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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATIONPROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to Section 240.14a-12
Santander Consumer USA Holdings Inc.(Name of Registrant as Specified In Its Charter)
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CONSUMERUSA
1601ElmSt.Suite800Dallas,Texas75201|214.634.1110
April28,2017
DearStockholders,
ThankyouforyourinterestinSantanderConsumerUSA(“SC”andthe“Company”).Weareproudtoleadthisdynamic,disciplinedandmaturingcompany,whichhasbeenaleaderinautomotivefinancefornearlytwodecades.YouareinvitedtoattendtheAnnualMeetingofStockholdersonMonday,June12,2017.TheAnnualMeetingwillbeginpromptlyat3p.m.,localtime,at1601ElmStreet,Suite800,Dallas,Texas75201.
Throughoutitsevolution,SChasremainedasustainableandprofitablebusiness.AttheheartoftheCompanyphilosophyisourdisciplinedapproachtothemarket,andensuringthatwehaveaSimple,PersonalandFairframeworkforourcustomers,employeesandconstituents.
SantanderConsumerUSAcontinuestodeliverstrong,stableperformancethroughcycles,whichislargelyattributabletosevendifferentiators: » Compliance,consumerandemployeefocusedculture » Data-drivenunderwritingdiscipline » Strongandgrowingcapitalbase » Deep,sustainedanddiverseaccesstofunding » BancoSantanderS.A.ownershipandsupport » LargestproviderforFiatChrysler(FCA) » Efficient,scalable,technology-drivenplatform
SantanderConsumerUSAremainsfocusedonourfourbusinesspillars–vehiclefinance,servicingloansforothers,fundingandliquidity,andinstillingacultureofcompliance.Inthepastyear,SCbalancedefficiencyanddisciplinedunderwritingwhileworkingtomaximizevolumeandprofitability.Wecontinuedtoleveragescaleandtechnologyforourloanplatformsandportfolios.WemaintainedleadershipintheABSmarketswhileoptimizingdiversesourcesofliquidity.AndwemadesignificantprogressinstrengtheningtheCompany’scomplianceandriskmanagementprocesses.
WeareoptimisticaboutSC’sprospectsfor2017asourfundamentalscontinuetostrengthen,andweremaincommittedtobetterservingourcustomersandcreatingvalueforallourstakeholders.
TheNoticeofAnnualMeetingandProxyStatementonthefollowingpagescontaininformationabouttheofficialbusinessoftheAnnualMeeting.Whetherornotyouexpecttoattend,pleasevoteyoursharesnow.Ofcourse,ifyouattendtheAnnualMeetinginpersonyouwillhavetheopportunitytorevokeyourproxyandvoteyoursharesinperson.Thisproxystatementisalsoavailableathttp://www.proxypush.com/SC.
WegratefullyacknowledgeyourcontinuinginterestinSantanderConsumerUSA,andwehopeyouwillattendtheAnnualMeeting.
Sincerely,
WilliamRainerChairmanoftheBoard
JasonKulas
PresidentandChiefExecutiveOfficer
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CONSUMERUSA
1601ElmSt.Suite800Dallas,Texas75201|214.634.1110
NOTICEOFANNUALMEETINGOFSTOCKHOLDERSTOBEHELDJUNE12,2017
NOTICEISHEREBYGIVENthattheAnnualMeetingofStockholdersofSantanderConsumerUSAHoldingsInc.willbeheldat1601ElmStreet,Suite800,Dallas,Texas75201,at3p.m.,localtime,onJune12,2017forthefollowingpurposes: 1. Toelect12directorstotheBoardofDirectors; 2. ToratifytheappointmentofPricewaterhouseCoopersLLPasourindependentregisteredpublicaccountingfirmforthecurrentfiscalyear;and 3. TotransactanybusinessasmayproperlycomebeforetheAnnualMeetinginaccordancewiththetermsofourThirdAmendedandRestatedBylaws.
TheBoardofDirectorshasfixedthecloseofbusinessonApril13,2017astherecorddateforthedeterminationofstockholdersentitledtonoticeof,andtovoteat,theAnnualMeeting.
ByOrderoftheBoardofDirectors,
ChristopherPfirrmanChiefLegalOfficer,GeneralCounselandCorporateSecretaryApril28,2017
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TABLEOFCONTENTS
TABLEOFCONTENTS 2017ProxySummary 1
CorporateGovernance 6
Proposal1:ElectionOfDirectors 6
DirectorIndependence 13
BoardLeadershipStructureandRiskOversight 14
BoardCommittees 15
DirectorCompensation 18
NominationofDirectors 20
ExecutiveOfficers 21
Audit 23
Proposal2:RatificationofAppointmentofIndependentRegisteredPublicAccountingFirm 23
AuditFeesandRelatedMatters 24
ReportoftheAuditCommittee 25
Compensation 26
CompensationDiscussionandAnalysis 26
CompensationCommitteeReport 40
ExecutiveCompensationTables 41
AdditionalGovernanceInformation 48
RelatedPartyTransactions 48
StockOwnershipInformation 51
OtherGovernanceInformation 53
QuestionsandAnswers 54 SC2017ProxyStatement
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PROXYSUMMARY
2017PROXYSUMMARYTHISSUMMARYHIGHLIGHTSINFORMATIONCONTAINEDELSEWHEREINTHISPROXYSTATEMENT.ITDOESNOTCONTAINALLOFTHEINFORMATIONTHATYOUSHOULDCONSIDER.PLEASEREADTHEENTIREPROXYSTATEMENTCAREFULLYBEFOREVOTING.
ImportantTerms
» “Board”–theBoardofDirectorsofSC
» “CommonStock”–sharesofSCcommonstock,parvalue$.01pershare
» “Company”,“us”,“we”,“our”and“SC”–SantanderConsumerUSAHoldingsInc.and,whereappropriate,SantanderConsumerUSAHoldingsInc.anditssubsidiaries
» “PwC”–PricewaterhouseCoopersLLP
» “Santander”and“SAN”–BancoSantander,S.A.
» “SBNA”–SantanderBank,N.A.,asubsidiaryofSHUSAandanaffiliateofSC
» “SHUSA”–SantanderHoldingsUSA,Inc.,SC’smajoritystockholderandasubsidiaryofSantander
YourVoteYourvoteisveryimportant.TheBoardisrequestingyoutoallowyourCommonStocktoberepresentedatour2017annualmeetingbyproxiesnamedontheproxycard.
ThisProxyStatementisbeingsenttoyouinconnectionwiththisrequestandhasbeenpreparedfortheBoardbyourmanagement.ThisProxyStatementisbeingsenttoourstockholdersonoraboutApril28,2017.
HowtoVoteYoumayvoteyoursharespriortotheAnnualMeetingviatheInternet,bytelephoneorbymail.
INTERNET
TELEPHONE
Gotowww.proxypush.com/sc Dialtoll-free855-782-8499 Mark,signanddateyourYouwillneedthecontrolnumberincludedinyourProxyCard/Voting
InstructionForm.
YouwillneedthecontrolnumberincludedinyourProxyCard/Voting
InstructionForm.
ProxyCard/VotingInstructionFormandreturnitinthe
postage-paidenvelopeprovided.
SC2017ProxyStatement
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PROXYSUMMARY
SummaryofVotingItemsandVotingRecommendations
PROPOSALS
BOARDRECOMMENDATION
ITEM1.ElectionofDirectors(Page6)
WeareaskingstockholderstovoteoneachdirectornomineetotheBoardnamedintheProxyStatement.TheBoardandtheExecutiveCommitteebelievethateachdirectornomineehasthequalifications,experienceandskillsnecessarytorepresentstockholdersthroughserviceontheBoard.
FORALL
ITEM2.RatificationofAppointmentofIndependentRegisteredPublicAccountingFirm(Page23)
TheAuditCommitteehasappointedPwCtoserveastheCompany’sindependentregisteredpublicaccountingfirmforthefiscalyearendingDecember31,2017.TheAuditCommitteeandtheBoardbelievethatthecontinuedretentionofPwCtoserveastheindependentauditorisinthebestinterestsoftheCompanyanditsstockholders.Asamatterofgoodcorporategovernance,stockholdersarebeingaskedtoratifytheAuditCommittee’sappointmentofPwC.
FOR
NomineesforElectionasDirectorsTheBoardrecommendsavoteFORtheelectionofeachofthefollowingnomineesfordirector:
NAME
AGE
DIRECTORSINCE
INDEPENDENT
COMMITTEEMEMBERSHIP
WilliamRainer 70 2015 ● BoardChair,EC(Chair)
StephenA.Ferriss 71 2013 ● BoardViceChair,CC(Chair),AC,EC
JoséDoncel 56 2015 ---
BrianGunn 44 2015 RC
VictorHill 53 2015 RCOC,RC
EdithE.Holiday 65 2016 ● CC,RCOC
MarkP.Hurley 58 2016 ● RC(Chair),AC,RCOC
JasonA.Kulas 46 2015 EC
JavierMaldonado 54 2015 CC,EC,RCOC
RobertJ.McCarthy 63 2015 ● RCOC(Chair),AC,CC
WilliamF.Muir 62 2016 ● AC(Chair),RC
ScottPowell 55 2016 ---
AC:AuditCommittee,CC:CompensationCommittee,EC:ExecutiveCommittee,RC:RiskCommittee,RCOC:RegulatoryandComplianceOversightCommittee
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PROXYSUMMARY
2016BUSINESSHIGHLIGHTS
»Totalautooriginationsof$22billion
»Morethan900,000unitsoriginated
»LargestproviderforFiatChrysler(FCA)
»Morethan$38billionincommittedliquidity
»Santandersupporttotaling$6.3billion
»Issuedandsold$8.3billioninbondsacrossthreedistinctplatforms
»Twonewrevolvingwarehousefacilitiesestablished,includingonenewlender
»FormedOfficeofConsumerPractices
»Real-timecallmonitoringrolledoutforallinbound/outboundcallcenterlines
»LaunchedIdeasIntoActioncampaigntoencourageemployeestosubmitideastoimproveprocessandbetterservecustomers
»Totaled$12billion
»Servicingfeeincomeof$156million
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PROXYSUMMARY
GovernanceHighlights
AnnualelectionofalldirectorsAnnualevaluationofCEObyBoardAnnualBoardandCommitteeself-evaluationsandannualindividualdirectorevaluationsStrongBoardprovidingchallengetomanagementopinionsStrongindependentChairmanoftheBoardOrientationprogramfornewdirectorsandcontinuingeducationforalldirectorsRobuststockownershipguidelinesforindependentdirectorsStrongriskoversightbyfullBoardandBoardCommitteesRegularexecutivesessionsofnon-managementdirectors
CompensationProgramOurexecutivecompensationprogramisdesignedtoreinforcethelinkbetweenthelong-terminterestsofourexecutiveofficersandourstockholders.Asignificantportionofourexecutiveofficers’incentivecompensationisdeferredandpayableinSCshares,andtherefore,directlyalignedwiththeCompany’sperformance,includingtotalstockholderreturn.
ELEMENT
KEYCHARACTERISTICS
PURPOSE
BaseSalary
Fixedcashcompensationcomponent,reviewedatleast
annually,thatreflectstheexecutive’sposition,responsibilities,qualifications,tenureand
contributionstotheCompany
OfferssecurityforexecutivesandallowstheCompanytomaintainastablemanagementteam
AnnualIncentiveAwardProgram
Comprisedofbothshort-termandlong-termincentives;asignificantportionofannualbonusesaredeferredandhalfarepayableincashandhalfarepayableinSC
equityawards
Designedtomotivateandrewardtheachievementof
Companyandindividualperformancegoals,appropriatelybalancecompensationriskandalignmanagementand
stockholderinterests
RetirementBenefits;WelfareBenefits;
Perquisites
Indirectcompensationconsistingofaretirementplan,healthandwelfareplansandminimalperquisites
Providesexecutiveswithsecurityduringemploymentandintoretirementandpromotesemployeehealth,which
assistsintheretentionofourexecutives
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PROXYSUMMARY KeyFeaturesofourCompensationProgram
TieannualincentivecompensationtotheachievementofmeaningfulCompanyandindividualperformancegoals
Subjectasignificantportionofannualincentivecompensationtodeferral
PayasignificantportionofannualincentivecompensationinSCstock
SubjectOmnibusIncentivePlanawardsto“double-trigger”changeincontrolvesting
Subjectincentivecompensationtoarobustmalusandclawbackpolicy
Conditionasignificantportionofcompensationontheacceptanceofconfidentiality,non-compete,non-solicitandotherrestrictivecovenants
Useaprominentindependentcompensationconsultant
Usearepresentativeandrelevantpeergroup
Structureperformance-basedcompensationtobetax-deductiblewhereappropriate
Imposeannuallimitsonnon-employeedirectorcompensation
Maintainindependentnon-employeedirectorstockownershipguidelines
Conductarobustannualcompensationriskassessment
Donotrepriceunderwaterstockoptions
Donotgrantdiscountedstockoptions
DonotallowhedgingorpledgingofSCstockbyexecutiveofficersordirectors
Awarded2016TotalDirectCompensationTheamountsreportedasAwardedTotalDirectCompensationbelowdifferfromtheamountsdeterminedunderSECrulesasreportedfor2016intheSummaryCompensationTablesetforthonpage41ofthisProxyStatement.Thetablebelowisasupplementto–notasubstitutefor–theSummaryCompensationTable.
NAMEANDPRINCIPALPOSITION
SALARY
($)
ANNUALBONUS(1)
SHORT-TERMINCENTIVE
LONG-TERMINCENTIVE(2)
SIGN-ON/RETENTIONBONUS(2)
AWARDED
TOTALDIRECTCOMPENSATION($)
CASH($)
RSUS($) CASH($)
RSUS($) CASH($)
RSUS($)
JasonKulasPresidentandCEO
1,800,000
491,750
491,750
491,750
491,750
—
—
3,767,000
IsmailDawoodCFO
724,750
420,450
420,450
280,300
280,300
1,221,555
—
3,347,805
RichardMorrinCOO
531,923
214,500
214,500
143,000
143,000
—
480,000
1,726,923
KalyanSeshanCRO
665,000
193,500
193,500
129,000
129,000
—
—
1,310,000
ChristopherPfirrmanCLOandGeneralCounsel
649,418
156,000
156,000
104,000
104,000
300,000
300,000
1,769,418
(1)Amountsincludetheannualbonusearnedin2016andawardedin2017.(2)Subjecttofuturevestingandforfeitureconditions. SC2017ProxyStatement
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CORPORATEGOVERNANCE-PROPOSAL1:ELECTIONOFGOVERNANCE
CORPORATEGOVERNANCEProposal1:ElectionofDirectors
WHATYOUAREVOTINGON:
Atthe2017AnnualMeeting,12directorsaretobeelectedtoholdofficeuntilthe2018AnnualMeetinganduntiltheirsuccessorsareelectedandqualified,oruntilthedirectorseitherresignorareremovedfromoffice.
IntroductionAsofthedateofourAnnualMeeting,theBoardwillconsistof12members.ThecurrentmembersareJoséDoncel,StephenA.Ferriss,BrianGunn,VictorHill,EdithE.Holiday,MarkP.Hurley,JasonA.Kulas,JavierMaldonado,RobertJ.McCarthy,WilliamF.Muir,ScottPowellandWilliamRainer.EachmemberofourBoardisalsoamemberoftheboardofdirectorsofSantanderConsumerUSAInc.,anIllinoiscorporation,awholly-ownedsubsidiaryofSC(“SCIllinois”).
SHUSAhastherighttonominateeightmembersoftheBoard.See“CorporateGovernance—NominationofDirectors.”SHUSAhasnominatedMr.Doncel,Mr.Ferriss,Mr.Gunn,Mr.Hill,Mr.Kulas,Mr.Maldonado,Mr.PowellandMr.RainerforelectiontotheBoard.TheBoardhasnominatedMs.Holiday,Mr.Hurley,Mr.McCarthyandMr.MuirforelectiontotheBoard.TheBoardhasdeterminedthatMr.Ferriss,Ms.Holiday,Mr.Hurley,Mr.McCarthy,Mr.MuirandMr.Rainerareindependentdirectors.
EachofthedirectorselectedattheAnnualMeetingwillbeelectedforaone-yeartermwhichexpiresatthenextAnnualMeetingandwillserveuntilthedirector’ssuccessorhasbeenelectedandqualified,oruntilthedirector’searlierresignationorremoval.
InformationConcerningtheNomineesBiographicalinformationforeachnomineeforelectiontotheBoardappearsbelow.Theinformationisbasedentirelyuponinformationprovidedbytherespectivenominees.
THEBOARDOFDIRECTORSRECOMMENDSAVOTEFOREACHOFTHENOMINEES.
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CORPORATEGOVERNANCE-PROPOSAL1:ELECTIONOFGOVERNANCE
JOSÉDONCEL
DIRECTORSINCE:2015AGE:56
EXPERIENCEMr.DoncelhasservedasaseniorexecutiveofSantanderandpredecessorcompaniessince1993,mostrecentlyasSeniorExecutiveVicePresidentandDirectoroftheAccountingandControlDivisionsinceOctober2014,asSeniorExecutiveVicePresidentandDirectoroftheCorporateDivisionofInternalAuditfromJune2013toOctober2014,andasSeniorExecutiveVicePresidentandDirectorGeneraloftheRetailBankingManagementControlAreafromApril2013toJune2013.HewaspreviouslyemployedbyArthurAndersenAuditores,S.A.,DivisionofFinancialInstitutions.Mr.DonceliscurrentlyamemberoftheboardsofdirectorsofSHUSAandSBNA.HeisalsochairmanoftheboardsofdirectorsofBancodeAlbacete,S.A.,AdministracióndeBancosLatinoamericanosSantander,S.L.,GrupoEmpresarialSantander,S.L.,SantanderInvestmentI,S.A.,andAblasaParticipaciones,S.L.,andamemberoftheboardsofdirectorsofSantanderHoldingInternacional,S.A.,SantusaHolding,S.L,IngenieríadeSoftwareBancario,S.L.,Geoban,S.A.andProdubanServiciosInformáticosGenerales,S.L.Mr.DoncelholdsadegreeineconomicandbusinesssciencesfromtheUniversidadComplutensedeMadrid.Mr.Doncelhasextensiveexperienceinleadership,financeandriskmanagement,andwebelieveheisqualifiedtoserveontheBoard.
STEPHENA.FERRISS
DIRECTORSINCE:2013AGE:71
Vice-ChairmanoftheBoard
COMMITTEES
»Audit
»Compensation(Chair)
»Executive
EXPERIENCEMr.FerrisshasservedasadirectorofSHUSAsince2012andisalsothechairmanoftheboardsofSantanderBanCorpandBancoSantanderPuertoRico.Mr.FerrisswasadirectorofSBNAfrom2012to2015andwasalsoadirectorofIberchemfrom2007until2013.Previously,heservedasPresidentandChiefExecutiveOfficerofSantanderCentralHispanoInvestmentServices,Inc.from1999to2002,andheldvariousrolesatBankersTrust,includingManagingDirectorandPartneroftheBankersTrustGlobalInvestmentBankinLondonandNewYork.PriortoBankersTrust,Mr.Ferrissspent19yearsatBankofAmerica.HealsopreviouslyservedastheseniorindependentdirectorofManagementConsultingGroupPLC,London.Mr.FerrissgraduatedfromColumbiaCollegeandreceivedamaster’sdegreeinLatinAmericanInternationalEconomicsfromColumbiaUniversitySchoolofInternationalandPublicAffairs.Mr.Ferrisshasextensiveexperienceinmanagementandinternationalfinance,andwebelieveheisqualifiedtoserveontheBoard.
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CORPORATEGOVERNANCE-PROPOSAL1:ELECTIONOFGOVERNANCE
BRIANGUNN
DIRECTORSINCE:2015AGE:44
COMMITTEES
»Risk
EXPERIENCEMr.GunnhasservedasChiefRiskOfficerandSeniorExecutiveVicePresidentofSHUSAsinceJune2015,andisamemberofSHUSA’sCEOExecutiveCommittee.InFebruary2016,hewasnamedChiefRiskOfficerandSeniorExecutiveVicePresidentofSBNAandalsoservesonSBNA’sCEOExecutiveCommittee.PriortojoiningSHUSA,Mr.GunnservedastheChiefRiskOfficerofAllyFinancialServicesfrom2011toJune2015.Priortothatrole,Mr.GunnwasChiefRiskOfficerofAlly’sGlobalAutomotiveServicesdivision.BeforejoiningAlly,hespent10yearsinavarietyofriskmanagementpositionsatGECapitalincludingChiefRiskOfficerofGEMoneyCanada.Heholdsabachelor’sdegreeinfinancefromProvidenceCollegeandamaster’sdegreeinbusinessadministrationfromHofstraUniversity.Mr.Gunnhasextensiveexperienceinriskmanagementandfinance,andwebelieveheisqualifiedtoserveontheBoard.
VICTORHILL
DIRECTORSINCE:2015AGE:53
COMMITTEES
»RegulatoryandComplianceOversight
»Risk
EXPERIENCEMr.HillhasservedasManagingDirectorandChiefExecutiveOfficerofSantanderConsumer(UK)plc(“SCUK”)since2005.Mr.Hillhasoverthirtyyears’experienceintheUKmotorfinanceindustry,thelastseventeenattheboardlevel.HebeganhiscareerwithFirstNationalMotorplc(f/k/aLombardNorthCentralplc),wherehefocusedonoperations,inparticular,customerserviceandcollections.In2005,hewasresponsibleforthelaunchofSCUKandhasledthebusinessoverthepasttwelveyears,duringwhichtimeSCUKundertookamajoracquisitionandintegrationoftheautoloansportfoliofromGECapitalBankin2009.Mr.HillcurrentlyservesontheboardsofdirectorsofSantanderConsumer(UK)Plc,HyundaiCapitalUKLtd(JV),PSAFinanceUKLtd(JV),FirstNationalMotorPlcandPSAFinancePlc.HehaspreviouslyservedasadirectorofGECapitalBankLimitedandofseveralcompaniesintheAbbeyNationalGroup.Mr.HillqualifiedasaCharteredDirectorin2007,achievedaFellowshipoftheInstituteofDirectorsinLondonin2012,andbecameaQualifiedMediatorforCivilandCommercialDisputesin2008.Mr.Hillhasextensiveexperienceinmanagementandintheautofinanceindustry,andwebelieveheisqualifiedtoserveontheBoard.
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CORPORATEGOVERNANCE-PROPOSAL1:ELECTIONOFGOVERNANCE
EDITHE.HOLIDAY
DIRECTORSINCE:2016AGE:65
COMMITTEES
»Compensation
»RegulatoryandComplianceOversight
EXPERIENCEMs.HolidayisamemberoftheboardsofdirectorsofHessCorporation,WhiteMountainsInsuranceGroupLtd.,andCanadianNationalRailwayandisamemberoftheboardsofdirectorsortrusteesofvariousinvestmentcompaniesintheFranklinTempletonGroupofFunds,servingasLeadDirectoroftheTempletonFunds.ShealsoservedontheboardsofdirectorsofRTIInternationalMetals,Inc.from1999to2015,andoftheHJHeinzCompanyfrom1994to2013.Ms.HolidaywasalsothePresident,SecretaryandTreasurerofComcastTWHoldings,Inc.from2006to2007.From1990to1993,Ms.HolidaywasAssistanttothePresidentoftheUnitedStatesandSecretaryoftheU.S.Cabinet.From1989to1990,sheservedasGeneralCounseloftheU.S.TreasuryDepartment,andfrom1988to1989,sheservedasCounselortotheSecretaryandAssistantSecretaryforPublicAffairsandPublicLiaisonoftheU.S.TreasuryDepartment.Priortothat,Ms.Holidayheldvariousotherpositionsingovernmentandinprivatepractice.Ms.HolidayholdsaB.S.andaJ.D.fromtheUniversityofFloridaandisamemberoftheStateBarsofFloridaandGeorgiaandtheDistrictofColumbiaBar.Ms.Holidayhasextensiveexperienceinlegalandregulatorymattersandinpublicservice,andwebelievethatsheisqualifiedtoserveontheBoard.
MARKP.HURLEY
DIRECTORSINCE:2016AGE:58
COMMITTEES
»Audit
»RegulatoryandComplianceOversight
»Risk(Chair)
EXPERIENCEMr.Hurleyco-foundedFiduciaryNetwork,aspecialtyfinancebusinessfocusedonwealthmanagementcompanies,andhasservedasitsChairmanandChiefExecutiveOfficersince2006.Mr.HurleyservedasChairmanandChiefExecutiveOfficerofUndiscoveredManagers,amutualfundcompanythathefounded,from1997until2004,whenitwassoldtoJPMorgan.HepreviouslywasaManagingDirectoratMerrillLynchandaVicePresidentatGoldmanSachsandservedastheDirectorofResolutionsattheOfficeofThriftSupervision,U.S.TreasuryDepartment.Mr.HurleycurrentlyservesontheboardofdirectorsoftheUniversityofNorthTexasFoundation.Heholdsabachelor’sdegreeinengineeringandhistoryfromtheUnitedStatesMilitaryAcademyandamaster’sdegreeinbusinessadministrationfromtheStanfordGraduateSchoolofBusiness.Mr.HurleyalsowasaCaptainintheU.S.ArmyFieldArtillery,servingforfiveyears.Mr.Hurleyhasextensivemanagerialandfinanceexperience,andwebelieveheisqualifiedtoserveontheBoard.
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CORPORATEGOVERNANCE-PROPOSAL1:ELECTIONOFGOVERNANCE
JASONA.KULAS
DIRECTORSINCE:2015AGE:46
PresidentandChiefExecutiveOfficer
COMMITTEES
»Executive
EXPERIENCEMr.KulashasservedasourChiefExecutiveOfficer(“CEO”)sinceJuly2015andasourPresidentsinceFebruary2016,havingpreviouslyservedasourPresidentfromNovember2013toJuly2015andourChiefFinancialOfficerfromJanuary2007toJuly2015.SinceJuly2015,hehasalsoservedasadirector,havingpreviouslyservedonourBoardfrom2007to2012.HealsoservedasadirectorofSHUSAfromOctober2015toSeptember2016.Priortojoiningus,Mr.KulaswasaManagingDirectorininvestmentbankingforJPMorganSecurities,Inc.,wherehewasemployedfrom1995to2007.HealsoworkedpreviouslyatDun&BradstreetandasanadjunctprofessoratTexasChristianUniversity.Mr.KulasalsocurrentlyservesontheboardofdirectorsofthenonprofitSantanderConsumerUSAInc.Foundation.Heholdsabachelor’sdegreeinchemistryfromSouthernMethodistUniversityandamaster’sdegreeinbusinessadministrationfromTexasChristianUniversity.Mr.Kulashasextensiveknowledgeandexperienceinfinanceandintheconsumerfinanceindustry,andwebelieveheisqualifiedtoserveontheBoard.
JAVIERMALDONADO
DIRECTORSINCE:2015AGE:54
COMMITTEES
»Compensation
»Executive
»RegulatoryandComplianceOversight
EXPERIENCEMr.MaldonadohasservedasSeniorExecutiveVicePresident,GlobalHeadofCostControlofSantandersinceOctober2015.HehasheldnumerousmanagementpositionsatSantanderanditsaffiliates,includingSeniorExecutiveVicePresidentofSantander,HeadoftheNewGeneralDirectorateforCoordinationandControlofRegulatoryProjectsofSantander,fromSeptember2014toOctober2015;ExecutiveCommitteeDirector,HeadofInternalControlandCorporateDevelopment,forSantander(UK)plcfromMay2012toSeptember2014;VicePresidentinChargeofClosedFundsandComplaintsforBancoSantanderBrazilfromOctober2011toApril2012;andGeneralManagerforSantanderintheMiddleEastfromJanuary2011toSeptember2011.Previously,Mr.MaldonadowasanattorneywithBaker&McKenzieandCorporateandInternationalLawDepartmentHeadatJ.Y.Hernandez-CanutLawFirm.Mr.MaldonadohasservedasadirectorofSHUSAsinceApril2015andhasservedasvice-chairmanoftheboardofdirectorsofSHUSAsinceOctober2015.HealsocurrentlyservesasadirectorofBancoSantanderPuertoRico,SantanderBanCorpandSantanderInvestmentSecurities(“SIS”).Mr.MaldonadoalsoservesasadirectorofSaudiHollandiBankRiyadh.HeholdslawdegreesfromNorthwesternUniversityandUNEDUniversity.Mr.Maldonadohasextensiveknowledgeandexperienceininternationalfinanceandlegalandregulatoryaffairs,andwebelieveheisqualifiedtoserveontheBoard.
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CORPORATEGOVERNANCE-PROPOSAL1:ELECTIONOFGOVERNANCE
ROBERTJ.McCARTHY
DIRECTORSINCE:2015AGE:63
COMMITTEES
»Audit
»Compensation
»RegulatoryandComplianceOversight(Chair)
EXPERIENCEIn2014,Mr.McCarthyretiredfromMarriottInternational,Inc.,whereheservedasChiefOperationsOfficer.Mr.McCarthyjoinedMarriottin1975,whereheservedinvariousleadershippositions,includingSeniorVicePresident,NortheastRegionfrom1995to2000;ExecutiveVicePresident,Operationsfrom2000to2002;President,NorthAmericafrom2003to2009;GroupPresidentfrom2009to2011;andChiefOperationsOfficerfromDecember2011untilFebruary2014.Mr.McCarthyhasservedasChairmanofHotelDevelopmentPartnerssinceMarch2014.HecurrentlyisamemberoftheBoardofTrusteesatVillanovaUniversityandamemberoftheBoardofPriton,LLC.Previously,Mr.McCarthyservedasadirectoroftheServiceSourceFoundation,asamemberoftheboardoftheAutismLearningCenter,asamemberoftheDean’sAdvisoryBoardatCornellUniversitySchoolofHotelAdministration,asamemberoftheDean’sAdvisoryBoardatVillanovaUniversitySchoolofBusinessandasamemberoftheboardofmanagersatAvendra,LLC.Heholdsabachelor’sdegreeinbusinessadministrationfromVillanovaUniversityandisagraduateoftheAdvancedManagementProgramattheWhartonSchoolofBusinessattheUniversityofPennsylvania.Mr.McCarthyhasextensivemanagerialandfinanceexperience,andwebelieveheisqualifiedtoserveontheBoard.
