Edgar Filing: NORTHERN TRUST CORP

DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

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☐		Soliciting Material Under Section 240.14a-12

NORTHERN TRUST CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

Northern Trust Corporation

50 South La Salle Street

Chicago, Illinois 60603

March 16, 2017

Dear Stockholder:

You are cordially invited to attend the Northern Trust Corporation 2017 Annual Meeting of Stockholders on Tuesday, April 25, 2017, at 10:30 a.m., Central Time, at our corporate headquarters at 50 South La Salle Street in Chicago, Illinois.

For more than 125 years, our stockholders’ support has been essential to Northern Trust’s stability and success. Your vote plays a vital role and is very important for our future. Whether or not you plan to attend the Annual Meeting, I urge you to vote your shares as promptly as possible.

The attached Notice of Annual Meeting of Stockholders and Proxy Statement provide you with information about each proposal to be considered at the Annual Meeting, as well as other information you may find useful in voting your shares. If you plan to attend the Annual Meeting, please review the information on admittance procedures in the accompanying Proxy Statement.

If you choose not to attend in person, you may vote your shares by Internet or telephone. If you received a paper copy of the proxy materials, you also may complete, sign, date, and return your proxy card in the enclosed envelope. Instructions for voting by Internet or telephone can be found on your proxy card or your Notice Regarding the Availability of Proxy Materials.

Thank you for your continued support of Northern Trust Corporation, and your contribution to the future of our company.

Sincerely,

Frederick H. Waddell

Chairman of the Board and Chief Executive Officer

LOGO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS


Date:		Tuesday, April 25, 2017

Time:		10:30 a.m., Central Time

Place:		Northern Trust Corporation 50 South La Salle Street Chicago, Illinois 60603

Purposes:		The purposes of the Annual Meeting are to:

		● elect thirteen directors to serve on the Board of Directors until the 2018 Annual Meeting of Stockholders or until their successors are elected and qualified; ● approve, by an advisory vote, 2016 named executive officer compensation; ● hold an advisory vote on the frequency with which the Corporation should hold advisory votes on executive compensation; ● approve the Northern Trust Corporation 2017 Long-Term Incentive Plan; ● ratify the appointment of KPMG LLP as Northern Trust Corporation’s independent registered public accounting firm for the 2017 fiscal year; and ● transact any other business that may properly come before the Annual Meeting.

Record Date:		You can, and should, vote if you were a stockholder of record at the close of business on February 27, 2017.

March 16, 2017

By order of the Board of Directors,

LOGO

Stephanie S. Greisch

Corporate Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 25, 2017

This Proxy Statement, other proxy materials, our Annual Report on Form 10-K for the year ended December 31, 2016 and a link to the means to vote by Internet or telephone are available at materials.proxyvote.com/665859.

TABLE OF CONTENTS


GENERAL INFORMATION			1

A Notice Regarding the Availability of Proxy Materials			1
Who May Vote			1
Voting Your Proxy			2
Revoking Your Proxy			3
Voting in Person			3
Householding Information			3
Quorum and Vote Required for Approval			4
Solicitation of Proxies; Costs			6

ADMITTANCE TO THE ANNUAL MEETING			6

ITEM 1—ELECTION OF DIRECTORS			7

INFORMATION ABOUT THE NOMINEES FOR DIRECTOR			8

BOARD AND BOARD COMMITTEE INFORMATION			13
Board Committees			13
Committee Composition			14
Audit Committee			14
Business Risk Committee			15
Capital Governance Committee			15
Compensation and Benefits Committee			15
Corporate Governance Committee			16
Corporate Social Responsibility Committee			16
Executive Committee			16

CORPORATE GOVERNANCE			17
Key Governance Practices			17
Director Independence			17
Related Person Transactions Policy			18
Executive Sessions			20
Board Leadership Structure; Lead Director			20
Risk Oversight			21
Corporate Governance Guidelines			22
Code of Business Conduct and Ethics			22
Management Development and Succession Planning			22
Director Nominations and Qualifications			23
Stockholder Engagement			23
Communications with the Board and Independent Directors			24
Securities Transactions Policy and Procedures and Policy Against Hedging			24

SECURITY OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS			25
Section 16(a) Beneficial Ownership Reporting Compliance			26

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS			26

ITEM 2—ADVISORY VOTE ON EXECUTIVE COMPENSATION			28

ITEM 3—ADVISORY VOTE ON THE FREQUENCY OF STOCKHOLDER VOTES ON EXECUTIVE COMPENSATION			29



EXECUTIVE COMPENSATION			30
Compensation Discussion and Analysis			30
Compensation and Benefits Committee Report			52
Summary Compensation Table			53
Grants of Plan-Based Awards			56
Description of Certain Awards Granted in 2016			57
Outstanding Equity Awards at Fiscal Year-End			61
Option Exercises and Stock Vested			64
Pension Benefits			64
Nonqualified Deferred Compensation			68
Potential Payments Upon Termination of Employment or a Change in Control of the Corporation			71

DIRECTOR COMPENSATION			76
Annual Retainer and Other Fees			76
Deferral of Compensation			76
Other Director Compensation			76
Stock Ownership Guidelines			77
Director Compensation Table			77

