion, and pivoting to remote working as we acted as a conduit of government assistance to individuals and businesses. The demands were tremendous for U.S. Bank management and their teams. On behalf of the Board of Directors, I want to assure you they not only rose to the challenge, they went above and beyond to identify opportunities to serve and provide support for our customers and communities.

Although our Board was able to meet in person only one time during the year, we quickly adjusted to frequent virtual meetings to provide effective oversight and counsel throughout the year. The culture of collaboration and candid dialog that we have built over the years served us well as we adapted to new ways of working. It also allowed us to oversee the company's many initiatives to rapidly adapt to the changing environment and evaluate its strategic priorities.

We have entered 2021 more confident than ever that U.S. Bancorp has the agility, stamina, talent and vision to provide leadership in turbulent times, to serve customers needs as new challenges and opportunities arise, and to take action on critical and strategic issues for the benefit of all its stakeholders. We also are pleased with the upcoming release of the company's first ESG report this year, which describes key focus areas for environmental, social and governance excellence. We encourage you to learn more about this at usbank.com/ESG2020.


    Sincerely,

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Olivia F. Kirtley
Lead Director

March 9, 2021

U.S. Bancorp 2021 Proxy Statement


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Notice of Annual Meeting of Shareholders of U.S. Bancorp

Date and time:   Tuesday, April 20, 2021, at 11:00 a.m., central time

Place:

 

Online at www.virtualshareholdermeeting.com/USB2021

 

 

Due to the public health concerns resulting from the novel coronavirus (COVID-19) pandemic, we are holding the Annual Meeting of U.S. Bancorp in a virtual-only meeting format to support the health and safety of our shareholders and employees. You will not be able to attend the Annual Meeting at a physical location. For more information on the virtual-only format, please see the "Questions and Answers about the Annual Meeting and Voting" section beginning on page 70.

Items of business:

 

1.

 

The election of the 13 directors named in the proxy statement

 

 

2.

 

The ratification of the selection of Ernst & Young LLP as our independent auditor for the 2021 fiscal year

 

 

3.

 

An advisory vote to approve the compensation of our executives disclosed in the proxy statement

 

 

4.

 

Any other business that may properly be considered at the meeting or any adjournment of the meeting

Record date:

 

You may vote at the meeting if you were a shareholder of record at the close of business on February 23, 2021.

Voting by proxy:

 

It is important that your shares be represented and voted at the meeting. You may vote your shares by Internet or telephone by no later than 11:59 p.m., Eastern time, on April 19, 2021 (or April 15, 2021, for shares held in the U.S. Bank 401(k) Savings Plan), as directed in the proxy materials. If you received a printed copy of the proxy materials, you may also complete, sign and return the enclosed proxy card or voting instruction form by mail. Voting in any of these ways will not prevent you from virtually attending or voting your shares at the meeting. We encourage you to vote by Internet or telephone to reduce mailing and handling expenses.

Internet availability of proxy materials:

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on April 20, 2021: Our proxy statement and 2020 Annual Report are available at www.proxyvote.com.

Sign up for electronic delivery:

 

If you received paper copies of the notice or proxy materials, we encourage you to sign up to receive all of your future proxy materials electronically, as described under "How can I receive my proxy materials by e-mail in the future?" on page 74. To express our appreciation, we will plant a tree in partnership with the Arbor Day Foundation on behalf of every retail shareholder account that registers for electronic delivery of our proxy materials.

By order of the Board of Directors

SIGNATURE

Laura F. Bednarski
Corporate Secretary

March 9, 2021

U.S. Bancorp 2021 Proxy Statement


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Proxy statement table of contents

Proxy statement highlights

    1  

Proposal 1 – Election of directors

    8  

▶ Director selection and nomination considerations

    8  

▶ 2021 nominees for director

    10  

Corporate governance

    18  

▶ Director independence

    18  

▶ Board meetings and committees

    19  

▶ Board performance evaluations

    20  

▶ Director education

    21  

▶ Shareholder engagement

    21  

▶ Conduct

    21  

▶ Committee member qualifications

    21  

▶ Committee responsibilities

    22  

▶ Risk oversight by the Board of Directors

    24  

▶ Board leadership structure

    27  

▶ Majority vote standard for election of directors

    29  

▶ Succession planning and management development

    29  

Certain relationships and related transactions

    30  

▶ Review of related person transactions

    30  

▶ Related person transactions

    31  

Compensation discussion and analysis

    32  

Compensation committee report

    47  

Executive compensation

    48  

▶ Summary compensation table

    48  

▶ Grants of plan-based awards

    49  

▶ Outstanding equity awards

    51  

▶ Option exercises and stock vested

    53  

▶ Pension benefits

    53  

▶ Nonqualified deferred compensation

    56  

▶ Potential payments upon termination or change-in-control

    57  

▶ Pay ratio

    60  

Director compensation

    61  

Audit committee report and payment of fees to auditor

    64  

Proposal 2 – Ratification of selection of independent auditor

    66  

Proposal 3 – Advisory vote on executive compensation

    67  

Security ownership of certain beneficial owners and management

    68  

Questions and answers about the annual meeting and voting

    70  

Other matters

    75  

▶ Annual Report to Shareholders and Form 10-K

    75  

▶ Communicating with U.S. Bancorp's Board of Directors

    75  

▶ Deadlines for nominating directors and submitting proposals for the 2022 annual meeting

    75  

▶ Other matters for consideration

    76  

Non-GAAP financial measures

    77  

U.S. Bancorp 2021 Proxy Statement

 


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Proxy statement highlights
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Proxy statement highlights

This highlights section does not contain all the information that you should consider before voting. Please read the entire proxy statement carefully.

Voting matters and Board recommendations

Proposal
    Board
recommendation


For more
information
             
Proposal 1 –   The election of the 13 director nominees named in the proxy statement   "FOR" all
nominees
  Page 8
Proposal 2 –   The ratification of the selection of Ernst & Young LLP as our independent auditor for the 2021 fiscal year   "FOR"   Page 66
Proposal 3 –   An advisory vote to approve the compensation of our executives disclosed in the proxy statement   "FOR"   Page 67

Casting your vote

The Board of Directors of U.S. Bancorp is soliciting proxies for use at the annual meeting of shareholders to be held on April 20, 2021, and at any adjournment or postponement of the meeting. The proxy materials were first made available to shareholders on or about March 9, 2021.

Your vote is important! Please cast your vote and play a part in the future of U.S. Bancorp. Even if you plan to attend our annual meeting, please cast your vote as soon as possible by:

GRAPHIC   Internet
www.proxyvote.com
  GRAPHIC   Telephone   GRAPHIC   Mail       

The voting deadline is 11:59 p.m., Eastern time, on April 19, 2021 (or April 15, 2021, for shares held in the U.S. Bank 401(k) Savings Plan).

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Attending the annual meeting

You are invited to attend the annual meeting of shareholders, which is being held virtually. You will be able to attend the meeting, as well as vote and submit your questions during the meeting, by visiting www.virtualshareholdermeeting.com/USB2021 and logging in with the 16-digit control number found on your proxy card, voter instruction form, or notice, as applicable. We encourage all shareholders to vote and submit questions in advance of the meeting at www.proxyvote.com.

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Proxy statement highlights

About U.S. Bancorp

U.S. Bancorp, with nearly 70,000 employees and $554 billion in assets as of December 31, 2020, is the parent company of U.S. Bank National Association, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with digital tools that allow customers to bank when, where and how they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial, corporate, and investment customers across the country and around the world as a trusted and responsible financial partner. This commitment continues to earn a spot on the Ethisphere Institute's World's Most Ethical Companies list and puts U.S. Bank in the top 5% of global companies assessed on the CDP A List for climate change action. Visit usbank.com for more.

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1.
Source: S&P Global Market Intelligence; Peer banks include: BAC, CFG, FITB, JPM, KEY, PNC, RF, TFC and WFC; 5-Year average ranges from 2016-2020, 10-Year average ranges from 2011-2020, 15-Year average ranges from 2006-2020

U.S. Bancorp 2021 Proxy Statement

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Underpinning our best-in-class financial results:

GRAPHIC   A differentiated
business mix
  GRAPHIC   Through-the-cycle
underwriting discipline
  GRAPHIC   A strong and nimble culture

What differentiates U.S. Bank?

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Access to our ESG Report and Community Impact Report is provided for informational purposes only and none of the ESG Report, the Community Impact Report, nor any other information included on our website is incorporated by reference or otherwise made a part of this proxy statement.

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Proxy statement highlights


Director nominees at a glance

Name

Age


Director
Since


Primary Occupation
Committee
Memberships


Independent
Warner L. Baxter     59     2015   Chairman, President and CEO, Ameren Corporation   A, CHR   GRAPHIC
Dorothy J. Bridges     65     2018   Former Senior Vice President, Federal Reserve Bank of Minneapolis   PR, RM   GRAPHIC
Elizabeth L. Buse     60     2018   Former CEO, Monitise plc   A, CP   GRAPHIC
Andrew Cecere     60     2017   Chairman, President and CEO,
U.S. Bancorp
  CP, RM, E   CEO
Kimberly N. Ellison-Taylor     50     2021   Executive Director of Finance Thought Leadership, Oracle Corporation   A, PR   GRAPHIC
Kimberly J. Harris     56     2014   Retired President and CEO,
Puget Energy, Inc.
  G (Chair),
CP, E
  GRAPHIC
Roland A. Hernandez     63     2012   Founding Principal and CEO, Hernandez Media Ventures   CP (Chair),
A, E
  GRAPHIC
Olivia F. Kirtley
Lead Director
    70     2006   Business Consultant   CHR, G, E   GRAPHIC
Karen S. Lynch     58     2015   President and CEO, CVS Health Corporation   A (Chair),
CHR, E
  GRAPHIC
Richard P. McKenney     52     2017   President and CEO, Unum Group   RM (Chair),
G, E
  GRAPHIC
Yusuf I. Mehdi     54     2018   Corporate Vice President, Microsoft Corporation   PR, RM   GRAPHIC
John P. Wiehoff     59     2020   Retired Chairman and CEO,
C.H. Robinson Worldwide, Inc.
  PR, RM   GRAPHIC
Scott W. Wine     53     2014   CEO, CNH Industrial N.V.   CHR (Chair), A, E   GRAPHIC
A   Audit Committee   PR   Public Responsibility Committee
CP   Capital Planning Committee   RM   Risk Management Committee
CHR   Compensation and Human Resources Committee   E   Executive Committee
G   Governance Committee        

U.S. Bancorp 2021 Proxy Statement

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Board composition

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Proxy statement highlights

2020 executive compensation program

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Governance highlights


 

 

Board independence


 

 

 


Strong Lead Director position: Our independent directors elect from among their ranks a Lead Director, who has broad authority and responsibility over Board governance and operation.

 

 

 


Key committees independent: Independent directors comprise 100% of each of the Audit, Compensation and Human Resources, and Governance Committees.

 

 

 


Regular executive sessions: The full Board and its standing committees each meet in executive session on a regular basis without members of management present.

 

 


 

 

 

 

 

 

 

Board accountability


 

 

 


Majority voting: Our directors are elected annually by a majority of votes cast in uncontested elections.

 

 

 


Board not classified: All of our directors are elected annually.

 

 


 

 

 

 

 

 

 

Shareholder rights and engagement


 

 

 


3/3/20/20 proxy access: A shareholder or group of up to 20 shareholders that has held at least 3% of our company's stock for at least three years is able to nominate directors to fill up to 20% of the Board seats (but at least two directors).

 

 

 


Special meeting: Holders of at least 25% of our stock are able to call a special meeting of shareholders.