WILLIAMF.MUIR
DIRECTORSINCE:2016AGE:62
COMMITTEES
»Audit(Chair)
»Risk
EXPERIENCEIn2014,Mr.MuirretiredfromAllyFinancialInc.(formerlyknownasGeneralMotorsAcceptanceCorporation(“GMAC”)),whereheservedasPresidentandheadofitsGlobalAutomotiveServicesbusinesssince2004.Inthatrole,heledAlly’sautomotivefinance,insurance,vehicleremarketingandservicingoperations.Priortothattime,heservedasExecutiveVicePresidentandChiefFinancialOfficerofGMACfrom1998to2004.From1996to1998,Mr.Muirservedasexecutive-in-chargeofoperationsandthenexecutivedirectorofplanningatDelphiAutomotiveSystems,aformersubsidiaryofGeneralMotors(“GM”).PriortoservingatDelphiAutomotiveSystems,heservedinvariousexecutivecapacitiessincefirstjoiningGMACin1992andalsoservedinanumberofcapacitieswithGMsincejoiningGMin1983.Mr.MuiralsoservedasChairmanoftheAllyInsuranceGroupfrom1999to2014andamemberoftheAllyBankboardofdirectorsfrom2004to2014.Mr.Muirreceivedabachelor’sdegreeinindustrialengineeringandoperationsresearchfromCornellUniversityin1977.Heearnedamaster’sdegreeinbusinessadministrationfromHarvardUniversityin1983.Mr.Muirhasextensiveexperienceinmanagement,financeandtheautofinanceindustry,andwebelievethatheisqualifiedtoserveontheBoard.
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CORPORATEGOVERNANCE-PROPOSAL1:ELECTIONOFGOVERNANCE
SCOTTPOWELL
DIRECTORSINCE:2016AGE:55
EXPERIENCEMr.PowellhasservedastheChiefExecutiveOfficerandadirectorofSHUSAsinceMarch2015,andheisamemberofSHUSA’sBoardExecutiveCommittee.HehasalsoservedasChiefExecutiveOfficerandadirectorofSBNAsinceJuly2015,andheisamemberofSBNA’sBoardExecutiveCommittee.Previously,Mr.PowellheldnumerousmanagementrolesatJPMorganChase&Co.anditspredecessorBankOneCorporation,includingHeadofBankingandConsumerLendingOperations,ChiefExecutiveOfficerofConsumerBankingandRetailInvestments,HeadofConsumerLending,andChiefRiskOfficer,Consumer.Healsospent14yearsatCitigroupanditspredecessorsinseniorriskmanagementpositions.Mostrecently,beforejoiningSHUSA,Mr.PowellwasExecutiveChairmanofNationalFloodServicesInc.Mr.PowellisadirectorofthePhippsHousesandTheEndFundinNewYorkCity.Mr.PowellgraduatedfromtheUniversityofMinnesotaandreceivedamaster’sdegreeinbusinessadministrationfromtheUniversityofMaryland.Mr.Powellhasextensiveexperienceinmanagement,finance,riskmanagementandconsumerandautolending,andwebelieveheisqualifiedtoserveontheBoard.
WILLIAMRAINER
DIRECTORSINCE:2015AGE:70
ChairmanoftheBoard
COMMITTEES
»Executive(Chair)
EXPERIENCEMr.Rainerhasextensiveexperienceandhasheldnumerousleadershiprolesinthefinancialservicesindustry.From2001to2004,Mr.RainerservedastheChairmanandChiefExecutiveOfficerofOneChicago,LLC,aregulatedfuturesexchange.HealsoservedastheChairmanoftheCommodityFuturesTradingCommissionfrom1999to2001,asChairmanoftheUnitedStatesEnrichmentCorporationfrom1994to1998,andasFounderofGreenwichCapitalMarkets,Inc.from1981to1988.Previously,Mr.RainerheldvariousleadershippositionsatKidder,Peabody&Co.,Inc.FromJuly2015toMarch2016,heservedasadirectorofBancoSantanderInternational(“BSI”),andfromDecember2015toMarch2016,heservedaschairmanoftheboardofSIS.Mr.RainerservedasdirectorofIQFunds,afamilyofclosed-endmutualfunds,from2004until2010.From1996to2000andfrom2004to2008,Mr.RainerservedasatrusteeforSouthernMethodistUniversity.HehasservedasamemberoftheDean’sCounciloftheHarvardDivinitySchoolsince2003andasitsChairfrom2005throughJune2013.HeiscurrentlytheChairmanofShortridgeAcademy,Ltd.andNewBraunfelsCommunications,Inc.Mr.Rainerreceivedhisbachelor’sdegreeineconomicsandmaster’sdegreeinbusinessadministrationfromSouthernMethodistUniversity.Mr.Rainerhasextensiveknowledgeandexperienceinfinance,regulatoryaffairs,andleadershipoffinancialservicesfirms,andwebelieveheisqualifiedtoserveontheBoard.
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CORPORATEGOVERNANCE-DIRECTORINDEPENDENCE DirectorIndependence
DIRECTOR
ORGANIZATION
RELATIONSHIP
SCTRANSACTION/RELATIONSHIP
Mr.Ferriss
SHUSA Director
MajorityStockholder
SBNA FormerDirector
Affiliate
SantanderCentralHispanoInvestmentServices,Inc.
FormerCEO
Affiliate
SantanderBanCorp ChairmanoftheBoard
Affiliate
BancoSantanderPuertoRico ChairmanoftheBoard
Affiliate
Ms.Holiday
SC
IndependentAdvisor
During2016,SCpaidMs.Holiday$18,739foradvisoryservicestotheBoardpriortoherappointmentas
adirector.
Mr.Muir
SC
IndependentAdvisor
During2016,SCpaidMr.Muir$18,739foradvisoryservicestotheBoardprior
tohisappointmentasadirector.
Mr.Rainer BSI FormerDirector
Affiliate
SIS FormerChairman
Affiliate
SC2017ProxyStatement
13
Becauseweareacontrolledcompany,weareexemptfromtherequirementintheNewYorkStockExchange(“NYSE”)ListedCompanyRulesthatamajorityofourdirectorsmustbeindependent.Inaddition,weareexemptfromtherequirements(i)thatourExecutiveCommittee(whichhastheresponsibilitiesunderitscharterofaNominatingandGovernanceCommittee)becomposedsolelyofdirectorswhomeettheindependencestandardsundertheNYSEListedCompanyRulesand(ii)thatourCompensationCommitteebecomposedsolelyofdirectorswhomeetadditional,heightenedindependencestandardsundertheNYSEListedCompanyRulesandtherulesoftheSecuritiesandExchangeCommission(“SEC”).TheCompanyissubjecttotherequirementthatallmembersofourAuditCommitteesatisfyindependencerequirementssetforthundertheNYSEListedCompanyRulesandmeettheadditionalcriteriaforindependenceofauditcommitteememberssetforthinRuleof10A-3(b)(1)undertheSecuritiesExchangeActof1934(the“ExchangeAct”).
UndertheNYSEListedCompanyRules,tobeconsideredindependent,thedirectormustnothaveadisqualifyingrelationship,asdefinedintheNYSEListedCompanyRules;andtheBoardmustaffirmativelydeterminethatthedirectorotherwisehasnodirectorindirectmaterialrelationshipwiththeCompany.Inmakingindependencedeterminations,theBoardcomplieswithallNYSEandSECcriteriaandconsidersallrelevantfactsandcircumstances.TheBoardhasdeterminedthatMr.Ferriss,Ms.Holiday,Mr.Hurley,Mr.McCarthy,Mr.MuirandMr.Rainer(the“IndependentDirectors”)areindependentasdefinedbytheNYSEListedCompanyRules.TheBoardalsodeterminedthatBlytheMastersandHeidiUeberroth,eachofwhomresignedfromtheBoardduring2016,andWolfgangSchoellkopf,whoresignedfromtheBoardin2017,wereindependentasdefinedbytheNYSEListedCompanyRules.
InassessingtheindependenceoftheIndependentDirectors,theBoardconsidered,withoutlimitation,thefollowingtransactions,relationshipsandarrangements:
TheBoardhasalsodeterminedthateachmemberoftheAuditCommittee(Mr.Ferriss,Mr.Hurley,Mr.McCarthyandMr.Muir)isan“auditcommitteefinancialexpert”inaccordancewiththe
definitionestablishedbytheSEC.Further,allofthedirectors,exceptforMr.Kulas(the“OutsideDirectors”),qualifyasoutsidedirectorsasdefinedbytheNYSEListedCompanyRules.
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CORPORATEGOVERNANCE-BOARDLEADERSHIPSTRUCTUREANDRISKOVERSIGHT
BoardLeadershipStructureandRiskOversight
14
SC2017ProxyStatement
TheBoardisresponsiblefortheoversightofmanagementonbehalfofourstockholders.TheBoardanditscommitteesmeetperiodicallythroughouttheyearto(i)reviewstrategy,businessandfinancialperformance,riskandcontrolmatters,andcompensationandmanagementdevelopment,and(ii)provideguidancetoandoversightof,andotherwiseassessandadvise,theCEOandotherseniorexecutives.TheBoard’sleadershipstructure,describedbelow,isdesignedtoensurethatauthorityandresponsibilityareeffectivelyallocatedbetweentheBoardandmanagement.
TheBoarddoesnothaveanyformalpolicyonwhetherthesamepersonshouldserveasboththeCEOandChairmanoftheBoard,astheBoardbelievesthatitshouldhavetheflexibilitytomakethedeterminationoftheappropriateleadershipforusatanygivenpointintime.InJuly2015,theBoarddecidedtoseparatethepositionsofChairmanoftheBoardandCEO.Currently,Mr.RainerservesastheindependentChairmanofourBoard.WebelievethathavinganindependentChairmancancreateanenvironmentthatleadstoobjectiveevaluationandoversightofmanagement’sperformance,increasesmanagementaccountabilityandimprovestheabilityoftheBoardtomonitorwhethermanagement’sactionsareinthebestinterestsofallstockholders.Asaresult,atthistime,webelievethatMr.RainerservingasourindependentChairmanenhancestheeffectivenessoftheBoardasawhole.TheBoardwillcontinuetoreviewtheBoard’sleadershipperiodicallyandmaymodifythisstructurefromtimetotimeifitisinthebestinterestsofourCompanyandourstockholders.
TheChairmanoftheBoardleadstheBoard,setsthetoneforitscultureandensuresitseffectivenessinoverseeingtheCompanyanditsmanagement.TheChairmanpresidesatallmeetingsoftheBoard,aswellasexecutivesessionsofoutsidedirectorsand,inconsultationwiththeCEO,otherdirectorsandmanagement,establishestheagendaforeachBoardmeeting.TheChairmanalsohasthepowertocallspecialmeetingsoftheBoard.Mr.FerrissservesastheBoard’sVice-Chairman,whoactsasChairmanoftheBoardifMr.Rainerisabsent.
TheCompanyhasestablishedariskgovernancestructurethatassignsresponsibilityforriskmanagementamongfront-linebusinesspersonnel,anindependentriskmanagementfunction,andinternalaudit.Accordingtothismodel,businessownersmaintainresponsibilityforidentifyingandmitigatingtherisksgeneratedthroughtheirbusinessactivities.TheChiefRiskOfficer(“CRO”),whoreportstotheCEOandisindependentofanybusinessline,isresponsiblefordevelopingandmaintainingariskframeworkthatensuresrisksareappropriatelyidentifiedandmitigated,andforreportingontheoveralllevelofriskintheCompany.TheCROisalsoaccountabletotheRiskCommitteeandtoSHUSA’sChiefRiskOfficer.TheCROischargedwiththeimplementationandexecutionoftheenterpriseriskmanagement(“ERM”)programundertheoversightoftheBoardanditscommittees.
RiskmanagementisoverseenbytheBoardthroughfourstandingcommittees:theRiskCommittee,theAuditCommittee,theCompensationCommitteeandtheRegulatoryandComplianceOversightCommittee,eachofwhichischairedbyanindependentdirector.Committeechairsareresponsibleforcallingmeetingsoftheircommittees,presidingatmeetingsoftheircommittees,
approvingagendasandmaterialsfortheircommitteemeetings,servingasaliaisonbetweencommitteemembersandtheBoard,andbetweencommitteemembersandseniormanagement,includingtheCEOandCRO,andworkingdirectlywiththeseniormanagementresponsibleforcommitteematters.EachBoardcommitteeprovidesregularreportstotheBoardregardingmattersreviewedbytheBoardcommittee.
Inadditiontoreceivinganddiscussingreportsofrisksunderthepurviewofaparticularcommittee,theBoardmonitorsourriskcultureandreviewsspecificandaggregateriskstheCompanyfaces.Further,atleastannually,theBoardapproves,attherecommendationoftheRiskCommittee,aRiskAppetiteStatement(a“RAS”),whichdefinesthelevelsandtypesofriskstheCompanyiswillingtoassumetoachieveitsbusinessplanswhilecontrollingriskexposureswithinourriskcapacity.Inaddition,theRASestablishesprinciplesforrisktakingintheaggregateandforeachrisktype,andissupportedbyacomprehensivesystemofrisklimits,escalationtriggersandcontrolprograms.
TheRiskCommitteeischargedwithresponsibilityforestablishinggovernanceovertheERMprocess,providingoversightofriskpoliciesandriskmanagementperformance.TheRiskCommitteemonitorsouraggregateriskpositionandreviewsreportsfrommanagementonthecomprehensiveportfolioofriskcategoriesandthepotentialimpacttheseriskscanhaveonourriskprofile.AcomprehensiveriskreportissubmittedregularlybytheCROtotheRiskCommitteeandtotheBoardprovidingmanagement’sviewofourriskposition.Further,theRiskCommitteereviewsandrecommendsfortheBoard’sapprovaltheRASandanERMPolicyalongwithvarioussub-policiesgoverning,withoutlimitation,enterpriserisk,creditrisk,informationrisk,marketandliquidityrisk,operationalrisk,modelriskandstrategicrisk.TheRiskCommitteealsoprovidesoversightofourimpactonSHUSA’scompliancewithitscapitaladequacyassessmentprocess,includingitsComprehensiveCapitalandReview(“CCAR”)submissionsandresolutionplanning.TheRiskCommitteealsoreviewsandconcursintheappointment,replacement,performanceandcompensationoftheCRO.
TheAuditCommitteeischargedwithoversightrelatingtotheintegrityofourfinancialstatementsandfinancialreportingprocess,theintegrityofoursystemsofinternalaccountingandfinancialcontrolsandinternalandexternalauditing,includingthequalificationsandindependenceofourindependentregisteredpublicaccountingfirm.TheAuditCommitteeoverseestheperformanceofourinternalauditfunction,reviewsandconcursintheappointment,replacement,performanceandcompensationofourChiefAuditExecutiveandapprovesourinternalauditfunction’sannualauditplan,charter,policiesandbudget.TheAuditCommitteealsoreceivesregularupdatesontheauditplan’sstatusandresultsincludingsignificantreportsissuedbyourinternalauditfunctionandthestatusofmanagement’scorrectiveactions.TheAuditCommitteealsoreviewsriskmanagementpoliciesandproceduresrelatedtofinancialandaccountingmatters,including,withoutlimitation,ourSupplementalStatementofEthicsandCodeofEthicsfortheCEOandSeniorFinancialOfficers.
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CORPORATEGOVERNANCE-BOARDCOMMITTEES
BoardCommittees
NAMEAUDIT
COMPENSATION
EXECUTIVE
REGULATORYANDCOMPLIANCE
OVERSIGHT
RISK
StephenA.Ferriss ● Chair ●
BrianGunn ●
VictorHill ● ●
EdithE.Holiday ● ●
MarkP.Hurley ● ● Chair
JasonA.Kulas ●
JavierMaldonado ● ● ●
RobertJ.McCarthy ● ● Chair
WilliamF.Muir Chair ●
WilliamRainer Chair
SC2017ProxyStatement
15
TheCompensationCommitteeworkstoensurethatthecompensationprogramscoveringourexecutives,businessunitsandrisk-takingemployeesappropriatelybalanceriskwithincentivessuchthatbusinessperformanceisachievedwithouttakingimprudentoruneconomicrisks.Atleastannually,theCompensationCommitteeconductsanassessmentofthecompensationpoliciesandpracticesforouremployees,includingourexecutiveofficers.TheassessmentincludeswhethersuchcompensationpoliciesandpracticescreatedrisksthatwerereasonablylikelytohaveamaterialadverseeffectontheCompany.
TheRegulatoryandComplianceOversightCommitteeischargedwiththeoversightofriskrelatingtotheeffectivenessofourcompliancemanagementsystem.TheRegulatoryandComplianceOversightCommitteealsooverseesourprogressinremediatingrisksidentifiedinriskassessmentfindings,internalauditfindingsandoutstandingcorrectiveactionsidentifiedbyregulatorsinexaminationreports,enforcementactionsandothercommunications.
InadditiontotheBoardandBoardcommittees,theCEOandCROdelegateriskmanagementresponsibilitytomanagementcommitteesincludingtheEnterpriseRiskManagementCommittee(“ERMC”),whichisco-chairedbyourCEOandCRO.TheERMCisresponsibleforERMgovernanceandoversight.TheERMCmaintainsandmonitorscompliancewiththeRASandthelimitsandescalationsdefinedinit.TheERMCoverseesimplementationofriskpoliciesacrosstheCompanywithapprovalbytheBoardortheappropriateBoardcommittee.TheERMCalsoreviewsandreportstotheBoardorappropriateBoardcommitteesonkeyriskexposures,trends,andconcentrationsandsignificantcompliancemattersandprovidesguidanceonthestepstomonitor,controlandreportmajorrisks.
Inaddition,theAssetLiabilityCommittee(“ALCO”)isresponsibleformanagingmarket,liquidityandassetandliabilityrisks.ALCOischairedbytheCFO,andtheCROisamemberofALCO.
TheBoardhasfivestandingcommittees:theAuditCommittee;theCompensationCommittee;theExecutiveCommittee;theRegulatoryandComplianceOversightCommittee;andtheRisk
Committee.ThechartersforeachcommitteemaybefoundonSC’swebsiteathttp://investors.santanderconsumerusa.com.
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CORPORATEGOVERNANCE-BOARDCOMMITTEES
Thefollowingsummarizesthemembershipofeachcommittee,aswellastheprimaryrolesandresponsibilitiesofeachcommitteeandthenumberoftimeseachcommitteemetin2016.
AUDITCOMMITTEE
NUMBEROFMEETINGSIN2016:22
MEMBERS
AMONGOTHERTHINGS,OURAUDITCOMMITTEE:
»Mr.Muir(Chair)
»Mr.Ferriss
»Mr.Hurley
»Mr.McCarthy
» Reviewsfinancialreportingpolicies,procedures,andinternalcontrols.
»
Administerstheappointment,compensation,andoversightofourindependentregisteredpublicaccountingfirm.
»
Pre-approvesaudit,audit-related,andnon-auditservicestobeperformedbyourindependentregisteredpublicaccountingfirm.
»
Reviewsandapprovesorratifiesallrelated-partytransactions.
»
Overseesourinternalauditfunction,includingapprovaloftheannualinternalauditplanandthereviewoftheperformanceoftheChiefAuditExecutive.
»
Reviewscertainriskmanagementpoliciesandprocedures,certainpolicies,processes,andproceduresregardingcompliancematters,aswellasourSupplementalStatementofEthicsandCodeofEthicsfortheChiefExecutiveOfficerandSeniorFinancialOfficers.
TheBoardhasdeterminedthateachofthemembersis“independent”asdefinedbySection10A(m)(3)oftheExchangeAct,Rule10A-3undertheExchangeAct,andtheNYSEListedCompanyRules.TheBoardhasalsodeterminedthateachofthemembersis“financiallyliterate”asrequiredbySection303A.07oftheNYSEListedCompanyRulesandan“auditcommitteefinancialexpert”asdefinedintheSEC’srules.
COMPENSATIONCOMMITTEE
NUMBEROFMEETINGSIN2016:18
MEMBERS
AMONGOTHERTHINGS,OURCOMPENSATIONCOMMITTEE:
»Mr.Ferriss(Chair)
»Ms.Holiday
»Mr.Maldonado
»Mr.McCarthy
» ReviewsandapprovesthecompensationoftheCEOandeachotherexecutiveofficer.
»
ReviewsandmakesrecommendationstotheBoardregardingthecompensationoftheIndependentDirectors.
»
Approvesandevaluatesallcompensationplans,policiesandprogramsoftheCompanyastheyaffectourdirectors,CEOandotherexecutiveofficers.
»
Setsperformancemeasuresandgoalsandverifiestheattainmentofperformancegoalsunderperformance-basedincentivecompensationarrangementsapplicabletoourexecutiveofficers.
»
Monitorsandassesseswhethertheoveralldesignandperformanceofourcompensationplans,policiesandprogramsdonotencourageemployees,includingourNEOs,totakeexcessiverisk.
»
Overseesthemanagementdevelopment,successionplanning,andretentionpracticesforourexecutiveofficers.
TheBoardhasdeterminedthatMr.Ferriss,Ms.Holiday,Mr.Maldonado,andMr.McCarthyqualifyas“outside”directorswithinthemeaningofInternalRevenueCodeSection162(m)(“Section162(m)”).TheBoardhasdeterminedthatMr.Ferriss,Ms.HolidayandMr.McCarthyare“independent”asdefinedbytheNYSEListedCompanyRulesandqualifyas“non-employee”directorswithinthemeaningofRule16b-3undertheSecuritiesExchangeActof1934,asamended(“Rule16b-3”).Mr.Ferriss,Ms.HolidayandMr.McCarthyconstituteasubcommitteeoftheCompensationCommitteewhenconsideringissuesgovernedbyRule16b-3.
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CORPORATEGOVERNANCE-BOARDCOMMITTEES
EXECUTIVECOMMITTEE
NUMBEROFMEETINGSIN2016:10
MEMBERS AMONGOTHERTHINGS,OUREXECUTIVECOMMITTEE:
»
»
»
»
Mr.Rainer(Chair)
Mr.Ferriss
Mr.Kulas
Mr.Maldonado
»
ActsontheBoard’sbehalfbetweenBoardmeetingsonallmattersthatmaybelawfullydelegated. »
ConsidersandrecommendscandidatesforelectiontotheBoard. »
LeadstheannualperformanceevaluationsoftheBoardandBoardcommittees.
»
ReviewsandadvisestheBoardonourcorporategovernance.
TheBoardhasdeterminedthatMr.RainerandMr.Ferrissare“independent”asdefinedbytheNYSEListedCompanyRules.
REGULATORYANDCOMPLIANCEOVERSIGHTCOMMITTEE
NUMBEROFMEETINGSIN2016:11
MEMBERS
AMONGOTHERTHINGS,OURREGULATORYANDCOMPLIANCEOVERSIGHTCOMMITTEE:
»
»
»
»
»
Mr.McCarthy(Chair)
Mr.Hill
Ms.Holiday
Mr.Hurley
Mr.Maldonado
»
Providesoversightandassessestheeffectivenessofourcompliancemanagementsystem.
»
OverseesourcompliancefunctionincludingtheChiefComplianceOfficer.
»
Overseesourprogressinrespondingtointernalauditfindings,riskassessmentfindings,andoutstandingcorrectiveactionsidentifiedbyregulatorsinexaminationreports,enforcementactionsandothercommunications.
»
ReviewsourregulatorycorrespondenceandreportsreceivedfromorsubmittedtoregulatorstoensureeffectivecommunicationbetweentheCompanyanditsrespectiveregulators.
TheBoardhasdeterminedthatMr.McCarthy,Ms.HolidayandMr.Hurleyare“independent”asdefinedbytheNYSEListedCompanyRules.
RISKCOMMITTEE
NUMBEROFMEETINGSIN2016:21
MEMBERS
AMONGOTHERTHINGS,OURRISKCOMMITTEE:
»
»
»
»
Mr.Hurley(Chair)
Mr.Gunn
Mr.Hill
Mr.Muir
»
Assessesandmanagesourenterpriserisk,creditrisk,marketrisk,operationalrisk,liquidityriskandotherriskmatters.
»
Providesoversightofourriskgovernancestructureinordertoevaluateandcontrolourrisks,includingtheapprovalofourRiskAppetiteStatement.
»
OverseesourriskmanagementfunctionincludingthereviewoftheperformanceoftheCRO.
»
Overseesandmanagesouractivitiesrelatedtocapitalplanningandanalysis.
TheBoardhasdeterminedthatMr.HurleyandMr.Muirare“independent”asdefinedbytheNYSEListedCompanyRules.
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CORPORATEGOVERNANCE-DIRECTORCOMPENSATION
DirectorCompensation
IndependentNon-EmployeeDirectorStockOwnershipGuidelines
18
SC2017ProxyStatement
EffectiveJuly15,2015,weadoptedadirectorcompensationprogramthatprovidedforthefollowingcompensationforindependentmembersoftheBoardofDirectors: » Anannualcashretainerof$100,000(paidquarterlyinarrears);plus
» AnannualgrantofrestrictedstockorRSUswithagrantdatefairmarketvalueequalto$50,000,vestingontheearlierofthe1stanniversaryofthegrantdateorthe1stAnnualStockholderMeetingfollowingthegrantdate(withthegrantdateoccurringatoraroundthestartoftheapplicabletermofservice);plus
» $70,000incashannuallyforservingasthechairofanycommitteeoftheBoard(paidquarterlyinarrears);plus
» $20,000incashannuallyforservingasanon-chairmemberofanycommitteeoftheBoard(paidquarterlyinarrears);plus
» $600,000incashannuallyifthedirectoralsoservesastheChairmanoftheBoard(paidquarterlyinarrears).
TheCompensationCommitteeperiodicallyreviewstheformandamountofdirectorcompensationandrecommendschangestotheBoard,asappropriate.Asaresultofitsreviewin2016,theCompensationCommitteerecommendedthattheBoardrevisetheindependentdirectorcompensationprogramtoreducetheadditionalcashretainerfortheChairmanoftheBoardfrom$600,000to$450,000.EffectiveOctober1,2016,theBoardapprovedtheCompensationCommittee’srecommendationtoreducetheadditionalcashretainerfortheChairmanoftheBoardfrom$600,000to$450,000.Therewerenootherchangestotheindependentdirectorcompensationprogramin2016.
Therevisedindependentdirectorcompensationprogramwasapprovedbyournon-independentdirectors,whodonotreceivecompensationfortheirserviceontheBoard.
Inordertoaligntheeconomicinterestsofourindependentnon-managementdirectorswiththoseofourstockholders,theBoardhasdeterminedthatourindependentdirectorsshouldholdameaningfulequitystakeinSC.Tothatend,ourIndependentNon-EmployeeDirectorStockOwnershipGuidelines(adoptedbytheBoardin2016)requireseachofourindependentdirectorstoacquireandretainsharesorshareequivalentsofourCommonStockwithatargetvaluenotlessthanfivetimestheannualequityretainer.
Thereisnorequiredtimeperiodwithinwhichanindependentdirectormustattaintheapplicablestockownershiptarget.However,untilthestockownershiptargetisachieved,theindependentdirectorswillberequiredtoretain100%ofallsharesofourCommonStockreceivedunderSC’sindependentdirectorcompensationprogram,aftertakingintoaccountanyapplicabletaxesdueonthevestingofthoseshares.
Asofthedatehereof,alldirectorsareincompliancewiththeIndependentNon-EmployeeDirectorStockOwnershipGuidelines.
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CORPORATEGOVERNANCE-DIRECTORCOMPENSATION DirectorCompensationTableforFiscalYear2016
NAME
FEESEARNEDORPAIDINCASH
($)
STOCKAWARDS(1)($)
ALLOTHERCOMPENSATION
($)
TOTAL($)
StephenA.Ferriss 153,425 50,000(7) — 203,425
EdithE.Holiday(2) 12,274 45,068(8) 18,739(10) 76,081
MarkP.Hurley(3) 92,826 58,219(9) — 151,045
BlytheMasters(4) 408,016 — 3,424(11) 411,440
RobertJ.McCarthy 160,000 50,000(7) — 210,000
WilliamF.Muir(2) 12,274 45,068(8) 18,739(10) 76,081
WilliamRainer 474,674 50,000(7) — 524,674
WolfgangSchoellkopf(5) 210,000 50,000(7) — 260,000
HeidiUeberroth(6) 168,856 — 16,986(11) 185,842
(1)Toalignourindependentdirectors’compensationwithstockholderinterests,eachindependentdirectorisgrantedaRSUawarduponelectionorre-election.In2016,exceptforMs.HolidayandMr.Muir,eachRSUawardwasgrantedonNovember1,2016.TheawardsforMs.HolidayandMr.MuirweregrantedonDecember7,2016.Eachawardwillvestupontheearlierof(i)thefirstanniversaryofthegrantdateand(ii)thefirstannualstockholdermeetingfollowingthegrantdate.ThiscolumnrepresentstheaggregategrantdatefairvaluecomputedinaccordancewithFASBASCTopic718,basedontheclosingpriceofourCommonStockontheapplicablegrantdate,butexcludingtheeffectofpotentialforfeitures.
(2)Ms.HolidayandMr.MuirwereappointedtotheBoardonNovember29,2016.
(3)Mr.HurleywasappointedtotheBoardonApril17,2016.
(4)Ms.MastersresignedfromtheBoardeffectiveJuly12,2016.
(5)Mr.SchoellkopfresignedfromtheBoardeffectiveApril21,2017.
(6)Ms.UeberrothresignedfromtheBoardeffectiveOctober18,2016.
(7)RepresentsagrantofRSUsonNovember1,2016forserviceasanindependentdirectorfromthedirector’selectionatthe2016AnnualMeetingoftheStockholdersthroughthe2017AnnualMeetingoftheStockholders.TheRSUswillvestontheearlierof(i)thefirstanniversaryofthegrantdateand(ii)thefirstAnnualMeetingoftheStockholdersfollowingthegrantdate.
(8)RepresentsagrantofRSUsonDecember7,2016forserviceasanindependentdirectorfromthedirector’sappointmenttotheBoardonNovember29,2016throughthe2017AnnualMeetingoftheStockholders.TheRSUswillvestontheearlierof(i)thefirstanniversaryofthegrantdateand(ii)thefirstAnnualMeetingoftheStockholdersfollowingthegrantdate.
