THG 2019 Proxy Statement

THE HANOVER INSURANCE GROUP 2019 PROXY STATEMENT 31 The 2018 STIP awards were as follows: NEO Award ($) John C. Roche 990,000 Jeffrey M. Farber 750,000 J. Kendall Huber 588,750 Richard W. Lavey 386,250 Bryan J. Salvatore 382,500 In recognition of the exceptional efforts undertaken by Messrs. Farber and Huber in connection with the successful divestiture of our Chaucer business unit to China Re, the Board and the Committee elected to fund their Leadership STIP awards above target. Long-Term Incentive Compensation Our long-term incentives are designed to: • encourage management to achieve long- and short-term goals, invest in our future and sustained success and avoid short-term excessive risk taking; • align management’s financial incentives with our stock price and the longer-term financial interests of shareholders; and • recruit and retain key leaders. Factors considered in determining our NEOs’ award opportunities under the long-term program include: • the importance of the NEO’s responsibilities within the organization; • the expected contributions of each NEO to our long-term performance; • the expense attributable to the award; • the dilutive impact to shareholders; • recruitment and retention considerations; • awards made to other executive officers; • competitive pay data; • the value of prior compensatory awards; • historical compensation; and • the projected value of prior grants and vesting schedules. As a condition to each long-term incentive compensation award, each participant must agree to certain non-solicitation, non- interference and confidentiality provisions in our favor. 2018 Long-Term Awards The 2018 long-term awards for our NEOs were comprised of a combination of performance-based restricted stock units (“ PBRSUs ”) and stock options. The mix of awards for our NEOs was intended to provide a balanced portfolio of equity awards and was chosen to motivate long-term stock appreciation, while encouraging retention. Long-term awards serve to align management’s financial incentives with longer-term, sustained growth in our stock price, and are subject to multi-year vesting periods to encourage both retention and a longer-term stake in the well-being and prosperity of all of our stakeholders. In 2018, Mr. Roche’s target long-term award was increased to reflect his new role as our President and CEO. For 2018, the long-term awards for each of Messrs. Farber, Huber and Lavey were also increased in recognition of the experience and expertise of each such individual, their overall importance and value to the organization, and competitive market data. Mr. Salvatore’s long-term awards for 2017 were designed to reflect not only what would otherwise be appropriate for his annual award, but also included supplemental awards designed to recruit Mr. Salvatore to join the Company and replace certain long-term awards he forfeited when he terminated employment with his previous employer. Accordingly, the value of his 2018 awards were lower than in 2017 to reflect his appropriate and customary annual award. 2018 Long-Term Awards (Number of Shares Underlying Awards) NEO PBRSUs (target) Options John C. Roche 9,000 67,860 Jeffrey M. Farber 5,930 44,730 J. Kendall Huber 3,275 24,690 Richard W. Lavey 2,560 19,290 Bryan J. Salvatore 2,045 15,435