 

 

 


No poison pill: Our company does not maintain a shareholder rights plan.

 

 

 


Shareholder outreach: Each year we reach out to our top 50 shareholders to invite a conversation about corporate governance, executive compensation, disclosure and any other matter of interest to the shareholder.

 

 


 

 

 

 

 

 

 

Board effectiveness


 

 

 


Board, committee and individual evaluations: The Governance Committee annually conducts rigorous Board assessments, including evaluations of committees and individual directors.

 

 

 


Overboarding restrictions: Unless approved by our Board, a director may not serve on more than three public company boards in addition to ours, and a director who is a CEO of a public company may not serve on more than two other boards.

 

 

 


Retirement policy: Our Board does not have a rigid retirement policy but instead evaluates for appropriateness the re-nomination of an incumbent director after he or she has reached the age of 72.

 

 


 

 

 

 

 

 

 

Director/shareholder alignment


 

 

 


Stock ownership: Each non-employee director is required to hold stock equal in value to five times the annual cash retainer.

 

 

 


No hedging or pledging: Like our executive officers, our directors are prohibited from pledging our company's securities as collateral for a loan and from engaging in any hedging transactions involving the company's securities.

 

 

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U.S. Bancorp 2021 Proxy Statement


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Proposal 1 — Election of directors

Proposal 1 — Election of directors

Our Board of Directors currently has 14 members, and directors are elected annually to one-year terms. Thirteen of our current directors have been nominated for election by the Board to hold office until the 2022 annual meeting and the election of their successors. Marc N. Casper is currently serving as a director but will not stand for re-election at the 2021 annual meeting.

All of the nominees currently serve on our Board. Kimberly N. Ellison-Taylor was appointed a director by the Board in January 2021. Each of the other nominees has previously been elected by the shareholders. The Board has determined that, except for Andrew Cecere, our Chairman, President and Chief Executive Officer, each nominee for election as a director at the annual meeting is independent from U.S. Bancorp as discussed later in this proxy statement under "Corporate Governance — Director Independence."

Director selection and nomination considerations

Director nominee selection process

The selection process for first-time director candidates includes the following steps:

Director candidates recommended by shareholders are given the same consideration as candidates suggested by a search firm, directors or executive officers. A shareholder seeking to recommend a prospective candidate for the Governance Committee's consideration should submit the candidate's name and sufficient written information about the candidate to permit a determination by the Governance Committee of whether the candidate meets the director selection criteria set forth in our Corporate Governance Guidelines. Recommendations should be sent to the Chair of the Governance Committee in care of the Corporate Secretary of U.S. Bancorp at the address listed on page 75 of this proxy statement.

Commitment to Board diversity

Our company is committed to diversity, equity and inclusion. Our Board is focused on diversity within its membership in order to benefit from a variety of perspectives, experiences and skill sets in exercising its oversight role. The Board's commitment to diversity is reflected in our Corporate Governance Guidelines, which require that any director search firm used to identify external candidates for a Board vacancy will be requested to present a diverse slate of candidates.

Director nomination considerations

Our Governance Committee continuously assesses the evolving opportunities and challenges facing our company in order to align the Board's composition with our company's leadership needs and strategic direction. When nominating new and incumbent directors, our Governance Committee considers the following factors:

U.S. Bancorp 2021 Proxy Statement

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Proposal 1 — Election of directors
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The Governance Committee applies certain criteria to identify the skills, experiences and professional qualifications that are likely to be strong indicators of an individual's unique contribution to the Board's collective oversight work. These criteria, along with the number of our nominees who possess each skill or qualification and the ways these experiences contribute to the Board's collective oversight of the development and execution of the company's strategy, are as follows:

   
   
   
   
   
   
   
   
   
 
      Skill or qualification     #
  Criteria
  Link to strategy
 
      Financial reporting and accounting       8       Have specialized financial reporting qualifications, such as experience as a CPA or as the CFO of a large corporation       Are particularly well suited to overseeing the quality and integrity of our company's financial statements    
 
      Chief executive experience       7       Are current or former CEOs of publicly held or large private corporations       Have experience overseeing senior leadership, finance, marketing and execution of corporate strategy from both a management and a board perspective    
 
      Financial services industry expertise       5       Have executive-level experience in the financial services industry       Possess deep knowledge of the business challenges and opportunities facing our company    
 
      Risk management       5       Have specific risk-management expertise, gained through leadership at either a critical infrastructure company or a financial services institution       Are particularly adept at identifying and assessing the varied risks facing our company as a large financial institution    
 
      Corporate governance       5       Have significant experience serving on and leading the boards of other large corporations and/or professional experience in the corporate governance field       Help our Board fulfill its oversight function effectively    
 
      Technological transformation       3       Have executive-level experience in an industry driving technological change       Contribute expertise regarding product innovation and evolving customer expectations    
 
      Customer experience       3       Have executive-level experience in a consumer-focused industry other than financial services       Provide insight into how our company interacts with retail customers    
 
      Other regulated industry expertise       2       Have executive-level experience in a regulated industry other than financial services       Provide a valuable perspective on how an extensive regulatory framework intersects with strategic and operational planning    
 
      Community leadership       1       Has significant professional leadership experience in community service organizations and/or in public policy roles       Provides perspective on our company's connections to the communities it serves and responsible business practices    
 

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Proposal 1 — Election of directors

2021 nominees for director

Each of the director nominees named below has agreed to serve as a director if elected. Proxies may not be voted for more than 13 nominees. If, for any reason, any nominee becomes unable to serve before the election, the persons named as proxies will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the Board of Directors may choose to reduce the number of directors that are nominated for election. In addition, as described below under "Corporate Governance — Majority Vote Standard for Election of Directors," each of the nominees has tendered his or her contingent resignation as a director in accordance with our Corporate Governance Guidelines, to be effective if he or she fails to receive a majority of the votes cast in an uncontested election and the Board accepts the tendered resignation.

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Proposal 1 — Election of directors
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Included below is certain information that the director nominees have provided about themselves, as well as additional information that the Board considered in nominating them.

PHOTO
Warner L. Baxter
Director since 2015

Committees

Audit

Compensation and Human Resources

  Business experience: Mr. Baxter, 59, is the Chairman, President and Chief Executive Officer of Ameren Corporation, a regulated electric and gas utility company serving customers in Missouri and Illinois. He has served in these positions since 2014. Mr. Baxter served as Chairman, President and Chief Executive Officer of Ameren Missouri from 2009 to 2014 and as Executive Vice President and Chief Financial Officer of Ameren Corporation from 2003 to 2009. In addition, he also served as President and Chief Executive Officer of Ameren Services from 2007 to 2009.

Other public company directorships:

Ameren Corporation since 2014 (Chairman)

Skills and qualifications:

Chief executive experience: Mr. Baxter's experience as a current CEO of a Fortune 500 company provides valuable leadership insight to the Board.

Corporate governance: Mr. Baxter has gained significant corporate governance expertise through his service as the Chairman of a large public company.

Financial reporting and accounting: Through his past experience as the CFO and Controller of a large publicly traded company, Mr. Baxter brings extensive financial reporting and accounting expertise to our Board.

Other regulated industry expertise: As the current President and CEO of a company in a highly regulated industry, Mr. Baxter provides valuable perspective on regulatory and business challenges facing our company.

Risk management: As the current President and CEO of a company in a critical infrastructure industry, Mr. Baxter brings valuable risk management expertise to our Board of Directors.

        
        

PHOTO
Dorothy J. Bridges
Director since 2018

Committees

Public Responsibility

Risk Management

  Business experience: Ms. Bridges, 65, is the former Senior Vice President of Public Affairs, Outreach and Community Development of the Federal Reserve Bank of Minneapolis, one of the twelve regional banks in the Federal Reserve System. She served as Senior Vice President from July 2011 until June 2018. Prior to joining the Federal Reserve Bank of Minneapolis, Ms. Bridges served as the President and Chief Executive Officer of City First Bank, a commercial bank providing financial services in low- and moderate-income communities, from 2008 until July 2011, and as President and Chief Executive Officer of Franklin National Bank, a Minneapolis commercial bank, from 1999 to 2008.

Skills and qualifications:

Community leadership: Through her experience as the senior leader in charge of public affairs, outreach and community development, and as the CEO of a commercial bank focusing on low- and moderate-income communities, Ms. Bridges brings to our Board expertise in understanding the financial needs of the individuals living in the communities we serve.

Financial services industry expertise: Ms. Bridges's extensive experience in the banking industry, as a senior leader of a reserve bank and as the CEO of two commercial banks, gives her valuable industry and regulatory oversight expertise.

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Proposal 1 — Election of directors

PHOTO
Elizabeth L. Buse
Director since 2018

Committees

Audit

Capital Planning

  Business experience: Ms. Buse, 60, is the former Chief Executive Officer of Monitise plc, a global mobile banking and payments company based in the United Kingdom. She served as Co-Chief Executive Officer and Chief Executive Officer of Monitise during 2014 and 2015, after retiring from Visa, Inc., the world's leading payment network, as Executive Vice President of Global Services, a position she held from 2013 to 2014. Ms. Buse held various senior leadership positions at Visa prior to that time, including Group President for Asia-Pacific, Central Europe, Middle East and Africa from 2010 to 2013.

Other public company directorships:

F5 Networks since 2020

Travelport Worldwide Ltd. from 2014 to 2019

Skills and qualifications:

Financial services industry expertise: As the former CEO of Monitise and as a director for several public and private financial services technology companies, Ms. Buse gained broad financial industry expertise that is particularly relevant to our Board.

        
        

PHOTO
Andrew Cecere
Director since 2017

Committees

Capital Planning

Risk Management

Executive

  Business experience: Mr. Cecere, 60, is the Chairman, President and Chief Executive Officer of U.S. Bancorp. He has served in this position since April 2018. He served as President and Chief Executive Officer from April 2017 to April 2018, as well as President and Chief Operating Officer from January 2016 to April 2017, after having served as Vice Chairman and Chief Operating Officer from January 2015 until January 2016. From February 2007 until January 2015, Mr. Cecere served as U.S. Bancorp's Vice Chairman and Chief Financial Officer, after having served as Vice Chairman, Wealth Management and Investment Services of U.S. Bancorp since the merger of Firstar Corporation and U.S. Bancorp in February 2001. Previously, he had served as an executive officer of U.S. Bancorp before its merger with Firstar, including as Chief Financial Officer from May 2000 through February 2001.

Other public company directorships:

Donaldson Company, Inc. since 2013 (Audit Committee)

Skills and qualifications:

Chief executive experience: As CEO of U.S. Bancorp, Mr. Cecere brings to all Board discussions and deliberations deep knowledge of our company and its business.

Financial reporting and accounting: Through his service on the audit committee of a public company, as well as his past experience as CFO of U.S. Bancorp, Mr. Cecere brings valuable financial reporting and accounting expertise to our Board.

Financial services industry expertise: Mr. Cecere has deep expertise in the financial services industry, gained through a career of more than 35 years at U.S. Bancorp.

Risk management: Mr. Cecere brings to our Board valuable risk management expertise gained through his work as CFO, Chief Operating Officer, and then CEO of U.S. Bancorp during the challenging regulatory and market environment of recent years.