(9)RepresentsagrantofRSUsonNovember1,2016,withagrantdatefairmarketvalueof(i)$50,000forserviceasanindependentdirectorfromthedirector’selectionatthe2016AnnualMeetingoftheStockholdersthroughthe2017AnnualMeetingoftheStockholdersand(ii)$8,219forserviceasanindependentdirectorfromApril17,2016toJune15,2016(thedaybeforethe2016AnnualMeetingoftheStockholders).TheRSUswillvestontheearlierof(i)thefirstanniversaryofthegrantdateand(ii)thefirstAnnualMeetingoftheStockholdersfollowingthegrantdate.
(10)
RepresentscashpaidforserviceasanindependentcontractoradvisortotheboardfromOctober24,2016untilNovember29,2016.
(11)
RepresentscashpaymentstocompensateformerdirectorsfortheprorataportionofequityretainerearnedfromJune16,2016untiltheirresignationsfromtheBoard.
SC2017ProxyStatement
19
ThefollowingtableprovidesinformationregardingcompensationforeachindependentmemberoftheBoardin2016.Underour
independentdirectorcompensationprogram,onlyindependentdirectorsarecompensatedfortheirserviceontheBoard.
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CORPORATEGOVERNANCE-NOMINATIONOFDIRECTORS
NominationofDirectors
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SC2017ProxyStatement
TheShareholdersAgreement,byandamongSC,SHUSA,ThomasG.Dundon,andcertainotherholdersofourCommonStock,whichwerefertoastheShareholdersAgreement,providesSHUSAwithspecialrightstonominatedirectorstotheBoardofDirectors.See“RelatedPartyTransactions—ShareholdersAgreement”forfurtherinformation.PursuanttotheShareholdersAgreement,SHUSAisentitledtonominateeightmembersofourBoard.TheShareholdersAgreementprovidesfurtherthatSHUSAmayremoveanydirectornominatedbySHUSAwithorwithoutcause.Inaddition,SHUSAhastherighttodesignateareplacementtofillavacancyontheBoardcreatedbythedepartureofadirectorthatwasnominatedbySHUSA,andwearerequiredtotakeallactionwithinourpowertocausesuchvacancytobefilledbysuchdesignatedreplacement(includingbypromptlyappointingsuchdesigneetotheBoard).
TheShareholdersAgreementprovidesthatMr.DundonwillserveasamemberoftheBoard(i)solongasMr.DundonistheCEOoftheCompanyor(ii)if(a)heownsatleast5%ofourthen-outstandingsharesofCommonStock(excludingsharesacquiredpursuanttoanyequity-basedcompensationplan)and(b)hisemploymentwasnotterminatedbytheCompanyforcauseorbyhimwithoutgoodreason(subjecttocertainexceptions)andhehascontinuedtocomplywithcertainprovisionsofhisemploymentagreementwiththeCompany.Mr.DundonvoluntarilyresignedfromtheBoardonApril1,2016.
WithrespecttodirectorsnotnominatedbySHUSA,theBoardisresponsibleforselectingnomineesforelectiontotheBoardbyourstockholders.Generally,theBoardbeginsidentifyingnomineesbyfirstevaluatingthecurrentmembersoftheBoardwillingtocontinueinservice.CurrentmembersoftheBoardwithskillsandexperiencethatarerelevanttoourbusinessandwhoarewillingtocontinueinserviceareconsideredforre-nomination.IfanymemberoftheBoarddoesnotwishtocontinueinserviceoriftheBoarddecidesnottore-nominateamemberforre-election,theBoardthenidentifiesthedesiredskillsandexperienceofanewnomineeinlightofthecriteriadescribedbelow.Generally,theBoardidentifiescandidatesfordirectornomineesinconsultationwithsittingmembersoftheBoardandwithmanagement,throughtheuseofsearchfirmsorotheradvisers,throughrecommendationssubmittedbyotherdirectorsorstockholdersandthroughsuchothermethodsastheBoarddeemsappropriate.Inidentifyingandevaluatingapotentialdirectornominee,theBoardconsiders,amongotherthings,thefollowingfactors:
» Ourneedswithrespecttotheparticulartalentsandexperienceofourdirectors;
» Thenominee’sknowledge,skillsandexperience,includingexperienceinfinance,administrationorpublicservice,inlightofprevailingbusinessconditionsandtheknowledge,skillsandexperiencealreadypossessedbyothermembersoftheBoard;
» Whetherthenomineeisindependent,asthattermisdefinedundertheNYSEListedCompanyRules;
» Thefamiliarityofthenomineewithourindustry; » Thenominee’sexperienceinlegalandregulatoryaffairs;
» Thenominee’sexperiencewithaccountingrulesandpractices;and
» ThedesiretobalancethebenefitofcontinuitywiththeperiodicinjectionofthefreshperspectiveprovidedbynewBoardmembers.
Initsidentificationandevaluationprocess,theBoardcollectsinformationaboutcandidatesthroughinterviews,detailedquestionnaires,backgroundchecksandothermeansthattheBoarddeemshelpfulinsuchprocess.
TheBoard’sgoalistoassembleaBoardthatbringstogetheravarietyofperspectivesandskillsderivedfromhighqualitybusinessandprofessionalexperience.Indoingso,theBoardwillalsoconsidercandidateswithappropriatenon-businessbackgrounds.
TheBoardisalsocommittedtodiversifiedBoardmembership.TheBoardwillnotdiscriminateonthebasisofrace,nationalorigin,gender,sexualorientation,religion,ordisabilityinselectingnominees.Diversityandinclusionarevaluesembeddedintoourcultureandarefundamentaltoourbusiness.Inkeepingwiththosevalues,whenassessingacandidate,theBoardconsidersthedifferentviewpointsandexperiencesthatacandidatecouldbringtotheBoardandhowthoseviewpointsandexperiencescouldenhancetheBoard’seffectivenessintheexecutionofitsresponsibilities.TheBoardisalsocommittedtoseekinghighlyqualifiedwomenandindividualsfromminoritygroupstoincludeinthepoolfromwhichnewcandidatesareselected.Inaddition,theBoardassessesthediversityoftheBoardandcommitteesasapartofitsannualself-evaluationprocess.
Otherthantheforegoing,therearenostatedminimumcriteriafordirectornominees.TheBoardmayalsoconsidersuchotherfactorsasitmaydeeminourbestinterestsandthebestinterestsofourstockholders.WealsobelieveitmaybeappropriateforkeymembersofourmanagementtoparticipateasmembersoftheBoard.
SubjecttotherightsofourmajoritystockholderandMr.Dundon,stockholdersmaynominatecandidatesforelectiontotheBoard.InordertonominateacandidateforelectiontotheBoard,stockholdersmustfollowtheproceduressetforthinourBylaws,includingtimelyreceiptbytheSecretaryoftheCompanyofnoticeofthenominationandcertainrequireddisclosureswithrespectbothtothenominatingstockholderandtherecommendeddirectornominee.Forcompletedescriptionoftherequirementsandproceduresforstockholdernominations,pleaserefertoourBylaws.
Directorsmaybeelectedbyapluralityofvotescastatanymeetingcalledfortheelectionofdirectorsatwhichaquorumispresent.ThepresenceofamajorityoftheholdersofourCommonStock,whetherinpersonorbyproxy,constitutesaquorum.TheBoarddidnotreceiveanyrecommendationsfromstockholders(otherthanSHUSA)requestingthattheBoardconsideracandidateforinclusionamongthenomineesinourProxyStatementforthisAnnualMeeting.However,ourpolicyisthatwewillconsideranysuchrecommendationaslongasthestockholdermakingtherecommendationprovidestoustheinformationconcerningtherecommendedindividualthatisrequiredunderourBylaws.
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EXECUTIVEOFFICERS
EXECUTIVEOFFICERS
NAME AGE POSITION
JasonA.Kulas 46 PresidentandChiefExecutiveOfficer
IsmailDawood 45 ChiefFinancialOfficer
RichardMorrin 47 ChiefOperatingOfficer
ChristopherPfirrman 57 ChiefLegalOfficerandGeneralCounsel
KalyanSeshan 49 ChiefRiskOfficer
DonaldGoin 46 ChiefInformationOfficer
MaryBarnes 66 ChiefComplianceOfficer
LisaVanRoekel 47 ChiefHumanResourcesOfficer
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Thenames,ages,andcurrentpositionsofourexecutiveofficersasofthedateofthisProxyStatementarelistedinthetablebelow.Eachexecutiveofficer,includingtheCEO,iselectedbytheBoard.Eachexecutiveofficerholdsofficeuntilhisor
hersuccessoriselectedandqualified.Therearenofamilyrelationshipsamongtheexecutiveofficersnoristhereanyagreementorunderstandingbetweenanyofficerandanyotherpersonpursuanttowhichtheofficerwaselected.
JasonA.KulasPresidentandChiefExecutiveOfficerMr.Kulas’sbiographyisincludedunder“CorporateGovernance—Proposal1:ElectionofDirectors—InformationConcerningtheNominees”above.
IsmailDawoodChiefFinancialOfficerMr.DawoodjoinedusasourChiefFinancialOfficerinDecember2015.Priortojoiningus,Mr.DawoodservedasExecutiveVicePresidentandChiefFinancialOfficeroftheInvestmentServicesdivisionofTheBankofNewYorkMellonCorporation(“BNYMellon”)sinceApril2013,asExecutiveVicePresidentandDirectorofInvestorRelationsandFinancialPlanningandAnalysisofBNYMellonfromJune2009toMarch2013andasSeniorVicePresidentandGlobalHeadofCorporateDevelopmentandStrategyofBNYMellonfromNovember2006toMay2009.HealsoservedinvariousseniorrolesatWachoviaCorporation,wherehewasemployedfrom1994to2006,includingManagingDirectorofStructuredTreasuryActivitiesandManagingDirectorofCorporateDevelopment.Mr.Dawoodholdsamaster’sdegreeinbusinessadministrationfromtheWhartonSchoolofBusinessandabachelor’sdegreeinfinancefromSt.John’sUniversity,Jamaica(Queens),NewYorkandisaCharteredFinancialAnalyst(CFA)charterholder.
RichardMorrinChiefOperatingOfficerMr.MorrinhasservedasourChiefOperatingOfficersinceFebruary2016,havingjoinedusasourExecutiveVicePresident,NewBusinessinAugust2011.Priortojoiningus,Mr.Morrinheldavarietyofmanagementpositionsin21yearsofcombinedserviceatAllyFinancialandGeneralMotorsAcceptanceCorp.Mostrecently,hemanagedthecommerciallendingoperationsforAllyautomotivedealersintheUnitedStatesandCanada.Mr.MorrinisalsoamemberoftheboardofdirectorsofSantanderConsumerInternationalPuertoRico,LLC,awholly-ownedsubsidiaryofSCIllinois(“SCI”).Heholdsabachelor’sdegreeineconomicsfromtheUniversityofPennsylvaniaandamaster’sdegreeinbusinessadministrationfromtheUniversityofVirginia.
ChristopherPfirrmanChiefLegalOfficerandGeneralCounselMr.PfirrmanhasservedasourChiefLegalOfficerandGeneralCounselSinceSeptember2015.(HistitlechangedfromSeniorChiefLegalOfficerandGeneralCounselinDecember2016.)HewaspreviouslyemployedbySHUSA,andmostrecently,servedasSeniorExecutiveVicePresidentandGeneralCounselofSHUSAandofSBNAfromJanuary2012toSeptember2015.HeservedasSBNA’sSeniorVicePresidentandDeputyGeneralCounselfrom2000toJanuary2012,andhewasanattorneyinthelawfirmofEdwards&Angell,LLP(nowLockeLordLLP)from1996to2000.Hereceivedabachelor’sdegreefromFairfieldUniversityinConnecticutandaJurisDoctoratefromtheCollegeofWilliamandMaryinVirginia.HeisamemberoftheMassachusettsandConnecticutbars.
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EXECUTIVEOFFICERS
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KalyanSeshanChiefRiskOfficerMr.SeshanhasservedasourChiefRiskOfficersinceSeptember2015.Priortojoiningus,heservedasSeniorVicePresidentandChiefRiskOfficerofNationstarMortgagefromNovember2013toSeptember2015.Mr.SeshanwaspreviouslyemployedbyJPMorganChaseasSeniorVicePresidentandHeadofDefaultStrategiesofMortgageCapitalMarketsfromOctober2010toNovember2013;ChiefRiskOfficerofMortgageDefaultfromApril2009toOctober2010;andChiefRiskOfficerofChaseAutoandEducationFinancefromOctober2007toApril2009.Hereceivedamaster’sdegreeinbusinessadministrationfromtheIndianInstituteofManagementandabachelor’sdegreeinmathematicsfromLoyolaCollege,MadrasUniversity.
DonaldGoinChiefInformationOfficerMr.Goinre-joinedusasourChiefInformationOfficerinAugust2015havingservedasourChiefInformationOfficerfromJanuary2003toSeptember2011.HewasemployedbyCapitalOneFinancialServicesasDigitalOperationsOfficerfromMarch2014toAugust2015,byCapitalOneAutoFinanceasManagingVicePresident,CustomerOperationsfromMarch2013toMarch2014andasChiefInformationOfficerfromSeptember2011toMarch2013.Priortojoiningus,heheldavarietyofconsultingandtechnologymanagementrolesatRaytheonE-Systems,SouthwestAirlinesandIONATechnologies.HecurrentlyservesontheSt.JudeCharitiesTechnologyAdvisoryCouncil.Mr.GoinpursuedgraduatestudiesatDukeUniversityandreceivedabachelor’sdegreeincomputersciencefromtheUniversityofTexasatDallas.Mr.GoinservedhonorablyintheUnitedStatesMarineCorps.
MaryBarnesChiefComplianceOfficerMs.BarneshasservedasourChiefComplianceOfficersinceJanuary2017,havingjoinedusasourSeniorVicePresident,ConsumerComplianceinApril2016.Previously,Ms.Barnesservedasaconsultant,providingcomplianceandriskmanagementconsultingservicestolargefinancialinstitutionswithaspecialemphasisoncomprehensivecompliancegovernance,controls,assessment,mitigationandremediation,withTreliantRiskAdvisorsasaSeniorAdvisorfrom2013to2016andwithNorthHighlandCompanyasaPrincipalfrom2011-2013.Priortothat,sheservedasacomplianceandriskmanagementprofessionalwithvariouscompanies,includingKPMGLLP,whereshewasaPrincipalintheRiskAdvisorypractice,andBankofAmerica,whereshewasaSeniorVicePresident.Ms.Barnesearnedabachelor’sdegreeinindustrialengineeringfromtheUniversityofTexasatArlington.
LisaVanRoekelChiefHumanResourcesOfficerMs.VanRoekelhasservedasourChiefHumanResourcesOfficersinceMarch2016,havingpreviouslyservedasourHeadofHumanResourcesfrom2006to2009.Previously,sheservedastheInterimChiefHumanResourcesOfficerofSHUSAfromDecember2015toFebruary2016;astheChiefHumanResourcesOfficerofSBNAfromDecember2013toFebruary2016;andastheDeputyManagingDirector,HumanResourcesofSBNAfromJuly2012toDecember2013.Ms.VanRoekelisalsoamemberoftheboardofdirectorsofSCI.Sheholdsabachelor’sdegreeandamaster’sdegreeinjournalismfromEastTexasStateUniversity.
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AUDIT-PROPOSAL2:RATIFICATIONOFAPPOINTMENTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
AUDIT
Proposal2: RatificationofAppointmentofIndependentRegisteredPublicAccountingFirm
WHATYOUAREVOTINGON:
WeareaskingourstockholderstoratifytheappointmentofPricewaterhouseCoopersLLPasourindependentregisteredpublicaccountingfirmfor2017.
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OurAuditCommitteeisresponsiblefortheappointment,compensation,retention,andoversightoftheindependentregisteredpublicaccountingfirmretainedtoperformtheauditofourfinancialstatementsandourinternalcontroloverfinancialreporting.TheAuditCommitteehasappointedtheaccountingfirmofPwCtoserveastheCompany’sindependentregisteredpublicaccountingfirmforthefiscalyearendingDecember31,2017.
StockholderRatificationofAppointmentofIndependentRegisteredPublicAccountingFirmAproposaltoratifytheappointmentofPwCtoserveasourindependentregisteredpublicaccountingfirmforthefiscalyearendingDecember31,2017willbepresentedattheAnnualMeeting.RepresentativesofPwCareexpectedtobepresentatthemeeting.Theywillhavetheopportunitytomakeastatementiftheydesiretodosoandwillbeavailabletorespondtoappropriatequestionsfromstockholders.
StockholderratificationoftheselectionofPwCasourindependentregisteredpublicaccountingfirmisnotrequiredbyourBylawsorotherapplicablelegalrequirement.However,theBoardissubmittingtheselectionofPwCtoourstockholdersforratificationasamatterofgoodcorporategovernance.Ifourstockholdersfailtoratifytheselection,theAuditCommitteewillreconsiderwhetherornottoretainthatfirm.Eveniftheselectionisratified,theAuditCommitteeatitsdiscretionmaydirecttheappointmentofadifferentindependentregisteredpublicaccountingfirmatanytimeduringtheyearifitdeterminesthatsuchachangewouldbeinourbestinterestsandourstockholders’bestinterests.
TheaffirmativevoteoftheholdersofamajorityofthesharesofCommonStockentitledtovoteonthismatterattheAnnualMeeting,whetherinpersonorrepresentedbyproxy,willapprovetheproposaltoratifyPwCasourindependentregisteredaccountingfirmforthefiscalyearendingDecember31,2017.
PriorChangeinAuditorIn2015,theAuditCommitteedecidedtoopentheannualindependentauditorselectionprocesstoseveralindependentregisteredpublicaccountingfirms,includingourpreviousauditor,Deloitte&ToucheLLP(“Deloitte”)andourcurrentauditorPwC.
TheAuditCommittee,withtheassistanceofmanagement,performedanevaluationoffirmstodeterminetheCompany’sindependentauditorforthe2016fiscalyear.Asaresultofthisprocess,onDecember9,2015,theAuditCommitteeformallyapprovedtheengagementofPwCasourindependentauditorforthefiscalyearendingDecember31,2016.OnDecember9,2015,weinformedDeloittethatitwasbeingdismissedasourindependentauditor.
DeloitteservedasourindependentauditorforthefiscalyearsendedDecember31,2014andDecember31,2015.ThereportsofDeloitteonourconsolidatedfinancialstatementsforthefiscalyearsendedDecember31,2014andDecember31,2015didnotcontainanadverseopinionoradisclaimerofopinion,norweretheyqualifiedormodifiedastouncertainty,auditscope,oraccountingprinciples.DuringthefiscalyearsendedDecember31,2014andDecember31,2015therewere:(i)nodisagreementswithDeloitteonanymatterofaccountingprinciplesorpractices,financialstatementdisclosures,orauditingscopeorprocedures,whichdisagreements,ifnotresolvedtothesatisfactionofDeloittewouldhavecausedDeloittetomakereferencetothesubjectmatterofthedisagreementsinconnectionwithitsreports,and(ii)no“reportable”eventsasthattermisdefinedinItem304(a)(1)(v)ofRegulationS-K,exceptforamaterialweaknessinourinternalcontroloverfinancialreportingasofJune30,2015inconnectionwiththepreparationandreviewofourCondensedConsolidatedStatementofCashFlows(“SCF”)ReportandasofDecember31,2015,materialweaknessesinconnectionwiththepreparationofourSCFaswellasourcreditlossallowancemethodology,ouridentificationofloansmodifiedastroubleddebtrestructurings,ourcreditlossallowancemodelsandourcontrolenvironment.InformationregardingthematerialweaknesseswasdescribedinManagement’sReportonInternalControlsoverFinancialReportingincludedinItem9AofourAnnualReportonForm10-KfortheyearendedDecember31,2015,asfiledwiththeSEC.DeloittediscussedthesecontroldeficiencieswiththeAuditCommittee,andtheAuditCommitteeauthorizedDeloittetodiscusssuchcontroldeficiencieswithPwCandtorespondfullytoanyinquiriesofPwCregardingsuchcontroldeficiencies.
DuringourfiscalyearsendedDecember31,2014andDecember31,2015,neitherwe,noranyoneonourbehalf,consultedPwCwithrespectto:(i)theapplicationofaccountingprinciplestoaspecifiedtransaction,eithercompletedorproposed,orthetypeofauditopinionthatmightberenderedonourconsolidated
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AUDIT-AUDITFEESANDRELATEDMATTERS
THEBOARDOFDIRECTORSUNANIMOUSLYRECOMMENDS
AVOTEFORTHERATIFICATIONOFOURAPPOINTMENTOFPWCASOURINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
FORTHECURRENTFISCALYEAR.
AUDITFEESANDRELATEDMATTERSAuditandNon-AuditFees
(1)Representsfeesbilled,orexpectedtobebilled,fortheauditofourfinancialstatementsincludedinourAnnualReportonForm10-K,reviewoffinancialstatementsincludedinourQuarterlyReportsonForm10-Q,andtheauditofourinternalcontroloverfinancialreporting.
(2)Representsfeesbilled,orexpectedtobebilled,forassurancerelatedservices.Suchservicesduring2016and2015principallyincludedattestationreportsrequiredunderservicesagreements,consenttousetheauditor’sreportinconnectionwithvariousdocumentsfiledwiththeSEC,comfortlettersissuedtounderwritersforsecuritiesofferingsandcertainotheragreeduponprocedures.
(3)Representsfeesbilled,orexpectedtobebilled,fortaxcompliance,taxadviceandtaxplanning.
(4)Includesfeesforservicesin2016relatingtotheauditofourfinancialstatementsincludedinourFiscalYear2015AnnualReportonboth(i)Form10-K,asfiledwiththeSEConMarch31,2016and(ii)Form10-K/A,asfiledwithSEConOctober27,2016.
AuditCommitteePre-ApprovalofAuditandNon-AuditServicesofIndependentAuditor
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SC2017ProxyStatement
financialstatements,andneitherawrittenreportwasprovidedtousnororaladvicewasprovidedtousthatPwCconcludedwasanimportantfactorconsideredbyusinreachingadecisionastotheaccounting,auditing,orfinancialreportingissue;or(ii)anymatter
thatwaseitherthesubjectofadisagreement(asdefinedinItem304(a)(1)(iv)ofRegulationS-Kandtherelatedinstructions)orareportableevent(asdescribedinItem304(a)(1)(v)ofRegulationS-K).
ThefollowingtablespresentfeesforprofessionalauditservicesrenderedbyPwCandDeloitte,respectively,fortheauditsofourannualfinancialstatementsandtheeffectivenessofinternal
controlsfortheyearsendedDecember31,2016and2015,andfeesforotherservicesrenderedbyPwCandDeloitte,respectively,during2016and2015.
PricewaterhouseCoopersLLP
2016
2015
AuditFees(1) $10,523,000 —
Audit-RelatedFees(2) $1,892,000 —
TaxFees(3) $210,000 —
AllOtherFees — —
Deloitte&ToucheLLP
2016
2015
AuditFees(1) — $5,889,452(4)
Audit-RelatedFees(2) — $1,255,532
TaxFees(3) — —
AllOtherFees — —
TheAuditCommitteehasimplementedprocedurestoensurethatallauditandpermittednon-auditservicesprovidedtousarepre-approvedbytheAuditCommittee.Specifically,theAuditCommitteepre-approvestheuseofanindependentaccountantforspecificauditandnon-auditservices,withinapprovedmonetarylimits.Ifaproposedservicehasnotbeenpre-approved,thenitmustbespecificallypre-approvedbytheAuditCommitteebeforeitmaybeprovidedbyourindependentaccountant.Anypre-approvedservicesexceedingthepre-approvedmonetarylimitsrequirespecificapprovalbytheAuditCommittee.The
AuditCommitteemaydelegatepre-approvalauthoritytooneormoreofitsmemberswhenexpeditionofservicesisnecessary.
Alloftheaudit-related,taxandallotherservicesprovidedbyeachofDeloitteandPwCtousin2016wereapprovedbytheAuditCommitteebymeansofspecificpre-approvalsorpursuanttoproceduresestablishedbytheAuditCommittee.TheAuditCommitteehasdeterminedthatallnon-auditservicesprovidedbyeachofDeloitteandPwCin2016werecompatiblewithmaintainingitsindependenceintheconductofitsauditingfunctions.
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AUDIT-REPORTOFTHEAUDITCOMMITTEE
REPORTOFTHEAUDITCOMMITTEE
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25
ThisreportreviewstheactionstakenbyourAuditCommitteewithregardtoourfinancialreportingprocessduring2016andparticularlywithregardtoauditedconsolidatedfinancialstatementsasofDecember31,2016and2015andforeachofthethreeyearsendedDecember31,2016.
TheAuditCommitteeiscomprisedoffournon-managementdirectors.TheBoardhasdeterminedthateachmemberofourAuditCommitteehasnomaterialrelationshipwiththeCompanyundertheBoard’sdirectorindependencestandardsandthateachisindependentunderthelistingstandardsoftheNYSE,andtheSEC’sstandardsrelatingtotheindependenceofauditcommittees.TheBoardhasalsodeterminedthateachmemberisfinanciallyliterateandisan“auditcommitteefinancialexpert”asdefinedbytheSEC.
TheAuditCommitteeoperatesunderawrittencharteradoptedbytheBoardthatispublishedontheinvestorrelationssectionofSC’swebsiteathttp://investors.santanderconsumerusa.com.Weannuallyreviewourwrittencharterandourpractices.WehavedeterminedthatourcharterandpracticesareconsistentwiththelistingstandardsoftheNewYorkStockExchangeandtheprovisionsoftheSarbanes-OxleyActof2002.
ThepurposeoftheAuditCommitteeistoassistBoardoversightof(i)ourindependentregisteredpublicaccountingfirm’squalificationsandindependence,(ii)theperformanceoftheinternalauditfunctionandthatoftheindependentregisteredpublicaccountingfirm,(iii)management’sresponsibilitiestoassurethatthereisinplaceaneffectivesystemofcontrolsreasonablydesignedtosafeguardtheassetsandincomeoftheCompany,(iv)theintegrityofourfinancialstatements,and(v)compliancewithourethicalstandards,policies,plansandprocedures,andwithlawsandregulations.
WediscussedwithPwCthemattersrequiredtobediscussedbyPublicCompanyAccountingOversightBoard(“PCAOB”)AuditingStandardNo.1301(CommunicationswithAuditCommittees),includingPwC’soverallauditscopeandauditapproachassetforthinthetermsoftheirengagementletter;PwC’soverallauditstrategyforsignificantauditrisksidentifiedbythem;andthenatureandextentofthespecializedskillsnecessarytoperformtheplannedaudit.Inaddition,wemonitortheaudit,audit-relatedandtaxservicesprovidedbyPwC.DetailsofthefeespaidtoPwCcanbefoundinthisProxyStatementunder“Audit—AuditFeesandRelatedMatters”.
PwCprovidedusthewrittendisclosuresandtheletterrequiredbyPCAOB’sEthicsandIndependenceRule3526(CommunicationswithAuditCommitteesConcerningIndependence),andwediscussedandconfirmedwithPwCtheirindependence.WehaveconsideredwhetherPwC’sprovisionofanynon-auditservicestousiscompatiblewithmaintainingauditorindependence.Wehaveconcludedthattheprovision
ofanynon-auditservicesbyPwCwascompatiblewithPwC’sindependenceintheconductofitsauditingfunctions.
Managementisresponsibleforourinternalcontroloverfinancialreporting,thefinancialreportingprocessandourConsolidatedFinancialStatements.TheindependentauditorisresponsibleforperforminganindependentauditofourConsolidatedFinancialStatementsandoftheeffectivenessofinternalcontroloverfinancialreportinginaccordancewithauditingstandardspromulgatedbythePCAOB.OurInternalAuditDepartment,undertheChiefAuditExecutive,isresponsibletotheAuditCommitteeforpreparinganannualauditplanandconductinginternalauditsintendedtoevaluateourinternalcontrolstructureandcompliancewithapplicableregulatoryrequirements.ThemembersoftheAuditCommitteearenotprofessionallyengagedinthepracticeofaccountingorauditing;asnotedabove,theAuditCommittee’sresponsibilityistomonitorandoverseetheseprocesses.
Weregularlymeetandholddiscussionswithourmanagementandinternalauditorsandwiththeindependentauditor,includingsessionswiththeinternalauditorsandwiththeindependentauditorwithoutmembersofmanagementpresent.ManagementrepresentedtousthatourConsolidatedFinancialStatementswerepreparedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(“U.S.GAAP”).WereviewedanddiscussedourConsolidatedFinancialStatementswithmanagementandPwC.
WealsodiscussedwithPwCthequalityofouraccountingprinciples,thereasonablenessofcriticalaccountingestimatesandjudgments,andthedisclosuresinourConsolidatedFinancialStatements,includingdisclosuresrelatingtosignificantaccountingpolicies.Basedonourdiscussionswithourmanagement,internalauditorsandPwC,aswellasareviewoftherepresentationsgiventousandPwC’sreportstous,werecommendedtotheBoard,andtheBoardapproved,inclusionoftheauditedConsolidatedFinancialStatementsinourAnnualReportonForm10-KfortheyearendedDecember31,2016,asfiledwiththeSEC.
SubmittedbytheAuditCommitteeoftheBoardofDirectors:WilliamF.Muir,ChairStephenA.FerrissMarkP.HurleyRobertJ.McCarthy
ThisreportshallnotbedeemedtobeincorporatedbyreferencebyanygeneralstatementincorporatingbyreferencethisProxyStatementintoanyfilingunderTheSecuritiesActof1933orExchangeAct,andshallnototherwisebedeemedfiledundertheseActs.
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COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
COMPENSATIONCompensationDiscussionandAnalysisExecutiveSummary
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Introduction.ThisCompensationDiscussionandAnalysis(“CD&A”)describesthematerialelementsofcompensationawardedto,earnedby,orpaidtoeachofourexecutiveofficerswhoareincludedintheSummaryCompensationTableofthisProxyStatement,whowecollectivelyrefertoasour“namedexecutiveofficers”or“NEOs”andfocusesontheinformationcontainedinthefollowingtablesandrelatedfootnotesprimarilyfortheyear2016.