ITEM 4—APPROVAL OF THE NORTHERN TRUST CORPORATION 2017 LONG-TERM INCENTIVE PLAN			78
Overview			78
Plan Highlights			78
Description of the 2017 Plan			79
New Plan Benefits			85
Federal Income Tax Consequences			85

EQUITY COMPENSATION PLAN INFORMATION			88

AUDIT COMMITTEE REPORT			89

AUDIT MATTERS			90
Fees of Independent Registered Public Accounting Firm			90
Pre-Approval Policies and Procedures of the Audit Committee			90

ITEM 5—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			91

STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING			92

LOGO

PROXY STATEMENT

The accompanying proxy is solicited on behalf of the Board of Directors (the “Board”) of Northern Trust Corporation (the “Corporation”) for use at the Corporation’s Annual Meeting of Stockholders to be held on Tuesday, April 25, 2017 (the “Annual Meeting”). On or about March 16, 2017, we began mailing or otherwise making available our proxy materials, including a copy of our Annual Report on Form 10-K for the year ended December 31, 2016, to all stockholders entitled to vote at the Annual Meeting.

GENERAL INFORMATION

A Notice Regarding the Availability of Proxy Materials

Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), for some of our stockholders we are providing access to our proxy materials via the Internet. The rules permit us to send a Notice Regarding the Availability of Proxy Materials (the “Notice”) to stockholders of record and beneficial owners. All stockholders have the ability to access the proxy materials on the website referred to in the Notice, www.proxyvote.com, or to request a printed set of proxy materials on this site or by calling toll-free 1-800-579-1639. Complete instructions for accessing the proxy materials on the Internet or requesting a printed copy may be found in the Notice. In addition, stockholders may request to receive all future proxy materials in printed form by mail or electronically by e-mail on the website above or when voting electronically. Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the impact of our annual stockholders’ meetings on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.

Who May Vote

Record holders of the Corporation’s common stock at the close of business on February 27, 2017 may vote at the Annual Meeting. On that date, the Corporation had 229,484,933 shares of common stock outstanding.

You are entitled to one vote for each share of common stock that you owned of record at the close of business on February 27, 2017. The proxy card or Notice, as applicable, indicates the number of shares you are entitled to vote at the Annual Meeting.

Voting Your Proxy

Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares promptly.

If you are a “stockholder of record” (that is, you hold your shares of the Corporation’s common stock in your own name), you may vote your shares by proxy using any of the following methods:

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using the Internet site listed on the Notice or the proxy card;

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calling the toll-free telephone number listed on the proxy card; or

●

completing, signing, dating and returning your proxy card.

The Internet and telephone voting procedures set forth on the Notice and the proxy card are designed to authenticate stockholders’ identities, to allow stockholders to provide their voting instructions and to confirm that their instructions have been properly recorded. If you vote by Internet or telephone, you should not return your proxy card.

If you are a “beneficial owner,” also known as a “street name” holder (that is, you hold your shares of the Corporation’s common stock through a broker, bank or other nominee), you will receive from the record holder, in the form of a Notice or otherwise, voting instructions (including instructions, if any, on how to vote by Internet or telephone) that you must follow in order to have your shares voted at the Annual Meeting. Under the rules of various national and regional securities exchanges, brokers, banks and other nominees that hold securities on behalf of beneficial owners generally may vote on routine matters even if they have not received voting instructions from the beneficial owners for whom they hold securities, but are not permitted to vote on nonroutine matters unless they have received such voting instructions. While the ratification of the appointment of the Corporation’s independent registered public accounting firm is considered to be a routine matter, each of the other matters to be presented to the stockholders at the Annual Meeting described in this Proxy Statement is considered to be a nonroutine matter. Thus, if you fail to provide your specific voting instructions, your broker may only vote your shares on the ratification of the appointment of the Corporation’s independent registered public accounting firm. Consequently, it is important that you communicate your voting instructions by using any of the following methods so your vote can be counted:

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using the Internet site listed on the voting instruction form;

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calling the toll-free telephone number listed on the voting instruction form; or

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completing, signing, dating and returning your voting instruction form.

If you own shares of common stock as a participant in The Northern Trust Company Thrift-Incentive Plan (“TIP”), or as a participant in any other employee benefit plan of the Corporation, your proxy card will cover the shares credited to each of your plan accounts. The completed proxy card (or vote by Internet or telephone) will serve as your voting instructions to the TIP trustee. To allow sufficient time for voting by the trustee, your voting instructions must be received by 11:59 p.m, Eastern Time, on April 20, 2017.

Whether you vote by Internet, telephone or mail, your shares will be voted in accordance with your instructions. If you sign, date and return your proxy card without indicating how you want to vote your shares, the proxy holders will vote your shares in accordance with the following recommendations of the Board:


Item 1	—	FOR the election of each nominee for director;

Item 2	—	FOR the approval, by an advisory vote, of the 2016 compensation of the Corporation’s named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC;

Item 3	—	EVERY YEAR for the frequency with which the Corporation should hold advisory votes on executive compensation;

Item 4	—	FOR the approval of the Northern Trust Corporation 2017 Long-Term Incentive Plan; and

Item 5	—	FOR the ratification of the appointment of KPMG LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2017.

The proxy holders are authorized to vote as they shall determine in their sole discretion on any other business that may properly come before the Annual Meeting.