U.S. Bancorp 2021 Proxy Statement

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Proposal 1 — Election of directors
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Kimberly N. Ellison-Taylor
Director since 2021

Committees

Audit

Public Responsibility

  Business experience: Ms. Ellison-Taylor, 50, is the Executive Director of Finance Thought Leadership of Oracle Corporation, a Fortune 100 company that provides products and services for enterprise information technology environments. She has served in this position since April 2019. Ms. Ellison-Taylor served as the Global Strategy Leader in the Cloud Business Group of Oracle from September 2018 to March 2019 and as the Global Strategy Director in the Financial Services Industry Group of Oracle from July 2015 until September 2018. From 2016 to 2018, she also served as the chairman of the American Institute of CPAs, the world's largest member association representing the accounting profession. From 2004 to July 2015, she served as the Executive Director and Global Leader for Health, Human and Workforce Industry solutions at Oracle. Prior to joining Oracle in 2004, she held roles at KPMG and served as the Chief Information Technology Officer for Prince George's County Government in Maryland.

Skills and qualifications:

Financial reporting and accounting: Ms. Ellison-Taylor's experience as a CPA and former chairman of the American Institute of CPAs provides valuable financial reporting and accounting expertise to our Board.

Technological transformation: Through her current experience at a company providing innovative technology products and services, her past experience as a Chief Information Technology Officer and her current role teaching Emerging Technologies and Innovation at Carnegie Mellon University, Ms. Ellison-Taylor brings to our Board vast expertise of innovative technology that is particularly relevant to our company.

        
        

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Kimberly J. Harris
Director since 2014

Committees

Chair, Governance

Capital Planning

Executive

  Business experience: Ms. Harris, 56, is the retired President and Chief Executive Officer of Puget Energy, Inc., an energy services holding company, and its subsidiary Puget Sound Energy, Inc., a utility company providing electric and natural gas service in the northwest United States. She served in these positions from March 2011 until her retirement in January 2020. Ms. Harris served as President of Puget Energy and Puget Sound Energy from July 2010 through February 2011 and as Executive Vice President and Chief Resource Officer from May 2007 until July 2010.

Other public company directorships:

American Water Works Company, Inc. since 2019 (Executive Development and Compensation, and Safety, Environmental, Technology and Operations Committees)

Puget Energy, Inc. and Puget Sound Energy, Inc. from 2011 to 2020

Skills and qualifications:

Chief executive experience: Ms. Harris's experience as a CEO provides valuable leadership perspective to our Board gained by leading a large company through the recent economic and regulatory environment.

Other regulated industry expertise: Ms. Harris's experience as the leader of a company in a heavily regulated industry gives her valuable expertise in managing a complex business in the context of an extensive regulatory regime.

Risk management: As the recently retired President and CEO of a company in a critical infrastructure industry, Ms. Harris brings valuable risk management experience to our Board.

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Roland A. Hernandez
Director since 2012

Committees

Chair, Capital Planning

Audit

Executive

  Business experience: Mr. Hernandez, 63, is the Founding Principal and Chief Executive Officer of Hernandez Media Ventures, a privately held company engaged in the acquisition and management of media assets. He has served in this capacity since January 2001. Mr. Hernandez served as Chairman of Telemundo Group, Inc., a Spanish-language television and entertainment company, from 1998 to 2000 and as President and Chief Executive Officer from 1995 to 2000.

Other public company directorships:

MGM Resorts International since 2002 (Compensation Committee Chair; Audit and Corporate Social Responsibility Committees)

Fox Corporation since 2019 (Audit Committee Chair; Nominating and Corporate Governance Committee)

Take-Two Interactive Software, Inc. since 2019 (Compensation Committee)

Belmond Ltd. (formerly Orient Express Hotels Ltd.) from 2013 to 2019

Vail Resorts, Inc. from 2002 to 2019

Skills and qualifications:

Corporate governance: Through his past experience as the Chairman or Lead Director of several public companies, Mr. Hernandez brings to our Board significant expertise in corporate governance issues and practices.

Financial reporting and accounting: With his extensive past and current experience on the audit committees of the boards of public companies, Mr. Hernandez brings broad financial reporting and accounting expertise to our Board.

Customer experience: Mr. Hernandez brings deep expertise of customer expectations to our Board, gained through his prior experience as the leader of a consumer-focused company.

        
        

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Olivia F. Kirtley
Director since 2006
Lead Director

Committees

Compensation and Human Resources

Governance

Executive

  Business experience: Ms. Kirtley, 70, a Certified Public Accountant and Chartered Global Management Accountant, has served as a business consultant on strategic, risk and corporate governance issues since 2000. She also served as the President of the International Federation of Accountants ("IFAC"), the global organization for the accountancy profession, which facilitates the establishment of international auditing, ethics and education standards, from 2014 to 2016, and as Deputy President of IFAC from 2012 to 2014. Prior to 2000, she served as a senior manager at a predecessor to accounting firm Ernst & Young LLP, and as Treasurer, Vice President and Chief Financial Officer at Vermont American Corporation.

Other public company directorships:

Papa John's International, Inc. since 2003 (Audit Committee)

Randgold Resources Ltd. from 2017 to 2019

Skills and qualifications:

Corporate governance: Ms. Kirtley brings to our Board a deep understanding of a wide range of current governance issues gained by her work as a corporate governance consultant and a faculty member of The Conference Board Directors' Institute.

Financial reporting and accounting: Ms. Kirtley gained extensive audit, financial reporting, and risk management experience as the CFO of an international company, as a CPA at a large international accounting firm and through her service as President of IFAC.

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Karen S. Lynch
Director since 2015

Committees

Chair, Audit

Compensation and Human Resources

Executive

  Business experience: Ms. Lynch, 58, is the President and Chief Executive Officer of CVS Health Corporation, a diversified health services and health care company. She has served in this position since February 2021. Ms. Lynch served as Executive Vice President of CVS Health Corporation, and President of its Aetna Business Unit, from November 2018 to February 2021. She served as President of Aetna,  Inc., a diversified health care benefits company, from 2014 until CVS Health's acquisition of Aetna in November 2018. Ms. Lynch served as Executive Vice President of Aetna's Local and Regional business from 2013 to 2014 and Executive Vice President of Aetna's Specialty Products business from 2012 to 2013. She served as President of Magellan Health Services Inc., a health care management company, from 2009 to 2012. Ms. Lynch began her career as a Certified Public Accountant at auditing firm Ernst & Young LLP.

Other public company directorships:

CVS Health Corporation since 2021

Skills and qualifications:

Chief executive experience: Ms. Lynch brings valuable leadership expertise as a current CEO of a Fortune 10 company in the health care field during the current pandemic and economic environment.

Financial reporting and accounting: Ms. Lynch's past experience as a CPA and public company auditor provides valuable financial reporting and accounting expertise to our Board.

Financial services industry expertise: Ms. Lynch's extensive insurance industry experience provides her with valuable financial services industry expertise.

Risk management: Ms. Lynch contributes valuable risk management expertise in the financial services industry through her experience leading a large health care benefits company.

        
        

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Richard P. McKenney
Director since 2017

Committees

Chair, Risk Management

Governance

Executive

  Business experience: Mr. McKenney, 52, is the President and Chief Executive Officer of Unum Group, a workplace financial protection benefits company. He has served as President since April 2015 and as Chief Executive Officer since May 2015. Mr. McKenney served as Executive Vice President and Chief Financial Officer of Unum from 2009 to 2015. Prior to joining Unum in 2009, he served as Executive Vice President and Chief Financial Officer at Sun Life Financial, Inc., an international financial services company, from 2006 to 2009.

Other public company directorships:

Unum Group since 2015

Skills and qualifications:

Chief executive experience: Mr. McKenney's experience as a current CEO provides valuable expertise to our Board gained by leading a large company through the current economic and regulatory environment.

Financial reporting and accounting: Through his past experience as CFO of several companies, Mr. McKenney brings extensive financial reporting and accounting expertise to our Board.

Financial services industry expertise: As the current President and CEO of a financial services company, Mr. McKenney brings to our Board discussions expertise in managing the business environment facing financial services companies.

Risk management: Through his experience as the leader of a financial services company, Mr. McKenney brings experience identifying, assessing and managing risk exposures of large, complex financial firms.

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Yusuf I. Mehdi
Director since 2018

Committees

Public Responsibility

Risk Management

  Business experience: Mr. Mehdi, 54, is the Corporate Vice President of the Modern Life and Devices Group of Microsoft Corporation, a multinational technology company. The Modern Life and Devices Group operates the Windows, Surface, Office, and Bing businesses of Microsoft. He has served in this position since June 2018. From 2015 to June 2018, he served as Corporate Vice President of the Windows and Devices Group and from 2011 to 2015 as the Corporate Vice President and Chief Marketing and Strategy Officer of the Interactive Entertainment Division, which operated Microsoft's Xbox business. Mr. Mehdi joined Microsoft in 1992 and held various leadership positions within the company prior to being named Senior Vice President of Microsoft's Online Services Division in 2001.

Skills and qualifications:

Customer experience: Mr. Mehdi's role driving customer experience at a large multinational company brings valuable retail and online business expertise to our Board.

Technological transformation: Mr. Mehdi's significant experience in an industry that must adapt in real time to rapid changes in technology and customer expectations is a valuable resource in executing U.S. Bancorp's corporate strategy.

        
        

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John P. Wiehoff
Director since 2020

Committees

Public Responsibility

Risk Management

  Business Experience: Mr. Wiehoff, 59, is the retired Chairman and Chief Executive Officer of C.H. Robinson Worldwide, Inc., a multimodal transportation services and third-party logistics company. He served as Chairman from 2006 to 2020. He also served as President from 1999 to 2019 and as Chief Executive Officer from 2002 to 2019. Prior to 1999, Mr. Wiehoff served in various senior leadership roles at C.H. Robinson starting in 1992 and began his career at Andersen Worldwide LLP with several different positions, including audit manager.

Other public company directorships:

Donaldson Company, Inc. since 2003 (Audit Committee Chair)

Polaris Industries, Inc. since 2007 (Chairman; Corporate Governance and Nominating Committee Chair; Compensation Committee)

C.H. Robinson Worldwide, Inc. from 2002 to 2020

Skills and qualifications:

Chief executive experience: Mr. Wiehoff's experience as the CEO of a Fortune 500 company gives him valuable leadership and business expertise.

Corporate governance: Mr. Wiehoff's experience as the Chairman of a public company and on the governance committee of a different public company provides valuable corporate governance expertise to our Board.

Financial reporting and accounting: Mr. Wiehoff gained broad financial reporting and accounting expertise through his experience as an audit manager for a large accounting firm.

Technological transformation: Through his experience as the leader at a logistics company, Mr. Wiehoff provides extensive expertise to our Board in executing strategy around technological transformation.

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Scott W. Wine
Director since 2014

Committees

Chair, Compensation and Human Resources

Audit

Executive

  Business experience: Mr. Wine, 53, is the Chief Executive Officer of CNH Industrial N.V., a global leader in capital goods including agricultural and construction equipment, trucks, and commercial vehicles. He has served in this position since January 2021. Prior to joining CNH Industrial, he served as the Chairman and Chief Executive Officer of Polaris Industries Inc., a worldwide manufacturer and marketer of innovative high-performance motorized products. He served as Chairman from 2013 to 2021, and Chief Executive Officer from 2008 to 2021.

Other public company directorships:

CNH Industrial N.V. since 2021

Polaris Industries Inc. from 2008 to 2020

Terex Corporation from 2011 to 2020

Skills and qualifications:

Chief executive experience: Mr. Wine's experience as the CEO of a large international manufacturing company gives him broad and valuable experience in a business focused on growing operations within domestic and overseas markets.

Corporate governance: Through his prior experience as the Chairman of a public company, Mr. Wine provides corporate governance expertise to our Board.

Customer experience: Mr. Wine contributes to our Board a current perspective on retail business gained from his leadership of a consumer-focused company.

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  FOR

    The Board of Directors recommends a vote "FOR" election of the 13 director nominees to serve until the next annual meeting and the election of their successors.