NAMEDEXECUTIVEOFFICERS
NAME
TITLE
JasonA.Kulas
PresidentandChiefExecutiveOfficer
IsmailDawood
ChiefFinancialOfficer
RichardMorrin
ChiefOperatingOfficer
KalyanSeshan
ChiefRiskOfficer
ChristopherPfirrman
ChiefLegalOfficerandGeneralCounsel
ThisCD&Aexplainstheoverallobjectivesofourexecutivecompensationprogram,howeachelementofourexecutivecompensationprogramisdesignedtosatisfytheseobjectives,andthepoliciesunderlyingour2016compensationprogram.
Wedesignourexecutivecompensationprogramtobeconsistentwithbestpractices,supportourbusinessesinachievingtheirkeygoalsandimperatives,anddrivestockholdervalue.Webelievethatourpayprograms,whichareintendedtocomplywithdirectivesfromourregulators,aregovernedbyasetofsoundprinciplesandaredesignedtomitigateexcessiverisk-taking.
2016BusinessPerformanceHighlights.Withnetincomeof$766millionand$21.9billionintotaloriginations,ourfullyear2016financialresultsdemonstrateourcontinuedprofitabilityandstrongreturns.Additionally,weachievedareturnonaverageassetsof2%andareturnonaverageequityof15.8%,andissued$8.3billioninsecuritizations.
Inlinewithourgoalofbalancingrisk/rewardmanagementwithincomeandprofitability,theseresultswereaccomplishedwhilealsotakingameasuredapproachtooriginationsinacompetitivemarketandimprovingthecreditqualityofourbalancesheet.
2016CompensationHighlights.Ourcompensationdecisionsfor2016reflectthedirectrelationshipbetweenthepayopportunitiesforourNEOsandperformanceforourstockholders.Basedonourstrongnetincomeof$766million,earnedinanincreasinglycompetitivemarket,theCompensationCommitteeapprovedfundingof102%oftargetoftheSCExecutiveBonusPool(the“BonusPool”).
The102%fundingoftheBonusPoolwasfurthersupportedbytheaccomplishmentofkeygoalsrelatedto:(i)oursurveyandprogramtomeasureandreportcustomersatisfaction;(ii)completionofcriticalregulatory,complianceandriskmilestonesand(iii)retentionofkeytalent.
AspartofourcontinualassessmentandevaluationofourcompensationprogramforNEOs,werestructuredtheannualbonustargetopportunitiesforcertainofourNEOstoadjustfortheelimination,goingforward,oftheSANPerformanceAwards(see“SANPerformanceAwards”inthisCD&Aforfurtherinformationregardingtheeliminationofsuchawardsandthecorrespondingadjustmentsmade).Additionally,we(i)extendedthevestingperiodfromthreetofiveyearsforthedeferredequityportionofannualincentiveawardstoourCEOand(ii)foreachofourNEOs,exceptforMorrin,addedperformancevestingconditionsforaportionoftheRSUsandlong-termcashgrantedaspartoftheannualincentiveawardfor2016.Thesechangesfurtherreinforceourphilosophythatpaybelinkedtoourperformanceinboththenear-andlong-term.
KeyExecutiveCompensationPrinciples.ThefundamentalprinciplesthatwefollowindesigningandimplementingcompensationprogramsforourNEOsareto:
» Attract,motivate,andretainhighlyskilledexecutiveswiththebusiness
experienceandacumennecessaryforachievingourlong-termbusinessobjectives;
» Linkpaytoperformanceandalign,toanappropriateextent,theinterestsofmanagementwiththoseofourstockholders;
» Appropriatelybalanceriskandfinancialresults;and » Supportourcorevalues,strategicmission,andvision.
Weaimtoprovideatotalcompensationpackagethatiscomparabletothatofotherfinancialinstitutionswithwhomwecompeteforbusinessandfortalent,takingintoaccountpubliclyavailableinformationprovidedbyourindependentcompensationconsultant.Withinthisframework,weconsidereachcomponentofeachNEO’scompensationpackageindependently;thatis,wedonotevaluatewhatpercentageeachcomponentcomprisesofthetotalcompensationpackage.In2016,wetookintoaccountourperformance,individualperformance,levelofresponsibility,andtrackrecordwithintheorganizationinsettingeachNEO’scompensation.
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COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS 2016CompensationActionsHowwecompensatedourCEO
JASONA.KULAS
AGE:46TITLE:PresidentandChiefExecutiveOfficer
INDIVIDUALPERFORMANCEGOALS(InadditiontooverallBonusPoolobjectivesdiscussedbelow)»Financial–Achieveannualbudgetandmaximize
liquidity»Risk–Activelydrive,support,andenforcerisk
managementstandards»Leadership–Setthetonefororganization
2016COMPENSATIONDECISIONS»BaseSalary–Remainedat$1,800,000for2016,
whichwasseteffectiveJuly1,2015,inrecognitionofhispromotiontoCEO
»AnnualBonus–Annualbonusawardof$1,967,000
(95%ofMr.Kulas’stargetbonus),providedinamixofcurrentanddeferredcashandRSUawards
»SANPerformanceAward–20,536PSUs
PERFORMANCEASSESSMENTInadditiontoMr.Kulas’scontributiontowardtheoverallBonusPoolobjectivesdiscussedbelow,theCompensationCommitteespecificallyrecognizedthatMr.Kulas:Financial»Ledafocusedapproachtomarketfortheexitfromourpersonallendingbusiness,beginningwitha
timelysaleofinstallmentlendingassetsinearly2016»Successfullycollaboratedwithbankandinstitutionaldebtinvestorstoachievecontinuedstrengthin
excessliquidity»Continuedtomeetspecificongoingandupdatedmilestonestoreduceintragroupdebt
Risk»LedouractiveparticipationintheSantanderUSRiskandCapitalTransformation(“CART”)efforts,
ensuringactivetrackingofimportantdeadlinesandactivecollaborationwithSHUSAonallCARTprojects
»Achieved96%on-timecompletionratesbyourassociatesforregulatorycomplianceandrisktraining,
directlyfollowingupwithassociateswhowerepastdueinordertoreinforcetheimportanceofregulatorycompliance
»Reinforcedtheimportanceofacultureofcomplianceandafocusontheconsumerinregulartownhall
meetingsandinallemployeecommunicationsLeadership»Continuedtointegratethe“Simple,Personal,Fair”globalculturalinitiativeintothebusiness
»EnhancedcommunicationandcollaborationwithinandacrossourexecutiveteamandwithSantander
andSHUSA
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Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
HowwecompensatedourotherNEOs
ISMAILDAWOOD
AGE:45TITLE:ChiefFinancialOfficer
INDIVIDUALPERFORMANCEGOALS PERFORMANCEASSESSMENT
(InadditiontooverallBonusPoolobjectivesdiscussedbelow)»Meetorexceed2016budgetfornetincome,
accountingfornon-controllablefactors»Deliverexpensemanagementdiscipline
»Remediateanyidentifiedaudit/controlrelated
deficiencieswithinprescribedtimeframes»Establishformalfinancialreportingprocessesto
ensureentireorganizationisoperatingfromsamesetoffinancialinformation
»Evaluatetalentandfinanceorganizationandexecute
anyneededchangesinfirsthalfof2016»Successfullyonboardnewauditors
»SuccessfullypartnerwithRiskorganizationon
continuedimprovementinoverallRiskandComplianceculture
2016COMPENSATIONDECISIONS»BaseSalary–Increasedfrom$650,000to$724,750,
perDecember2016letteragreement,tore-balancecompensation
»AnnualBonus–Annualbonusawardof$1,401,500
inaccordancewithDecember2016letteragreement,providedinamixofcurrentanddeferredcashandRSUawards
»Sign-onCashBonus–InMarch2016,Mr.Dawood
receivedaone-timecashbonusof$1,221,555inconnectionwithhisrecruitmentasCFO
InadditiontoMr.Dawood’scontributiontowardtheoverallBonusPoolobjectivesdiscussedbelow,theCompensationCommitteespecificallyrecognizedthatMr.Dawood:»Effectivelyengagedandsustainedregulatoryinteraction
»Significantlyimprovedourregulatoryposture
»Increasedthemanagementskill-setteamthroughseniorkeyhires
»Successfullydroveremediationprogramsagainstourmaterialweaknesses
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Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
RICHARDMORRIN
AGE:47TITLE:ChiefOperatingOfficer
INDIVIDUALPERFORMANCEGOALS PERFORMANCEASSESSMENT
(InadditiontooverallBonusPoolobjectivesdiscussedbelow)»Activelydrive,support,andenforceriskmanagement
standards»Alignglobalcultureinitiativetobusinessobjectives
»Enhance/improvecommunicationswithdealershipsby
creatingrobust“DealerEngagementProgram”»Ensurereturnonassethurdlesareachievedineach
originationchannel»Ensure“DealerPerformanceManagement”program
properlyreports,analyzes,andreactstodealershipsthatdeliverpoorperformance
»Meetorexceed2016budgetfornetincome,
accountingfornon-controllablefactors2016COMPENSATIONDECISIONS»BaseSalary–Increasedfrom$520,000to$650,000,
inordertoalignwithmarket»AnnualBonus–Annualbonusawardof$715,000
(110%ofMr.Morrin’stargetbonus),providedinamixofcurrentanddeferredcashandRSUawards
»SANPSUAward–5,172PSUs
»SpecialRetentionBonus–Specialretentionaward
grantedinMarch2016of54,114RSUs(withagrantdatefairvalueof$480,000)
InadditiontoMr.Morrin’scontributiontowardtheoverallBonusPoolobjectivesdiscussedbelow,theCompensationCommitteespecificallyrecognizedthatMr.Morrin:»Effectivelybalancedrisk/rewardmanagementwithincomeandprofitability
»Providedstrongengagementandinteractionwithmultipleregulatoryparties
»Wasagreatcollaborator;proactivelybroughtappropriatepartiestogethertofindeffectiveandefficient
solutionstoproblems»Wasastrongtalentmanagerleader,adeptatidentifyingtalentandbuilding/developingeffective
teams
SC2017ProxyStatement
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Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
KALYANSESHAN
AGE:49TITLE:ChiefRiskOfficer
INDIVIDUALPERFORMANCEGOALS PERFORMANCEASSESSMENT
(InadditiontooverallBonusPoolobjectivesdiscussedbelow)»Deliveronregulatoryimprovementgoals
»Ensurestrategicplanandbusinessstrategiesalignto
Board-approvedRiskAppetiteStatementandprovidereturnonequity
»RefinecurrentRiskandControlSelfAssessment
(RCSA)program»Establish“DealerManagementProgram”
»EnsureliquidityandIRRismanagedinaccordance
withregulatoryexpectations»Establishstrongandeffectiveworkingrelationships
withregulators»Continuetoenhanceriskgovernanceandreporting
principles2016COMPENSATIONDECISIONS»BaseSalary–Increasedfrom$490,000to$665,000,
effectiveJanuary2016,inordertoalignwithmarket»AnnualBonus–Annualbonusawardof$645,000
(110%ofMr.Seshan’stargetbonus),providedinamixofcurrentanddeferredcashandRSUawards
»SANPerformanceAward–5,628PSUs
InadditiontoMs.Seshan’scontributiontowardtheoverallBonusPoolobjectivesdiscussedbelow,theCompensationCommitteespecificallyrecognizedthatMr.Seshan:»Madesignificantprogressonregulatoryimprovementgoals
»Demonstratedabalancedapproachofriskandrewardandensuredthatappropriateriskmanagement
practicesweresupportiveofbusinessgoals»Builtcrediblerelationshipswithregulatorsandworkedcloselywithlinesofbusinessestoresolve
outstandingregulatorymatters
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SC2017ProxyStatement
Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
CHRISTOPHERPFIRRMAN
AGE:56TITLE:ChiefLegalOfficerandGeneralCounsel
INDIVIDUALPERFORMANCEGOALS PERFORMANCEASSESSMENT
(InadditiontooverallBonusPoolobjectivesdiscussedbelow)»ContributetocultureofRiskManagementand
Compliancefunctions»EnhanceBoardandmanagementstructuresand
policyprocedures»BuildoutandoverseeConsumerPracticesfunction
»Manageoutsidelegalexpense
»BuildandstrengthenlegalfunctiontoalignwithSC
objectives»CoordinateSCpoliciesandpracticeswithSHUSA
»Contributetowardsmeetingorexceedingbudgetfor
netincome,accountingfornon-controllablefactors2016COMPENSATIONDECISIONS»BaseSalary–$649,418;nochangefrom2015
»AnnualBonus–Annualbonusawardof$520,000
(100%ofMr.Pfirrman’stargetbonus),providedinamixofcurrentanddeferredcashandRSUawards
»SANPSUAward–3,118PSUs
»SpecialRetentionBonus–Inaccordancewitha
retentionagreement,Mr.PfirrmanreceivedaspecialretentionbonusinDecember2016intheamountof$600,000,providedinamixofcurrentanddeferredcashandRSUawards
InadditiontoMr.Pfirrman’scontributiontowardtheoverallBonusPoolobjectivesdiscussedbelow,theCompensationCommitteespecificallyrecognizedthatMr.Pfirrman:»Ledseveralsubstantialandstrategiclegalmatters
»Wasadrivingforcebehindsignificantregulatoryimprovements
»Wasapragmaticbusinessadvisorandlegalpartneroncomplexcommercialandregulatoryissues
»DemonstratedsoundjudgmentandwasatrustedcolleaguetopeersinallaspectsofhisChiefLegal
Officerrole»Oversawsignificantimprovementinourgovernancepractices
SC2017ProxyStatement
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Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
PROCESSFORDETERMININGEXECUTIVECOMPENSATIONCompensationCommitteeTheCompensationCommitteesetsthecompensationforourexecutiveofficers,includingourNEOs,andhasoversightof,amongotherthings,adoption,modification,andterminationofthetermsofourexecutiveequity-basedincentiveplan(s)(inwhichourNEOsparticipate)andapprovalofamountspaidtoourNEOsunderthoseplans.TheCommitteeoperatesunderawrittencharteradoptedbytheBoardthatispublishedontheinvestorrelationssectionofourwebsiteathttp://investors.santanderconsumerusa.com.TheCompensationCommitteeconductsanin-depthassessmentofeachNEO’sperformanceagainstSCandindividualgoalsandthenappliesitsjudgmenttomakecompensationdecisions.TheCommitteeutilizesaformulatoapproveabonuspoolforexecutiveofficersandcertainotherseniormembersofmanagement(see“SCBonusPool”inthisCD&Aforfurtherinformation),butdoesnototherwiserelyonaformulaormatrixtomakeindividualcompensationdecisions.TheCommitteebelievesthisprocessprovidesaccountabilityforperformanceagainstSCandindividualgoalsandenablestheCommitteetoassesseffectivelythequalityoftheperformanceandleadershipdemonstratedbyeachNEO.Importantly,theCompensationCommitteebelievesthattheprocessalsodifferentiatesamongeachNEO’sperformanceandmotivateseachNEO’sshort-termandlong-termresultsaswellaspromotesinnovationandbusinesstransformationwithinSC.ToadvisetheCommitteeinfulfillingitsdutiesandresponsibilities,theCommitteeretainedFredericW.Cook&Co.,Inc.(“Cook&Co.”)for2016toactasitsindependentconsultant.Cook&Co.reportsdirectlytothe
&Co.ascompensationconsultantstotheCommitteehavenotpresentedanyconflictofinterest.InitsroleofindependentcompensationconsultanttotheCompensationCommittee,Cook&Co.attendedCommitteemeetingsandprovidedindependentadviceoncurrenttrendsandbestpracticesincompensationdesignandprogramalternativesandadvisedonplansorpracticesthatmayimprovecompensationprogrameffectiveness.Cook&Co.alsoevaluatedourcompensationpracticesinlightofregulatoryexpectationsandprovidedfeedbackonsuchregulatoryexpectationstotheCommittee.Cook&Co.maymeetwithourCEOregardingthecompensationofourexecutiveofficers,includingourNEOs,butdoesnotmeetwithourCEOtodiscussanyaspectofhiscompensation.Cook&Co.assistedtheCompensationCommitteebyprovidingpreliminarycompetitivemarketandindustryinformationregardingcompensationforourNEOsandexecutiveofficersfor2016.Inprovidingsuchinformation,Cook&Co.developedaConsumerFinancepeergroup,composedofconsumerfinancecompanieswithwhichSCcompetesdirectlyforbothbusinessandtalent,andageneralBankingpeergroupwithwhichwecompetefortalent.Indeterminingcompaniesforinclusioninthepeergroup,Cook&Co.consideredcomparableindustryandbusinessmodelandcomparablesize.InreviewingNEOpaylevels,theCompensationCommitteeconsideredthemarketdataprovidedbyCook&Co.frombothpeergroups,andconsideredthesizeofthefirmsandthenatureoftheirbusinessesinusingthisdata.
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SC2017ProxyStatement
CommitteeandperformsnootherworkforSC.Aspartofits2016reviewofCook&Co.,theCommitteeanalyzedCook&Co.’sindependencefrommanagementandwhetherhiringCook&Co.wouldraiseaconflictofinterest.TheCommitteeperformedthisanalysisbytakingintoconsiderationthefollowingfactorssetforthinSection303A.05oftheNYSEListedCompanyManual:
» AnyotherservicesprovidedtousbyCook&Co.;
» TheamountoffeesCook&Co.receivedfromusasapercentageofCook&Co.’stotalrevenue;
» PoliciesandproceduresCook&Co.utilizestopreventconflictsofinterest;
» Anybusinessorpersonalrelationshipoftheindividualcompensation
advisorofCook&Co.withanymemberoftheCompensationCommitteeoranexecutiveofficerofours;
» AnybusinessorpersonalrelationshipofCook&Co.withanexecutiveofficerofours;
» AnySCstockownedbyCook&Co.ortheCompensationCommittee’sindividualadvisor;and
» AnybusinessorpersonalrelationshipofCook&Co.withanexecutiveofficerofours.
WithrespecttotheCompensationCommittee’sevaluationofCook&Co.’sindependence,SCdidnotpayanyfeestoCook&Co.beforeitsappointmentinOctober2015,orsincethattimeotherthaninconnectionwithworkperformedfortheCommittee.TheCommitteedetermined,basedonitsanalysisoftheabovefactors,thatCook&Co.isindependentfrommanagementandthattheworkofCook&Co.andtheindividualcompensationadvisorsemployedbyCook
TheCompensationCommitteedidnotaimtosettargetcompensationatanyspecificpositioningagainstthepeergroupsbutusedthepeergroupsasageneralreferencepointasitmadecompensationdecisionsforourNEOsandexecutiveofficers.ThefollowingtablesetsforthourConsumerFinanceandBankingpeergroups.
PEERGROUPS
CONSUMERFINANCE
BANKING
AllyFinancialInc.
CapitalOneFinancialCorporation
ConsumerPortfolioServices,Inc.
CreditAcceptanceCorp.
DiscoverFinancialServices
PRAGroup,Inc.
SpringleafHoldings,Inc.
SynchronyFinancial
BOKFinancialCorporation
CITGroupInc.
CitizensFinancial
Group,Inc.
ComericaIncorporated
FifthThirdBancorpBanks
HuntingtonBancsharesIncorporated
KeyCorp.Banks
RegionsFinancialCorporation
SunTrustBanks,Inc.
SVBFinancialGroup
ThePNCFinancialServicesGroup,Inc.
ZionsBancorporation
Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS ConsiderationofSay-on-PayVote
PRINCIPALCOMPONENTSOFEXECUTIVECOMPENSATIONOverviewofComponents
ELEMENT
DESCRIPTIONANDPURPOSE
BaseSalary
»
Fixedcashcompensationcomponentthatreflectstheofficer’spositionandresponsibilities.
»
OffersstabilityforNEOsandallowsustomaintainastablemanagementteam.
AnnualBonus
»
AnnualbonusprogramdesignedtomotivateandrewardtheachievementofSCand/orindividualperformancegoals.
»
For2016,theCompensationCommitteeawardedbonusestoourNEOsbaseduponabonuspoolmethodologyadoptedbytheCommittee.
»
Theannualbonusiscomprisedofbothshort-termandlong-termincentives.AportionofthebonusisdeferredincashandRSUs(asmorefullydescribedbelow),aspartofabalanceddesignintendedtoappropriatelybalancecompensationrisk.
»
For2016,exceptforMr.Morrin,aportionofthedeferredcashandRSUsarealsosubjecttofutureSantanderandSCperformancegoalstofurtherencouragelong-term,sustainableperformance.Additionally,forallNEOs,paymentofthedeferredcashandRSUsisspecificallyconditionedupontheabsenceofseveralnegativeriskand/orlegalevents,including,butnotlimitedto,anyofthefollowing:(i)materialfailureswithrespecttoriskmanagementbyusandanyofouraffiliates;(ii)anymaterial,negativerestatementofourfinancialstatementsasaresultofactivitiescarriedoutonorafterJanuary1,2016;(iii)materialbreachbytheNEOofanyofourinternalrulesorregulations;or(iv)amaterial,negativechangeinourcapitalizationorriskprofile.
Long-TermEquity-BasedIncentiveCompensation
»
NEOs(otherthanMr.Dawood)receivedagrantofperformance-basedRSUsin2016underthe2015SANPerformanceAwardprogram,whichvestinMarch2019basedonascorecardofSantanderperformancegoals.Theseawardsarenotintendedtobemadeinfutureyears.
»
Inadditiontothelong-termincentivecomponentsoftheannualbonus,certainofourNEOsreceivedcertainone-timeretentiongrantsoftime-vestingRSUsin2016,whichgenerallyvestoverathree-yearperiodsubjecttocontinuedservice(withcertainexceptions).
»
Alignslong-termNEOandstockholderinterestsandencouragesretention.
Retirement,HealthandWelfareBenefits;
Perquisites
»
ProvideNEOswithstabilityduringemploymentandintoretirementandarecompetitivewithoverallmarketpractices.
EmploymentAgreements
»
SeverancebenefitsprovidedtocertainNEOsuponcertainterminationsofemployment(asmorefullydescribedbelow).
»
FacilitatesretentionofNEOsbyprovidingincomestabilityintheeventofjobloss.
SC2017ProxyStatement
33
TheCompensationCommitteevaluesinputfromourstockholdersonourexecutivecompensationprogramandourprinciplesandobjectiveswhendeterminingexecutivecompensation.OnewaytheCommitteereceivesthatinputisthroughtheresultsofanadvisorystockholdervoteonexecutivecompensation(the“Say-on-Payvote”).WeholdaSay-on-Payvoteeverythreeyears,mostrecentlyin2015,basedon
thepreferenceexpressedbyourstockholdersatour2015AnnualMeeting.Inthe2015Say-on-Payvote,asignificantmajorityofourstockholders,over85%ofvotescast,approved,onanadvisorybasis,thecompensationforourNEOs.TheCommitteedidnottakeanyspecificactionswithrespectto2017compensationdecisionsforourNEOsasaresultofthe2015Say-on-Payvote.
TheCompensationCommitteeusesthefollowingelementsofcompensationtoattractandretainNEOsandmaintainastableteamofeffectiveleaders,tobalancethecompensationofourNEOswiththeshort-termandlong-termobjectivesofSC,andtoaligntheinterestsofourNEOswiththeinterestsofallofourstockholders.For2016,thecompensationthatwepaidtoourNEOsconsistedprimarilyofbasesalaryandshort-and
long-termincentiveopportunities,aswedescribemorefullybelow.Inaddition,ourNEOswereeligibleforparticipationincompany-widehealthandwelfarebenefitsplans,andweprovidedourNEOswithcertainhealthandwelfarebenefitsandperquisitesnotavailabletoouremployeesgenerally,aswedescribemorefullybelow.TheprincipalelementsofcompensationavailabletoourNEOsin2016wereasfollows:
Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
BaseSalary
AnnualBonuses
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SC2017ProxyStatement
BasesalaryreflectseachNEO’slevelofresponsibility,leadership,andtenure,aswellastheCompensationCommittee’sevaluationofeachNEO’scontributiontotheperformanceandprofitabilityofSC.InestablishingeachNEO’sannualbasesalary,theCommitteeconsideredmarketsalarydata,ourbudget,achievementofperformanceobjectives,andourCEO’sassessmentoftheotherNEOs’performance.ExceptforMr.SeshanandMr.Pfirrman,thebasesalariesofourNEOsweregenerallysetinaccordancewitheachNEO’semploymentagreement.WhileeachsuchNEO’semploymentagreementprovidesforthepossibilityofincreasesinbasesalary,annualincreasesarenotguaranteed.
ThefollowingtableprovidesdetailregardingeachNEO’sbasesalaryasofDecember31,2016:
NAME
BASESALARY($)
JasonKulas 1,800,000
IsmailDawood 724,750
RichardMorrin 650,000
KalyanSeshan 665,000
ChristopherPfirrman 649,418
TheCompensationCommitteeapprovedincreasesinbasesalariesforcertainNEOsduring2016.Formoreinformationregardingthesebasesalaryincreases,see“2016CompensationActions”inthisCD&A.
Introduction.For2016,theannualcompensationofourNEOsincludedbonuspaymentspayableincashandRSUspursuanttoSC’sSeniorExecutiveAnnualBonusPlan(the“BonusPlan”).TheBonusPlanisintendedtoprovideanincentiveforsuperiorworkandtomotivatecoveredkeyexecutivestowardevengreaterachievementandbusinessresults,totietheirgoalsandintereststothelong-terminterestsofourstockholders,andtoenableustoattractandretainhighly-qualifiedexecutives.TheBonusPlanisabonusplanunderwhichourexecutiveofficers,includingourNEOs,willbeeligibletoreceivebonuspaymentsforaspecifiedperiod(forexample,ourfiscalyear).BonusesundertheBonusPlanmaybeperformance-basedordiscretionary.IndividualBonusTargets.TheCompensationCommitteeassignedtoeachNEOatargetbonusawardopportunityundertheBonusPlanfor2016basedontheNEO’sroleandresponsibilities,rateofbasesalary,andcompetitivepracticesatourcompensationpeergroups.ThefollowingtableprovidesdetailregardingeachNEO’stargetbonusundertheBonusPlanforperformancein2016:
NAME
TARGETBONUS($)
JasonKulas 2,070,000
IsmailDawood N/A
RichardMorrin 650,000
KalyanSeshan 588,500
ChristopherPfirrman 519,200
Mr.Dawood’s2016bonuswasdeterminedunderthetermsofhisemploymentagreement.WeoriginallyenteredintotheemploymentagreementwithMr.DawoodinDecember2015whenhejoinedus.InordertorecruitMr.Dawood,hisemploymentagreementguaranteedhisannualbonusamountfor2016,andprovidedforanadditionalannuallong-termRSUawardvaluedat$330,000.InDecember2016,Mr.Dawood’semploymentagreementwasamendedtoconformthestructureofhiscompensationopportunitieswithcertainSCandSantanderpoliciesdescribedfurtherbelowunder“FormofAwards:MixofCurrentandDeferredCashandRSUs,”andtofurtherencourageMr.Dawood’sretention.Aspartofthatamendment,histargetbonuswasincreasedfrom110%to140%ofhisbasesalary,andhisannuallong-termRSUawardswereeliminated.Theamountofhisguaranteedbonusfor2016wassetat$1,401,500.Thisamountincludesboththeincreasedtargetbonuspercentageandthevalueoftheforegoneannuallong-termRSUawardfor2016.Mr.Dawood’semploymentagreementdoesnotprovideforaguaranteedbonusamountfor2017orlater.
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COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
SCBONUSPOOLMETRIC
WEIGHTINGOFSC
BONUSPOOLMETRIC
Results,StrategyandCustomers
»NetIncomefor2016vs.budget
»ReturnonRisk-WeightedAssets(RoRWA)vs.budget 70%
»Implementationofcomprehensivesurveyandprogramtomeasureandreportcustomersatisfaction
Regulatory,ComplianceandRisk
»Completionofcriticalmilestones 20%
EmployeesandCulture
»Improvedemployeeenablement 10%
»Retentionofkeytalent(90%top-ratedperformers)
SHUSAAdjustment Formulaic
DiscretionaryAdjustment +/-20%
SC2017ProxyStatement
35
SCBonusPool.TheCompensationCommitteeapprovedtheBonusPoolasamethodologyforsettingtheoverallfundingofBonusPlanawardswithrespectto2016forourexecutiveofficers,includingourNEOs,andcertainseniormembersofmanagement.ThetargetamountoftheBonusPoolisthesumoftheindividualtargetbonusamounts.TheBonusPool
methodologyincorporatesabalanced,“scorecard”approachthatconsidersourfinancialperformanceagainstbudgetedfinancialgoals,aswellasperformancerelatedtocustomersatisfaction,regulatorycompliance,employees,andculture.TheCommitteeapprovedthefollowingmetricsfortheBonusPoolfor2016:
Forpurposesofthe2016BonusPool: » “Netincome”isdefinedunderU.S.GAAP.
» “RoRWA”(or“returnonrisk-weightedassets”)isanon-GAAPmeasureandisdefinedastheratioofnetincometototalrisk-weightedassets.(Undercertainbankingregulators’risk-basedcapitalguidelines,assetsandcreditequivalentamountsofderivativesandoff-balancesheetexposuresareassignedtobroadriskcategories.Theaggregatedollaramountineachriskcategoryismultipliedbytheassociatedriskweightofthecategory.Theresultingweightedvaluesareaddedtogetherwiththemeasureformarketrisk,resultinginourtotalrisk-weightedassets.)
For2016,weperformedslightlybelowtargetonournetincomeandRoRWAgoals.ForpurposesoftheBonusPlan:
» Ournetincomefor2016was$766million,slightlybelowour2016budgetednetincomeof$775million,and
» OurRoRWAfor2016was2.05%,slightlybelowour2016budgetedRoRWAof2.08%.
TheCompensationCommitteedeterminedthatwehadmetthegoalsrelatedto:
» Implementationofacomprehensivesurveyandprogramtomeasureandreportcustomersatisfaction;
» Completionofcriticalmilestones;and » Retentionofkeytalent.
TheCompensationCommittee,however,determinedthatSChadnotmetitsgoalsregardingemployeeenablement.
ThefinalcalculatedscoreoftheBonusPoolbeforetheexerciseofanydiscretionaryadjustmentwas94.7%.TheBonusPoolprovidesthatthisfinalcalculatedscorebeadjustedbythedifferencebetweenourbonusplanscoreandthefinalscoreunderSHUSA’sbonusplan,multipliedby20%.SHUSA’sbonusplanscoreforthispurposewas102%;therefore,anadjustmentof1.5%wasappropriate.