Revoking Your Proxy

You may revoke your proxy at any time before it is voted at the Annual Meeting by:

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sending a written notice of revocation to the Corporation’s Corporate Secretary;

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submitting another signed proxy card with a later date;

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voting by Internet or telephone at a later date; or

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attending the Annual Meeting and voting in person.

If you hold your shares in the name of your broker, bank or other nominee and wish to revoke your proxy, you will need to contact that party to revoke your proxy.

Voting in Person

You may come to the Annual Meeting and vote your shares in person by obtaining and submitting a ballot that will be provided at the meeting. However, if your shares are held by a broker, bank or other nominee in street name, to be able to vote at the meeting you must obtain a proxy, executed in your favor, from the record holder of your shares, indicating that you were the beneficial owner of the shares at the close of business on February 27, 2017.

Householding Information

We are delivering only one Annual Report on Form 10-K and Proxy Statement (or, as applicable, the Notice) to stockholders of record who share the same address unless they have notified us that they wish to continue receiving multiple copies. This practice, known as “householding,”

reduces duplicate mailings, saves printing and postage costs as well as natural resources and will not affect dividend check mailings. If you wish to receive separate copies of proxy materials, please contact Broadridge at 1-866-540-7095 or Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Stockholders who wish to receive a separate set of proxy materials now should contact Broadridge at the same telephone number or mailing address and the materials will be delivered to you promptly upon your request.

If you and other stockholders of record with whom you share an address currently receive multiple copies of our proxy materials or if you hold our stock in more than one account, and, in either case, you wish to receive only a single copy of such materials in the future, please contact Broadridge at the telephone number or mailing address above with the names in which all accounts are registered and the name of the account for which you wish to receive mailings.

Quorum and Vote Required for Approval

A quorum of stockholders is necessary to hold a valid meeting. A quorum will exist if a majority of the outstanding shares entitled to vote at the meeting is present in person or by proxy at the Annual Meeting. Abstentions and broker nonvotes, if any, will be counted as present for purposes of establishing a quorum. A “broker nonvote” will occur when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions from the beneficial owner. As noted above, brokers, banks and other nominees generally cannot vote your shares on any of the matters to be presented to stockholders at the Annual Meeting described in this Proxy Statement, other than the ratification of the appointment of KPMG LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2017, without your specific instructions. Please return your proxy card or voting instruction form, as applicable, or vote by Internet or telephone so your vote can be counted. An inspector of election appointed for the Annual Meeting will tabulate all votes cast in person or by proxy at the Annual Meeting. In the event a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be adjourned or postponed to solicit additional proxies.

The following table indicates the vote required for approval of each item to be presented to the stockholders at the Annual Meeting and the effect of abstentions and broker nonvotes.


Item	Required Vote	Effect of Abstentions and Broker Nonvotes
Item 1—Election of directors	Affirmative vote of a majority of the votes cast with respect to each nominee. See below for further detail.	● Abstentions with respect to a nominee will have no effect on the election of such nominee. ● Broker nonvotes will have no effect on the voting for this item.
Item 2—Advisory vote on executive compensation	Affirmative vote of a majority of the shares of common stock present and entitled to vote.	● Abstentions will have the effect of a vote AGAINST this item. ● Broker nonvotes will have no effect on the voting for this item.
Item 3—Advisory vote on frequency of votes on executive compensation	Affirmative vote of a plurality of the shares of common stock present and entitled to vote.	● Abstentions will have no effect on the voting for this item. ● Broker nonvotes will have no effect on the voting for this item.
Item 4—Approval of the Northern Trust Corporation 2017 Long-Term Incentive Plan	Affirmative vote of a majority of the shares of common stock present and entitled to vote.	● Abstentions will have the effect of a vote AGAINST this item. ● Broker nonvotes will have no effect on the voting for this item.
Item 5—Ratification of the appointment of KPMG LLP as the Corporation’s independent registered public accounting firm for the 2017 fiscal year	Affirmative vote of a majority of the shares of common stock present and entitled to vote.	● Abstentions will have the effect of a vote AGAINST this item. ● Brokers may vote uninstructed shares on this item.

Pursuant to the Corporation’s By-laws, a nominee for director in an uncontested election (such as this year’s election where the only nominees are those recommended by the Board) must receive the affirmative vote of a majority of the votes cast with respect to his or her election at a meeting of stockholders to be elected. In contested elections, the affirmative vote of a plurality of the votes cast will be required to elect a director. The Corporation’s Corporate Governance Guidelines require an incumbent director who fails to receive the affirmative vote of a majority of the votes cast with respect to his or her election in an uncontested election at a meeting of stockholders to submit his or her resignation following certification of the stockholder vote. Such resignation will first be considered by the members of the Corporate Governance Committee (other than the tendering director, if applicable), who will recommend to the Board whether to accept or reject the resignation after considering all factors deemed relevant by the Committee, including, without limitation, any stated reasons as to why stockholders did not support the director whose resignation has been tendered, the length of service and qualifications of such director, the director’s contributions to the Corporation and the Corporation’s Corporate Governance Guidelines. The Board (other than the tendering director) will then act to accept or reject the Committee’s recommendation no later than ninety days following the date of the stockholders’ meeting after considering the factors considered by the Committee and such additional information and factors as the Board believes to be relevant.