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Corporate governance

Corporate governance

Our Board of Directors and management are dedicated to exemplary corporate governance. Good corporate governance is vital to our continued success. Our Board of Directors has adopted Corporate Governance Guidelines to provide a corporate governance framework for our directors and management to effectively pursue our objectives for the benefit of our shareholders. The Board reviews and updates these guidelines and the charters of the Board committees at least annually in response to evolving best practices and the results of annual Board and committee evaluations. Our Corporate Governance Guidelines can be found at www.usbank.com by clicking on "About us", "Investor relations", "Corporate Governance" and then "Governance documents."

Director independence

Our Board of Directors has determined that each of the following directors, comprising all of our current non-employee directors, has no material relationship with U.S. Bancorp and is independent: Warner L. Baxter, Dorothy J. Bridges, Elizabeth L. Buse, Marc N. Casper, Kimberly N. Ellison-Taylor, Kimberly J. Harris, Roland A. Hernandez, Olivia F. Kirtley, Karen S. Lynch, Richard P. McKenney, Yusuf I. Mehdi, John P. Wiehoff and Scott W. Wine. Andrew Cecere is not independent because he is an executive officer of U.S. Bancorp. The Board had determined that each of Arthur D. Collins, Jr., Doreen Woo Ho, David B. O'Maley, O'dell M. Owens, M.D., M.P.H and Craig D. Schnuck was an independent director prior to their retirement from the Board in April 2020.

Our Board has adopted a set of standards in our Corporate Governance Guidelines to assist it in assessing the independence of each of our non-employee directors. A director of U.S. Bancorp who meets the independence qualifications of the New York Stock Exchange (the "NYSE") listing standards may be deemed "independent" by the Board of Directors after consideration of the relationships between U.S. Bancorp or any of its affiliates and the director or any of his or her immediate family members or other related parties. Our Board deems the following relationships to be categorically immaterial such that they will not, by themselves, affect an independence determination:

The only relationships between U.S. Bancorp and our directors or the directors' related interests that were considered by the Board when assessing the independence of our non-employee directors are the relationships between U.S. Bancorp and each of Microsoft Corporation, a corporation with which our director Yusuf I. Mehdi is affiliated, Oracle Corporation, a corporation with which our director Kimberly N. Ellison-Taylor is affiliated, and Schnuck Markets, Inc., a corporation with which Craig D. Schnuck, a former director who retired in April 2020, is affiliated.

The Board determined that these relationships, which are described later in this proxy statement under the heading "Certain Relationships and Related Transactions — Related Person Transactions," do not or did not impair Mr. Mehdi's, Ms. Ellison-Taylor's or Mr. Schnuck's independence. This determination was based on the Board's conclusion that the amounts involved in transactions between U.S. Bancorp and Microsoft, Oracle or Schnuck Markets, as the case may be, are immaterial to Microsoft's, Oracle's and Schnuck Markets' gross revenues, respectively, and that the relationships had no unique characteristics that could influence Mr. Mehdi's, Ms. Ellison-Taylor's or Mr. Schnuck's impartial judgment as a director of U.S. Bancorp.

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Board meetings and committees

The Board of Directors conducts its business through meetings of the Board and the following standing committees: Audit, Capital Planning, Compensation and Human Resources, Governance, Public Responsibility, Risk Management, and Executive. The standing committees report on their deliberations and actions at each full Board meeting. Each of the standing committees has the authority to engage outside experts, advisers and counsel to the extent it considers appropriate to assist the committee in its work. Each of the standing committees has adopted and operates under a written charter.

The independent directors meet in executive session (without the CEO or any other member of management present) at the end of each regularly scheduled Board meeting and may also meet in executive session at any other time. The Lead Director presides over these executive sessions. See "Board Leadership Structure." During each committee meeting, the committees have the opportunity to hold executive sessions without members of management present.

The Board of Directors held eleven meetings during 2020. Each director attended at least 75% of the total meetings of the Board and Board committees on which he or she served during the year. The average attendance rate of all directors at Board and Board committee meetings in 2020 was 99%.

Directors are expected to attend all meetings of shareholders. All directors serving at the time attended the 2020 annual meeting.

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Corporate governance

Board performance evaluations

Our Governance Committee conducts an annual assessment of the Board's performance to determine whether the Board, its committees and its members are functioning effectively and to identify areas for growth and improvement. The annual process is as follows:

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Based on director feedback received over the last several years through this annual evaluation process and through less formal channels, including feedback provided by directors at meetings, management has adjusted the content and style of its written materials and oral presentations for committee meetings. In addition, the Governance Committee has received information about the skills and qualifications that directors would like future Board or committee members to have. Director feedback has also led to discussion of how to appropriately balance oversight responsibility for critical matters affecting our company among the Board and its committees, and how committee action is most effectively communicated to the full Board.

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Director education

It is important for our directors to continually receive additional information and training that will help them to effectively oversee the management of our company. We have implemented a robust director education program that begins with in-depth training covering our industry and each of our lines of business, and that continues with special education sessions throughout the year that highlight current business, industry, regulatory and governance topics presented by internal and external experts. Directors are encouraged to attend continuing training sessions offered by outside providers on topics related to general corporate governance as well as specialized areas in risk management, audit, compensation and other matters, at the company's expense.

Shareholder engagement

We value the views of our investors and welcome feedback from them. Our standard engagement practice is to initiate conversations with our largest investors each fall. In the fall of 2020, we reached out to our top 50 shareholders and invited them to talk to us about corporate governance, our COVD-19 response, executive compensation and disclosure matters, and any other topics they wish to discuss. We also consider requests for engagement from shareholders outside of the fall outreach effort.

Management shares the feedback received from shareholders with the Governance Committee, and feedback that relates to matters that are specifically overseen by a different Board committee are also provided to those committees. The committees take the views expressed by our shareholders into consideration when making decisions. Management also considers shareholder feedback about disclosure practices when preparing our company's public filings.

Conduct

We are deeply committed to maintaining the highest standards of ethical conduct that reflect our purpose and core values. In recognition of that commitment, we were named one of the World's Most Ethical Companies® in 2021 by the Ethisphere Institute.

Our Code of Ethics and Business Conduct, which is available on our website at usbank.com by clicking on "About us", "Investor relations", "Corporate Governance" and then "Governance documents", outlines the responsibilities of every employee and director to our customers, our shareholders, our community and each other.

Committee member qualifications

All of the Audit Committee members meet the independence and experience requirements of the NYSE and the Securities and Exchange Commission (the "SEC"). As part of those requirements, our Board of Directors has determined that each member of the Audit Committee is financially literate. All of the Governance Committee members and Compensation and Human Resources Committee members also meet the independence requirements of the NYSE, including, with respect to the Compensation and Human Resources Committee members, the NYSE's independence requirements specific to members of compensation committees.

The Audit Committee charter generally prohibits Audit Committee members from serving on more than two other public company audit committees. Currently, no Audit Committee member exceeds this limitation. At all times, one or more members of our Audit Committee possess the education or experience required to qualify as an "audit committee financial expert" as defined by the SEC, and one or more members of our Risk Management Committee have experience identifying, assessing and managing the risk exposures of large, complex financial firms, in accordance with rules promulgated by the Federal Reserve Board.

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Corporate governance

Committee responsibilities

The charter of each of our standing committees fully describes that committee's responsibilities. These charters can be found on our website at www.usbank.com by clicking on "About us", "Investor relations", "Corporate Governance" and then "Board committees." The following summary highlights the committees' key areas of oversight.

Committee
Primary responsibilities and membership

 

 

 
Audit

Held 13 meetings during 2020

 

Assisting the Board of Directors in overseeing the quality and integrity of our financial statements and the adequacy and reliability of disclosures to shareholders and bank regulatory agencies, including matters related to accounting, financial reporting and internal controls; our compliance with legal and regulatory requirements; and the qualifications, performance and independence of our independent external auditor;

appointing, compensating, retaining and overseeing the work of the independent auditor;

reviewing the effectiveness of systems that implement our company's ethics guidelines; and

overseeing the internal audit function and approving the appointment, evaluation and compensation of the Chief Audit Executive.

 

Current members: Karen S. Lynch (Chair), Warner L. Baxter, Elizabeth L. Buse, Kimberly N. Ellison-Taylor, Roland A. Hernandez and Scott W. Wine

 

Audit committee financial experts: Karen S. Lynch, Warner L. Baxter, Kimberly N. Ellison-Taylor, Roland A. Hernandez and Scott W. Wine

        
        

Capital Planning

Held 6 meetings during 2020

 

Overseeing the capital planning and capital management processes and actions, including stress testing processes, scenarios and results;

reviewing the Comprehensive Capital Analysis and Review and recommending approval to the Board of Directors;

monitoring our company's capital adequacy;

overseeing, approving and, if triggered, directing the execution of our company's resolution and recovery plans and recommending approval of the plans to the Board of Directors; and

reviewing and approving the issuance or repurchase of equity or debt securities and other significant financial transactions related to our company's capital management strategy.

 

Current members: Roland A. Hernandez (Chair), Elizabeth L. Buse, Andrew Cecere and Kimberly J. Harris

        
        

Compensation and Human Resources

Held 6 meetings during 2020

 

Discharging the Board's responsibilities relating to our compensation programs and employee benefit plans, including reviewing and approving our executive officers' compensation;

overseeing our human capital strategy and talent management program, including recruitment, evaluations and development activities;

overseeing and reviewing the results of our employee diversity, equity and inclusion initiatives;

recommending to the Board for approval all equity-based incentive plans;

recommending to the independent directors for approval the compensation program for our non-employee directors;

evaluating and discussing with the appropriate officers of our company the incentives for risk taking contained in our incentive compensation plans and programs and satisfying itself that they are consistent with the safety and soundness of our company and with applicable law, regulation and guidance; and

evaluating the CEO's performance in light of approved goals and objectives and overseeing succession planning for executive officers other than our CEO.

 

Current members: Scott W. Wine (Chair), Warner L. Baxter, Olivia F. Kirtley and Karen S. Lynch

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Committee
Primary responsibilities and membership

 

 

 
Governance

Held 5 meetings during 2020

 

Discharging the Board's responsibilities relating to corporate governance matters, including developing and recommending to the Board a set of corporate governance guidelines;

evaluating and making recommendations to the Board with respect to the size, composition and leadership of the Board and its committees, including identifying and recommending to the Board individuals qualified to become directors;

overseeing succession planning for our CEO;

evaluating related person transactions;

conducting an annual performance evaluation of the Board, its committees and its members;

overseeing our engagement with and disclosure to shareholders and other interested parties concerning corporate governance, environmental and social matters; and

making recommendations to the Board regarding any shareholder proposals.

 

Current members: Kimberly J. Harris (Chair), Marc N. Casper, Olivia F. Kirtley, Richard P. McKenney

        
        

Public Responsibility

Held 3 meetings during 2020

 

Overseeing our management of reputation risk and reviewing our company's reputation, culture and brand management activities;

reviewing and considering our position and practices on matters of public interest and public responsibility and similar social issues involving our relationship with the community at large;

reviewing our community reinvestment and fair and responsible banking activities and performance;

reviewing public policy matters that impact our company's business activity, financial performance or reputation;

reviewing policies and procedures for corporate political contributions;

overseeing our policies and programs related to other corporate responsibility matters, including environmental sustainability; and

reviewing our diversity, equity and inclusion strategy and progress against goals.