Table of Contents
COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
SCBONUSPOOLMETRIC
RESULTS
TARGET
WEIGHTING
FINALSCBONUSPOOL%
Results,StrategyandCustomers
»NetIncomefor2016vs.budget Slightlybelowtarget
70%
69.2% »ReturnonRisk-WeightedAssets(RoRWA)vs.budget Slightlybelowtarget »Implementationofcomprehensivesurveyandprogramtomeasureandreportcustomer
satisfaction
Goalsmet
Regulatory,ComplianceandRisk
»Completionofcriticalmilestones
Goalsmet 20%
20%
EmployeesandCulture
»Improvedemployeeenablement
Goalsnotmet 10% 5.5%
»Retentionofkeytalent(90%top-ratedperformers)
Goalsmet
SHUSAAdjustment
Exercised Formulaic 1.5%
DiscretionaryAdjustment Exercised +/-20% 5.8%
TOTAL
102%
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SC2017ProxyStatement
WhiletwoofthemetricsfortheBonusPoolwereslightlybelowtargetandtheemployeeenablementgoalwasnotachieved,netincomewasstronginanincreasinglycompetitivemarketandourNEOsmadesignificantstridesinachievingtheirindividualgoals,instillingacultureofcomplianceandbalancingrisk/rewardmanagementwithincomeandprofitability.Asnotedabove,the
CompensationCommitteemayuseitsdiscretiontoadjustthefinalBonusPoolfundingupordownby20percentagepointsineitherdirection.Accordingly,theCommitteeinitsdiscretiondeterminedthattheBonusPoolshouldbefundedat102%oftargetfor2016,summarizedasfollows:
IndividualPerformanceAssessmentsandAwardDeterminations.Asdescribedabove,ourperformanceresultedinanapprovedfundingof102%oftheBonusPooltarget.Wemultiplythisbonuspoolpercentagebytheapplicabletargetbonusamountofeachexecutiveofficer,includingeachNEO,toestablishaninitialstartingpointforeachexecutivesubjecttotheBonusPool.
Eachexecutive’sawardundertheBonusPlanissubjecttoadiscretionaryadjustment,eitherpositiveornegative,basedontheevaluationoftheexecutive’sperformancebytheCompensationCommittee.Innoevent,however,willtheaggregatetotaloftheactualbonusamountsexceedtheaggregatetotaloftheBonusPool.TheCommitteebelievesthatthisindividualperformancereviewanddiscretionaryadjustmentsservestockholderinterestsbyprovidingtheCommitteewithameanstodifferentiatecompensationoutcomesamongourNEOsbasedonthequalityoftheperformanceandleadershipdemonstratedbyeachNEO.
TheCompensationCommitteeconductedadetailedevaluationandassessmentofeachNEO’s2016performanceagainstpre-establishedperformancemeasuresthatweretiedtofinancialperformanceandstrategicinitiatives,includingriskandcompliancemeasures.AllofourNEOsreceivedaperformanceratingofmeetsorexceedsexpectations.See
“2016CompensationActions”inthisCD&Afortheadditionalinformationontheindividualperformancegoalsandassessments.
For2016,followingthereviewofourperformanceandeachNEO’sindividualperformance,theCompensationCommitteeapprovedawardsundertheBonusPlanforeachsuchNEOasfollows:
NAMEDEXECUTIVEOFFICER
2016BONUSPLANAWARD
($)
%OFTARGETBONUS
AWARDED
JasonKulas
1,967,000 95%
IsmailDawood
1,401,500 N/A*
RichardMorrin
715,000 110%
KalyanSeshan
645,000 110%
ChristopherPfirrman
520,000
100%
*Note:Mr.Dawood’s2016bonusamountwasdeterminedpursuanttohisemploymentagreementasdiscussedabove.
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COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
NAMEDEXECUTIVEOFFICER
CASHPORTIONOF2016BONUSAWARD($)
RSUPORTIONOF2016BONUSAWARD($)
JasonKulas
983,500 983,500
IsmailDawood
700,750 700,750
RichardMorrin
357,500 357,500
KalyanSeshan
322,500 322,500
ChristopherPfirrman
260,000 260,000
SC2017ProxyStatement
37
For2016,awardsundertheBonusPlanwerepayableincashandRSUsasdiscussedbelow.TheseamountswillappearintheSummaryCompensationTableofourproxystatementsoverseveralyearsasfollows:
» TheimmediatelypayablecashamountsoftheBonusPlanawardsare
reflectedinthe“Bonus”columnofthe“—SummaryCompensationTable.”
» ThedeferredcashamountsoftheBonusPlanawardsaresubjecttoadditionalvestingrequirementsdiscussedbelowandwillbereflectedinthe“AllOtherCompensation”columnofthe“—SummaryCompensationTable”forsubsequentyearstotheextentearnedandvested.
» TheRSUportionoftheBonusPlanawardsweregrantedunderSC’sOmnibusIncentivePlaninMarch2017(the“OmnibusPlan”)andwillbereflectedinthe“StockAwards”columnofthe“—SummaryCompensationTable”for2017.
FormofAwards:MixofCurrentandDeferredCashandRSUs.Asweareacontrolledcompany,ownedindirectlybySantander,certainofourexecutiveofficers,includingourNEOs,andotheridentifiedstaffaresubjecttoDirective2013/36/EU
(“CRDIV”)promulgatedbytheEuropeanParliamentandCounciloftheEuropeanUnion.UnderSantander’sManagementBoardCompensationPolicyandIdentifiedStaffPlan,certainidentifiedstaff,includingallofourexecutiveofficersandallofourNEOs,arerequiredtodeferreceiptofaportionoftheirvariablecompensation(includingallbonusespaidundertheBonusPlan)inordertocomplywithCRDIV.Ultimately,thesepoliciesareintendedtoensurethatannualbonusawardsencouragesustainable,long-termperformanceconsistentwithourriskappetiteandriskmanagementpoliciesandarealignedwithlong-termstockholderinterests.
Accordingly,eachNEO’saggregateawardundertheBonusPlanfor2016waspayable50%incash(aportionofwhichwaspaidimmediatelyandaportionofwhichwasdeferred)and50%intheformofstock-settledRSUs(aportionofwhichwasvestedandsettledimmediatelyandaportionofwhichwassubjecttovesting).AfterthesharessubjecttotheRSUsaresettled,theywillremainsubjecttotransferandsalerestrictionsforoneyear.ThefollowingtablereflectstheportionsofeachNEO’sawardfor2016thatwaspayableinformofcashandRSUs:
TheportionofthetotalawarddeferredisbasedonSantanderpoliciesasimplementedbyus.Underthosepolicies,Mr.Kulashas50%ofhisBonusPlanawarddeferred,andtheotherNEOshave40%oftheirBonusPlanawardsdeferred.
Thedeferredportion(whethercashorRSUs)becomesearnedandvestedannuallyoveravestingperiodoffiveyearsforMr.KulasandthreeyearsfortheotherNEOs.Generally,theexecutivemustremaincontinuouslyemployedwithusthrougheachvestingdate.
Forthe2016awards,additionalcorporateperformancegoalswereaddedinorderforMr.Kulastoearnthevestinginstallmentsinyearsthree,four,andfive,andfortheotherNEOs(otherthanMr.Morrin)toearnthevestinginstallmentforyearthree.Theseperformancegoalsfurtherencouragesustainable,long-termperformanceandreflecttheintenttonotmakefuturegrantsundertheSANPerformanceAwardprogram.
Theperformancemetricsareweighted50%towardsSantanderperformanceand50%towardsSCperformanceandfollowabalanced,“scorecard”approach.
» TheSantandergoalsrelateequallyto(1)growthinSantanderearningspershare(“EPS”)over2015-2018,(2)Santander’srelativetotalshareholderreturn(“TSR”)over2016-2018,(3)attainmentbySantanderofcertaincapitalratiogoalsbyDecember31,2018,and(4)growthinSantander’sRoRWAover2015-2018.
» SC’sgoalsrelateequallyto(1)SCattainingaspecifiedlevelofEPSbyDecember31,2018,(2)SC’srelativeTSRover2016-2018,(3)SCattainingcertaincapitalratiogoalsbyDecember31,2018,(4)SCattainingaspecifiedlevelofreturnonassetsbyDecember31,2018,and(5)SCattainingaspecifiedlevelofexpenseratiobyDecember31,2018.
Performancebelowtargetgoalsforeachcomponentresultinbelow-targetpayouts,andperformancebelowcertainthresholdgoalswillresultinnopayoutforeachcomponent.Noamountgreaterthanthetargetawardcanbeearned.
Thepaymentofthedeferredportionofthe2016awardsundertheBonusPlanisconditionedonavoidanceofcertaineventsorconduct,including:(1)ourdeficientfinancialperformance;(2)
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COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
NAMEDEXECUTIVEOFFICER
TOTALAMOUNTDEFERRED($)
CASHDEFERRED($)
RSUsDEFERRED($)
JasonKulas
983,500 491,750
491,750
IsmailDawood
560,600 280,300
280,300
RichardMorrin
286,000 143,000
143,000
KalyanSeshan
258,000 129,000
129,000
ChristopherPfirrman
208,000 104,000
104,000
Long-TermEquity-BasedIncentiveCompensation
38
SC2017ProxyStatement
materialbreachbytheNEOofanyofourmaterialinternalrulesorregulations;(3)materialnegativerestatementofourfinancialstatements(otherthananyrestatementundertakenasaresultofachangeinaccountingstandards);(4)materialnegativechangeinourcapitalizationorriskprofilepriortotheapplicablesettlementdate;or(5)certainotherdetrimentalconductbytheNEO.Theseconditionsareintendedtofurtherreinforcea
businessculturethatpromotesconductbasedonthehighestethicalstandardsconsistentwithourriskmanagementpolicies.
OurNEOshadthefollowingamountsoftheirvariablecompensationfor2016deferredpursuanttothedesigndescribedabove:
Introduction.InadditiontoRSUsgrantedasaportionoftheBonusPlanaward,whichareaformoflong-termequityincentive,theCompensationCommitteemay,initsdiscretion,grantadditionallong-termincentiveawardsunderourOmnibusPlan.Theseawardsmaybeintheformofrestrictedstock,RSUs,stockoptions,orotherformsofawardpermittedundertheOmnibusPlan.
Long-termequity-basedincentivecompensationencouragesourNEOstocreateandsustainstockholdervalueoverlongerperiods.Inaddition,long-termequity-basedincentivecompensationpromotesretentionbecauseitsfullvaluecannotberealizeduntilvestingoccurs,whichgenerallyrequirescontinuedemploymentformultipleyears,typically,threetofiveyears.
2016Awards.InMarch2016,theCompensationCommitteemadeaspecialretentionawardofRSUstoMr.Morrinintheamountof$480,000,vestingannuallyoverthreeyears.Thegrantwaspartofaretentionprogramfollowingthetransitionintheexecutiveteamduring2016.
Also,inNovember2016,Mr.Pfirrmanreceivedpaymentofaretentionbonusintheamountof$600,000,payableinamixofimmediateanddeferredcashandRSUs.ThiswaspartofaretentionawardpreviouslygrantedbySHUSAandstructuredsoastocomplywithCRD-IV.
SANPerformanceAwards.Wepreviouslyawardedperformance-basedRSUs(“PSUs”)undertheOmnibusPlanaspartoftheSANPerformanceAwardprogram.ThePSUsbecomeearnedbasedonmulti-yearperformanceofSantander.Theawardsmadein2015becomeearnedbasedonSantander’srelativeTSRperformanceover2014-2017.SantanderchangedthedesignforthePSUsgrantedin2016,asdescribedinmoredetailbelow.SantanderandtheCompensationCommitteedonotintendtocontinuethisprogramforfutureyears,andasnotedabovethishasresultedinchangestothetargetbonusopportunityforcertainofourNEOsandadesignchangetoRSUsgrantedundertheBonusPlantoincludeafutureperformancerequirementforaportionofthevestingforourNEOs(exceptforMr.Morrin).
OurNEOs,otherthanMr.Dawood,receivedagrantofPSUsundertheSANPerformanceAwardprograminNovember2016.
Mr.Dawooddidnotreceiveanawardundertheprogrambecausetheawardswerebasedon2015performanceandhisemploymentwithusdidnotbeginuntilDecember2015.ThefollowingtableliststhetargetnumberofPSUsgranted:
NEO PSUsGRANTED
JasonKulas 20,536
RichardMorrin 5,172
KalyanSeshan 5,628
ChristopherPfirrman 3,118
UndertheSANPerformanceAwardprogram,thePSUsreflectedinthechartabovewillbecomevestedinMarch2019basedontheachievementofarangeofperformancegoalsbySantander:
GOAL
WEIGHTING
SANEPSgrowth,2015-2017,relativetoacompetitorgroup 25%
SANreturnontangibleequityin2017 25%
SANemployeesatisfaction(#ofmarketsinwhichSANgroupmemberiswithintop3bankstoworkforin2017)
20%
SANcustomersatisfaction(#ofmarketsinwhichSANgroupmemberiswithintop3banksincustomersatisfactionindexin
2017)
15%
Individualcustomerloyaltygoals,asof12/31/17 7.5%
Corporatecustomerloyaltygoals,asof12/31/17 7.5%
SettlementofthePSUsiscontingentonourNEOremainingemployedthroughtheMarch2019settlementdate.AswithBonusPlanRSUs,thePSUsarealsoconditionedonavoidanceofcertain
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COMPENSATION-COMPENSATIONDISCUSSIONANDANALYSIS
SC2017ProxyStatement
39
eventsorconductbytheexecutive,including:(1)ourdeficientfinancialperformance;(2)materialbreachbytheNEOofanyofourmaterialinternalrulesorregulations;(3)materialnegativerestatementofourfinancialstatements(otherthananyrestatementundertakenasaresultofachangeinaccountingstandards);(4)materialnegativechangeinourcapitalizationorriskprofilepriortotheapplicablesettlementdate;or(5)certainotherdetrimentalconductbyourNEO.AfterthesharessubjecttothePSUsaresettled,theywillremainsubjecttotransferandsalerestrictionsforoneyear.
OtherCompensationInadditiontothebenefitsthatallofouremployeesareeligibletoreceive,ourNEOsareeligibletoreceivecertainotherbenefitsandperquisites.For2016,theadditionalbenefitsandperquisitesincludedacarallowanceandcompany-paidannualpremiumsforexecutivemedical,dentalanddisabilitybenefits.Thesebenefitsandperquisitesaregenerallyconsistentwiththosepaidtosimilarlysituatedexecutives.
RetirementBenefitsEachofourNEOsiseligibletoparticipateinourqualifieddefinedcontributionretirementplan(i.e.,401(k)Plan)underthesametermsasourothereligibleemployees,includingwithrespecttotheSCmatchingcontributionunderthe401(k)Plan.WeprovidethesebenefitsinordertofosterthedevelopmentofourNEOs’long-termcareerswithSC.WedonotprovidedefinedbenefitpensionbenefitsornonqualifiedorexcessretirementbenefitstoanyofourNEOs.
EmploymentAgreementsWehaveenteredintoemploymentagreementswitheachofourNEOs(exceptforMr.SeshanandMr.Pfirrman),establishingkeyelementsofcompensationinadditiontoourgenerally-applicableplansandprogramsandthatincludecertainrestrictivecovenants,suchasthoseprohibitingpost-employmentcompetitionorsolicitationbyourNEOs.Webelievethattheseagreementsprovidestabilitytousandfurthertheobjectivesofourcompensationprogram,includingourobjectiveofattractingandretainingthehighestqualityexecutivestomanageandleadus.See“Compensation—PotentialPaymentsuponTerminationorChangeofControl—EmploymentAgreements”inthisProxyStatementforadditionalinformationregardingourNEOemploymentagreements.
ClawbackPolicyIn2016,weadoptedaPolicyonMalusandClawbackRequirements(the“ClawbackPolicy”).TheClawbackPolicycontainsaframeworkunderwhichwewillimplementintoourincentivecompensationarrangements(1)provisionsthatcancauseunvestedcompensationtobereducedorforfeitedduringtheapplicablevestingperiod(oftenreferredtoas“malus”provisions)and(2)provisionsthatcancausepreviouslyearnedandpaidcompensationtoberepaid(oftenreferredtoas“clawback”provisions).Malusandclawbackprovisionsserveseveralpurposes,suchastoensurethatourincentivecompensationawardsarebasedonsustainable,appropriateandcompliantperformance;thatsuchperformanceisachievedconsistentlywithinapplicableriskframeworks;andthatouremployeesarediscouragedfrommanipulatingperformance
orfinancialmetricsorengaginginotherbehaviorsthatcouldadverselyimpactus.
EmployeescoveredbytheClawbackPolicyinclude,ataminimum,(1)employeesoremployeegroupsidentifiedas“coveredemployees”undertheGuidanceonSoundIncentiveCompensationPoliciesadoptedbyU.S.bankingagencies,(2)employeesdeterminedtobe“identifiedstaff”underCRDIVand(3)anyotheremployeeswhoreceiveincentivecompensationawardsthatwedetermineshouldbesubjecttomalusorclawbackrequirements.
IncentivecompensationcoveredbytheClawbackPolicywillinclude,ataminimum,(1)“incentivecompensationarrangements”withinthemeaningoftheGuidanceonSoundIncentiveCompensationPolicies,(2)“variableremuneration”withinthemeaningofCRDIVand(3)anyotherincentivecompensationarrangementsthatwedetermineshouldbecoveredbymalusorclawbackrequirements.
TheClawbackPolicyrequiresourapplicableincentivecompensationagreementstoreflectalldesignfeaturesofanymalusandclawbackrequirements,includingtriggeringevents,coveredemployeesandtimeperiodsduringwhichcompensationmaybesubjecttomalusandclawbackprovisions.Allofourmalusandclawbackrequirementsareintendedtobeenforceabletothemaximumextentpermittedbyapplicablelaw.
UndertheClawbackPolicy,malusprovisionsinclude,ataminimum,thefollowingtriggeringevents:(1)“detrimentalconduct”(asdescribedbelow);(2)breachofpost-employmentcovenants;and(3)themalustriggeringeventsrequiredbySantander’sremunerationpoliciesasineffectfromtimetotime,whichcurrentlyincludethefollowingcategoriesofevents:
» Significantriskmanagementfailuresatorbyus,orbyabusinessunitorcontrolorsupportfunctionofours;
» Materialrestatementofourfinancialstatements,exceptwhenappropriatepursuanttoachangeinaccountingstandards;
» Violationbythebeneficiaryofinternalregulations,policiesorcodesofconduct;
» SignificantchangesinthefinancialcapitalorriskprofileofSantander;
» Significantincreasesinrequirementstooureconomicorregulatorycapitalbasewhennotforeseenatthetimeofgenerationofexposures;
» Regulatorysanctionsorcriminalconvictionsforactsthatcouldbeattributabletousortothepersonnelresponsiblefortheacts;
» Anymisconduct,whetherindividualorcollective,inparticularwithrespecttomarketingofunsuitableproducts;and
» PoorfinancialperformanceofSantander.
ThemalustriggeringeventsundertheClawbackPolicyarenotlimitedtotheforegoingandwillbecustomizedandadjustedasappropriate.
UndertheClawbackPolicy,clawbackprovisionsinclude,ataminimum,thefollowingtriggeringevents:(1)“detrimentalconduct”(asdescribedbelow);(2)breachofpost-employmentcovenants;and(3)breachofapplicableanti-hedgingpolicies.TheclawbacktriggeringeventsundertheClawbackPolicyarenotlimitedtotheforegoingandwillbecustomizedandadjustedasappropriate.
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COMPENSATION-COMPENSATIONCOMMITTEEREPORT
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SC2017ProxyStatement
“Detrimentalconduct”undertheClawbackPolicyreferstocategoriesofemployeeconductspecifiedinincentivecompensationagreementsthatmaytriggerarighttoapplymalusorclawbackprovisionsagainsttheemployee.ThefollowinglistscategoriesofconductthatareconsidereddetrimentalconductundertheClawbackPolicy:
» Anemployee’sconductthatwouldpermitustoterminatetheemployeefor“cause”;
» Anemployee’scommissionofacriminalactthatvictimizesusora
customer,employeeorcounterpartyofoursorsubjectsustopublicridiculeorembarrassment;
» Improperorintentionalconductbyanemployeecausingreputationalharmtousorourcustomers;
» Anemployee’sbreachofafiduciarydutyowedtousoracustomerorformercustomerofours;
» Anemployee’sintentionalviolationof,orgrosslynegligentdisregardfor,
ourpolicies,rulesorprocedures,includinginconnectionwiththesupervisionoroversightofotheremployees;or
» Anemployeetakingormaintainingtradingpositions,orexecutinghisorherdutiesorresponsibilitiesinamannerthatresultsinaneedtorestatefinancialresultsinasubsequentreportingperiodorthatresultinasignificantfinanciallosstous.
TheClawbackPolicyisadministeredbyourChiefHumanResourcesOfficer,withtheadviceofourexecutive-levelmanagementhumanresourcescommittee,subjecttooversightandgovernancebyourCompensationCommittee.
TaxConsiderationsSection162(m)generallydisallowsafederaltaxdeductiontopubliccompaniesforcompensationgreaterthan$1millionpaidinanytaxyeartospecifiedexecutiveofficersunlessthecompensationqualifiesas“performance-basedcompensation”underthatsection.However,pursuanttothetransitionprovisionsunderSection162(m),certaincompensationarrangementsthatareenteredintobyacorporationbeforeitispubliclyheld,andthataredisclosedinthecorporation’sregistrationstatement,maynotbesubjecttothedeductibilitylimitsofSection162(m)foraperiodofapproximatelythreeyearsfollowingtheconsummationofthecorporation’spublicoffering(the“Exemption”).
TotheextentthattheyarenotintendedtoqualifyfortheExemption,certainofourcompensationarrangementsaredesignedtopermitustograntawardsthatmayqualifyas“performance-basedcompensation.”However,itispossiblethatawardsintendedtoqualifyforthetaxdeductionmaynotsoqualifyifallrequirementsofthe“performance-basedcompensation”exemptionarenotmet.Furthermore,theCompensationCommitteebelievesthatthetaxdeductionisonlyoneofseveralrelevantconsiderationsinsettingexecutivecompensationandtakesintoaccountamultitudeoffactorsinmakingexecutivecompensationdecisions.
Accordingly,theCommitteemay,incertaincircumstances,approvecompensationarrangementsthatprovideforcompensationthatisnotdeductibleforfederalincometaxpurposes.
CompensationRiskAssessmentAtleastannually,theCompensationCommitteeconductsanassessmentofthecompensationpoliciesandpracticesforouremployees,includingourexecutiveofficers,andwhethersuchpoliciesandpracticescreatedrisksthatwerereasonablylikelytohaveamaterialadverseeffectonus.Ourmanagementcompensationteamandanexecutive-levelmanagementhumanresourcescommitteeassisttheCommitteewithsuchriskassessmentandhelpensureourcompensationprogramsalignwithourgoalsandcompensationphilosophiesand,alongwithotherfactors,operatetomitigateagainsttheriskthatsuchprogramswouldencourageexcessiverisk-taking.
Webelieveourcompensationprogramsstriketheappropriatebalancebetweenshort-termandlong-termcomponents.Weconsiderthepotentialrisksinourbusinesswhendesigningandadministeringourcompensationprograms,andwebelieveourbalancedapproachtoperformancemeasurementandcompensationdecisionsworkstomitigatetheriskthatindividualswillbeencouragedtoundertakeexcessiveorinappropriaterisk.Ourcompensationprogramalsoissubjecttointernalcontrols,andwerelyonprinciplesofsoundgovernanceandgoodbusinessjudgmentinadministeringourcompensationprograms.
Basedonitsassessment,theCompensationCommitteehasdetermined,initsreasonablebusinessjudgment,thatourcompensationpoliciesandpracticesasgenerallyapplicabletoourexecutiveofficersandemployeesdonotcreaterisksthatarereasonablylikelytohaveamaterialadverseeffectonusandinsteadpromotebehaviorsthatsupportlong-termsustainabilityandstockholdervaluecreation.
CompensationCommitteeReportTheCompensationCommitteehasreviewedtheCD&AasrequiredbyItem402(b)ofRegulationS-KanddiscusseditwithSC’smanagement.Basedonsuchreviewanddiscussionswithmanagement,theCommitteehasrecommendedtotheBoardthattheCD&AbeincludedinthisProxyStatement.
SubmittedbytheCompensationCommittee:StephenA.Ferriss,ChairEdithE.HolidayJavierMaldonadoRobertJ.McCarthy
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COMPENSATION-EXECUTIVECOMPENSATIONTABLES
EXECUTIVECOMPENSATIONTABLESSummaryCompensationTableThefollowingtablesetsforththetotalcompensationpaidoraccruedfortheyearsendedDecember31,2016,2015,and2014(ifapplicable)foreachindividualwhoservedasourChiefExecutiveOfficerorChiefFinancialOfficerduring2016,andourthreeothermosthighlycompensatedexecutiveofficerswhowereservingasexecutiveofficersonDecember31,2016.TheseofficersarereferredtothroughoutthisProxyStatementasour“NEOs.”
NAMEANDPRINCIPALPOSITION
YEAR
SALARY($)(1)
BONUS($)(2)
STOCKAWARDS
($)(3)
OPTIONAWARDS
($)(4)
ALLOTHERCOMPENSATION
($)(5)
TOTAL($)
JasonKulasPresidentandCEO
2016 1,800,000 491,750 1,139,658 — 30,002 3,461,410 2015 1,392,581 446,304 540,479 764,000 25,541 3,168,905
2014 890,000
510,000
—
2,728,346
41,954
4,170,300
IsmailDawoodCFO
2016 724,750 1,642,005 — — 18,312 2,385,067
2015 32,500
—
1,330,018
—
—
1,362,518
RichardMorrinCOO
2016 531,923 214,500 765,372 — 43,772 1,555,567 2015 391,631 535,818 127,520 — 27,895 1,082,864
2014 340,000
76,500
—
—
36,875
453,375
KalyanSeshanCRO
2016 665,000 193,500 312,710 — 110,199 1,281,409
2015 158,308
395,821
—
277,200
3,323
834,652
ChristopherPfirrmanCLOandGeneralCounsel
2016 649,418
256,000
541,515
—
122,100
1,569,033
(1)Thebasesalaryamountsinthiscolumnrepresentactualbasecompensationpaidorearnedthroughtheendoftheapplicableyear.
(2)Theamountsinthiscolumnincludethenon-deferredcashportionoftheannualbonusearnedundertheBonusPlanfortheapplicableyear.See“CompensationDiscussionandAnalysis—PrincipalComponentsofExecutiveCompensation—AnnualBonuses”foradditionalinformation.Amountsinthiscolumnmayalsoincludeothercashsign-on,retentionorotherspecialbonuses.For2016,thisincludes(i)forMr.Dawood,aone-timecashsign-onbonusof$1,221,555inconnectionwithhisrecruitmentasCFO;and(ii)forMr.Pfirrman,$100,000asthenon-deferredcashportionofaretentionbonusawardgrantedinDecember2016.See“CompensationDiscussionandAnalysis—PrincipalComponentsofExecutiveCompensation—Long-TermEquityBasedIncentiveCompensation”foradditionalinformation.
(3)Theamountsinthiscolumnrepresenttheaggregategrantdatefairvalueoftheawardsdetailedunder“Fiscal2016GrantsofPlan-BasedAwards”inthisProxyStatement,whichfor2016werecomprisedof:
» RSUawardsgrantedinearly2016astheequityportionofannualbonusesundertheBonusPlangrantedforperformancein2015; » PSUsawardedundertheSANPerformanceAwardprograminNovember2016;and » Otherone-timeRSUawardsgrantedtocertainofourNEOs.
SECrulesrequiretheSummaryCompensationTabletoincludeineachyear’samounttheaggregategrantdatefairvalueofstockawardsgrantedduringtheyear.Typically,wegrantRSUawardsearlyintheyearaspartoftheannualbonusawardforprioryearperformance.Asaresult,theamountsforRSUawardsgenerallyappearintheSummaryCompensationTablefortheyearaftertheperformanceyearuponwhichtheywerebasedand,therefore,theSummaryCompensationTabledoesnotfullyreflecttheCompensationCommittee’sviewofitspay-for-performanceexecutivecompensationprogramforaparticularperformanceyear.Forexample,amountsshownas2016compensationinthe“StockAwards”columnreflectRSUawardsgrantedinFebruary2016for2015performance.See“CompensationDiscussionandAnalysis—PrincipalComponentsofExecutiveCompensation”foradiscussionabouthowtheCommitteeviewedits2016compensationdecisionsforourNEOs.ThegrantdatefairvalueofthestockawardsincludedintheSummaryCompensationTablerepresentstheaggregategrantdatefairvaluecomputedinaccordancewithFASBASCTopic718,basedontheclosingpriceofourCommonStockontheapplicablegrantdate,butexcludingtheeffectofpotentialforfeitures.Additionaldetailsonaccountingforequity-basedcompensationcanbefoundinNote1,“DescriptionofBusiness,BasisofPresentation,andSignificantAccountingPoliciesandPractices—StockBasedCompensation”andNote16,“EmployeeBenefitPlans”ofourconsolidatedfinancialstatementsfiledwiththeSEConForm10-KforthefiscalyearendedDecember31,2016.ForthePSUsgrantedundertheSANPerformanceAwardprogram,thegrantdatefairvaluewasbasedonanassumedprobableoutcomethatthefulltargetvalueoftheawardswouldbeearned(whichisalsothemaximumvalueofthoseawards).TheactualvalueofthePSUswilldependonachievementofspecifiedSantanderperformanceovertheapplicableperformanceperiods.See“CompensationDiscussionandAnalysis—PrincipalComponentsofExecutiveCompensation—Long-TermEquityBasedIncentiveCompensation”foradditionalinformation.Also,seethe“OutstandingEquityAwardsatFiscal2016YearEnd”tableinthisProxyStatementforadditionalinformationregardingthevestingparametersthatareapplicabletotheseawards.
(4)TheamountsinthiscolumnrepresentthegrantdatefairvalueofstockoptionsgrantedintheapplicableyearcomputedinaccordancewithFASBASCTopic718,butexcludingtheeffectofpotentialforfeitures.NostockoptionsweregrantedtoourNEOsin2016.Fordetailsontheassumptionsforcomputingthegrantdatefairvalueofstockoptionsgrantedinprioryears,seeNote1,“DescriptionofBusiness,BasisofPresentation,andSignificantAccountingPoliciesandPractices—StockBasedCompensation,”inthe“EmployeeBenefitPlans”footnotetoourconsolidatedfinancialstatementsfiledwiththeSEConForm10-Kfortheapplicablefiscalyear.
