Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
As described in further detail in the proxy statement for its 2020 annual
meeting of stockholders, Mastercard Incorporated ("Mastercard" or the "Company")
has designed executive compensation programs to support its strategic objectives
to grow, diversify and build the Company and to attract, motivate and retain its
executives, who are critical to Mastercard's long-term success. To achieve these
objectives, the Human Resources and Compensation Committee (the "HRCC") of the
Board of Directors has the authority to make adjustments to ensure that
compensation appropriately reflects operating performance that is reasonably
within management's control and to achieve desired human capital objectives,
including the retention and engagement of leadership talent needed to execute
the Company's business strategy and create long-term value for stockholders.
Historically, the HRCC has used this authority from time to time to adjust
payouts under the compensation programs, including by applying its discretion to
reduce bonus payouts in consideration of performance against strategic
objectives.
On December 31, 2020, the HRCC made certain adjustments to the terms of annual
incentive awards for 2020 ("2020 Annual Incentive Award") and Performance Stock
Unit awards with the three-year performance period ending December 31, 2020
scheduled to vest in 2021 ("2018 PSU Awards") to account for the effect of the
COVID-19 pandemic while also ensuring that compensation appropriately reflects
operating performance that is reasonably within management's control.
In contemplating potential adjustments, the HRCC carefully considered the
Company's Total Shareholder Return ("TSR") to ensure the continued alignment of
executive and stockholder interests. The Company's one-year TSR as of December
31, 2020 was 20%, which was at the 68th percentile of the S&P 500. Mastercard's
three-year TSR as of December 31, 2020 was 140%, which was at the 94th
percentile of the S&P 500.
Specifically, on December 31, 2020, the HRCC approved modifications to the
performance targets previously established for the 2020 Annual Incentive Awards
and 2018 PSU Awards for the entire population of bonus-eligible employees and
PSU holders, including the Company's named executive officers. The HRCC decided
to cap the maximum payout of both the 2020 Annual Incentive Awards and the 2018
PSU Awards at the target payout amount. The effect of the HRCC's actions will
result in a compensation outcome for 2020 that will be lower than that paid in
each of the three years preceding the pandemic.
The modifications to the 2020 Annual Incentive Awards consist of the one-time
exclusion from the financial performance targets of the financial impact of the
decrease in Personal Consumption Expenditure ("PCE") and the decrease in
cross-border travel due to the pandemic, both of which are outside of the
Company's control. The financial performance target modifications also exclude
certain pandemic-related expense savings (such as T&E savings) from which
employees would have otherwise benefited in connection with the determination of
payouts under the Annual Incentive Awards.
The 2018 PSU Awards by their original terms already contain a target adjustment
for PCE. Therefore, the only modifications to the 2018 PSU Awards are to exclude
from the financial targets the impact of the decrease in cross-border travel and
certain pandemic-related expense savings (e.g., T&E savings).
The target adjustments for the 2020 Annual Incentive Awards and 2018 PSU Awards
are determined by incorporating independent third-party data measuring the
impact of the COVID-19 pandemic on PCE and cross-border travel. Final payouts
will be calculated based on achievement against these adjusted targets, subject
to a maximum payout at target.
In approving the above modifications, the HRCC acknowledged the unprecedented
changes in the economic environment and the impact on the Company's employees
and stockholders as a result of the COVID-19 pandemic. The HRCC believes these
modified performance targets facilitate a more accurate measurement of
performance that is reasonably within management's control and ensure the
Company can continue to retain and motivate its key employees who are needed to
execute the Company's business strategy and sustain the creation of long-term
value for stockholders.
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Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit Number Exhibit Description
104 Cover Page Interactive Data File - the cover page interactive data file does
not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document.
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