THG 2019 Proxy Statement

THE HANOVER INSURANCE GROUP 2019 PROXY STATEMENT 27 Principal Components of Executive Compensation BaseSalarypaidbi-weekly throughout2018Short-Term Incentive -basedon2018Companyand individualperformance. lump sumpaid inMarch2019. long-Term Incentive -Performance-BasedRestrictedStockUnits.Cliff vest in2021* long-Term Incentive -Non-QualifiedStockOptions.1/3of theaward vestson the first threeanniversariesofgrant2019Optionshavea10-year term (2028) * The number of performance-based restricted stock units that are earned will be based on the Company’s three-year relative total shareholder return over the performance period (2018-2020). Annual Base Salary Annual base salary is designed to provide a fixed level of compensation to our NEOs depending on their roles, skills, qualifications and competitive pay levels (based upon the Comparative Proxy Data and Comparative Market Data), as well as to attract and retain employees. Base salary, however, is only one of several different components of an executive’s total compensation package and makes up a significantly smaller portion of total target compensation than the combined short- and long- term incentive opportunities described below. 2018 Base Salary Rate NEO 2018 Base Salary Rate ($) % Change* John C. Roche 900,000 6 President and CEO Jeffrey M. Farber 650,000 — EVP and CFO J. Kendall Huber 575,000 5 EVP and General Counsel Richard W. Lavey 515,000 — EVP and President, Hanover Agency Markets Bryan J. Salvatore 510,000 — EVP and President, Specialty *Percentage change measured against base salary rate in effect as of the end of 2017. With respect to Mr. Roche and Mr. Huber, their annual base salary adjustments were each deemed warranted by the Committee in light of the NEO’s expertise, experience, and breadth of responsibilities and market compensation levels. Short-Term Incentive Compensation Our short-term incentive compensation program is an annual performance-based bonus program intended to provide cash compensation opportunities for our NEOs. Opportunities are targeted at a percentage of annual base salary, depending on each NEO’s role, competitive pay levels (based upon the Comparative Proxy Data and Comparative Market Data) and overall pay package. Actual payouts range from 0%-200% of the target award based upon Company and individual performance, as discussed below. 2018 2019 2020 2021 Options have a 10- year term (2028) Base Salary paid bi-weekly throughout 2018 Short-Term Incentive – based on 2018 Company and individual performance. Lump sum paid in March 2019. Long-Term Incentive – Performance-Based Restricted Stock Units . Cliff vest in 2021* Long-Term Incentive – Non- Qualified Stock Options . 1/3 of the award vests on the first three anniversaries of grant