(5)Theamountsinthiscolumnforthemostrecentyeararedetailedbelowinthe“AllOtherCompensationTable.”Theamountsinthiscolumnincludetheamountoflong-termcashawardsgrantedinprioryearsasthedeferredcashportionofannualbonusawardsundertheBonusPlanthatbecameearnedandvestedintheapplicableyear.
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COMPENSATION-EXECUTIVECOMPENSATIONTABLES
AllOtherCompensationTable
NAME
CARALLOWANCE
($)
SC
CONTRIBUTIONTODEFINED
CONTRIBUTIONPLAN
EXECUTIVEDISABILITYBENEFITS
($)(a)
HOUSINGALLOWANCE
($)
DEFERREDANNUALVARIABLE
COMPENSATION($)(b)
PERSONALTRAVELEXPENSES
($)
OTHER(c)($)
TOTAL($)
JasonKulas
9,600
15,900
3,034
—
—
—
1,468
30,002
IsmailDawood
—
13,500
2,571
—
—
—
2,241
18,312
RichardMorrin
9,600
11,746
3,237
—
17,595
—
1,594
43,772
KalyanSeshan
9,600
9,046
3,489
27,371
—
22,738
37,955
110,199
ChristopherPfirrman
9,600
18,044
3,894
88,374
—
—
2,188
122,100
(a)AmountrepresentstheannualpremiumspaidbySCforNEOexecutivelifeanddisabilitybenefits.
(b)Reflectstheamountoflong-termcashawardsgrantedinprioryearsasthedeferredcashportionofannualbonusawardsundertheBonusPlanthatbecameearnedandvestedin2016.See“Compensation—CompensationDiscussionandAnalysis—PrincipalComponentsofExecutiveCompensation—AnnualBonuses”foradditionalinformation.
(c)Representsgross-upamountpaidtoNEOfortaxablefringebenefits.
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COMPENSATION-EXECUTIVECOMPENSATIONTABLES Fiscal2016GrantsofPlan-BasedAwardsThefollowingtableprovidesinformationregardingshort-termawardsandlong-termawardsgrantedtoourNEOsundertheOmnibusPlanduringtheyearendedDecember31,2016.Seethe“OutstandingEquityAwardsatFiscal2016YearEnd”tablebelowforadditionalinformationregardingthevestingparametersthatareapplicabletotheseawards.
NAME
TYPEOFAWARD(1)
GRANTDATE
ESTIMATEDFUTUREPAYOUTSUNDEREQUITY
INCENTIVEPLANAWARDS(2)
ALLOTHERSTOCK
AWARDS:NUMBEROFSHARESOFSTOCKORUNITS(#)(3)
ALLOTHEROPTIONAWARDS:
NUMBEROFSECURITIESUNDERLYINGOPTIONS(#)
EXERCISEORBASEPRICEOFOPTIONAWARDS($/SH)
GRANT
DATEFAIRVALUEOFSTOCKANDOPTIONAWARDS($)(4)
THRESHOLD
(#)
TARGET(#)
JasonKulas
RSU 4/7/16 — — 78,298 — — 803,346
RSU 4/28/16 — — 6,656 — — 89,262
PSU
11/1/16
770
20,536
—
—
—
247,050
IsmailDawood
—
—
—
—
—
—
—
—
RichardMorrin
RSU 3/29/16 — — 54,114 — — 480,000
RSU 4/5/16 — — 21,293 — — 223,152
PSU
11/1/16
194
5,172
—
—
—
62,220
KalyanSeshan
RSU 4/5/16 — — 23,377 — — 245,000
PSU
11/1/16
211
5,628
—
—
—
67,710
ChristopherPfirrman
RSU 4/5/16 — — 19,465 — — 204,000
PSU 11/1/16 117 3,118 — — — 37,515
RSU
11/16/16
—
—
21,645
—
—
300,000
(1)TypeofAward:
» RSU–restrictedstockunit » PSU–SANPerformanceAwardprogramRSU
(2)TheamountsshownunderthesecolumnsrepresentpotentialaggregatethresholdandtargetpayoutsforachievementbySantanderofthresholdandtargetperformancelevelsforawardsgrantedundertheSANPerformanceAwardprogram.The“threshold”levelreferstoanamountequalto3.75%ofourNEO’stargetaward,ortheminimumamountpayableifaperformancetargetisreachedundertheprogram.The“target”levelreferstoanamountequalto100%ofourNEO’stargetaward.
(3)ThiscolumnshowsthenumberofRSUsgrantedin2016toourNEOs.ForRSUsgrantedundertheBonusPlantoMr.KulasonApril7,2016andApril28,2016,50%ofsuchRSUsvestedandsettledimmediatelyandtheremainderwillvestandbesettledinthreeequalinstallmentsonthefirstthreeanniversariesofthegrantdate.ForRSUsgrantedundertheBonusPlantoMessrs.Morrin,SeshanandPfirrmanonApril5,2016,60%ofsuchRSUsvestedandsettledimmediatelyandtheremainderwillvestandbesettledinthreeequalinstallmentsonthefirstthreeanniversariesofthegrantdate.FortheretentionawardRSUsgrantedtoMr.MorrinonMarch29,2016,one-thirdofsuchRSUswillvestandsettleoneachofthefirstthreeanniversariesofthegrantdate.FortheretentionawardRSUsgrantedtoMr.PfirrmanonNovember16,2016,onethirdofsuchRSUsvestedandsettledimmediatelyandtheremainderwillvestandbesettledintwoequalinstallmentsonthefirsttwoanniversariesofthegrantdate.AfterthesharessubjecttotheRSUsaresettled,theywillremainsubjecttotransferandsalerestrictionsforaperiodofoneyear.
(4)ThiscolumnshowstheaggregategrantdatefairvalueofRSUsandPSUsgrantedtoourNEOsin2016.Generally,theaggregategrantdatefairvalueistheamountthatSCexpectstoexpenseinitsfinancialstatementsovertheaward’svestingscheduleasfollows:
» ForRSUs,fairvalueiscalculatedbasedontheclosingpriceofourCommonStockontheNYSEonthegrantdate(resultingina$8.87perunitvalueforMarch29,
2016,a$10.48perunitvalueforApril5,2016,a$10.26perunitvalueforApril7,2016,a$13.41perunitvalueforApril28,2016,anda$13.86perunitvalueforNovember16,2016).
» ForPSUs,thefairvalueisbasedonwholesharevalueattarget(whichisalsothemaximumvalueofthoseawards).Theactualvalueofunitsreceivedwilldependon
Santander’sfutureperformance,asdescribedin“Compensation—CompensationDiscussionandAnalysis–ComponentsofAnnualCompensation–Long-TermEquityBasedIncentiveCompensation.”
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COMPENSATION-EXECUTIVECOMPENSATIONTABLES
OutstandingEquityAwardsatFiscal2016Year-EndThefollowingtableprovidesinformationregardingalloutstandingequityawardsheldbyourNEOsasofDecember31,2016.
OPTIONAWARDS
STOCKAWARDS
NAME
NUMBEROFSECURITIESUNDERLYING
UNEXERCISEDOPTIONS
EXERCISABLE(#)
NUMBEROFSECURITIESUNDERLYINGUNEXERCISED
OPTIONSUNEXERCISABLE
(#)
EQUITYINCENTIVE
PLANAWARDS:
NUMBEROFSECURITIESUNDERLYING
UNEXERCISEDUNEARNEDOPTIONS(#)
OPTIONEXERCISEPRICE($)
OPTIONEXPIRATION
DATE
NUMBEROF
SHARESOR
UNITSOFSTOCKTHATHAVENOT
VESTED(#)
MARKETVALUEOF
SHARESOR
UNITSOFSTOCKTHATHAVENOT
VESTED($)(a)
EQUITYINCENTIVEPLAN
AWARDS:NUMBER
OFUNEARNEDSHARES,UNITSOROTHERRIGHTSTHAT
HAVENOTVESTED(#)
EQUITYINCENTIVEPLAN
AWARDS:MARKET
ORPAYOUTVALUEOF
UNEARNEDSHARES,UNITSOROTHERRIGHTSTHAT
HAVENOTVESTED($)(a)
JasonKulas
239,096 — — 9.21 Dec.2021 68,918(b)
930,393 — —
166,019 — — 9.21 Dec.2021 11,950(c)
161,325 — —
73,252 — — 12.10 Dec.2021 39,149(d)
528,512 — — 136,759 205,139(1) — 24.00 Jan.2024 3,328(d) 44,928 — — 33,333 66,667(2) — 26.48 July2025 — — 3,940(e) 53,190
—
— — — — — — 20,536(f) 277,236
IsmailDawood
— —
—
—
—
56,911(g)
768,299
—
—
RichardMorrin
85,982 — — 9.21 Dec.2021 1,509(c) 20,372 — —
41,048 — — 9.21 Dec.2021 54,114(h)
730,539 — — 18,112 — — 12.10 Dec.2021 8,518(i) 114,993 — —
—
— — — — — — 5,172(f) 69,822
KalyanSeshan
8,000 32,000(3) — 21.74 Sept.2025 9,351(i) 126,239 — —
—
— — — — — — 5,628(f) 75,978
ChristopherPfirrman
— — — — — 7,786(i) 105,111 — — — — — — — 14,430(j) 194,805 — —
—
— — — — — — 3,118(f) 42,093
VestingofoptionandstockawardsreflectedinthetableissubjecttocontinuousservicewithSC,exceptthatunvestedawardsmayvestuponterminationbyusfor“cause,”terminationbytheofficerfor“goodreason”orterminationduetotheofficer’s“disability”ordeath(ineachcaseasdefinedintheapplicableawardagreement).Theterminationvestingprovisionsgenerallyarecoveredinthefootnotesbelow.VestingofawardsmayalsobeimpactedbyachangeincontrolofSC,asmorefullydescribedin“Compensation—PotentialPaymentsuponTerminationorChangeinControl—EquityCompensationPlans”inthisProxyStatement.NotesRelatingtoOptionAwards
(1)ReflectoptionsgrantedunderourManagementEquityPlanonJanuary24,2014.UnvestedoptionsvestinsubstantiallyequalinstallmentsonJanuary24,2017,2018,and2019,withoneyearofacceleratedvestingintheeventofterminationduetodisabilityordeath.
(2)ReflectoptionsgrantedundertheOmnibusPlanonJuly1,2015.UnvestedoptionsvestinsubstantiallyequalinstallmentsonJuly1,2017and2018,withfullvestingintheeventofterminationduetodisabilityordeath.
(3)ReflectoptionsgrantedundertheOmnibusPlanonSeptember22,2015.UnvestedoptionsvestinsubstantiallyequalinstallmentsonSeptember22,2017,2018,2019,and2020,withfullvestingintheeventofterminationduetodisabilityordeath.
NotesRelatingtoStockAwards(allgrantedundertheOmnibusPlan)
(a)ThemarketvalueofthestockawardsisbasedontheclosingpricepershareofourCommonStockontheNYSEonDecember31,2016,whichwas$13.50.
(b)ReflectrestrictedsharesgrantedonDecember31,2013,whichvestinsubstantiallyequalinstallmentsonDecember31,2017and2018,withfullvestingintheeventofterminationbyuswithoutcauseorintheeventofterminationduetodisabilityordeath.
(c)ReflectRSUsgranted(toMr.MorrinonFebruary27,2015andtoMr.KulasonApril10,2015)insettlementofthedeferredstockportionoftheofficer’s2014annualbonus.Mr.Kulas’soutstandingRSUsvestinequalinstallmentsonApril10,2017and2018.Mr.Morrin’soutstandingRSUsvestinequalinstallmentsonFebruary27,2017and2018.AllRSUscontinuetovestpursuanttotheiroriginalscheduleintheeventofterminationbyuswithoutcause,terminationbytheofficerforgoodreason,orterminationduetodisabilityordeath.
(d)ReflectRSUsgrantedonApril7,2016andApril28,2016,insettlementofthedeferredstockportionoftheofficer’s2015annualbonus.TheunvestedRSUsgrantedonApril7,2016,vestinequalinstallmentsonApril7,2017,2018,and2019.TheunvestedRSUsgrantedonApril28,2016vestinequalinstallmentsonApril28,2017,2018,and2019.AllRSUscontinuetovestpursuanttotheiroriginalscheduleintheeventofterminationbyuswithoutcause,terminationbytheofficerforgoodreason,orterminationduetodisabilityordeath.
(e)ReflectPSUsgrantedonJune17,2015aspartoftheSANPerformanceAwardprogramfor2015.ThePSUsvestinequalinstallmentsonJune17,2017and2018basedonSAN’sachievingacertainTSRpositionrelativetoitspeergroupfortheapplicableperformanceperiod.AllPSUscontinuetovestpursuanttotheiroriginalscheduleandsubjecttotheiroriginalperformanceconditionsintheeventofterminationbyuswithoutcause,terminationbytheofficerforgoodreason,orterminationduetodisabilityordeath.
(f)ReflectPSUsgrantedonNovember1,2016aspartoftheSANPerformanceAwardprogramfor2016.ThePSUsvestinoneinstallmentonMarch15,2019basedonSAN’sachievementofanumberofperformanceconditionsrelatedtoearningspershare(25%ofthePSUs),returnontangibleequity(25%ofthePSUs),employeesatisfaction(20%ofthePSUs),customersatisfaction(15%ofthePSUs),individualcustomerloyaltygoals(7.5%ofthePSUs)andcorporatecustomerloyaltygoals(7.5%ofthePSUs).AllPSUscontinuetovestpursuanttotheiroriginalscheduleandsubjecttotheiroriginalperformanceconditionsintheeventofterminationbyuswithoutcause,terminationbytheofficerforgoodreason,orterminationduetodisabilityordeath.
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COMPENSATION-EXECUTIVECOMPENSATIONTABLES (g)ReflectRSUsgrantedonDecember16,2015pursuanttoMr.Dawood’sofferletter.TheRSUsvestinequalinstallmentsonDecember16,2017and2018.TheRSUsalsovestfullyifweterminateMr.Dawood’semploymentwithoutcause,ifheterminateshisemploymentforgoodreason,orifhisemploymentterminatesduetohisdisabilityordeath.
(h)ReflectRSUsgrantedonMarch29,2016asaretentionaward.TheRSUsvestinequalinstallmentsonMarch29,2017,2018,and2019.TheRSUsalsovestfullyifweterminatetheofficer’semploymentwithoutcause,ifheterminateshisemploymentforgoodreason,orifhisemploymentterminatesduetohisdisabilityordeath.
(i)ReflectRSUsgrantedonApril5,2016insettlementofthedeferredstockportionoftheofficer’s2015annualbonus.TheRSUsvestinequalinstallmentsonApril5,2017,2018,and2019.AllRSUscontinuetovestpursuanttotheiroriginalscheduleintheeventofterminationbyuswithoutcause,terminationbytheofficerforgoodreason,orterminationduetodisabilityordeath.
(j)ReflectRSUsgrantedonNovember16,2016asaretentionaward.TheRSUsvestinequalinstallmentsonNovember16,2017and2018.TheRSUsalsovestfullyifweterminatetheofficer’semploymentwithoutcauseorifhisemploymentterminatesduetohisdisabilityordeath.
Fiscal2016OptionExercisesandStockVestedThefollowingtableprovidesinformationregardingtheexerciseofstockoptionsandsharesacquiredbyourNEOsuponthevestingofrestrictedstockandRSUsheldbyourNEOsin2016.
OPTIONAWARDS STOCKAWARDS
NAME
NUMBEROFSHARESACQUIREDONEXERCISE
(#)
VALUEREALIZEDONEXERCISE($)(1)
NUMBEROFSHARESACQUIREDONVESTING(#)
VALUEREALIZEDONVESTING($)(2)
JasonKulas — —
39,149
401,669 — — 5,975 61,901 — — 3,328 44,628 —
—
34,459
465,197
IsmailDawood — — 28,456 391,839
RichardMorrin
— —
755
7,935 —
—
12,775
133,882
KalyanSeshan — — 14,026 146,992ChristopherPfirrman
— —
11,679
122,396 —
—
7,215
100,000
(1)AmountsreflecttheaggregatedifferencebetweenthemarketpriceofourCommonStockattheexercisedateandtheexercisepriceoftheoptions.
(2)AmountsreflectthemarketvalueofourCommonStockonthedayonwhichtherestrictedstockandRSUsvested.
POTENTIALPAYMENTSUPONTERMINATIONORCHANGEOFCONTROL
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EquityCompensationPlansUnderourpriorequitycompensationplan,theManagementEquityPlan,vestingofawardsissubjecttoaccelerationuponachangeincontrol(asdefinedintheplan)ofus.Specifically,unlessotherwiseprovidedbytheCompensationCommittee,(1)time-vestingoptionswillautomaticallyvestandbecomeexercisable,and(2)performance-vestingoptionswillvesttotheextentthatweachievetheapplicableaveragereturnonequitytargetstartingatthebeginningofapre-establishedfive-yearperformanceperiodandendinguponthedateofthechangeincontrol.NofurtherawardswillbegrantedundertheManagementEquityPlan.
Weoriginallyadoptedourcurrentequitycompensationplan,theOmnibusPlan,onDecember28,2013,andwerestatedtheOmnibusPlaneffectiveJune16,2016,withtheapprovalofourstockholders.
ForOmnibusPlanawardsgrantedbeforeJune16,2016,intheeventofachangeincontrol(asdefinedintheplan)ofus,unlessotherwiseprovidedbytheCompensationCommittee,
(1)alltime-vestingoptionswillbecomefullyexercisable;(2)alltime-vestingrestrictedstockawardsandRSUswillbecomefullyvested;and(3)allperformance-vestingawardswillbecomevestedtotheextentthattheapplicableperformancetargetsaremetthroughthedateofthechangeincontrol.
ForOmnibusPlanawardsgrantedonorafterJune16,2016,intheeventofachangeincontrol(asdefinedintherestatedplan)ofus,(1)awardsgrantedtonon-employeedirectorswillfullyvest;and(2)forawardsgrantedtoallotherserviceproviders,vestingwilldependonwhethertheawardsareassumed,converted,orreplacedbytheresultingentity:
» Forawardsthatarenotassumed,converted,orreplaced,(i)time-vestingawardswillfullyvestuponthechangeincontrol;and(ii)performance-vestingawardswillvestbasedonthegreaterofachievementofallperformancegoalsatthe“target”levelortheactuallevelofachievementofperformancegoalsasofthechangeincontrol,andwillbeproratedbasedontheportionoftheperformanceperiodthathadbeencompletedthroughthedateofthechangeincontrol.
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COMPENSATION-EXECUTIVECOMPENSATIONTABLES
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» Forawardsthatareassumed,convertedorreplaced,noautomaticvestingwilloccuruponthechangeincontrol.Instead,theawards,asadjustedinconnectionwiththetransaction,willcontinuetovestinaccordancewiththeirterms.Inaddition,time-vestingawardswillfullyvestiftheawardrecipienthasaterminationofemploymentwithintwoyearsafterthechangeincontrolbythecompanyotherthanforcauseorbytherecipientforgoodreason(eachasdefinedintheapplicableawardagreement).Forperformance-vestingawards,theamountvestinguponinvoluntaryterminationwithintwoyearsofachangeincontrolwillbebasedonthegreaterof(i)achievementofallperformancegoalsatthe“target”levelor(ii)theactuallevelofachievementofperformancegoalsasofthechangeincontrol.
AllawardsundertheManagementEquityPlanandtheOmnibusPlanarealsosubjecttoanychangeincontrolandemploymentterminationprovisionscontainedinapplicableawardagreementsandemploymentagreements.Seethefootnotestothe“Compensation—ExecutiveCompensationTables—OutstandingEquityAwardsatFiscal2016YearEnd”tableofthisProxyStatementforinformationregardingvestingofoutstandingequityawardsuponemploymenttermination.
EmploymentAgreementsWearepartytoemploymentagreementswithMessrs.Kulas,Morrin,andDawood.Theseagreementsprovidetheseindividualswith,amongotherthings,paymentsandbenefitsintheeventofterminationofemploymentunderthevariouscircumstancesdescribedbelow.
AchangeincontroldoesnotaffectthetimingoramountofseverancepaymentstoourNEOsundertheiremploymentagreements.
EmploymentAgreementswithJasonKulasandRichardMorrinWeenteredintoemploymentagreementswithMessrs.KulasandMorrinonMay1,2009,andAugust24,2011,respectively,whichsetforththetermsandconditionsofMessrs.Kulas’andMorrin’semploymentwithus.Eachoftheemploymentagreementshadaninitialtermofthreeyears,whichhaspassed,andeachautomaticallyextendsannuallyforadditionalone-yearterms,unlesseitherpartyprovidesnoticeofnon-renewalatleastthreemonthspriortotheextensiondate.
EachofMessrs.KulasandMorrinwillbeentitledtothefollowingunderhisemploymentagreementifterminatedbyuswithoutcause(asdefinedintheagreement)(butexcludingterminationduetodeathordisability)oruponresignationbecauseofareductioninbasesalaryortargetbonusopportunity,ineachcasesubjecttotheexecutionofageneralreleaseandwaiverinfavorofSC: » 12monthsofsalarycontinuation;
» Fullannualperformancebonusforthecalendaryearinwhichtheterminationofemploymentoccurs;
» Certaindeferredbonuspayments; » Acceleratedvestingandsettlementofequity-related
awards;and » 12monthsofcontinuedmedical,dental,andlifeinsurancecoverage.
EachofMessrs.KulasandMorrinwillbeentitledtothefollowingunderhisemploymentagreementifhisemploymentterminatesduetodisability(asdefinedintheagreement):(1)participationinourshort-termsalarycontinuationprogramfor13weeks;(2)subsequentparticipationinourlong-termandindividualdisabilityinsuranceprogrampursuanttoitsterms;and(3)proratedannualbonusesfortheyearofterminationand,incertaincases,forsubsequentyears.
EachofMessrs.KulasandMorrinwillbeentitledtothefollowingunderhisemploymentagreementifhisemploymentterminatesduetodeath: » 12monthsofsalarycontinuation;
» Fullannualperformancebonusforthecalendaryearinwhichtheterminationofemploymentoccurs;
» Certaindeferredbonuspayments;and » 12monthsofcontinuedmedicalanddentalinsurancecoverage.
EachofMessrs.KulasandMorrinissubjecttothefollowingrestrictivecovenantsunderhisemploymentagreement: » Perpetualconfidentiality;
» Non-solicitationofouremployeesandouraffiliateemployeesduringemploymentandforoneyearafter;
» Non-competitionduringemploymentandforanyperiodwhilereceivingseverancepaymentsundertheagreement;
» Cooperationinthecontextoflitigationinvolvingouraffiliatesorusduring
employmentandforthependencyofanysuchlitigationorotherproceeding;and
» Perpetualnon-disparagementofus,ouraffiliates,andourofficersanddirectorsandouraffiliates’officersanddirectors.
EmploymentAgreementwithIsmailDawoodOnDecember1,2016,Mr.Dawoodenteredintoanamendedandrestatedemploymentletteragreementwithus,whichsetsforththetermsandconditionsofMr.Dawood’semploymentwithus.Undertheagreement,ifMr.Dawood’semploymentisterminatedbyusotherthanforcauseandotherthanduetodeathordisability(ineachcaseasdefinedintheagreement),orifheresignswithgoodreason(asdefinedintheagreement),hewillbeentitledtoreceiveterminationbenefits,contingentonhisexecutionofareleaseofclaims,whichincludethefollowing:(1)alumpsumpaymentequalto225%ofhisannualbasesalary;and(2)alumpsumcashpaymentequalto12monthsofcompany-paidhealthcarecoverageforMr.Dawoodandhiseligibledependents.
Further,ifMr.Dawood’semploymentwasterminatedotherthanforcauseandotherthanduetodeathordisability,orifheresignedwithgoodreason,hewasentitledtoreceive:(1)alumpsumcashpaymentequalto$330,000ifhisterminationoccurredpriortopaymentofhis2016annualbonus(andhedidnotreceiveanybonus);and(2)fullvestingofhissign-onawardof85,367RSUs.
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COMPENSATION-EXECUTIVECOMPENSATIONTABLES TablesIllustratingPotentialPaymentsuponTerminationorChangeinControlThefollowingtableprovidesinformationregardingthepaymentsandbenefitstowhicheachNEOwouldbeentitledintheeventofterminationofsuchindividual’semploymentwithSCunderspecifiedcircumstancesandintheeventofachangeincontrolofSC.Exceptasotherwisenoted,theamountsshown(1)areestimatesonlyand(2)assumethattheapplicableterminationofemploymentwaseffective,orthatthechangeincontroloccurred,asofDecember31,2016.
NAME
CASH($)
EQUITY($)(7)
PERQUISITES/BENEFITS($)
TOTAL($)
JasonKulas
Terminationduetodeath 4,213,304(1) 1,995,584 1,018,130(8) 7,227,018Terminationduetodisability 1,921,554(2) 1,995,584 — 3,917,138TerminationbySCwithoutcause 4,213,304(1) 1,995,584 7,183(9) 6,216,071TerminationbyNEOforgoodreason 446,304(6) 1,065,191 — 1,511,495Changeincontrol(notermination) — 1,665,158 — 1,665,158
IsmailDawood Terminationduetodeath — 768,299 1,000,000(10) 1,768,299Terminationduetodisability — 768,299 50,820(11) 819,119TerminationbySCwithoutcause 1,960,688(3) 768,299 16,239(12) 2,745,226TerminationbyNEOforgoodreason 1,960,688(3) 768,299 16,239(12) 2,745,226Changeincontrol(notermination) — 768,299 — 768,299
RichardMorrin Terminationduetodeath 1,488,261(4) 935,726 1,007,200(8) 3,431,187Terminationduetodisability 659,511(2) 935,726 — 1,595,237TerminationbySCwithoutcause 1,488,261(4) 935,726 7,176(9) 2,431,163TerminationbyNEOforgoodreason 123,261(5) 935,726 — 1,058,987Changeincontrol(notermination) — 865,904 — 865,904
KalyanSeshan Terminationduetodeath 98,000(6) 202,217 — 300,217Terminationduetodisability 98,000(6) 202,217 — 300,217TerminationbySCwithoutcause 98,000(6) 202,217 — 300,217TerminationbyNEOforgoodreason 98,000(6) 202,217 — 300,217Changeincontrol(notermination) — 126,239 — 126,239
ChristopherPfirrman Terminationduetodeath 81,600(6) 342,009 — 423,609Terminationduetodisability 81,600(6) 342,009 — 423,609TerminationbySCwithoutcause 81,600(6) 342,009 — 423,609TerminationbyNEOforgoodreason 81,600(6) 147,204 — 228,804Changeincontrol(notermination) — 105,111 — 105,111
(1)Includesannualbasesalaryof$1,800,000,$1,967,000forthefullannualperformancebonusfor2016,andpaymentofdeferredcashportionofbonusawardstotaling$446,304.
(2)Assumesthat:(i)theNEOfirstreceivescompensationunderourshort-termsalarycontinuationprogram13weekspriortoDecember31,2016andbeginsreceivingcompensationandbenefitsunderourlong-termandindividualdisabilityinsuranceprogramonDecember31,2016,(ii)targetlevelofannualcashperformancebonusisachievedin2016andnobonusispayableforsubsequentyearsduetoourNEOreceivingcompensationandbenefitsunderourlong-termandindividualdisabilityinsuranceprogram,and(iii)theNEOiseligibleforourshort-termsalarycontinuationbenefits.See“Compensation—PotentialPaymentsuponTerminationorChangeinControl—EmploymentAgreements”foradditionalinformation.
(3)Includes225%ofbasesalaryeffectiveasofDecember31,2016,and$330,000pursuanttoMr.Dawood’semploymentagreement.
(4)Includesannualbasesalaryof$650,000,$715,000forthefullannualperformancebonusfor2016andpaymentofdeferredcashportionofbonusawardstotaling$123,261.
(5)Representstheunpaiddeferredcashportionofthe2014and2015bonusawards.
(6)Representstheunpaiddeferredcashportionofthe2015bonusaward.
(7)Representsthevalueofacceleratedvestingofoptionawardsandstockawards.Seethefootnotestothe“Compensation—ExecutiveCompensationTables—OutstandingEquityAwardsatFiscal2016YearEnd”tableofthisProxyStatementforinformationregardingvestinguponemploymenttermination.See“Compensation—PotentialPaymentsuponTerminationorChangeinControl—EquityCompensationPlans”aboveforinformationregardingvestinguponchangeincontrol.Amountsreflectedassumethatallapplicableperformancetargetsforanyperformance-vestingawardsareachieved.
(8)Representspaymentoflifeinsuranceproceedsand12monthsofcontinueddependentmedicalanddentalbenefits.Assumesnoincreaseinthecostofwelfarebenefits.
(9)Represents12monthsofcontinuedmedicalanddentalbenefitsandlifeinsurancecoverage.Assumesnoincreaseinthecostofwelfarebenefits.
(10)
IncludeslifeinsurancepaymenttobemadetoMr.Dawood’sbeneficiariesunderourexecutivelifeinsurancepolicyifMr.DawooddiedonDecember31,2016.
(11)
Representscostofsupplementaldisabilitycoveragetopay60%ofannualizedbasesalaryuntilage65.
(12)
Includes12monthsofcontinuedmedicalanddentalbenefitsforMr.Dawoodandhisdependents.
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ADDITIONALGOVERNANCEINFORMATION-RELATEDPARTYTRANSACTIONS
ADDITIONALGOVERNANCEINFORMATION
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RelatedPartyTransactionsTransactionsbyuswithrelatedpartiesaresubjecttoaformalwrittenpolicy,aswellasregulatoryrequirementsandrestrictions.Underourwrittenpolicy,ourdirectorsanddirectornominees,executiveofficersandholdersofmorethan5%ofourCommonStock,includingtheirimmediatefamilymembers,willnotbepermittedtoenterintoarelatedpartytransactionwithus,asdescribedbelow,withouttheconsentofourAuditCommittee.Anyrequestforustoenterintoatransactioninwhichtheamountinvolvedexceeds$120,000andanysuchpartyhasadirectorindirectmaterialinterest,subjecttocertainexceptions,willberequiredtobepresentedtoourAuditCommitteeforreview,considerationandapproval.ManagementwillberequiredtoreporttoourAuditCommitteeanysuchrelatedpartytransactionandsuchrelatedpartytransactionwillbereviewedandapprovedordisapprovedbythedisinterestedmembersofourAuditCommittee.