Solicitation of Proxies; Costs

The Corporation will bear the cost of preparing, printing and mailing the materials in connection with this solicitation of proxies. In addition to mailing these materials, the Corporation’s officers and other employees may, without being additionally compensated, solicit proxies personally and by mail, telephone or electronic communication. The Corporation will reimburse banks and brokers for their reasonable out-of-pocket expenses related to forwarding proxy materials to beneficial owners of stock or otherwise in connection with this solicitation. In addition, the Corporation has retained Georgeson Inc. to assist in the solicitation of proxies for a fee of approximately $12,500, plus reasonable out-of-pocket expenses.

ADMITTANCE TO THE ANNUAL MEETING

Stockholders at the close of business on the record date, February 27, 2017, or their duly appointed proxies, may attend our Annual Meeting at our corporate headquarters on April 25, 2017 at 10:30 a.m., Central Time. Registration will begin at 9:30 a.m. Our corporate headquarters are located at 50 South La Salle Street (northwest corner of La Salle Street and Monroe Street) in Chicago, Illinois.

In order to be admitted to the meeting, you must bring documentation showing that you owned the Corporation’s common stock at the close of business on the record date, February 27, 2017. Acceptable documentation includes an admission ticket, a Notice Regarding the Availability of Proxy Materials or any other proof of ownership of the Corporation’s common stock at the close of business on February 27, 2017. A brokerage statement or letter from a bank or broker reflecting your holdings at the close of business on February 27, 2017 is an example of such other proof of ownership. Your admission ticket is located on the top portion of the rear side of your proxy card or on the left side of your voting instruction form if your shares are held by a broker, bank or other nominee in street name. You will be asked to present valid picture identification, such as a driver’s license or passport. For safety and security reasons, cameras and recording devices will not be permitted in the meeting.

ITEM 1—ELECTION OF DIRECTORS

Stockholders will be asked to elect thirteen directors at the Annual Meeting. Each of the thirteen nominees is currently serving as a director of the Corporation and its principal subsidiary, The Northern Trust Company (the “Bank”). Included in the incumbent directors nominated for re-election are Jay L. Henderson and Michael G. O’Grady, who were appointed as directors of the Corporation by the Board, effective July 18, 2016 and January 1, 2017, respectively, each in accordance with the Corporation’s By-laws and pursuant to the recommendation of the Corporation’s Chairman and Chief Executive Officer (“CEO”) and Lead Director. Dipak C. Jain will not be standing for re-election, as he will be retiring from service as a director effective upon the conclusion of his current term at the Annual Meeting. Mr. Jain has served as member of the Board since 2004.

Each of the thirteen director nominees has consented to serve as a director if elected at the Annual Meeting. Each nominee elected as a director will serve until the next Annual Meeting of Stockholders or until his or her successor is elected and qualified. If any nominee is unable to serve as a director at the time of the Annual Meeting, your proxy may be voted for the election of another nominee proposed by the Board or the Board may reduce the number of directors to be elected at the Annual Meeting.

As discussed further under “Corporate Governance—Director Nominations and Qualifications,” in evaluating director nominees, the Corporate Governance Committee considers a variety of factors, including relevant business and industry experience; professional background; age; current employment; community service; other board service; and racial, ethnic, and gender diversity. Accordingly, the thirteen director nominees possess a wide variety of experience, qualifications and skills, which will equip the Board with the collective expertise to perform its oversight function effectively. Each of the candidates also has a reputation for, and long record of, integrity and good business judgment; has experience in leadership positions with a high degree of responsibility; is free from conflicts of interest that could interfere with his or her duties to the Corporation and its stockholders; and is willing and able to make the necessary commitment of time and attention required for effective Board service.

A summary of certain key experience, qualifications and skills represented by the nominees for election to the Board at the Annual Meeting, collectively, is set forth below.


Key Experience, Qualifications and Skills

● Corporate governance and social responsibility		● Marketing

● Finance and accounting		● Operations

● Financial services		● Public company board experience

● Global experience		● Risk management

● Leadership of large, complex, highly regulated organizations ● Management development and succession		● Strategic thinking ● Technology

Further information with respect to the nominees is set forth on the following pages.

The Board unanimously recommends that you vote FOR the election of each nominee.

INFORMATION ABOUT THE NOMINEES FOR DIRECTOR

The following information about the nominees for election to the Board at the Annual Meeting is as of the date of this Proxy Statement, unless otherwise indicated.


		LINDA WALKER BYNOE, Director since 2006, Age 64 President and Chief Executive Officer, Telemat Ltd. (project management and consulting firm) since 1995. Ms. Bynoe is a director of Anixter International Inc. and Prudential Retail Mutual Funds and a trustee of Equity Residential. She is a former director of Simon Property Group, Inc. The Board concluded that Ms. Bynoe should serve as a director based on her diverse consulting and investment experience, her expertise in public accounting, corporate governance, managing a private equity investment portfolio and strategy development and her experience as a director of financial services and other complex global corporations.

