THG 2019 Proxy Statement

THE HANOVER INSURANCE GROUP 2019 PROXY STATEMENT 26 Setting Executive Compensation Use of Compensation Consultants and Comparative Data In evaluating our executive compensation programs, the Committee is advised by its independent compensation consultant, F.W. Cook, as discussed in the “Board Committees-Compensation Committee” section beginning on page 12. F.W. Cook provides information as to compensation levels for comparable positions at other companies that compete with us for executive talent. For 2018, this data was prepared based upon the publicly disclosed proxy statements of the group of property and casualty insurance companies listed below (the “Comparative Proxy Data ” and such companies, the “ Comparative Proxy Data Companies ”) and market pay data collected from the Mercer U.S. Property & Casualty Insurance Company Survey (size-adjusted data collected from 56 property and casualty insurance companies) (the “Comparative Market Data ”). The Comparative Proxy Data Companies were determined by the Committee based upon the recommendation of F.W. Cook. For 2018, no changes were made to this group. Comparative Proxy Data Companies • Alleghany Corporation • Selective Insurance Group, Inc. • American Financial Group, Inc. • State Auto Financial Corporation • Cincinnati Financial Corporation • The Hartford Financial Services Group, Inc. • CNA Financial Corporation • The Progressive Corporation • Markel Corporation • White Mountains Insurance Group, Ltd. • Mercury General Corporation • W.R. Berkley Corporation • Old Republic International Corporation • XL Group plc The Committee reviews the Comparative Proxy Data and the Comparative Market Data, including information on base salary levels, target and actual total cash levels, long-term incentive opportunities and target and actual total compensation levels, as well as comparative financial metrics, such as direct premiums written, market capitalization, and net income. While the Committee believes the Comparative Proxy Data and the Comparative Market Data are useful, such data is intended solely as one of several reference points to assist the Committee in its compensation discussions and deliberations. Accordingly, rather than relying on or setting benchmarks for our executive compensation against such data, the Committee instead relies on the general knowledge, experience and judgment of its members, both with regard to competitive compensation levels and the relative success that we have achieved in recruiting and retaining personnel. Role of Executive Officers in Compensation Decisions and CEO Performance Review Committee meetings are regularly attended by our CEO, General Counsel, Chief Human Resources Officer and our Chair of the Board (who is an independent director, but not a Committee member), as well as a representative of F.W. Cook. Each individual generally participates in these meetings and provides counsel and advice at the Committee’s request. Other independent directors and members of management also attend meetings from time to time. In addition, the Committee regularly meets in executive sessions without members of management present. An executive is not permitted to be present while the Committee conducts its deliberations on that executive’s compensation. Following a process that was established by the Nominating and Corporate Governance Committee (the “ NCGC ”) and the Board, our independent Chair of the Board leads an annual performance review of the CEO. This review includes discussions with directors and officers, and a review of the CEO’s self-assessment and of our financial and operational performance. The Compensation Committee annually considers the CEO’s performance and other relevant external factors and makes a recommendation to the CID for the CEO’s annual compensation and targets. The Committee’s recommendation and the results of the performance evaluation are then reviewed and discussed by the CID. Results of this review process help form the basis for establishing the CEO’s annual compensation package. The CID has final authority to ratify the compensation of our CEO. For compensation decisions regarding NEOs (other than the CEO), the Committee primarily considers the recommendations of our CEO, its own observations regarding each executive, as well as information provided by F.W. Cook.