 

Current members: Marc N. Casper (Chair), Dorothy J. Bridges, Kimberly N. Ellison-Taylor, Yusuf I. Mehdi and John P. Wiehoff

        
        

Risk Management

Held 7 meetings during 2020

 

Overseeing our overall risk management function, which governs the management of credit, interest rate, liquidity, market, operational, compliance (including BSA/AML), strategic and reputation risk, as well as other risks faced by our company, including cybersecurity;

reviewing and approving our company's Risk Management Framework and Risk Appetite Statement;

monitoring our company's risk profile relative to its risk appetite and compliance with risk limits; and

reviewing and evaluating significant capital expenditures and potential mergers and acquisitions.

 

Current members Richard P. McKenney (Chair), Dorothy J. Bridges, Andrew Cecere, Yusuf I. Mehdi and John P. Wiehoff

        
        

Executive

Held 1 meeting during 2020

 

The Executive Committee has authority to exercise all powers of the Board of Directors, as permitted by law and our bylaws, between regularly scheduled Board meetings.
 
Current members: Andrew Cecere (Chair), Marc N. Casper, Kimberly J. Harris, Roland A. Hernandez, Olivia F. Kirtley, Karen S. Lynch, Richard P. McKenney and Scott W. Wine

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Corporate governance

Risk oversight by the Board of Directors

Board-level oversight of risk management structure

As part of its responsibility to oversee the management, business and strategy of our company, the Board of Directors has approved a Risk Management Framework that establishes governance and risk management requirements for all risk-taking activities. This framework includes company-level and business unit Risk Appetite Statements that set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives.

The Board of Directors oversees management's performance relative to the Risk Management Framework, Risk Appetite Statements, and other policy requirements. While management is responsible for defining the various risks facing our company, formulating risk management policies and procedures, and managing risk exposures on a day-to-day basis, the Board's responsibility is to oversee our company's risk management processes by informing itself about our material risks and evaluating whether management has reasonable risk management and control processes in place to address those material risks.

The Board's risk oversight responsibility is primarily carried out through its standing committees, as follows:

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The Risk Management, Audit, and Capital Planning Committees meet annually in joint session to give each committee the opportunity to review the risk areas primarily overseen by the other, and all Board members attend this meeting to benefit from the discussion. Finally, at each meeting of the full Board of Directors, each committee gives a detailed report of the matters it discussed and conclusions it reached during its recent meetings.

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Focus on cybersecurity risk

The Board is very focused on the risks that cybersecurity threats pose to our company as a major financial services institution. The Board has established a comprehensive oversight framework to address those increasing risks:

a Cybersecurity Oversight Subcommittee of the Risk Management Committee was formed in January 2019 to provide dedicated oversight of the following matters:

our program and practices for identifying cybersecurity risks;

our controls to prevent, detect and respond to cyber attacks, cyber incidents or information or data breaches;

our cyber resiliency, including cybersecurity risk preparedness, incident response plans, and business continuity and disaster recovery capabilities; and

our investments in cybersecurity infrastructure;

the Risk Management Committee receives regular reports from management on cybersecurity issues and maintains primary oversight of risks arising from the related areas of data privacy and information security;

the annual joint session of the Risk Management, Audit, and Capital Planning Committees includes a report from our company's Chief Information Security Officer on the cybersecurity threats facing our company and our company's preparedness to meet and respond to those threats; and

the full Board typically holds an annual cybersecurity educational session, which features the perspective of an outside expert on a current cybersecurity topic, complemented by special presentations from our company's information security and risk management functions.

The COVID-19 pandemic

The COVID-19 pandemic is profoundly affecting our customers, our employees and the communities we serve. At the onset of the pandemic we activated our crisis management plans, which are tested annually under the oversight of the Board. The Board was highly engaged in overseeing management's pandemic response, and increased its communications and interactions with management as the crisis developed and as the company adjusted its operations to provide critical financial support, through both private and government programs, to our communities.

As the crisis continues to evolve, our customers rely on us to provide essential financial services and our employees rely on us to provide a safe working environment. The Board has continued to actively monitor management's response to this crisis, which has included:

Management and the Board of Directors will continue to actively oversee our response and the risks related to the COVID-19 pandemic.

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Corporate governance

Management-level risk structure underlying Board oversight

Each Board committee carries out its risk management responsibilities using reports from management containing information relevant to the risk areas under that committee's oversight. The committees must therefore be confident that an appropriate risk monitoring structure is in place at the management level in order to be provided accurate and useful informational reports. The management-level risk oversight structure is robust. Our company relies on comprehensive risk management processes to identify, aggregate and measure, manage, and monitor risks. This system enables the Board of Directors to establish a mutual understanding with management of the effectiveness of our company's risk management practices and capabilities, to review our company's risk exposure and to elevate certain key risks for discussion at the Board level. A framework exists to account for the introduction of emerging risks or any increase in risks routinely taken, which would either be largely controlled by the risk limits in place or identified through the frequent risk reporting that occurs throughout our company.

The Executive Risk Committee, which is chaired by our Chief Risk Officer and which includes the CEO and other members of the executive management team, oversees execution against the Risk Management Framework and company-level Risk Appetite Statement. The Executive Risk Committee meets monthly, and more frequently when circumstances merit, to provide executive management oversight of our Risk Management Framework, assess appropriate levels of risk exposure and actions that may be required for identified risks to be adequately mitigated, promote effective management of all risk categories, and foster the establishment and maintenance of an effective risk culture. The Executive Risk Committee members manage large, sophisticated groups within our company that are dedicated to controlling and monitoring risk to the levels deemed appropriate by the Board of Directors and executive management. These individuals, together with our company's Controller, Treasurer and others, also provide the Board's committees with the information the committees need and request in order to carry out their oversight responsibilities.

The Executive Risk Committee focuses on current and emerging risks, including strategic and reputational risks, directing timely and comprehensive actions. The following senior operating committees have also been established to support the work of the Executive Risk Committee, each responsible for overseeing a specified category of risk:

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Corporate governance
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Our Board and management-level committees are supported by a "three lines of defense" model for establishing effective checks and balances. The first line of defense, primarily the revenue-generating business lines, manages risks in conformity with established limits and policy requirements. In turn, business leaders and their risk officers establish programs to ensure conformity with these limits and policy requirements. The second line of defense, primarily the Chief Risk Officer's organization, but also including the policy and oversight activities of corporate support functions, translates risk appetite and strategy into actionable risk limits and policies. The second line of defense monitors the first line of defense's compliance with limits and policies, and provides reporting and escalation of emerging risks and other concerns to senior management and the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee and senior management with independent assessment and assurance regarding the effectiveness of our company's governance, risk management and control processes.

Board leadership structure

Board leadership policies and practices

Our Board believes that a strong, independent Board of Directors is critical to effective oversight of management. The Board regularly and carefully considers the critical issue of the best independent leadership structure for the Board, and maintains a flexible policy regarding the issue of whether the position of Chairman should be held by an independent director. At least annually, the Board reviews the Board's and company's needs and the leadership attributes of its directors and executives to determine whether our company is best served at that particular time by having the CEO or another director hold the position of Chairman.

In order to provide strong independent Board leadership, the independent directors elect a Lead Director with the substantial leadership responsibilities detailed below when the position of Chairman is not held by an independent director. The Lead Director is elected annually upon the recommendation of the Governance Committee, with the expectation that he or she will generally serve three, and may serve up to five, consecutive terms.

In addition to strong independent leadership of the full Board, each of the Audit Committee, Governance Committee, and Compensation and Human Resources Committee is composed solely of independent directors. Independent directors, therefore, oversee critical, risk-sensitive matters such as the quality and integrity of our financial statements; the compensation of our executive officers, including the CEO; the nomination of directors; and the evaluation of the Board, its committees, and its members. Each of the remaining committees, aside from the Executive Committee, is chaired by an independent director. The full Board and each of its committees meet in executive session on a regular basis.

Current leadership structure

Andrew Cecere, our President and Chief Executive Officer, became Chairman of the Board on the date of the 2018 annual meeting. Olivia F. Kirtley has served as the Board's independent Lead Director since our 2020 annual meeting.

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Corporate governance

Chairman

The independent directors believe that Mr. Cecere is the member of the Board best suited to contribute to long-term shareholder value by serving as Chairman, because he has the knowledge, expertise and experience to understand and clearly articulate to the Board the opportunities and risks facing our company and to lead discussions on important matters affecting our business.

Role of Chairman

When the Chairman is also the CEO, that person's primary responsibilities as Chairman are as follows:

set Board meeting agendas in collaboration with the Lead Director, who has final approval authority over them;

preside at Board meetings, guiding discussion and ensuring that decisions are made;

ensure that the Board is provided with full information on our company and its industry;

set shareholder meeting agendas, subject to approval by the Board, and preside at meetings of the shareholders; and

chair the Board's Executive Committee.

Lead Director

Ms. Kirtley brings a wealth of business and board leadership experience to her role as Lead Director of our Board. As a corporate governance consultant and faculty member of The Conference Board Directors' Institute, she has a particular strength in understanding current corporate governance issues. She has served as Chair of the Audit and Risk Management Committees, and she is currently a member of the Compensation and Human Resources, Governance and Executive Committees.

Role of Lead Director

The independent directors entrust the Lead Director with the following responsibilities and authority:

lead executive sessions of the Board's independent or non-management directors, and preside at any session of the Board where the Chairman is not present;

act as a regular communication channel between the independent directors and the CEO;

approve the Board meeting agendas;

approve Board meeting schedules to ensure there is sufficient time for discussion of all agenda items;

approve information sent from management to the Board;

as appropriate, be the representative of the independent directors in discussions with our major shareholders regarding their concerns and expectations;

as appropriate, call special Board meetings or special meetings of the independent directors;

approve, on behalf of the Board, the retention of consultants who report directly to the Board;

assist the Board and company officers in assuring compliance with and implementation of our Corporate Governance Guidelines;

advise the independent Board committee chairs in fulfilling their designated roles and responsibilities to the Board;

review shareholder communications addressed to the full Board or to the Lead Director;

interview all Board candidates and make recommendations to the Governance Committee and the Board; and

communicate, as appropriate, with our regulators.

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Corporate governance
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Majority vote standard for election of directors

Our bylaws provide that in uncontested elections, a nominee for director will be elected to the Board if the number of votes cast "FOR" the nominee's election exceeds the number of votes cast "AGAINST" that nominee's election. The voting standard for directors in a contested election is a plurality of the votes cast at the meeting.

Our Corporate Governance Guidelines provide that director nominees must submit a contingent resignation in writing to the Governance Committee, which becomes effective if the director fails to receive a sufficient number of votes for re-election at the annual meeting of shareholders and the Board accepts the resignation. The Board will nominate for election or re-election as director only candidates who have tendered such a contingent resignation.

Our Corporate Governance Guidelines further provide that if an incumbent director fails to receive the required vote for re-election, our Governance Committee will act within 90 days after certification of the shareholder vote to determine whether to accept the director's resignation, and will submit a recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding his or her resignation. The Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director's resignation.

If each member of the Governance Committee fails to receive the required vote in favor of his or her election in the same election, then those independent directors who did receive the required vote will appoint a committee amongst themselves to consider the resignations and recommend to the Board whether to accept them. However, if the only directors who received the required vote in the same election constitute three or fewer directors, all directors may participate in the decision regarding whether to accept the resignations.

Each director nominee named in this proxy statement has tendered an irrevocable, contingent resignation as a director in accordance with our Corporate Governance Guidelines, which resignation will become effective if he or she fails to receive the required vote for election at the annual meeting and the Board accepts his or her resignation.

Succession planning and management development

A primary responsibility of the Board is planning for CEO succession, as well as overseeing succession planning for other senior management positions. The Board's process targets the building of enhanced management depth and skills, considers continuity and stability within our company, and responds to our company's evolving needs and changing circumstances. To achieve these goals, the executive talent development and succession planning process is integrated into the Board's annual activities.