		SUSAN CROWN, Director since 1997, Age 58 Chairman and Chief Executive Officer, Owl Creek Partners, LLC (private equity firm) since 2010, and Chairman and Founder, Susan Crown Exchange Inc. (social investment organization) since 2009. Ms. Crown previously served as Vice President of Henry Crown and Company (company with diversified investments) from 1984 to 2015. Ms. Crown is a director of Illinois Tool Works Inc. Ms. Crown also serves as Vice Chair of the Board of Trustees of Rush University Medical Center in Chicago and as a director of CARE USA. Ms. Crown previously served two terms as a Fellow of Yale Corporation. The Board concluded that Ms. Crown should serve as a director based on her business experience, her leadership and risk oversight experience as a director of Illinois Tool Works Inc. and her extensive experience with civic and not-for-profit organizations. The Board also considered the valuable perspective on governance and corporate responsibility matters that Ms. Crown brings through her current and former board service at various large organizations, both commercial and not-for-profit.

		DEAN M. HARRISON, Director since 2015, Age 62 President and Chief Executive Officer, Northwestern Memorial HealthCare (the primary teaching affiliate of Northwestern University Feinberg School of Medicine and parent corporation of Northwestern Memorial Hospital) since 2006. Mr. Harrison served as President of Northwestern Memorial Hospital from 1999 to 2006. The Board concluded that Mr. Harrison should serve as a director based on his extensive experience leading a large, complex organization in a highly regulated industry.



		JAY L. HENDERSON, Director since 2016, Age 61 Retired Vice Chairman, Client Service, PricewaterhouseCoopers LLP (professional services firm). Mr. Henderson served as Vice Chairman, Client Service for PricewaterhouseCoopers LLP from 2007 to June 2016, and as Managing Partner of the Greater Chicago Market of PricewaterhouseCoopers LLP from 2003 to 2013. Mr. Henderson previously held various other positions at PricewaterhouseCoopers LLP and its predecessor since 1977. Mr. Henderson is a director of Illinois Tool Works Inc. and The J.M. Smucker Company. The Board concluded that Mr. Henderson should serve as a director based on his extensive experience working with complex global organizations across multiple markets and industry sectors, as well as his leadership experience in various roles at PricewaterhouseCoopers LLP.

		MICHAEL G. O’GRADY, Director since 2017, Age 51 President of the Corporation and the Bank since January 1, 2017. Previously, Mr. O’Grady served as President of Northern Trust’s Corporate & Institutional Services business from 2014 to 2016 and as Chief Financial Officer of the Corporation and the Bank from 2011 to 2014. Before joining Northern Trust in 2011, Mr. O’Grady served as a Managing Director in Bank of America Merrill Lynch’s Investment Banking Group. The Board concluded that Mr. O’Grady should serve as a director based on his experience and ongoing responsibilities with respect to the Corporation’s businesses.

		JOSE LUIS PRADO, Director since 2012, Age 62 Chairman and Chief Executive Officer, Evans Food Group, Ltd. (global food company) since April 2016. Mr. Prado served as President of Quaker Oats North America, a division of PepsiCo, Inc. from 2011 to 2014 and as President and Chief Executive Officer of Grupo Gamesa-Quaker, PepsiCo International, Monterrey, Mexico, from 2002 to 2010. Mr. Prado previously held various other positions at PepsiCo since 1984. Mr. Prado is a director of Brinker International, Inc. The Board concluded that Mr. Prado should serve as a director based on his management, marketing and risk oversight experience at a complex global corporation and his substantial international experience.



		THOMAS E. RICHARDS, Director since 2015, Age 62 Chairman, President and Chief Executive Officer, CDW Corporation (provider of integrated information technology solutions in the United States, Canada and the United Kingdom). Mr. Richards has served as CDW Corporation’s President since 2009, its Chief Executive Officer since 2011 and its Chairman since 2013. Prior to serving as Chief Executive Officer, Mr. Richards served as CDW Corporation’s Chief Operating Officer from 2009 to 2011. Mr. Richards is a director of CDW Corporation. The Board concluded that Mr. Richards should serve as a director based on his experience leading a large, complex organization and his experience in the information technology industry.

		JOHN W. ROWE, Director since 2002, Lead Director since April 2010, Age 71 Chairman Emeritus, Exelon Corporation (producer and wholesale marketer of energy) since 2012. Mr. Rowe served as Chairman and Chief Executive Officer of Exelon Corporation from 2002 to 2012. Mr. Rowe is a director of Allstate Corporation, American DG Energy Inc., and SunCoke Energy, Inc. Mr. Rowe is a former director of Sunoco, Inc. and Exelon Corporation. The Board concluded that Mr. Rowe should serve as a director based on his management, regulatory, government relations and risk oversight experience as Chief Executive Officer at Exelon Corporation (and, prior to that, at New England Electric System and Central Maine Power Company) and his experience as a director of other complex corporations.

		MARTIN P. SLARK, Director since 2011, Age 62 Chief Executive Officer, Molex LLC (manufacturer of electronic, electrical and fiber optic interconnection products and systems) since 2005. Previously, Mr. Slark served as President and Chief Operating Officer of Molex from 2001 to 2005. Mr. Slark is a director of Hub Group, Inc., Koch Industries, Inc. and Liberty Mutual Insurance Company. The Board concluded that Mr. Slark should serve as a director based on his experience leading a complex global corporation and his risk oversight experience as Chief Executive Officer of Molex LLC and as a director of other complex global corporations.



