THG 2019 Proxy Statement

THE HANOVER INSURANCE GROUP 2019 PROXY STATEMENT 25 Other Significant Compensation Practices ✓ Equity Awards – our long-term awards for NEOs have historically been granted exclusively in the form of equity-based awards, ensuring that the value of such awards at realization is tied to our stock price and aligned with shareholder interests; ✓ Vesting – our long-term equity incentives, including performance-based incentives, generally vest over a period of three years to ensure that our executives maintain a longer-term view of shareholder value creation and to encourage retention; ✓ Maximum Payout Caps – our variable short- and long-term incentive plans are capped at a maximum payout level, and the Committee retains discretion to reduce or eliminate payments to NEOs under the annual short-term incentive compensation program; ✓ Clawback Policy – we maintain a clawback policy that requires NEOs, in certain circumstances, to return cash and equity incentive compensation payments if our financial statements are restated as a result of their wrongdoing. Additionally, the terms of our equity award agreements subject the executive to the potential return of the value received upon vesting of such awards in the event the executive breaches certain non-solicitation, non-interference or confidentiality provisions or otherwise violates our Code of Conduct; ✓ Limited Perquisites – we provide limited perquisites to our executives; ✓ Prohibition on Pledging/Hedging – pursuant to our insider trading policy, executives and directors are prohibited from pledging any of their THG securities, and all officers, directors and employees are prohibited from hedging their exposure to ownership of, or interests in, our securities; ✓ Stock Ownership Guidelines – we require our executives to maintain substantial levels of ownership of our stock to ensure that their interests are effectively aligned with those of our shareholders (see “Stock Ownership Guidelines for Named Executive Officers and Directors” on page 4); ✓ Contractual Protections for the Company – every executive is subject to non-solicitation, non-interference and confidentiality agreements that extend one year or more beyond termination of employment; ✓ No Re-pricing of Stock Option Grants – we have never re-priced stock option grants; ✓ Limited Tax Gross-Ups – none of our NEOs (other than Mr. Huber whose terms of participation in the plan have not changed since the plan was adopted in 2008) are entitled to receive a “280G tax gross-up” payment under our Employment Continuity Plan (the change in control or “ CIC Plan ”); and ✓ “Double Trigger” for Change in Control Benefits – our CIC Plan and, with a limited exception for “retirement-eligible employees,” our long-term award agreements, each contain “double trigger” provisions that require an involuntary or constructive termination of employment in connection with a change in control as a condition to receiving change in control benefits. In summary, our performance and, with respect to long-term awards, our stock price, have a significant impact on our NEO compensation. The Committee continues to grant target compensation at levels that it believes are appropriate under current circumstances, but actual compensation is, and is expected to continue to be, highly dependent on our financial performance and stock price appreciation. Executive Compensation Policy and Objectives The overall objectives of our executive compensation programs are to: • attract and retain qualified, high-performing individuals who will contribute to our continued success; • tie a significant portion of compensation to overall performance, balancing risk and reward; • motivate executives to achieve our financial and business objectives; • incentivize executives to manage and invest in the long-term, sustained success of the Company; and • align the interests of our executives with those of our shareholders. Each component of compensation is intended to achieve particular objectives, and the entire compensation package is designed to align with our business strategy and be reasonably competitive in the marketplace. Although we do not have a policy for a fixed allocation between either cash and non-cash or short-term and long-term incentive compensation, we design our NEO compensation packages with greater emphasis on variable compensation tied to performance rather than base salary, and a significant portion of total target compensation is in the form of long-term, equity-based awards, which are subject to substantial vesting requirements and the value of which are dependent on our stock performance. This approach is intended to balance short- and long-term performance goals and promote shareholder value.