The Board works with the Governance Committee to evaluate a number of potential internal and external candidates as successors to the CEO, and considers emergency, temporary scenarios as well as long-term succession. The CEO makes available to the Board his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for those individuals. The Compensation and Human Resources Committee is responsible for reviewing succession planning for executive officer positions other than the CEO.

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Certain relationships and related transactions

Certain relationships and related transactions

Review of related person transactions

The Board has adopted a written Related Person Transactions Policy for the review, evaluation and approval or ratification of transactions between our company and its related persons. "Related persons" under this policy include our directors, director nominees, executive officers, holders of more than 5% of our common stock, and their respective immediate family members. "Immediate family members" include children, stepchildren, parents, stepparents, spouses, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and any person (other than a tenant or employee) sharing the person's household.

Except as described below, the policy requires the Governance Committee of the Board to review and evaluate and either approve or disapprove all transactions or series of transactions in which:

The Board has determined that the Governance Committee does not need to review or approve certain transactions even if the amount involved will exceed $120,000, including the following transactions:

When considering whether to approve or ratify a transaction, the Governance Committee will consider facts and circumstances that it deems relevant to its determination, including:

No director is allowed to participate in the deliberations or vote on the approval or ratification of a transaction if that director is a related person with respect to the transaction under review. On an annual basis, the Governance Committee assesses all ongoing relationships with related persons to confirm that the transactions are still appropriate.

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Certain relationships and related transactions
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Related person transactions

Lending transactions

During 2020, U.S. Bancorp and our banking and broker-dealer subsidiaries engaged in transactions in the ordinary course of business with some of our directors, executive officers and the persons that we know beneficially owned more than 5% of our common stock on December 31, 2020, and the entities with which they are associated. All loans and loan commitments and any transactions involving other financial products and services in connection with these transactions were made in the ordinary course of business, on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to our banking and broker-dealer subsidiaries and did not involve more than the normal risk of collectability or present other unfavorable features.

Transactions with entities affiliated with directors or executive officers

Our director Yusuf I. Mehdi currently serves as a Corporate Vice President of Microsoft Corporation. During 2020, we paid approximately $30 million to Microsoft for software and services in the ordinary course of business, including desktop software, server and cloud enrollment services, and support and development of products. Microsoft's annual revenue was approximately $143 billion for fiscal year 2020.

Kimberly Ellison-Taylor is the Executive Director of Finance Thought Leadership for Oracle Corporation. During 2020, we paid approximately $21 million to Oracle for software, hardware and professional services, including backend database, middleware and end-user applications. Oracle's annual revenue was approximately $39 billion for fiscal year 2020.

The son of our Vice Chair, Payment Services, Shailesh M. Kotwal, is a non-executive employee in U.S. Bank's corporate and commercial banking business line, who received $137,163 in compensation during 2020. We established the compensation paid to Mr. Kotwal's son in 2020 in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. In addition to this compensation, he also received employee benefits generally available to all of our employees.

During 2020, U.S. Bank operated 32 branches and 70 ATMs in grocery stores owned by Schnuck Markets, Inc., of which Craig D. Schnuck, who retired from our Board in April 2020, beneficially owns approximately 13% of the outstanding capital stock. Mr. Schnuck's sister, Nancy A. Diemer, and his four brothers, Scott C. Schnuck, Todd R. Schnuck, Mark J. Schnuck and Terry E. Schnuck, each beneficially own approximately 13% of the outstanding capital stock of Schnuck Markets as well. In addition, each of Mr. Schnuck's brothers is a director of Schnuck Markets, and three of his brothers hold officer positions: Todd R. Schnuck is the Chairman and Chief Executive Officer; Mark J. Schnuck is the Vice President; and Terry E. Schnuck is the Assistant Secretary. Rent and fee payments by U.S. Bank to Schnuck Markets were approximately $1.3 million in 2020. The consolidated gross revenues of Schnuck Markets in 2020 were approximately $3 billion.

These transactions were conducted at arm's length in the ordinary course of business by each party to the transactions. As discussed above under the heading "Corporate Governance — Director Independence," the Board of Directors has determined that these relationships are immaterial to Mr. Mehdi, Ms. Ellison-Taylor, and Mr. Schnuck, and that Mr. Mehdi, Ms. Ellison-Taylor and Mr. Schnuck were all determined to be independent directors.

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Compensation discussion and analysis

Compensation discussion and analysis

This section explains how we compensated the individuals who served as our CEO or CFO for 2020 and each of our three other most highly compensated executive officers for 2020 (our named executive officers, or "NEOs").

The NEOs are as follows for 2020:

Reference guide

Executive compensation overview

  33

Philosophy and objectives of our executive compensation program

  35

Base salary

  36

Annual cash incentive awards

  36

▶ How we determine our NEOs' annual cash incentive awards

  36

▶ Setting the Target Award Amounts

  37

▶ Calculating the Bonus Funding Percentage

  37

▶ Factoring in individual performance and risk sensitivity

  39

Long-term incentive awards

  40

▶ Establishing the structure of the equity awards

  40

▶ Setting the value of the equity awards

  40

▶ Selecting the performance metrics for the PRSU awards

  40

▶ Setting the levels of absolute and relative ROE for the PRSU performance matrix

  41

Decision making and policies

  42

▶ Who is involved in making executive compensation decisions

  42

▶ How executive compensation is determined

  43

▶ Compensation peer group

  44

▶ Stock ownership and retention requirements

  44

▶ Clawback and forfeiture provisions applicable to executive awards

  45

▶ Change-in-control provisions for executive officers

  45

▶ Hedging and pledging policy

  45

▶ Risk considerations

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Executive compensation overview

Program structure in 2020

Our Compensation and Human Resources Committee (referred to as the "Committee" in this "Compensation Discussion and Analysis" section) considers the views of our shareholders, along with industry trends and the specific strategic needs of our company, when designing the executive compensation program. The Committee considers the high support for our recent Say on Pay votes — 95% in each of the last three years — as a strong endorsement that the program is structured effectively. There were no significant structural changes made to the program in 2020.

2020 performance-based compensation results

Our corporate results were challenged by the economic effects of the COVID-19 pandemic during 2020, but the Committee did not make any pandemic-specific modifications to the structure of the NEOs' performance-based compensation awards. Any adjustments applied to the performance metric calculations were made in accordance with the terms of the awards, which had been established before COVID-19 became a pandemic, and are described in detail in this "Compensation Discussion and Analysis" section.

    ​Payouts for NEOs' 2020 annual cash incentive awards ranged from 61.2% to 87.6% of their respective target amounts, based on earnings per share ("EPS") and business line pretax income results for the year.

    ​The performance-based restricted stock units ("PRSUs") granted in 2018 were earned at 120.5% of the NEOs' respective target amounts, based on absolute and relative return on equity ("ROE") results for 2018-2020.

Corporate financial performance

In 2020 our company once again demonstrated strong performance relative to its financial peer group in the most commonly used performance metrics for the banking industry.

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Compensation discussion and analysis

Elements of total direct compensation

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Sound compensation practices

Our executive compensation program incorporates many strong governance features, including the following:

  What we do    

 

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Significant majority of each executive officer's compensation is at risk

 

 

 

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We may cancel unvested equity awards and reduce cash incentive compensation for executives who demonstrate inadequate sensitivity to risk

 

 

 

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We have a clawback policy that allows us to recoup annual cash incentive payouts attributable to incorrectly reported earnings

 

 

 

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We have meaningful stock ownership and hold-until-retirement requirements

 

 

 

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The Committee retains an independent compensation consultant that provides no other services to our company

 

 

 

    

 

 

 

 
What we don't do

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Our executive officers do not have employment or change-in-control agreements

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We do not allow executive officers to hedge or pledge their company stock

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We do not have single-trigger accelerated vesting of equity awards upon a change-in-control of the company

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We do not provide tax gross-ups (except in relation to relocation expenses)

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We do not pay dividends on any PRSUs that are not earned through satisfaction of the awards' performance metrics; dividends accrued on earned PRSUs are not paid until the awards vest


    

 

 

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Philosophy and objectives of our executive compensation program

Compensation program objective

The Committee has structured the executive compensation program to create long-term shareholder value by attracting and retaining talented leaders and rewarding them for top performance. The Committee achieves this objective through a compensation program that:

Pay for performance

U.S. Bancorp operates in a highly complex business environment, where it competes with many well-established financial institutions and, increasingly, with non-banks offering products and services that traditionally were offered only by banks. Our long-term business objective is to maximize shareholder value by consistently delivering superior returns on common equity that exceed the cost of equity. If we are successful in achieving this objective, the Committee believes the results will benefit our shareholders.

Accordingly, our executive compensation program is designed to reward our executives for achieving annual and long-term financial results that further our long-term business objectives. The annual cash incentive plan rewards performance relative to corporate EPS and business line pretax income targets established at the beginning of the fiscal year, and the PRSUs are earned based on achievement of ROE targets over a three-year period that directly measure the return generated by the company on its shareholders' investment. The ultimate value of both the PRSUs and RSUs is dependent on our long-term financial success as reflected in the price of U.S. Bancorp stock.

At the same time, the Committee carefully weighs the risks inherent in these programs against the goals of the programs and the company's risk appetite. Additional discussion of the risk oversight undertaken by the Committee can be found below under "Decision Making and Policies — Risk Considerations."

Pay levels

When determining executive compensation levels each year, the Committee considers the value of each compensation element as well as the value of the total direct compensation package. Key factors that inform pay levels include the following:

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Compensation discussion and analysis

Compensation elements

Our NEOs' total direct compensation consists of three elements: base salary, annual cash incentive compensation, and long-term incentive compensation (60% of which is delivered in PRSUs and 40% in RSUs). Each of these elements of total direct compensation is described in detail below.

NEOs are also eligible to receive health benefits under the same plans available to our other employees, matching contributions to their U.S. Bank 401(k) Savings Plan accounts on the same basis as our other employees, and retirement benefits that are earned over their career with the company. No NEO has an employment or standalone change-in-control agreement. NEOs do not receive gross-up payments for tax liabilities resulting from perquisites, except in relation to relocation expenses.

Base salary

Base salary is the only component of the NEO's total direct compensation not at risk. The Committee considers the salary of executive officers relative to comparable executives in our compensation peer group and will make market-based adjustments as it deems appropriate. Salaries can also be adjusted to reflect experience and tenure in a position, internal pay equity within the executive officer group, promotions or increased scope of responsibilities, individual performance, and retention considerations.

2020 salary actions: The Committee made no changes to Mr. Cecere's salary for 2020. Each of the other NEOs' salaries were increased by $25,000 — $80,000 to reflect market considerations.

NEO


2019
base salary


2020
base salary


 

Andrew Cecere

$ 1,200,000 $ 1,200,000  

Terrance R. Dolan

$ 700,000 $ 725,000  

Jeffry H. von Gillern

$ 625,000 $ 675,000  

Timothy A. Welsh

$ 575,000 $ 655,000  

Gunjan Kedia

$ 575,000 $ 655,000  

Annual cash incentive awards

How we determine our NEOs' annual cash incentive awards

All executive officers have the opportunity to earn annual cash incentive awards that reflect their responsibility levels and reward achievement of corporate and business line goals. The awards made to our NEOs for 2020 performance were granted under our Annual Executive Incentive Plan (the "AEIP").