		DAVID H. B. SMITH, JR., Director since 2010, Age 50 Executive Vice President, Policy & Legal Affairs and General Counsel, Mutual Fund Directors Forum (nonprofit membership organization for investment company directors) since 2005. Previously, Mr. Smith held several positions at the U.S. Securities and Exchange Commission from 1996 to 2005, including Associate Director in the Division of Investment Management. Mr. Smith is a director of Illinois Tool Works Inc. and a trustee of Carleton College. The Board concluded that Mr. Smith should serve as a director based on his regulatory and leadership experience in the finance industry gained from his roles at the U.S. Securities and Exchange Commission and the Mutual Fund Directors Forum. The Board also considered that Mr. Smith’s interest as a beneficiary of a trust that holds a significant amount of the Corporation’s common stock further aligns his interests with the interests of the Corporation’s stockholders.

		DONALD THOMPSON, Director since 2015, Age 53 Founder and Chief Executive Officer, Cleveland Avenue, LLC (food and beverage incubator and accelerator) since May 2015 and Retired President and Chief Executive Officer, McDonald’s Corporation (global foodservice retailer). Mr. Thompson served as President and Chief Executive Officer of McDonald’s Corporation from 2012 until 2015, as President and Chief Operating Officer of McDonald’s Corporation from 2010 to 2012, and as President of McDonald’s USA from 2006 to 2010. Mr. Thompson is a director of Royal Caribbean Cruises Ltd. Mr. Thompson served as director of McDonald’s Corporation from 2011 to 2015 and of Exelon Corporation from 2007 to 2013. The Board concluded that Mr. Thompson should serve as a director based on his management and board experience at other complex global corporations.

		CHARLES A. TRIBBETT III, Director since 2005, Age 61 Managing Director, Russell Reynolds Associates (global executive recruiting firm) since 1989, Chairman of the firm’s Leadership Assessment and Promotions Board since 2006, and Co-Leader of the firm’s CEO and Board Advisory Group since 1995. The Board concluded that Mr. Tribbett should serve as a director based on his global leadership consulting experience evaluating and identifying senior management professionals and his leadership experience as a Managing Director of Russell Reynolds Associates.

LOGO

FREDERICK H. WADDELL, Director since 2006, Age 63

Chairman of the Board of the Corporation and the Bank since 2009 and Chief Executive Officer of the Corporation and the Bank since 2008. Mr. Waddell served as President of the Corporation and the Bank from 2006 to 2011 and from October to December 2016; as Chief Operating Officer of the Corporation and the Bank from 2006 to 2008; and as Executive Vice President of the Bank from 1997 to 2006 and of the Corporation from 2003 to 2006.

Mr. Waddell is a director of AbbVie, Inc.

Since joining Northern Trust in 1975, Mr. Waddell has held leadership positions in a variety of the Corporation’s businesses. The Board concluded that Mr. Waddell should serve as a director based on his experience and ongoing responsibilities with respect to the Corporation’s businesses.

BOARD AND BOARD COMMITTEE INFORMATION

Our Board currently consists of fourteen members. The Board has determined that each of the following twelve current directors is independent in accordance with our independence standards, which conform with SEC rules and the listing standards of The NASDAQ Stock Market LLC (“NASDAQ”): Linda Walker Bynoe, Susan Crown, Dean M. Harrison, Dipak C. Jain (who is not standing for re-election), Jay L. Henderson, Jose Luis Prado, Thomas E. Richards, John W. Rowe, Martin P. Slark, David H. B. Smith, Jr., Donald Thompson and Charles A. Tribbett III.

During 2016, the Corporation’s Board held seven meetings. All persons who were directors during 2016 attended at least 75% of the total meetings of the Board and the committees on which they served occurring during the period in which they served. Our Corporate Governance Guidelines state that all directors are expected to attend each Annual Meeting of Stockholders. In accordance with this expectation, all of the directors then serving attended the 2016 Annual Meeting of Stockholders held on April 19, 2016.

Board Committees

The standing committees of the Board are the Audit Committee, the Business Risk Committee, the Capital Governance Committee, the Compensation and Benefits Committee, the Corporate Governance Committee, the Corporate Social Responsibility Committee and the Executive Committee. With the exception of the Executive Committee, all standing committees are composed solely of independent directors. Consequently, independent directors directly oversee critical matters and appropriately oversee the Chairman and CEO. Each standing committee is governed by a written charter. These charters detail the duties and responsibilities of each committee and are available on the Corporation’s website at www.northerntrust.com.

Additional information regarding the roles, responsibilities and composition of the Board’s standing committees is set forth below.

Committee Composition

A summary of the composition of each of the Board’s current standing committees is set forth below.

Director

Audit

Business

Risk

Capital
Governance

Compensation
and Benefits

Corporate
Governance

Corporate
Social
Responsibility

Executive

Bynoe

✓

Crown

✓

Harrison

✓

Henderson

✓

Jain

✓

O’Grady

Prado

✓

Richards

✓

Rowe

✓

Slark

✓

Smith

✓

Thompson

✓

Tribbett

✓

Waddell

C - Chair ✓ - Member

Audit Committee

The Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the Corporation and its subsidiaries and the audits of the consolidated financial statements of such entities, as well as to provide assistance to the Board in fulfilling its legal and fiduciary obligations with respect to matters involving the organization’s accounting, auditing, financial reporting, internal financial control and legal compliance functions, including, without limitation: (i) assisting the Board’s oversight of (a) the integrity of the organization’s consolidated annual and quarterly financial statements and earnings releases, (b) the organization’s compliance with legal and regulatory requirements, (c) the qualifications and independence of the Corporation’s public accountants and (d) the performance of the organization’s internal audit function and the Corporation’s public accountants; and (ii) preparing the report required to be prepared by the Committee pursuant to SEC rules for inclusion each year in the Corporation’s proxy statement relating to its Annual Meeting of Stockholders.