Thefollowingisasummaryofmaterialprovisionsofvarioustransactionswehaveenteredintowithourexecutiveofficers,directors(includingnominees),5%orgreaterstockholdersandanyoftheirimmediatefamilymembersorentitiesaffiliatedwiththem.Webelievethetermsandconditionssetforthinsuchagreementsarereasonableandcustomaryfortransactionsofthistype.
ShareholdersAgreementInconnectionwithourinitialpublicofferinginJanuary2014,weenteredintotheShareholdersAgreement,withSHUSA,DDFS,LLC(“DDFS”)SponsorAutoFinanceHoldingsSeriesLP(“SponsorAuto”)andMr.Dundon.TheShareholdersAgreement,asamended,providesthesestockholders,amongotherthings,certainrightsrelatedtodirectornominations,approvalsovercertainactionstakenbyusandregistrationrights.
BoardComposition
TheShareholdersAgreementprovidesthatSHUSAhastherighttonominateanumberofdirectorsequaltotheproduct(roundeduptothenearestwholenumberofdirectors)of(i)afraction,thenumeratorofwhichisthenumberofsharesofourCommonStockthen-heldbySHUSAandthedenominatorofwhichisthetotalnumberofourthen-outstandingsharesofCommonStockand(ii)thenumberofdirectorsconstitutingourentireBoardiftherewerenovacancies.
TheShareholdersAgreementalsoprovidesthatMr.Dundonwillhavetherighttoserveasadirectorforsolongas(x)heisourCEOor(y)heownsatleast5%ofourthen-outstandingsharesofCommonStock(excludingsharesacquiredbyDDFSorMr.Dundonpursuanttoanyequity-basedcompensationplan)andhascontinuedtocomplywithcertainprovisionsofhisemploymentagreementwiththeCompany.Mr.Dundon,whoresignedfromtheBoardonApril1,2016,haselectednottoexercisethisrightintheShareholdersAgreementandhasdecidednottostandforelectionasadirectoratour2017AnnualMeeting.
TheShareholdersAgreementprovidesthatwewilltakeallactionwithinourpowertocausetheindividualsnominatedpursuanttotheprovisionsoftheShareholdersAgreementtobeincludedintheslateofnomineesrecommendedbytheBoardtoourstockholdersforelectionasdirectorsateachAnnualMeetingofourstockholdersandtocausetheelectionofeachsuchnominee,includingsolicitingproxiesinfavoroftheelectionofsuchnominees.EachofSHUSAandDDFShascommittedunderthetermsoftheShareholdersAgreementtovoteallsharesofCommonStockownedbysuchstockholdertocausetheelection
orre-electionoftheindividualsnominatedpursuanttotheprovisionsoftheShareholdersAgreementdescribedabove.Inaddition,SHUSAhastherighttodesignateareplacementtofillavacancyontheBoardcreatedbythedepartureofadirectorwhowasnominatedbySHUSA,andwearerequiredtotakeallactionwithinourpowertocausesuchvacancytobefilledbysuchdesignatedreplacement(includingbypromptlyappointingsuchdesigneetotheBoard).
ApprovalRights
TheShareholdersAgreementalsoprovidesthatthefollowingactionsbyuswillrequiretheapprovalofamajorityofthedirectorsnominatedbySHUSAforsolongasSHUSA’sshareownershipisgreaterthan20%ofouroutstandingsharesofCommonStock:
» ExceptasrequiredbychangesinlaworGAAP,anychangetoourmaterialaccountingpolicies;
» ExceptasrequiredbychangesinlaworchangeswhichareconsistentwithchangestothetaxpoliciesorpositionsofaffiliatesofSantanderintheUnitedStates,anychangetoourmaterialtaxpoliciesorpositions;and
» Anychangeinourprincipallineofbusinessorofcertainofourmaterialsubsidiaries.
PutandCallRights
TheShareholdersAgreementalsoprovidesthatDDFSandSHUSAhavecertainputandcallrightsrelatingtothesharesofCommonStockownedbyDDFS.OnJuly2,2015,Mr.DundonenteredintoaSeparationAgreementwiththeCompany,DDFS,SHUSAandSantander,underwhichhisrolesasChairmanoftheBoardandCEOwereterminatedeffectiveasofJuly2,2015.TheSeparationAgreementprovided,amongotherthings,thatMr.DundonresignasChairmanoftheBoard,asourCEOandasanofficerand/ordirectorofanyofoursubsidiarycompanies.Also,inconnectionwith,andpursuantto,theSeparationAgreement,onJuly2,2015,Mr.Dundon,theCompany,DDFS,SHUSAandSantanderenteredintoanamendmenttotheShareholdersAgreement(“SecondAmendment’).TheSecondAmendmentamended,forpurposesofcalculatingthepricepersharetobepaidintheeventthataputorcalloptionwasexercisedwithrespecttothesharesofourCommonStockownedbyDDFSinaccordancewiththetermsandconditionsoftheShareholdersAgreement,thedefinitionoftheterm“AverageStockPrice”tomean$26.83.
PursuanttotheSeparationAgreement,SHUSAwasdeemedtohavedeliveredasofJuly3,2015anirrevocablenoticetoexerciseacalloptionwithrespecttoall34,598,506sharesofourCommonStockownedbyDDFSandconsummatethetransactionscontemplatedbysuchcalloptionnotice,subjecttothereceiptofrequiredregulatoryapprovalsandanyotherapprovalsrequiredbylaw(the“CallTransaction”).BecausetheCallTransactionwasnotconsummatedpriortoOctober15,2015(the“CallEndDate”)asaresultofafailuretoobtainrequiredregulatoryapprovals,DDFSisfreetotransferanyorallsharesofourCommonStockitowns,subjecttothetermsandconditionsoftheAmendedandRestatedLoanAgreement,datedasofJuly16,2014,betweenDDFSandSantander(the“LoanAgreement”).TheLoanAgreementprovidesfora$300millionrevolvingloanwithamaturitydateofApril15,2017.PursuanttotheLoanAgreement,29,598,506sharesofourCommonStockownedbyDDFSarepledgedascollateralunderarelatedpledgeagreement(the“PledgeAgreement”).BecausetheCallTransactionwasnotcompletedonorbeforetheCallEndDate,interestwillaccrueonthepricepaidpershareinthe
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CallTransactionattheovernightLIBORrateonthethirdbusinessdayprecedingtheconsummationoftheCallTransactionplus100basispointswithrespecttoanysharesofourCommonStockultimatelysoldintheCallTransaction.TheShareholdersAgreementfurtherprovidesthatSantandermay,atitsoption,becomethedirectbeneficiaryoftheCallOption,andSantanderhasexercisedthisoption.Ifconsummatedinfull,DDFSwouldreceiveapproximately$928.3millionplusinterestthathasaccruedsincetheCallEndDate.Todate,theCallTransactionhasnotbeenconsummated.
PursuanttotheLoanAgreement,ifatanytimethevalueofourCommonStockpledgedunderthePledgeAgreementislessthan150%oftheaggregateprincipalamountoutstandingundertheLoanAgreement,DDFShasanobligationtoeither(a)repayaportionofsuchoutstandingprincipalamountsuchthatthevalueofthepledgedcollateralisequaltoatleast200%oftheoutstandingprincipalamount,or(b)pledgeadditionalsharesofourCommonStocksuchthatthevalueoftheadditionalsharesofCommonStock,togetherwiththe29,598,506sharesalreadypledgedunderthePledgeAgreement,isequaltoatleast200%oftheoutstandingprincipalamount.AsofthedateofthisProxyStatement,thevalueofthepledgedcollateralislessthan150%ofaggregateprincipalamountoutstandingundertheLoanAgreement,andDDFShasnottakenanyofthecollateralpostingactionsdescribedinclauses(a)or(b)above.IfSantanderdeclarestheborrower’sobligationsundertheLoanAgreementdueandpayableasaresultofaneventofdefault(includingwithrespecttothecollateralpostingobligationsdescribedabove),underthetermsoftheLoanAgreementandthePledgeAgreementSantander’sabilitytorealizeuponthesharesofourCommonStocksubjecttothePledgeAgreementis,subjecttocertainexceptions,limitedtotheexercisebySHUSAand/orSantanderoftherighttodeliverthecalloptionnoticeandtoconsummatetheCallTransactionatthepricespecifiedintheShareholdersAgreement.IftheborrowerfailstopayobligationsundertheLoanAgreementwhendue,includingbecauseofSantander’sdeclarationofsuchobligationsasdueandpayableasaresultofaneventofdefault,ahigherdefaultinterestratewillapplytosuchoverdueamounts.
Inconnectionwith,andpursuantto,theSeparationAgreement,onJuly2,2015,DDFSandSantanderenteredintoanamendmenttotheLoanAgreementandanamendmenttothePledgeAgreementthatprovide,amongotherthings,thattheoutstandingbalanceundertheLoanAgreementshallbecomedueandpayableupontheconsummationoftheCallTransactionandthattheamountotherwisepayabletoDDFSundertheCallTransactionshallbereducedbytheamountoutstandingundertheLoanAgreement,includingprincipal,interestandfees,andfurtherthatanynetcashproceedsreceivedbyDDFSonaccountofsalesofourCommonStockaftertheCallEndDateshallbeappliedtotheoutstandingbalanceundertheLoanAgreement.
OnAugust31,2016,Mr.Dundon,DDFS,theCompany,SantanderandSHUSAenteredintoaSecondAmendmenttotheSeparationAgreement,andMr.Dundon,DDFS,SantanderandSHUSAenteredintoaThirdAmendmenttotheShareholdersAgreement,wherebythepricepersharetobepaidtoDDFSinconnectionwiththeCallTransactionwasreducedfrom$26.83to$26.17,thearithmeticmeanofthedailyvolume-weightedaveragepriceforashareofourCommonStockforeachofthe10consecutivecompletetradingdaysimmediatelypriortoJuly2,2015,thedateonwhichtheCallOptionwasexercised.
OnApril17,2017,theLoanAgreementmaturedandbecamedueandpayablewithanunpaidprincipalbalanceofapproximately$290millionasofthatdate.BecausetheborrowerfailedtopayobligationsundertheLoanAgreementonApril17,2017,theborrowerisindefaultandiscurrentlybeingchargedthedefaultinterestrateasdefinedbytheLoanAgreement.TheLoan
AgreementgenerallydefinesthedefaultinterestrateastheBaseRateplus2%.TheBaseRateasdefinedintheLoanAgreementisthehigherof(i)thefederalfundsrateplus1⁄2of1%or(ii)theprimerate,whichistheannualrateofinterestpubliclyannouncedbytheNewYorkBranchofSantanderfromtimetotime.AsofApril21,2017,theprimerateasannouncedbytheNewYorkBranchofSantanderwas4%.
Other
TheShareholdersAgreementprovidesthatneitherSHUSAnorwearepermittedtotakeanyactionthatwouldcauseDDFSorSponsorAutotoberequiredtoregisterasabankholdingcompany.TheShareholdersAgreementalsoprovidesthatSHUSA,DDFSandSponsorAutohavepreemptiverightstopurchasetheirrespectiveproportionatesharesofanyissuancebyusofequitysecurities,securitiesconvertibleintoorexercisableforequitysecuritiesorsecuritiesthatincludeanequitycomponent,subjecttocertainexceptions.
OtherArrangementsGuarantees
Santanderhasprovidedguaranteesofthecovenants,agreements,andourobligationsunderthegoverningdocumentsofourwarehousefacilitiesandprivatelyissuedamortizingnotes.Theseguaranteesarelimitedtoourobligationsasservicer.Beginninginfiscalyear2015,wehaveagreedtopaySantanderandSHUSAafeeof12.5basispointsonsuchfacilitiesandnotesinexchangeforprovidingsuchguarantees.Forthefiscalyear2016,weincurred$6.4millioninfeesunderthisarrangement.
CurrentlyOutstandingBorrowingArrangements
Santanderhasextendedvariouscreditfacilities(the“SantanderCreditFacilities”)tous.
SantanderConsumerFunding3LLC(asubsidiaryofours)hasacommittedfacilityinaninitialamountof$1,750millionestablishedwiththeNewYorkBranchofSantanderinDecember2011.In2016,thelargestoutstandingprincipalbalanceonthisfacilitywas$1,000million,andasofDecember31,2016,thebalanceofthelinewas$1,000million.In2016,wepaid$28.9millionininterestandfeesonthislineofcredit.Theeffectiveinterestrateonthisfacilityin2016was2.86%.ThecurrentmaturityofthefacilityisDecember29,2017.OnMarch4,2016,thisfacilitywasamendedtoreducethecommittedamountfrom$1,750millionto$1,000million.
SantanderConsumerFunding5LLC(asubsidiaryofours)hasacommittedfacilityinaninitialamountof$1,750millionestablishedwiththeNewYorkBranchofSantanderinDecember2011.In2016,thelargestoutstandingprincipalbalanceonthisfacilitywas$1,000millionandasofDecember31,2016,thebalanceofthelinewas$1,000million.In2016,wepaid$22.4millionininterestandfeesonthislineofcredit.Theeffectiveinterestrateonthisfacilityin2016was2.88%.ThecurrentmaturityofthefacilityisDecember31,2018.OnMarch4,2016,thisfacilitywasamendedtoreducethecommittedamountfrom$1,750millionto$1,000million.
SantanderConsumerCaptiveAutoFundingLLC(asubsidiaryofours)hasacommittedfacilityof$500millionestablishedwiththeNewYorkbranchofSantanderonMay31,2013.In2016,thelargestoutstandingprincipalbalanceonthisfacilitywas$500million,andasofDecember31,2016,thebalanceofthelinewas$500million.In2016,wepaid$14.0millionininterestandfeesonthislineofcredit.Theeffectiveinterestrateonthisfacilityin2016was3.04%.ThecurrentmaturityofthefacilityisDecember29,2017.
SantanderConsumerCaptiveAutoFunding5LLC(asubsidiaryofours)hasacommittedfacilityof$500millionestablishedwith
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SC2017ProxyStatement
theNewYorkbranchofSantanderonMay31,2013.In2016,thelargestoutstandingprincipalbalanceonthisfacilitywas$475millionandasofDecember31,2016,thebalanceofthelinewas$175million.In2016,wepaid$2.6millionininterestandfeesonthislineofcredit.Theeffectiveinterestrateonthisfacilityin2016was3.87%.ThecurrentmaturityofthefacilityisDecember31,2018.
SantanderConsumerABSFunding2,LLC(asubsidiaryofours)establishedacommittedfacilityof$300millionwithSHUSAonMarch6,2014.In2016,thelargestoutstandingprincipalbalanceonthisfacilitywas$300million,andasofDecember31,2016,theoutstandingprincipalbalanceofthelinewas$300million.In2016,wepaid$6.1millionininterestandfeesonthislineofcredit.Theeffectiveinterestrateonthisfacilityin2016was2.25%.ThisfacilitymaturedonMarch6,2017andwasreplacedonthesamedaywitha$300milliontermpromissorynoteexecutedbySCIllinoisastheborrowerandSHUSAasthelender.InthequarterendedMarch31,2017,thelargestoutstandingprincipalbalanceonthenotewas$300million,andasofMarch31,2017,theoutstandingprincipalbalanceonthenotewas$300million.InthequarterendedMarch31,2017,wepaidzeroinprincipalandzeroininterestandfeesonthisnote.Interestaccruesonthisnoteatarateequaltothree-monthLIBORplus1.35%.ThenotehasamaturitydateofMarch6,2019.
TheCompanyhasacommittedfacilityinaninitialamountof$1,500millionestablishedwithSHUSAonMarch4,2016.In2016,thelargestoutstandingprincipalbalanceonthisfacilitywas$200million,andasofDecember31,2016,thebalanceofthelinewaszero.In2016,wepaid$20.1millionininterestandfeesonthislineofcredit.Theeffectiveinterestrateonthisfacilityin2016was3.74%.ThecurrentmaturityofthisfacilityisMarch1,2019.OnNovember1,2016,thisfacilitywasamendedtoincreasethecommittedamountto$3,000million.
SPAINRevolvingFundingLLC(asubsidiaryofours)establishedacommittedfacilityof$750millionwiththeNewYorkbranchofSantanderonApril3,2017.AsofApril15,2017,theoutstandingprincipalbalanceofthefacility(whichwasalsothelargestoutstandingprincipalbalanceasofApril15,2017)waszero,andwehavepaidzeroininterestandfeesonthisfacility.Borrowingsunderthisfacilitybearinterestatarateequaltoone-monthLIBORplusaspread(basedonthequalityofthecollateralforthefacility)rangingfrom0.60%to0.90%.ThecurrentmaturitydateofthefacilityisDecember31,2018.
SCIllinoisasborrowerexecuteda$650milliontermpromissorynotewithSHUSAaslenderonMarch31,2017.InthequarterendedMarch31,2017,thelargestoutstandingprincipalbalanceonthenotewas$650million,andasofMarch31,2017,theoutstandingprincipalbalanceonthenotewas$650million.InthequarterendedMarch31,2017,wepaidzeroinprincipalandzeroininterestandfeesonthisnote.Interestaccruesonthisnoteattherateof4.20%.ThenotehasamaturitydateofMarch31,2022.
AnysecureddrawingsoutstandingundertheSantanderCreditFacilitiesatthetimeofthefacilities’maturitywillamortizetomatchthematuritiesandexpectedcashflowsofthecorrespondingcollateral.Thecurrentmaturityofeachfacilityislistedabove.Santanderhastheoptiontoallowustorenewthesefacilities.Thesefacilitiescurrentlypermitunsecuredborrowing.
ServicingArrangements
WeareundercontractwithSBNAtoservicethebank’sretailandrecreationalvehicleloanportfolio,whichhadabalanceof$531millionasofDecember31,2016.For2016,SBNApaid$5.2milliontouswithrespecttothisagreement.
ThroughSeptember30,2014,wewereundercontractwithSBNAtoservicethebank’sportfolioofChryslerdealerloans
eitherpurchasedfromusororiginatedunderaflowagreementwithus.EffectiveOctober1,2014,thiscontractwasterminatedandreplacedwithanewcontractwhichtransferredtheservicingofallChryslerdealerloanstoSBNAfromus,requiredSBNAtopayusaone-timefeeof$607,000relatedtothetransferofsuchservicingandrequiredSBNAtopayusarelationshipmanagementfeebasedontheperformanceandyieldsofChryslerdealerloansheldbySBNA.OnApril15,2016,therelationshipmanagementfeewasreplacedwithanoriginationfeeandannualrenewalfeeforeachloan.For2016,SBNApaidus$419,000inrelationshipmanagementfeesand$3.9millioninoriginationandrenewalfeesrelatedtotheseloans.Additionally,for2016,wepaidservicingfeesof$110,000toSBNAunderthiscontract.
UntilMay9,2015,wewerepartytoaflowagreementwithSBNAwherebyweservicedallChryslerconsumervehicleleasesoriginatedundertheagreementandcertainleasessoldtoSBNA.Additionally,wereceivedanoriginationfeeonallleasesoriginatedundertheflowagreement.AsofDecember31,2016,thisportfolioofservicedleaseshadabalanceof$1,297million.For2016,SBNApaidus$7.7millioninservicingfeesrelatedtotheseleases.
OnMarch29,2017,weenteredintoaMasterSecuritiesPurchaseAgreementwithSantander,underwhichwehavetheoptiontosellacontractuallydeterminedamountofeligibleprimeloanstoSantander,throughtheSPAINsecuritizationplatform,foratermendinginDecember2018.Weprovideservicingonallloansoriginatedunderthisarrangement.ForthethreemonthsendedMarch31,2017,wesold$700millionofloanstoSantanderunderthisagreement.
EmploymentofFamilyMembersofDirectorsorExecutiveOfficers
Fromtimetotime,wemayemployindividualswhoareimmediatefamilymembersofourdirectorsorexecutiveofficers,butonlyiftheyareatleastasqualifiedasotherapplicants.
WehaveemployedKennethDundonasourSeniorVicePresident,OriginationsQualityControl.KennethDundonisthebrotherofourformerdirectorandCEO,ThomasDundon.For2016,KennethDundonreceivedcompensationhavinganaggregatevalueof$359,444.WebelievethatthecompensationpaidtoKennethDundoniscomparabletothecompensationwepaytootheremployeesinequivalentpositionswithsimilarlevelsofperformance,skillandexperience.
OtherAgreements
ProdubanServiciosInformaticosGenerales,S.L.,aSantanderaffiliate,isundercontractwithustoprovideprofessionalservices,telecommunications,andinternaland/orexternalapplications.Expensesincurredtotaled$93,000fortheyearendedDecember31,2016.
OnJune30,2014,weenteredintoanindemnificationagreementwithSBNAwherebyweindemnifySBNAforanycreditorresiduallossesonapoolof$48.2millioninleasesoriginatedunderaflowagreementwithSBNA.Atthetimeoftheindemnificationagreement,weestablisheda$48.2millioncollateralaccountwithSBNAinrestrictedcashthatwillbereleasedovertimetoSBNA,inthecaseoflosses,andtous,inthecaseofpaymentsandsaleproceeds.AsofDecember31,2016,thebalanceinthecollateralaccountwas$11.3million.AsofDecember31,2016,wehadarecordedliabilityof$2.7millionrelatedtotheresiduallossescoveredundertheindemnificationagreement.
Weperiodicallysellloanandleasecontractstoaffiliatesundercertainagreements.AlthoughnosuchsalesoccurredduringtheyearendedDecember31,2016,wesoldleasestoSBNAwith
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adepreciatednetcapitalizedcostof$369.1millionandanetbookvalueof$317.3millioninChryslerCapitalleases.Thissalewaseffectedthroughthetransferofaspecialunitofbeneficialinterest(SUBI)inourtitlingtrust.Proceedsfromthesaleofleaseswere$322.9millionforagainof$4.6millionfortheyearendedDecember31,2014.Weretainedservicingrightsontheleasessoldinthistransaction.
OnSeptember16,2014,wesold$18.2millionofreceivablesfromdealerstoSBNA,resultinginagainof$347,000.Wewereentitledtoadditionalproceedsonthissaletotaling$694,000ifcertainconditions,includingcontinuedexistenceandperformanceofthesoldloans,weremetatthefirstandsecondanniversariesofthesale.Atthefirstandsecondanniversarydatesofthesale,whichoccurredduringtheyearsendedDecember31,2015and2016,respectively,wereceived$347,000and$347,000,respectively,inadditionalproceedsrelatedtothesaleduetothesatisfactionofconditionsspecifiedatthetimeofthesale.
InDecember2015,weformedanewwholly-ownedsubsidiary,SCI,andSCIopeneddepositaccountswithBancoSantanderPuertoRico.AsofDecember31,2016,SCIhadcashof$98.8millionondepositwithBancoSantanderPuertoRico.ThedepositaccountswereenteredintointheordinarycourseofbusinessandonsubstantiallythesametermsasBancoSantanderPuertoRico’sotheraccountholders.
During2015,SISpurchasedaportionofClassBnotesofSDART2013-3,aconsolidatedsecuritizationTrust,withaprincipalbalanceof$725,000.In2016,SISwaspaid$2,000ininterestontheClassBnotes.In2016,thelargestoutstandingprincipalbalanceoftheClassBnoteswas$510,000,andasofDecember31,2016,theoutstandingprincipalbalanceoftheClassBnoteswaszero.TheeffectiveinterestrateoftheClassBnotesin2016was1.19%.
Inaddition,SISpurchasedaninvestmentintheClassA3notesofCCART2013-A,asecuritizationTrustformedbyusin2013.AlthoughCCART2013-AisnotaconsolidatedentityoftheCompany,wecontinuetoservicetheassetsoftheassociatedtrust.In2016,SISwaspaid$2,000ininterestontheClassA3notes.In2016,thelargestoutstandingprincipalbalanceoftheClassA3noteswas$743,000,andasofDecember31,2016,theoutstandingprincipalbalanceoftheClassA3noteswaszero.TheeffectiveinterestrateoftheClassA3notesin2016was0.91%.
SISalsoservesasco-manageroncertainofoursecuritizations.AmountspaidtoSISasco-managerfortheyearendedDecember31,2016totaled$1.1million.ThepaymentstoSISasco-managerofoursecuritizationsweremadeintheordinarycourseofbusinessandonsubstantiallythesametermsasotherco-managersofoursecuritizations.
WehaveenteredintointerestrateswapsandcapswithSantanderanditsaffiliateswithanotionalvalueofapproximately$7.3billionasofDecember31,2016.Interestexpenseontheseagreementsincludesamountstotaling$16.1millionfortheyearendedDecember31,2016.
WearepartytoaMasterServicesAgreementwithacompanyinwhichwehaveacostmethodinvestmentandholdawarranttoincreaseourownershipifcertainvestingconditionsaresatisfied.TheMasterServicesAgreementenablesustoreviewcreditapplicationsofretailstorecustomers.WebeganreviewingapplicationsundertermsofthisAgreementonOctober24,2013.Wedidnotoriginateanyloansin2016underthisagreementand,effectiveAugust17,2016,weceasedfundingneworiginationsfromalloftheretailersforwhichwereviewcreditapplicationsunderthisagreement.
UnderanagreementwithMr.Dundon,weareprovidedaccesstoasuiteataneventcenterthatisleasedbyMr.Dundon,andwhichweuseforbusinesspurposes.WereimburseMr.Dundonfortheuseofthisspaceonaperiodicbasis.In2016,wereimbursedMr.Dundon$200,000fortheuseofthisspace.
TwoofthefundsthatinvestedinSponsorAuto,CCPIIAutoHoldingsLLCandKKR2006AutoHoldingsILLC,alsoweretheequityinvestorsintwoLLCsthatwereformedin2011andwereconsolidatedinourfinancialstatementsduetoourbeingtheprimarybeneficiaryoftheentities.OnAugust30,2013,thefundsabandonedtheirinterestsintheentities,resultinginourhavingfullownershipoftheentities,whichcontinuetobeconsolidatedinourfinancialstatements.Eachfund’sinvestmentineachLLCwas$5,000.AtthetimetheLLCswereformed,weenteredintoindemnificationagreementswitheachofthefundswherebywereimbursedthefunds,onagrossed-upbasis,foralltaxestheyincurredrelatedtotheirinvestmentsintheLLCs.Paymentsundertheseindemnificationagreementshavetotaled$28.1million,allofwhichwaspaidduringtheyearendedDecember31,2012.In2016,werecovered$940,000ofthereimbursedamountsasaresultoftaxrefundstothefunds.AtDecember31,2016,wehadareceivableof$4.2million,representingtheremainingamountoftheindemnificationpaymentsthatweexpecttorecoverasthefundsreceiveadditionaltaxrefunds.Additionally,oneofthefundsservedasthemanagingmemberoftheVIEsuntiltheabandonment.
OnOctober21,2013,weenteredintoaleaseforapproximately373,000squarefeetatapropertythatnowservesasourcorporateheadquarters,andinwhichpropertyMr.KulasandMr.Dundonhaveaminorityequityinvestment.AsofDecember31,2016,futureminimumleasepaymentsovertheremainderofthe12-yeartermofthelease,whichextendsthrough2026,totalapproximately$69.0million.For2016,weincurred$4.9millioninleaseexpensesonthisproperty.
ThefollowingtableprovidesinformationregardingthebeneficialownershipofourCommonStockasofMarch31,2017(unlessotherwisenoted)by:(i)eachpersonknowntobeneficiallyownmorethan5%ofourCommonStock;(ii)eachofourdirectors;(iii)eachofourNEOs;and(iv)allcurrentdirectorsandexecutiveofficersasagroup.
Forpurposesofthistable,“beneficialownership”(asdefinedinRule13d-3oftheExchangeAct)takesintoaccountsharesastowhichtheindividualhasorsharesvotingorinvestmentpoweraswellassharesthatmaybeacquiredwithin60days(suchasbyexercisingvestedstockoptions,orthevestingofRSUs)andisdifferentfrombeneficialownershipforpurposesofSection16
oftheExchangeAct.Asaresult,thenumbersbelowmaydifferfromthenumbersreportedinformsfiledpursuanttoSection16.
Toourknowledgeandunlessotherwiseindicated,eachstockholderlistedbelowhassolevotingandinvestmentpowerovertheshareslistedasbeneficiallyownedbysuchstockholder.Percentageofownershipisbasedupon359,394,898sharesofCommonStockoutstandingasofMarch31,2017.Numberofsharesheldbybeneficialownersofmorethan5%ofourCommonStockareasofthedateoftheapplicableSECfilingsmadebythoseowners(unlessotherwisenoted),however,percentageshavebeenrecalculatedasofMarch31,2017.
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ADDITIONALGOVERNANCEINFORMATION-STOCKOWNERSHIPINFORMATION
NAMEOFBENEFICIALOWNER
SHARESOWNED
NUMBER
PERCENTAGE
Beneficialownersof5%ormoreofourCommonStock:
ThomasG.Dundon(1)(2) 41,838,031 11.64%
SantanderHoldingsUSA,Inc.(2)(3) 210,995,049 58.71%
WellingtonManagementGroupLLP(4) 23,209,017 6.46%
DirectorsandNamedExecutiveOfficers:
JasonA.Kulas(5) 962,855 *
IsmailDawood 36,949 *
RichardMorrin(6) 184,298 *
ChristopherPfirrman(7) 23,306 *
KalyanSeshan(8) 30,710 *
JoséDoncel — *
StephenA.Ferriss(9) 8,691 *
BrianGunn — *
VictorHill — *
EdithE.Holiday — *
MarkP.Hurley — *
JavierMaldonado — *
RobertJ.McCarthy 2,271 *
WilliamF.Muir — *
ScottPowell — *
WilliamRainer 2,271 *
Allexecutiveofficersanddirectorsasagroup(19persons) 1,286,787 *
* Lessthan1%oftheoutstandingbeneficialownership(1)ThisinformationisbasedsolelyontheSchedule13GfiledonFebruary17,2016byourformerdirectorandCEO,ThomasG.Dundon,2100RossAvenue,Suite800,Dallas,Texas75201.Includes323,176sharesofrestrictedstockand6,847,379stockoptionsthatarecurrentlyexercisableorexercisedsubjecttorequiredregulatoryapproval,overwhichMr.Dundonhassolevotinganddispositivepower.Furtherincludes34,598,506sharesownedbyDDFSLLC,aDelawarelimitedliabilitycompanysolelyownedbyMr.Dundon,overwhichMr.DundonandDDFSLLChavesharedvotinganddispositivepower.