The formula for calculating each NEO's Annual Cash Incentive Payout consists of the following elements:

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Setting the Target Award Amounts

The Target Award Amount (% of base salary) for each executive officer is based on the officer's level of responsibility within the organization as well as market-based and internal pay equity considerations. The Target Award Amount is considered by the Committee to be an important component of total compensation that is established to provide an appropriate balance between short-term, cash-based compensation and long-term, equity-based compensation in each NEO's total compensation package.

2020 target award actions: The Committee made adjustments to the Target Award Percentages in 2020 for NEOs other than the CEO to ensure those executives' target compensation levels remain competitive within our compensation peer group.

NEO


Target Award
Percentage
for 2019



Target Award
Percentage
for 2020



Target Award
Amount
for 2020



 

Andrew Cecere

265 % 265 % $ 3,180,000  

Terrance R. Dolan

150 % 180 % $ 1,305,000  

Jeffry H. von Gillern

    $ 1,080,000  

Timothy A. Welsh

150 % 160 % $ 1,048,000  

Gunjan Kedia

    $ 1,048,000  

Calculating the Bonus Funding Percentage

The Bonus Funding Percentage consists of two evenly weighted factors: the Corporate Result, which is based on EPS performance, and the Business Line Result, which is based on business line pretax income performance. Both the EPS and business line pretax income results are assessed relative to targets included in our company's annual financial plan. The Board establishes these financial targets at the beginning of the fiscal year with the intent that they are challenging yet achievable goals.

For executives with leadership responsibilities for the entire company, including Messrs. Cecere and Dolan, or for a corporate-wide support function, including Mr. von Gillern, the Business Line Result is based on the weighted average of the pretax income results of all the company's business lines. For executives who lead a revenue-producing group, including Mr. Welsh and Ms. Kedia, the Business Line Result is based on the weighted average pretax income results of the business lines within the group he or she leads.

For purposes of computing the Bonus Funding Percentage, we adjust EPS results to remove the impact of any variation in our loan loss reserve build or release on an after-tax basis, while including net charge-offs to capture actual credit losses experienced. The Committee established this approach at the beginning of 2020 in connection with our adoption of the Current Expected Credit Losses ("CECL") accounting standard in January 2020, which created significant potential accounting volatility and uncertainty with our loan loss reserve that would be dependent upon a number of judgmental factors and economic assumptions.

For business line pretax income, the results include a component for changes in the loan loss reserve driven by loan balances and changes in loan portfolio credit quality. The Committee adjusts the results, however, so that the effect of any variation in our loan loss reserve build or release driven by changes in loan portfolio credit quality is reduced by 50% to align bonus funding with changes in credit quality while reducing some of the volatility caused by judgmental factors. In previous years, before we had adopted CECL, we had made the 50% modification for both EPS and business line pretax income results.

These adjustments for loan loss reserve variation maintain accountability for credit quality and are applied consistently whether the adjustment is positive or negative. The Committee will also consider in any year whether EPS should be further adjusted from reported amounts to normalize any notable items and whether other normalizing adjustments should be made to business line pretax income results.

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Compensation discussion and analysis

The Committee believes that EPS and business line pretax income are appropriate performance metrics for the executive officers' annual cash incentive awards for the following reasons:

The Bonus Funding Percentage for each business line is calculated as follows:

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2020 Corporate Result: The Corporate Result was 58.7%, which was calculated as follows:

2020 Business Line Results: Pretax income results, inclusive of the regular adjustments described above, ranged from 40.6% to 224.6% of target performance across our company's 23 revenue-producing business lines. These results generated Business Line Results of 0% to 200% following application of the leverage factor and the 0% floor and 200% ceiling. The weighted average Business Line Result of all the company's business lines was 63.8%.

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The Business Line Results were as follows for the NEOs:

NEO
Business Line Result
 
Andrew Cecere
Terrance R. Dolan
Jeffry H. von Gillern
63.8% (based on weighted average pretax income results for all the company's business lines)  
Timothy A. Welsh 116.6% (based on weighted average pretax income results for the business lines within the Consumer and Business Banking group)  
Gunjan Kedia 63.2% (based on weighted average pretax income results for the business lines within the Wealth Management and Investment Services group)  

Factoring in individual performance and risk sensitivity

The Committee considers the performance of the business lines managed by each executive officer and that executive officer's individual performance during the year. The Committee also uses a formal "risk scorecard" assessment, which can result in downward or upward adjustments to the Bonus Funding Percentage to reflect the executives' demonstrated sensitivity to risk.

The Committee believes that it is important to retain the ability to recognize outstanding individual performance and risk mitigation in determining Annual Cash Incentive Payouts, as well as to acknowledge circumstances where individual performance improvements are suggested or where inappropriate risk-taking behaviors have occurred. Modifications to our NEOs' Bonus Funding Percentage based on their individual performance and risk sensitivity have been used only occasionally, however, and have historically been modest in scope. During the five-year period preceding 2020, NEOs collectively received increases two times and decreases two times, resulting in modifications ranging from –5% to +10%.

2020 individual performance and risk sensitivity actions: The Committee increased the Bonus Funding Percentage applicable to Ms. Kedia's Target Award Amount by 5% to recognize her significant leadership outside her normal responsibilities in supporting the company's participation in the CARES Act's Paycheck Protection Program in 2020. The Committee did not make any other modifications for individual performance. Following an analysis of the NEOs' risk scorecard results, the Committee did not make any risk-based modifications to the NEOs' Bonus Funding Percentages.

2020 Annual Cash Incentive Payout results: The resulting payouts made to the NEOs in March 2021 for 2020 performance under the AEIP were as follows:

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Long-term incentive awards

Establishing the structure of the equity awards

Long-term, stock-based compensation represents the most significant portion of our NEOs' total compensation package. In 2020, 67% of our CEO's target total direct compensation and 60% of our other NEOs' target total direct compensation (on average) consisted of equity awards. The Committee uses equity awards to align the NEOs' interests with those of long-term shareholders.

The Committee grants equity awards to executive officers under the U.S. Bancorp 2015 Stock Incentive Plan. In 2020, 60% of the value of each executive officer's long-term incentive award was granted in the form of PRSUs that will cliff vest (if earned) on the third anniversary of the grant date, following a three-year performance period, and 40% was granted in the form of RSUs that will vest ratably over three years. Cash dividends on unvested PRSUs are accrued during the performance period but are only paid at vesting on shares earned, if any, by the executives.

The mix of performance-based and time-based equity vehicles, with the mix more heavily weighted toward performance-based equity, is designed to motivate achievement of financial objectives while encouraging retention and stock ownership.

Setting the value of the equity awards

Each year in January, the Committee determines the dollar value of the long-term incentive awards to be granted to the executive officers, and the grants are made on a pre-determined date in February or March. In setting each year's award amounts, the Committee considers the relative market position of the awards and the total compensation for each executive, the proportion of each executive's total direct compensation to be delivered as a long-term incentive award, internal pay equity, executive performance and changes in responsibility, retention considerations, and corporate performance.

2020 equity value actions: The Committee increased the value of the long-term incentive awards granted to the NEOs in 2020 to reward strong performance during 2019 and to align those NEOs' total compensation more closely with the opportunities available to executives in similar roles at companies in our peer group.

NEO


Value of
equity awards
granted in 2019



Value of
equity awards
granted in 2020



 

Andrew Cecere

$ 8,100,000 $ 8,600,000  

Terrance R. Dolan

$ 3,500,000 $ 3,600,000  

Jeffry H. von Gillern

$ 2,500,000 $ 2,750,000  

Timothy A. Welsh

$ 2,100,000 $ 2,300,000  

Gunjan Kedia

$ 2,100,000 $ 2,300,000  

Selecting the performance metrics for the PRSU awards

The number of PRSUs earned is determined according to a formula that uses a comparison of our actual ROE result to target-level ROE, as well as our ROE performance relative to that of our peer financial institutions. ROE is used as the performance metric because:

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The Committee uses a performance matrix, illustrated below, that reflects both absolute and relative ROE scales to determine the final PRSU award amounts earned during the performance period. Target levels of both absolute and relative ROE are established, with maximum and minimum levels also identified. Earn-out amounts are determined using interpolation.

The Committee believes that the PRSU earn-out structure provides an important balance between rewarding the achievement of absolute performance goals and strong relative performance. Executives are not rewarded for poor performance simply because members of our financial peer group have even worse performance, nor are they rewarded for exceeding expectations if performance relative to peers is substandard. In addition, by using a sliding scale for each ROE performance metric, the matrix takes into account the amount of variance from the ROE target and peer group ROE results, rewarding performance while mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award.

Setting the levels of absolute and relative ROE for the PRSU performance matrix

The target and maximum ROE levels selected by the Committee for the three-year performance period contained in the PRSU awards granted each year are based on the ROE range included in the company's profitability goals announced at the last Investor Day conference held before the grant or changes to profitability goals that are publicly communicated prior to the grant date. ROE may be adjusted from reported results to normalize the effect of significant notable items, e.g. merger-related changes in the event there were an acquisition integration occuring. Beginning in 2020, ROE results include adjustments related to the impacts of the CECL accounting standard. The adjustments eliminate the volatility of the accounting standard related to changes in the allowance for credit losses, while including net charge-offs related to actual credit losses experienced. These CECL-related adjustments to the ROE calculation for the PRSU awards were adopted by the Committee in January 2020, when we adopted the accounting standard, and before COVID-19 became a pandemic.

The Committee also establishes a sliding scale of ROE achieved relative to the ROE of our financial peer group, which consists of the following institutions: Bank of America, Citizens, Fifth Third, J.P. Morgan, KeyCorp, PNC, Regions, Truist Financial, and Wells Fargo. This group is used by the company for financial comparison purposes because these companies, along with U.S. Bancorp, are the largest financial services companies based in the United States that provide broadly comparable retail and commercial banking services. The ROE performance matrix provides that performance above the median of peers will increase the payout otherwise earned based on our absolute ROE result, while performance below the median of peers will reduce the award payout.

The company's absolute and relative ROE results for each of the three years within the performance period are applied to the performance matrix to produce a percentage of target PRSUs result for that year. At the end of the performance period, the percentage results for the three years will be averaged to determine the percentage of target PRSUs earned and eligible to vest upon the third anniversary of the grant date.

Results of PRSUs earned 2018-2020: In February 2018, PRSUs were granted for the 2018-2020 performance period using the following ROE performance matrix:

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Compensation discussion and analysis

The absolute and relative ROE performance during the three-year period was as follows:

    Year
  ROE1
  Peer group ranking
  Earn out percentage
 
    2018       15.4%       At or above 75th %ile       132.5%    
    2019       14.1%       At or above 75th %ile       120.6%    
    2020       13.0%       At or above 75th %ile       108.4%    
    Final earn out percentage for PRSU awards granted in 2018
  120.5%  
1.
2018 and 2019 ROE results are as reported, and 2020 ROE results include adjustments related to the impacts of the CECL accounting standard as described above. No notable items were excluded from 2020 ROE. Reported ROE for 2020 was 10.0%.

Based on performance through the end of 2020, 120.5% of the target number of units that had been granted in February 2018 were earned, and those units vested on the third anniversary of their grant date. The number of units earned by each NEO for performance during the 2018-2020 period is reported in the Outstanding Equity Awards at 2020 Fiscal Year-End table later in this proxy statement.

The ROE performance matrix applicable to PRSUs granted in early 2020 for the 2020-2022 performance period is consistent with the one set forth above for the 2018-2020 performance period.

Decision making and policies

Who is involved in making executive compensation decisions

Executive compensation policy, practices and amounts are determined by the Committee, which is composed entirely of independent directors. The Committee has responsibility for setting each component of compensation for our CEO with the assistance and guidance of its independent compensation consultant. The Committee has retained Meridian Compensation Partners, LLC ("Meridian") as its independent compensation consultant.