The Board has determined that all members of the Audit Committee are independent under SEC rules and NASDAQ listing standards. The Board also has determined that all Audit Committee members have the financial experience and knowledge required for service on the Committee, and that Messrs. Smith, Harrison, Slark and Thompson each satisfy the definition of “audit committee financial expert” under SEC rules. The Audit Committee met five times in 2016.

Business Risk Committee

The Business Risk Committee’s sole and exclusive function is responsibility for the risk-management policies of the Corporation’s global operations and oversight of the operation of the Corporation’s global risk-management framework. In furtherance of this function, the Business Risk Committee assists the Board in discharging its oversight duties with respect to: (i) the risks inherent in the businesses of the Corporation and its subsidiaries in the following categories: credit risk, market and liquidity risk, fiduciary risk, operational risk, compliance risk and strategic risk; and (ii) the process by which risk-based capital requirements are determined.

The Board has determined that all members of the Business Risk Committee are independent under SEC rules and NASDAQ listing standards. The Business Risk Committee met six times in 2016.

Capital Governance Committee

The purpose of the Capital Governance Committee is to assist the Board in discharging its oversight duties with respect to capital management and planning activities of the Corporation and its subsidiaries. Among other matters, the Capital Governance Committee performs the following functions: (i) oversees the capital adequacy assessments, forecasting, and stress testing processes and activities of the Corporation and its subsidiaries, including with respect to the annual Comprehensive Capital Analysis and Review (“CCAR”) exercise, and challenges management, as appropriate, on various elements of such processes and activities; (ii) reviews and recommends to the Board for approval the Corporation’s annual capital plan, including proposed capital actions, and reviews and challenges management, as appropriate, with respect to the assumptions, limitations and weaknesses related to the Corporation’s annual capital plan, including regarding risk identification and estimation approaches; (iii) receives reports on the Corporation’s material risks and exposures to inform decisions on capital adequacy and actions, including capital distributions; (iv) unless reviewed and approved by the Board, reviews and approves capital policies for the Corporation and the Bank, including the Corporation’s and the Bank’s capital management goals and targets and the Corporation’s payout ratios; (v) reviews and discusses with management the Corporation’s and the Bank’s regulatory capital ratios and capital levels; and (vi) reviews and recommends to the Board for approval (a) dividend declarations with respect to the Corporation’s common and preferred stock and (b) issuances or repurchases of debt or equity securities.

The Board has determined that all members of the Capital Governance Committee are independent under SEC rules and NASDAQ listing standards. The Capital Governance Committee met ten times in 2016.

Compensation and Benefits Committee

The purpose of the Compensation and Benefits Committee is to assist the Board in discharging its duties and responsibilities relating to: (i) the compensation of the directors and executive officers of the Corporation and its subsidiaries; and (ii) the employee benefit and equity-based plans of the organization. The Committee also assists the Board with management development and succession planning, including with respect to the position of CEO, and prepares the report required to be prepared by the Committee pursuant to SEC rules for inclusion in the Corporation’s proxy statement relating to its Annual Meeting of Stockholders.

The Board has determined that all members of the Compensation and Benefits Committee are independent under SEC rules and NASDAQ listing standards. The Compensation and Benefits Committee met five times in 2016.

Corporate Governance Committee

The purpose of the Corporate Governance Committee is to: (i) identify and recommend to the Board candidates for nomination or appointment as directors; (ii) review the Board’s committee structure and recommend appointments to committees; (iii) provide leadership in shaping the corporate governance of the Corporation, including through the development and recommendation to the Board of Corporate Governance Guidelines applicable to the Corporation; (iv) advise the Board on the appointment of a successor in the event of the unanticipated death, disability or resignation of the Corporation’s CEO, after consultation with the Chairman of the Corporation’s Compensation and Benefits Committee; (v) oversee the procedures relating to stockholder communications with the Board and review any proposals submitted by stockholders; and (vi) oversee the annual evaluation of the Board and its committees.

The Board has determined that all members of the Corporate Governance Committee are independent under SEC rules and NASDAQ listing standards. The Corporate Governance Committee met four times in 2016.

Corporate Social Responsibility Committee

The purpose of the Corporate Social Responsibility Committee is to assist the Board in discharging its oversight duties with respect to corporate citizenship and social responsibility matters of significance to the Corporation and its subsidiaries. Among other matters, the Corporate Social Responsibility Committee receives and reviews reports on each of the following as they pertain to the Corporation and its subsidiaries: (i) political, lobbying and other public advocacy activities, including significant trade association memberships; (ii) strategic philanthropy and charitable contributions; (iii) sustainability initiatives and other social responsibility matters of significance, including environmental, social, and governance issues; (iv) diversity and inclusion initiatives; (v) human rights matters; and (vi) compliance with the Community Reinvestment Act and Fair Lending laws. The Corporate Social Responsibility Committee also provides oversight with respect to the Corporation’s policies, programs and strategies in respect of each of these matters.