(2)DDFS(seeNote1)andSHUSA(whichcollectivelyowned245,593,555shares,or68.34%ofouroutstandingCommonStockasofMarch31,2017)arepartiestotheShareholdersAgreement,whichprovidescertainBoardnominationrightstoSHUSAandcertainvotingobligationsinconnectionwiththoserights.DuetotheseBoardnominationrightsandvotingobligations,eachofDDFSandSHUSAmaybedeemedtobeneficiallyownallsharesbeneficiallyownedbyeachotherpartywhicharesubjecttosuchvotingobligations.PursuanttotheSeparationAgreement,SHUSAwasdeemedtohavedeliveredasofJuly3,2015anirrevocablenoticetoexerciseacalloptionwithrespecttoallthesharesofourCommonStockownedbyDDFSandconsummatetheCallTransaction,subjecttothereceiptofrequiredbankregulatoryapprovalsandanyotherapprovalsrequiredbylaw.ThetabledoesnotreflectshareswhichmaybedeemedtobebeneficiallyownedbyDDFSorSHUSAsolelybyvirtueoftheShareholdersAgreementortheconsummationoftheCallTransaction.29,598,506sharesownedbyDDFSarepledgedassecurityforalineofcreditextendedtoDDFSbyanaffiliateofSantander.Formoreinformation,pleasesee“RelatedPartyTransactions—ShareholdersAgreement—PutandCallRights”inthisProxyStatement.
(3)RepresentssharesownedbySHUSA,75StateStreet,Boston,Massachusetts02109,awhollyownedsubsidiaryofSantander.
(4)ThisinformationisbasedsolelyontheSchedule13GfiledonFebruary09,2017,byWellingtonManagementGroupLLP(“Wellington”).Wellington,aninvestmentadviserandparentholdingcompany,reportedthatithadsharedvotingpowerwithrespectto20,207,263ofsuchsharesandshareddispositivepowerwithrespectto23,209,017shares.Wellingtonreportedthatitsclientshavetherighttoreceive,orthepowertodirectthereceiptof,dividendsfrom,ortheproceedsfromthesaleof,allsuchsharesownedofrecordbysuchclients.TheaddressofWellington’sprincipalbusinessofficeisWellingtonManagementCompanyLLP,280CongressStreet,Boston,Massachusetts02210.
(5)Includes736,973sharesofCommonStockthatMr.Kulashastherighttoacquirewithin60daysupontheexerciseofstockoptionsorthevestingofRSUs.
(6)Includes147,981sharesofCommonStockthatMr.Morrinhastherighttoacquirewithin60daysupontheexerciseofstockoptionsorthevestingofRSUs.
(7)Includes2,595sharesofCommonStockthatMr.Pfirrmanhastherighttoacquirewithin60daysupontheexerciseofstockoptionsorthevestingofRSUs.
(8)Includes11,117sharesofCommonStockthatMr.Seshanhastherighttoacquirewithin60daysupontheexerciseofstockoptionsorthevestingofRSUs.
(9)Includes5,207sharesofCommonStockthatMr.Ferrisshastherighttoacquirewithin60daysupontheexerciseofstockoptionsorthevestingofRSUs.
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OTHERGOVERNANCEINFORMATION OtherGovernanceInformation
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CodeofConductandEthics
WehaveadoptedourBusinessConductStatementasourCodeofConductandEthicsapplicabletoallofficers,directorsandemployees.TheBusinessConductStatementispubliclyavailableonourwebsiteathttp://investors.santanderconsumerusa.com.
CorporateGovernanceGuidelines
Inperformingitsrole,theBoardisguidedbyourCorporateGovernanceGuidelines,whichestablishaframeworkforthegovernanceoftheBoardandthemanagementofourCompany.TheguidelineswereadoptedbytheBoardandreflectregulatoryrequirementsandbroadlyrecognizedgovernancebestpractices,includingtheNYSEcorporategovernancelistingstandards.Theyarereviewedregularlyandupdatedasappropriate.Thefulltextcanbefoundonourwebsiteathttp://investors.santanderconsumerusa.com.
DirectorAttendance
During2016,theBoardheld21meetings.Eachincumbentdirectorattendedatleast75%oftheaggregatenumberofmeetingsoftheBoardandcommitteesoftheBoardonwhichheorsheserved,exceptforMr.Maldonado,whoattended44%ofthemeetingsoftheBoardandcommitteesoftheBoardonwhichheserved.Theoutsidedirectorsmetregularlyinexecutivesessions,withourindependentChairmanoftheBoardchairingthesessionsofoutsidedirectors.Weencourageallincumbentdirectors,aswellasallnomineesforelectionasdirector,toattendtheAnnualMeeting.Noneofourincumbentdirectorsattendedour2016AnnualMeeting,exceptforMr.Kulas.
CommunicationwithDirectors
StockholdersorotherinterestedpartiesdesiringtocommunicatewiththeBoard,withournon-managementdirectors,withourChairmanoftheBoardorthechairofanyoftheBoardcommitteesorwithanyindividualdirectormaydosoinwritingtoSantanderConsumerUSAHoldingsInc.,Attn:(NameofBoardMember(s)),c/oOfficeoftheSecretary,1601ElmStreet,Suite800,Dallas,Texas75201,orbye-mailc/otheOfficeoftheSecretaryatcorporate.secretary@santanderconsumerusa.com.
Section16(a)BeneficialOwnershipReportingCompliance
Section16(a)oftheExchangeActrequiresourdirectorsandexecutiveofficersandbeneficialownersofmorethan10%ofourCommonStocktofilereportswiththeSECwithrespecttotheirownershipofCommonStock.Directors,executiveofficersandpersonsowningmorethan10%ofourCommonStockarerequiredtofurnishuswithcopiesofallSection16(a)reportstheyfile.
Basedsolelyonourreviewofthecopiesofsuchreportsreceivedbyusandanywrittenrepresentationsfromreportingpersonsthatnootherreportswererequiredofthosepersons,webelievethatduring2016allsuchreportsrequiredtobefiledbyourdirectors,executiveofficersandbeneficialownersofmorethan10%ofourCommonStockwerefiled,exceptforaninadvertentfailuretofileaninitialstatementofbeneficialownershipuponMr.Hurley’sappointmenttotheBoardinApril2016.
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SC2017ProxyStatement
ProxyMaterialsandVotingInformation1.HowdoestheBoardrecommendthatIvoteonmatterstobeconsideredattheAnnualMeeting?
TheBoardrecommendsthatyouvoteasfollows:
AGENDAITEM
DESCRIPTION
BOARDRECOMMENDATION
1
ElectionofDirectors FORALL
2
RatificationofPwCastheCompany’sindependentregisteredpublicaccountingfirmfor2017
FOR
2.Whoisentitledtovote?
OnlyholdersofrecordofourCommonStockatthecloseofbusinessonApril13,2017,whichtheBoardofDirectorshassetastherecorddate,areentitledtonoticeof,andtovoteat,theAnnualMeeting.Asoftherecorddate,wehad359,418,551sharesofCommonStockoutstandingandentitledtovoteattheAnnualMeeting,andoursharesofCommonStockwereheldbyapproximately20stockholdersofrecord.EachstockholderofrecordofCommonStockontherecorddatewillbeentitledtoonevoteforeachshareheldonallmatterstobevoteduponattheAnnualMeeting.Therearenocumulativevotingrightsintheelectionofdirectors.
3.WhatconstitutesquorumattheAnnualMeeting?
Thepresence,inpersonorbyproxy,ofamajorityofthevotesentitledtobecastonamattertobevotedonattheAnnualMeetingconstitutesaquorumforactiononthatmatter.ThesharesofCommonStockrepresentedbyproperlyexecutedproxycardsorproperlyauthenticatedvotinginstructionsrecordedelectronicallythroughtheInternetorbytelephone,willbecountedforpurposesofdeterminingthepresenceofaquorumattheAnnualMeeting.Abstentionsandbrokernon-voteswillbecountedtowardfulfillmentofquorumrequirements.Abrokernon-voteoccurswhenanomineeholdingsharesforabeneficialownerdoesnotvoteonaparticularproposalbecausethenomineedoesnothavediscretionaryvotingpowerwithrespecttothatproposalandhasnotreceivedinstructionsfromthebeneficialowner.
4.HowdoIvotewithoutattendingtheAnnualMeeting?
Whetheryouholdsharesdirectlyasastockholderofrecordorthroughabroker,trustee,orothernominee,youmaydirecthowyoursharesarevotedwithoutattendingtheAnnualMeeting.YoumaygivevotinginstructionsbytheInternet,bytelephoneorbymail.Instructionsareontheproxycardorinstructioncard.Theproxyholderswillvoteallproperlyexecutedproxiesthataredeliveredinresponsetothissolicitation,andnotlaterrevoked,inaccordancewiththeinstructionsgivenbyyou.
Ifyouareastockholderofrecordontherecorddate,thenyourproxymustbereceivednolaterthan5:00p.m.,EasternTimeonJune11,2017tobecounted.Ifyouarethebeneficialownerofyoursharesheldthroughabroker,trusteeorothernominee,pleasefollowtheinstructionsofyourbroker,trusteeorothernomineeindeterminingthedeadlineforsubmittingyourproxy.
5.HowcanIrevokemyproxy?
AstockholderofrecordwhohasgivenaproxymayrevokeitatanytimepriortoitsexerciseattheAnnualMeetingbyeither(i)givingwrittennoticeofrevocationtoourCorporateSecretary,(ii)properlysubmittingadulyexecutedproxybearingalaterdate,or(iii)appearinginpersonattheAnnualMeetingandvotinginperson.
Ifyouarethebeneficialownerofsharesheldthroughabroker,trustee,orothernominee,youmustfollowthespecificinstructionsprovidedtoyoubyyourbroker,trustee,orothernomineetochangeorrevokeanyinstructionsyouhavealreadyprovidedtoyourbroker,trustee,orothernominee.
6.Whatisthedifferencebetweena“stockholderofrecord”anda“beneficial”stockholderofsharesheldinstreetname?
Ifyoursharesareowneddirectlyinyournameinanaccountwithourtransferagent,Computershare,youareconsideredthe“stockholderofrecord”ofthosesharesinyouraccount.
Ifyoursharesareheldinanaccountwithabroker,bank,orothernomineeascustodianonyourbehalf,youareconsidereda“beneficial”stockholderofthoseshares,whichareheldin“streetname.”Thebroker,bank,orothernomineeisconsideredthestockholderofrecordforthoseshares.Asthebeneficialowner,youhavetherighttoinstructthebroker,bank,orothernomineeonhowtovotethesharesinyouraccount.
7.Howwillyoutreatmyvotinginstructions?
Ifyouprovidespecificvotinginstructions,yourshareswillbevotedasinstructed.
IfyouholdsharesasthestockholderofrecordandsignandreturnaproxycardorvotebyInternetortelephonewithoutgivingspecificvotinginstructions,thenyourshareswillbevotedinaccordancewiththerecommendationsoftheBoard.TheBoardrecommends(1)avotefortheelectionofalldirectornomineesand(2)avotefortheratificationoftheappointmentofPwCasourindependentregisteredpublicaccountingfirm.Intheeventthatanydirectornomineeisunavailableforelection,suchsharesmaybevotedfortheelectionofsuchsubstitutenomineeornominees,ifany,astheBoardmayselect.
Thepersonsidentifiedashavingtheauthoritytovotetheproxiesgrantedbytheproxycardwillalsohavediscretionaryauthoritytovote,totheextentpermittedbyapplicablelaw,onsuchotherbusinessasmayproperlycomebeforetheAnnualMeetingandanypostponementoradjournment.TheBoardisnotawareof
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anyothermattersthatarelikelytobebroughtbeforetheAnnualMeeting.IfanyothermatterisproperlypresentedforactionattheAnnualMeeting,includingaproposaltoadjournorpostponetheAnnualMeetingtopermitustosolicitadditionalproxiesinfavorofanyproposal,thepersonsnamedintheproxycardwillvoteonsuchmatterintheirowndiscretion.
Asabeneficialstockholder,youmustprovidevotinginstructionstoyourbroker,bank,orothernomineebythedeadlineprovidedintheproxymaterialsyoureceivefromyourbroker,bank,orothernomineetoensureyoursharesarevotedthewayyouwouldlike.Ifyoudonotprovidevotinginstructionstoyourbroker,bank,orothernominee,whetheryoursharescanbevotedonyourbehalfdependsonthetypeofitembeingconsideredforvote.UnderNYSErules,brokersarepermittedtoexercisediscretionaryvotingauthorityonlyon“routine”matters.Therefore,yourbrokermayvoteonItemNo.2(RatificationoftheAppointmentofPwCasourIndependentRegisteredPublicAccountingFirmfor2017)evenifyoudonotprovidevotinginstructions,becauseitisconsideredaroutinematter.YourbrokerisnotpermittedtovoteontheotherAgendaItemsifyoudonotprovidevotinginstructions,becausethoseitemsinvolvemattersthatareconsiderednon-routine.
8.Whatisabrokernon-vote?
Ifyourbrokerdoesnotreceiveinstructionsfromyouonhowtovoteyoursharesanddoesnothavediscretiontovoteonaproposalbecauseitisanon-routinematter,thebrokermayreturntheproxywithoutvotingonthatproposal.Thisisknownasa“brokernon-vote.”Abrokernon-voteisdeemedasnotentitledtovoteatthemeetingwithregardtoaproposalsothatitdoesnothaveanyeffectontheoutcomeofavote.
9.Whatarethevotingrequirementstoelectdirectorsandtoapproveeachoftheproposals?
AttheAnnualMeeting,stockholderswillconsiderandactupon(1)theelectionof12directors(2)theratificationoftheappointmentofourindependentregisteredpublicaccountingfirmand(3)suchotherbusinessasmayproperlycomebeforetheAnnualMeeting.
OurThirdAmendedandRestatedBylaws(the“Bylaws”)providethatdirectorsareelectedbyapluralityofthevotescast.ThismeansthatthedirectornomineewiththemostvotesforaparticularseatontheBoardiselectedforthatseat.OnlyvotesactuallycastwillbecountedforpurposesofdeterminingwhetheradirectornomineereceivedthemostvotesforaparticularseatontheBoard.Abstentionsandthewithholdingofauthoritybyastockholder(includingbrokernon-votes)astotheelectionofdirectors(Proposal1)arenottreatedasvotes“cast”andthushavenoeffectontheresultsoftheelection.
UnderourBylaws,theratificationoftheappointmentofourindependentregisteredpublicaccountingfirm(Proposal2)mustbeapprovedbytheaffirmativevoteofamajorityofthevotespresentinpersonorrepresentedbyproxyatthemeetingandentitledtovoteonthematter.Abrokernon-voteisdeemedasnotentitledtovoteatthemeetingwithregardtoaproposalso
thatitdoesnothaveanyeffectontheoutcomeofProposal2.AbstentionswillbetreatedasvotesagainstProposal2.
AsofMarch31,2017,ourdirectorsandexecutiveofficersbeneficiallyowned1,286,787sharesofCommonStockeligibletobevotedattheAnnualMeeting,constitutingapproximately0.36%oftheoutstandingCommonStock.Inaddition,SHUSA,ourcontrollingstockholderandasubsidiaryofSantander,owns210,995,049sharesofCommonStock,constitutingapproximately58.71%oftheoutstandingCommonStockeligibletobevoted.Webelievethatourdirectors,executiveofficersandSHUSAwillvotealloftheirsharesofCommonStockinfavoroftheelectionofeachofthedirectornomineesandinfavorofProposal2,andtherefore,theoutcomeofthesemattersisreasonablyassured.
10.Whatis“householding”andhowdoesitaffectme?
IfyouandotherpersonsinyourhouseholdownsharesofourCommonStockasthebeneficialowner,yourbrokerorbankmayhavegivennoticethatyourhouseholdwillreceiveonlyonecopyofourannualreportandproxystatement.Thispracticeisknownas“householding.”Unlessyourespondedtothatnoticethatyoudidnotwishtoparticipateinhouseholding,youwouldbedeemedtohaveconsentedtoparticipating,andonlyonecopyofourannualreportandProxyStatementwouldbesenttoyouraddress(however,eachstockholderwouldcontinuetoreceiveaseparateproxycard).Thisprocedurereducesourprintingcostsandpostagefees.
Anystockholderwhowishestoreceivehisorherownsetofourannualreportsandproxystatements,orwhosharesanaddresswithanotherstockholderoftheCompanyandtogetherwouldliketoreceiveonlyonesetofannualdisclosuredocuments,shouldcontactusat1601ElmSt.,Suite800,Dallas,Texas75201Attention:CorporateSecretary,beingsuretosupplythenamesofallstockholdersatthesameaddress,thenameofthebankorbrokeragefirm,andtheaccountnumber(s).Youcanalsoreachusat(214)634-1110.Therevocationofconsenttohouseholdingshouldbeeffective30daysafterthenoticeisreceived.
AnnualMeetingInformation11.ArethereanyothermatterstobevoteduponattheAnnualMeeting?
WedonotknowofanymatterstobevotedonbystockholdersattheAnnualMeetingotherthanthoseincludedinthisProxyStatement.YourexecutedproxygivestheproxyholdersauthoritytovoteyoursharesinaccordancewithitsbestjudgmentwithrespecttoanyothermatterthatmayproperlycomebeforethestockholdersattheAnnualMeetinginaccordancewithRule14a-4(c)oftheSEC’sproxyrules,andtheproxyholdersintendtoexerciseitsjudgmentaccordinglyinsuchcircumstances.
12.HowcanIvoteinpersonattheAnnualMeeting?
SharesheldinyournameasthestockholderofrecordontherecorddatemaybevotedinpersonattheAnnualMeeting.
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SharesforwhichyouarethebeneficialownerbutnotthestockholderofrecordmaybevotedinpersonattheAnnualMeetingonlyifyouobtainalegalproxyfromthebroker,trustee,orothernomineethatholdsyoursharesgivingyoutherighttovotetheshares.EvenifyouplantoattendtheAnnualMeeting,werecommendthatyouvotebyproxyasdescribedbelowsothatyourvotewillbecountedifyoulaterdecidenottoattendtheAnnualMeeting.
Thevoteyoucastinpersonwillsupersedeanypreviousvotesthatyoumayhavesubmitted,whetherbyInternet,telephone,ormail.
13.HowcanIattendtheAnnualMeeting?
ToattendtheAnnualMeeting,youmustbeaholderofourCommonStockasoftherecorddateofApril13,2017,andrequestanadmissionticketinadvancebyfollowingtheinstructionsbelow.
IfyoursharesareowneddirectlyinyournameinanaccountwithComputershare,ourstocktransferagent,youmustprovideyournameandaddressasshownonyouraccountorvotingmaterialswithyouradmissionticketrequest.Ifyouholdyoursharesinanaccountwithabroker,bank,orothernominee,youmustincludeproofofyourstockownership,suchasacopyoftheportionofyourNoticeorproxycardthatshowsyournameandaddressoraletterfromyourbroker,bank,orothernomineeconfirmingyourstockownershipasofApril13,2017.Thee-mailnotificationreceivedwithelectronicdeliveryofproxymaterialsisnotsufficientproofofstockownership.
PleasesendyourAnnualMeetingadmissionticketrequestandproofofstockownershipasdescribedabovetotheOfficeoftheSecretarybyoneofthefollowingmethods: Email: [email protected]
Mail: SantanderConsumerUSAHoldingsInc.OfficeoftheCorporateSecretary1601ElmStreet,Suite800Dallas,Texas75201
TicketrequestsmustbereceivednolaterthanJune5,2017.Pleaseincludeyourmailingaddressaswellasyoure-mailaddressortelephonenumberinyouremailormailcommunicationincaseweneedtocontactyouregardingyourticketrequest.Youwillreceiveyouradmissionticketbymail.Onthedayofthemeeting,eachstockholdermusthaveanadmissiontickettoenterthemeeting.Alongwiththeadmissionticket,eachstockholderwillberequiredtopresentaformofgovernment-issuedphotoidentification,suchasadriver’slicenseorpassport.Theadmissionticketisnottransferable.
Largebags,backpacksandpackages,suitcases,briefcases,personalcommunicationdevices(e.g.,cellphones,smartphones,andtablets),cameras,recordingequipment,andotherelectronicdeviceswillnotbepermittedinthemeeting,andattendeeswillbesubjecttoasecurityinspection.
StockholderProposalsandCompanyInformation14.HowcanIsubmitastockholderproposalforthe2018AnnualMeeting?
StockholderproposalssubmittedpursuanttoSECRule14a-8forinclusioninour2018proxystatementandacteduponatour2018AnnualStockholderMeeting(the“2018AnnualMeeting”)mustbereceivedbyusatourexecutiveofficesat1601ElmSt.,Suite800,Dallas,Texas75201,Attention:OfficeoftheSecretary,nolaterthan120calendardaysbeforetheone-yearanniversaryofthedateofourproxystatementreleasedtostockholdersinconnectionwiththe2017AnnualMeeting.Asaresult,anynoticegivenbyastockholderpursuanttoSECRule14a-8)mustbereceivednoearlierthanFebruary12,2018andnolaterthanMarch14,2018.If,however,the2018AnnualMeetingtakesplacemorethan30daysbeforeorafterJune12,2018,thenthedeadlineforstockholderproposalssubmittedpursuanttoSECRule14a-8forinclusioninour2018proxystatementandacteduponatour2018AnnualMeetingshallbeadatethatwedeterminetobeareasonabletimebeforewebegintoprintandsendourProxyMaterials.Inthisevent,wewilldisclosethisdeadlineinapublicfilingwiththeSEC.
Stockholderproposalssubmittedforconsiderationatthe2018AnnualMeetingbutnotsubmittedpursuanttoSECRule14a-8,includingstockholdernominationsforcandidatesforelectionasdirectors,generallymustbedeliveredtotheSecretaryatourexecutiveofficesnotlaterthan90daysorearlierthan120daysbeforethefirstanniversaryofthedateofthe2017AnnualMeeting.Asaresult,anynoticegivenbyastockholderpursuanttotheprovisionsofourBylaws(otherthannoticepursuanttoSECRule14a-8)mustbereceivednoearlierthanFebruary12,2018andnolaterthanMarch14,2018.However,ifthedateofthe2018AnnualMeetingoccursmorethan30daysbeforeormorethan60daysafterJune12,2018,noticebythestockholderofaproposalmustbedeliverednoearlierthanthecloseofbusinessonthe120thdaypriortothedateofsuchAnnualMeetingandnolaterthanthecloseofbusinessonthe90thdaypriortothedateofsuchAnnualMeetingor,ifthefirstpublicannouncementofthedateoftheAnnualMeetingislessthan100dayspriortothedateofsuchAnnualMeeting,the10thdayfollowingthedayonwhichwefirstmakeapublicannouncementofthedateoftheAnnualMeeting.StockholderproposalsornominationsmustincludethespecifiedinformationconcerningthestockholderandtheproposalornomineeasdescribedinourBylaws.ThechairmanoftheAnnualMeetingmayrefusetoacknowledgeorintroduceanystockholderproposalornominationifnoticethereofisnotreceivedwithintheapplicabledeadlinesordoesnotcomplywithourBylaws.IfastockholderfailstomeetthesedeadlinesorfailstosatisfytherequirementsofourBylaws,thepersonsnamedasproxieswillbeallowedtousetheirdiscretionaryvotingauthoritytovoteonanysuchproposalornominationastheydetermineappropriateifandwhenthematterisraisedattheAnnualMeeting.
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ByOrderoftheBoardofDirectors,
ChristopherPfirrmanChiefLegalOfficer,GeneralCounselandCorporateSecretary SC2017ProxyStatement
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15.Whopaysforthisproxysolicitation?
ProxieswillbesolicitedfromourstockholdersbymailandthroughtheInternet.Wewillpayallexpensesinconnectionwiththesolicitation,includingpostage,printingandhandling,andtheexpensesincurredbybrokers,custodians,nomineesandfiduciariesinforwardingproxymaterialtobeneficialowners.WemayengageaproxysolicitationfirmtosolicitproxiesinconnectionwiththeAnnualMeeting,andweestimatethatthefeepayableforsuchserviceswouldbelessthan$10,000.Itispossiblethatourdirectors,officersandotheremployeesmaymakefurthersolicitationspersonallyorbytelephone,facsimileormail.Ourdirectors,officersandotheremployeeswillreceivenoadditionalcompensationforanysuchfurthersolicitations.
16.HowcanIobtainacopyoftheAnnualReportonForm10-K?
Uponwrittenrequest,wewillprovidetoyoubymailafreecopyofourAnnualReportonForm10-K(includingfinancialstatementsandfinancialstatementschedules)forthefiscalyearendedDecember31,2016.Pleasedirectyourrequestto1601ElmSt.,Suite800,Dallas,Texas75201Attention:CorporateSecretary.TheAnnualReportonForm10-Kmayalsobeaccessedonourwebsiteathttp://investors.santanderconsumerusa.com.
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ANNUAL MEETING OF SANTANDER CONSUMER USA HOLDINGS INC.Date: June 12, 2017
Time: 3:00 P.M. (Local Time) Place: 1601 Elm Street, Suite 800, Dallas, TX 75201
Please make your marks like this: ☒ Use dark black pencil or pen only
The Board of Directors Recommends a Vote FOR proposals 1 and 2.
1:
Election of Directors
DirectorsRecommend
ä
For Withhold 01 José Doncel ☐ ☐ For 02 Stephen A. Ferriss ☐ ☐ For 03 Brian Gunn ☐ ☐ For 04 Victor Hill ☐ ☐ For 05 Edith E. Holiday ☐ ☐ For 06 Mark P. Hurley ☐ ☐ For 07 Jason A. Kulas ☐ ☐ For 08 Javier Maldonado ☐ ☐ For 09 Robert J. McCarthy ☐ ☐ For 10 William F. Muir ☐ ☐ For 11 Scott Powell ☐ ☐ For 12 William Rainer ☐ ☐ For
2:
To ratify the appointment ofPricewaterhouseCoopers LLP as ourindependent registered public accountingfirm for the current fiscal year.
For☐
Against☐
Abstain☐
For
3:
Includes authorization to vote upon anybusiness as may properly come before theAnnual Meeting, or any adjournment orpostponement thereof, in accordance withthe terms of our Third Amended andRestated Bylaws.
Authorized Signatures - This section mustbe completed for your Instructions to beexecuted.
Please Sign Here Please Date Above
Please Sign Here Please Date Above
Please sign exactly as your name(s) appears on your stock certificate. If held in jointtenancy, all persons should sign. Trustees, administrators, etc., should include titleand authority. Corporations should provide full name of corporation and title ofauthorized officer signing the proxy.
Annual Meeting of Santander Consumer USA Holdings Inc.to be held on Monday, June 12, 2017
for Holders as of April 13, 2017This proxy is being solicited on behalf of the Board of Directors
INTERNETGo Towww.proxypush.com/sc
VOTE BY:
TELEPHONE
855-782-8499• Cast your vote online. OR • Use any touch-tone telephone.• View Meeting Documents.
•
Have your Proxy Card/VotingInstruction Form ready.
•
Follow the simple recorded instructions.
OR • Mark, sign and date your Proxy Card/Voting Instruction Form. • Detach your Proxy Card/Voting Instruction Form.
• Return your Proxy Card/Voting Instruction Form in the postage-paid envelope provided.
The undersigned hereby appoints Jason A. Kulas and Christopher Pfirrman, and each oreither of them, as the true and lawful attorneys of the undersigned, with full power ofsubstitution and revocation, and authorizes them, and each of them, to vote all the shares ofcapital stock of Santander Consumer USA Holdings Inc. which the undersigned is entitled tovote at said meeting and any adjournment or postponement thereof upon the mattersspecified and upon such other matters as may be properly brought before the meeting or anyadjournment or postponement thereof, conferring authority upon such true and lawfulattorneys to vote in their discretion on such other matters as may properly come before themeeting and revoking any proxy heretofore given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTEDOR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTIONOF THE DIRECTORS IN ITEM 1 AND FOR THE PROPOSAL IN ITEM 2 ANDAUTHORITY WILL BE DEEMED GRANTED TO VOTE UPON ANY BUSINESS ASMAY PROPERLY COME BEFORE THE ANNUAL MEETING, OR ANYADJOURNMENT OR POSTPONEMENT THEREOF, IN ACCORDANCE WITH THETERMS OF OUR THIRD AMENDED AND RESTATED BYLAWS.
All votes must be received by 5:00 P.M., Eastern Time, June 11, 2017.
PROXY TABULATOR FOR
SANTANDER CONSUMER USA HOLDINGS INC.
P.O. BOX 8016 CARY, NC 27512-9903
EVENT #
CLIENT #
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Proxy — Santander Consumer USA Holdings Inc. Annual Meeting of Stockholders June 12, 2017 3:00 P.M. (Local Time)
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned appoints Jason A. Kulas and Christopher Pfirrman (the“Named Proxies”) and each of them as proxies for the undersigned, withfull power of substitution, to vote the shares of common stock of SantanderConsumer USA Holdings Inc., a Delaware corporation (the “Company”),the undersigned is entitled to vote at the Annual Meeting of Stockholdersof the Company to be held at the offices of Santander Consumer USAHoldings Inc., at 1601 Elm Street, Suite 800, Dallas, Texas 75201, onJune 12, 2017 at 3:00 P.M. (Local Time) and all adjournments orpostponements thereof. The Board of Directors of the Company recommends a vote “FOR” allnominees for director, and “FOR” proposal 2. This proxy, when properly executed, will be voted in the mannerdirected herein. If no direction is made, this proxy will be voted“FOR” all nominees for director and “FOR” each proposal. In theirdiscretion, the Named Proxies are authorized to vote upon such othermatters that may properly come before the Annual Meeting or anyadjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriatebox (SEE REVERSE SIDE) but you need not mark any box if youwish to vote in accordance with the Board of Directors’recommendation. The Named Proxies cannot vote your shares unlessyou sign and return this card.