Our CEO and senior members of our human resources function, with the assistance of Meridian, develop initial recommendations for all components of compensation for the executive officers other than the CEO and present their recommendations to the Committee for review and approval. The Committee also annually reviews the total amount and types of compensation paid to non-employee members of the Board of Directors and recommends any changes to the independent directors for approval.

The Committee retains an independent compensation consultant to:

Meridian does not provide any other services to our company. Following a review of the relationship between the company and its independent compensation consultant in 2020, the Committee concluded that Meridian's work for the Committee does not raise any conflicts of interest.

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How executive compensation is determined

The executive compensation outcomes described in the preceding pages are the culmination of a year's worth of analysis and decisions made by the Committee, as follows:


 

 

January–February


 

 

 


Review the company's recent performance in several key financial metrics and compare it to the performance of its peer institutions in the financial services industry

 

 

 


Determine the cash incentive payouts to be made under the AEIP based on the previous year's corporate, business line and individual performance and sensitivity to risk

 

 

 


Calculate the percentage of target PRSU awards earned for the last completed performance period

 

 

 


Set the executive officers' base salaries and target award percentages for the coming year under the AEIP

 

 

 


Establish the structure and performance targets for the coming year under the AEIP

 

 

 


Set the structure and amount of the executive officers' long-term incentive awards

 

 

 


Establish performance targets for the upcoming PRSU awards and the value of equity awards to be granted to executive officers in February or March

 

 

 


Consider risks arising from the company's incentive compensation plans (see below for more information about the risk consideration process)

 

 


 

 

April


 

 

 


Review total realizable compensation summary sheets for each executive officer, including compensation outcomes under various termination scenarios

 

 

 


Review Say on Pay voting recommendations from proxy advisors and consider the results of the shareholder vote

 

 


 

 

July–October


 

 

 


Review comparative compensation information from peer institutions (see below for more information about our compensation peer group), as well as a larger group of diversified financial companies

 

 

 


Receive compensation consultant reports on executive compensation practices and trends in the financial services industry

 

 

 


Review market information and recommend non-employee director compensation for approval by the independent directors

 

 


 

 

December


 

 

 


Receive management reports on feedback from fall shareholder engagement conversations

 

 

 


Establish design of executive compensation program for the upcoming year and make preliminary decisions about target levels of compensation

 

 

 


Evaluate the CEO's performance with input from all of the non-management directors

 

 


 

 

Ongoing


 

 

 


Review the company's year-to-date financial performance relative to the targets included in its incentive compensation plans

 

 

 


Evaluate the structure of the executive compensation program and assess its effectiveness in creating long-term shareholder value

 

 

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Compensation peer group

The Committee does not "benchmark" pay to a particular market level but instead aims to establish compensation that is at a competitive level within a reasonable range of median amounts, taking into consideration an NEO's performance, tenure in his or her position, and comparability of his or her role with corresponding roles in peer institutions. The Committee used the following group of financial services companies to perform market checks when setting the compensation of our executive officers in 2020 (listed in descending order of assets held at December 31, 2020):

Company name




Assets1
($ in millions)




Market capitalization1
($ in millions)




Revenue2
($ in millions)
 

JPMorgan Chase & Co.

    $3,386,071     $387,335     $102,063  

Bank of America Corporation

    $2,819,627     $262,205     $74,208  

Citigroup Inc.

    $2,260,321     $128,374     $58,369  

Wells Fargo & Company

    $1,955,163     $124,779     $58,211  

Truist Financial Corporation

    $509,228     $64,615     $20,370  

The PNC Financial Services Group, Inc.

    $466,679     $63,131     $13,726  

Capital One Financial Corporation

    $421,602     $45,214     $18,259  

Fifth Third Bancorp

    $204,680     $19,641     $6,515  

Citizens Financial Group, Inc.

    $183,349     $15,272     $5,289  
     

U.S. Bancorp

  $553,905   $70,185   $19,420  
     

U.S. Bancorp percentile ranking

  50%   51%   44%  
     
1.
Source: S&P Capital IQ based on company filings and market data; at December 31, 2020

2.
Source: S&P Capital IQ based on company filings and market data; for the year ended December 31, 2020

The Committee selects companies for the compensation peer group that it believes represent our most meaningful competitors in the marketplace for executive talent. The Committee also reviews and uses compensation data from a large group of diversified financial services companies as an additional point of comparison. As a result of this ongoing analysis and resulting compensation adjustments, our executive compensation positioning is generally within market range, recognizing that several positions are unique to our company and do not have clear market comparisons.

Stock ownership and retention requirements

The Committee believes that ownership of our common stock by our executive officers directly aligns their interests with those of our other shareholders and helps balance the incentives for risk taking inherent in equity-based awards. We require our executives to hold significant amounts of company stock. We also require that they retain until retirement a substantial portion of their vested stock awards (net of shares withheld to satisfy tax obligations), even after minimum ownership levels have been met. The current ownership and retention requirements are as follows:

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Vested PRSUs, all RSUs and stock received and held after exercise of stock options are included in determining whether an executive officer satisfies his or her applicable minimum ownership level. As of December 31, 2020, all our executive officers were in compliance with the stock ownership and retention requirements except for one, whose holdings fell slightly below the applicable minimum level due to the reduced price of our stock.

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Clawback and forfeiture provisions applicable to executive awards

Change-in-control provisions for executive officers

Hedging and pledging policy

The company's Insider Trading Policy prohibits executive officers and directors of the company from hedging shares of the company's common stock, including, but not limited to, engaging in short sales or trading in puts, calls, covered calls or other derivative products. The policy also prohibits executive officers and directors from pledging shares of the company's common stock as collateral for a loan.

Risk considerations

Overview: Prudent risk taking is an integral part of any business strategy, and our compensation program is not intended to encourage management decisions that completely eliminate risk. Rather, the combination of various elements in our program is designed to encourage appropriate sensitivity to risk and mitigate the potential to reward risk taking that may produce short-term results that appear in isolation to be favorable, but that may undermine the successful execution of our long-term business strategy and negatively affect shareholder value. Our compensation practices are also designed to reward performance while maintaining our core commitment to customer service and ethical principles. Together with the company's processes for strategic planning, its internal control over financial reporting and other financial and compliance policies and practices, the design of our compensation program helps to discourage management actions that demonstrate insensitivity to risk.

Role of management: As a large financial services company, we have been subject to a continuing horizontal industry review of incentive compensation policies and practices undertaken by the Federal Reserve Board. We routinely undertake a thorough risk analysis of every incentive compensation plan of the company, the individuals covered by each plan and the risks inherent in each plan's design and implementation. We also conduct validation and back-testing activities to ensure that compensation plans are correctly risk rated, the plans are designed to adequately mitigate risk inherent therein, and the plans are administered effectively. The Incentive Review Committee was created to oversee that review and to provide more comprehensive oversight of the relationship between the various kinds of risk we manage and our company's incentive compensation plans and programs. The Incentive Review Committee meets throughout the year and reviews and approves all company incentive plans.

The Incentive Review Committee reviews incentive plan elements such as risk controls, plan participants, performance measures, performance and payout curves or formulas, how target level performance is determined (including whether any thresholds and caps exist), how frequently payouts occur, and the mix of fixed and variable compensation that the plan delivers. The plans and programs are also reviewed from the standpoint of reasonableness (for example, how target pay levels compare to similar plans for similar employee groups at other companies, and how payout amounts relate to the results that generate the payments), how well the plans and programs are aligned with the company's goals and objectives and with its risk appetite, and from an overall standpoint, whether these plans and programs represent an appropriate mix of short-term and long-term compensation.

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As part of this review by the Incentive Review Committee, our management team, including senior risk officers and individuals from the compensation department, have identified the risks inherent in these programs and have modified plans and controls where appropriate to mitigate certain potential risks. For example, most business line incentive compensation plans with a credit component track early defaults, or defaults that occur within the first 12 months, and must include a provision that allows the company to offset future payments by the amount of the previously paid incentives related to the early default.

In addition, a "risk scorecard" assessment measuring adequacy of risk management is undertaken for senior management-level employees who have the individual ability to pose material risk to the company, including the executive officers; all employees who have credit responsibility and who participate in annual corporate cash incentive plans; and all employees who, as part of a group, can engage in risk-taking behavior that could be material to the company and who participate in annual corporate cash incentive plans. This analysis serves as the basis for annual cash incentive plan adjustments for these employees. Annually, the Incentive Review Committee also addresses risk events that pose a material adverse impact to the company or business line to determine whether an event should trigger cancellation of equity awards. The Incentive Review Committee has reviewed its process with the Compensation and Human Resources Committee and discussed the areas where compensation-related risks were being addressed by plan modifications, or were mitigated by internal controls or otherwise.

Role of the Board: The Compensation and Human Resources Committee also conducts an annual review of the compensation packages and components for the executive officers. The Committee assesses the incentives for risk taking contained in the compensation program and balances them with the other goals of the compensation program. In evaluating the incentives for risk taking in compensation plans and policies for executive officers, the Committee considered the following risk-mitigating aspects of those plans and policies:


  

 

Overall executive compensation program risk mitigation factors


 

 

 


Long-term incentive focus: The majority of the total compensation received by executive officers is in the form of equity awards with multi-year vesting schedules, which helps to ensure that executives have significant value tied to long-term stock price performance and mitigates incentives to manage the company with an excessive focus on short-term gain.

 

 


 

 

Annual cash incentive risk mitigation factors


 

 

 


Specific risk sensitivity analysis: A "risk scorecard" assessment is performed for executive officers and can result in adjustments to award payouts under the AEIP.

 

 

 


Clawback policy: The company's incentive compensation clawback policy discourages risk taking that would lead to improper financial reporting.

 

 

 


Cap on award value: The maximum annual cash incentive award payable to an executive officer is equal to 200% of that officer's target award value, which limits the potential incentive to take excessive risk to maximize award value.

 

 


 

 

Long-term incentive risk mitigation factors


 

 

 


Equity cancellation provisions: Executive officers' unvested equity awards can be cancelled if their conduct has subjected the company to significant financial, reputational or other risk.

 

 

 


Choice of performance metric: The PRSUs use ROE as the measure of corporate performance for determining the final number of units earned under the award. Achieving a high ROE requires an appropriate balance between achieving the highest return on invested capital and managing risk within the company's established risk tolerance levels.

 

 

 


Maximum PRSU payout limited: The number of units that may be earned under the performance formula is capped at 150%, which limits the potential incentive to take excessive risk to maximize award value.

 

 

 


Sliding scale earn-out calculation: The PRSU performance matrix takes into account the amount of variance from the ROE target and peer group ROE results, mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award.

 

 

 


Meaningful stock ownership and retention requirements: Executives are required to hold significant amounts of company stock, a portion of which must be held until retirement, which fosters the alignment of executives' interests with those of our long-term shareholders.

 

 

 


Policy prohibiting hedging of shares: Our executives are prohibited from taking actions designed to hedge or offset any decrease in the market value of our common stock.

 

 

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Based on a consideration of the foregoing reviews and factors, the Committee has determined that risks arising from the company's compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the company.

Compensation committee report

The Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation and Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our 2020 Annual Report on Form 10-K.

Compensation and Human Resources Committee of the Board of Directors of U.S. Bancorp

Scott W. Wine, Chair   Olivia F. Kirtley    
Warner L. Baxter   Karen S. Lynch    

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Executive compensation

Executive compensation

Summary compensation table

The following table shows the cash and non-cash compensation awarded to or earned by our NEOs in 2020.

Name and
principal position




Year


Salary
($)





Stock
awards
($)1






Option
awards
($)







Non-equity