The Board has determined that all members of the Corporate Social Responsibility Committee are independent under SEC rules and NASDAQ listing standards. The Corporate Social Responsibility Committee met three times in 2016.

Executive Committee

The Board appoints an Executive Committee so that there will be a committee of the Board empowered to act for the Board, to the full extent permitted by law, between meetings of the Board if necessary and appropriate. The Executive Committee is composed of the Chairman of the Board and the Chair of each of the other standing committees of the Board. The Executive Committee did not meet in 2016.

CORPORATE GOVERNANCE

Key Governance Practices

We believe that the high standards set by our governance structure provide the foundation for the strength of our business. An overview of certain key governance practices reflective of our strong governance profile is set forth below.


What We Do		What We Don’t Do

✓	Majority Independent Directors	×	No Plurality Voting in Uncontested Director Elections

✓	Engaged Lead Director	×	No Staggered Board

✓	Frequent Executive Sessions for Independent Directors	×	No Poison Pill

✓	Annual Strategic Planning Meeting with Board and Executive Officers	×	No Supermajority Voting Requirements

✓	Regular Rotations of Committee Chairs	×	No Overboarding of Directors

✓	Regular Reviews of Governance Documents

✓	Annual Board and Committee Self-Evaluations

Director Independence

To be considered independent, the Board must affirmatively determine that a director has no relationship with the Corporation which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Corporation’s Corporate Governance Guidelines require that a majority of the directors serving on the Board meet the criteria for “independence” under NASDAQ listing standards.

To assist the Board in making its independence determinations, the Board has adopted categorical standards. Under these standards, the following persons shall not be considered “independent”:

●

a director who is or was an employee or executive officer of the Corporation, or whose Family Member (as defined below) is or was an executive officer of the Corporation, at any time during the past three years;

●

a director who receives or has received, or whose Family Member receives or has received, compensation from the Corporation in excess of $120,000 during any period of twelve consecutive months within the past three years, other than director and committee fees, benefits under a tax-qualified retirement plan or other forms of nondiscretionary compensation; provided, however, that compensation received by a Family Member of a director for service as an employee (other than as an executive officer) of the Corporation need not be considered in determining independence;

●

a director who is, or whose Family Member is, a current partner of the Corporation’s outside auditor, or who was a partner or employee of the Company’s outside auditor who worked on the Corporation’s audit at any time during any of the past three years;

●

a director of the Corporation who is, or has a Family Member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company serve on the compensation committee of such other entity; or

●

a director who is, or whose Family Member is, a partner in, a controlling stockholder of, or an executive officer of, any organization to which the Corporation made, or from which the Corporation received, payments for property or services in the current or any of the past three fiscal years that exceed the greater of $200,000 or 5% of the recipient’s consolidated gross revenue for that year, other than payments arising solely from investments in the Corporation’s securities or payments under nondiscretionary charitable contribution matching programs.

“Family Member” means a person’s spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person’s home.

The Board has determined that each director serving during 2016 was, and each current director (other than Mr. Waddell, who serves as Chairman and CEO of the Corporation, and Mr. O’Grady, who serves as President of the Corporation) is, independent of the Corporation in accordance with the Corporation’s Corporate Governance Guidelines and categorical standards.

In addition to the categorical standards, the Board also considers any transaction, relationship, or arrangement between the Corporation and a director that constitutes a related person transaction under the Corporation’s Related Person Transactions Policy, descriptions of which are provided under “Related Person Transactions Policy” below. In each case, the Board determined that these relationships were immaterial and did not affect any director’s ability to exercise independent judgment in carrying out his or her responsibilities as a director.

Related Person Transactions Policy

The Board, through its Audit Committee, has adopted a written Related Person Transactions Policy to govern the review, approval, and ratification of transactions to which the Corporation or its subsidiaries are party and in which any related persons have a direct or indirect material interest. “Related persons” means the Corporation’s directors, nominees for director, executive officers, greater than five percent beneficial owners, members of their immediate family and any person (other than a tenant or employee) sharing their household.

The Related Person Transactions Policy provides that the Corporation may undertake certain pre-approved related person transactions in the ordinary course of business without specific review, approval or ratification, including the following pre-approved transactions:

●

an extension of credit by the Corporation or any of its subsidiaries to a related person that is made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender and does not involve more than the normal risk of collectability or present other unfavorable features;

●

certain other ordinary course transactions in which the Corporation or its subsidiaries provide products or services to related persons on terms no less favorable to the Corporation and its subsidiaries as those prevailing at the time for comparable services to nonrelated persons;

●

a transaction involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services;

●

a transaction where the rates or charges involved in the transaction are determined by competitive bids, or the transaction involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority;

●

a transaction with another company to which a related person’s only relationship is as an employee, a director, a beneficial owner of less than 10% of the company’s outstanding common equity (when aggregated with all other directors, executive officers or nominees for election as a director of the Corporation), or, in the case of partnerships, a limited partner with less than 10% interest in the partnership (when aggregated with all other directors, executive officers or nominees for election as a director of the Corporation) and who is not a general partner of, or holder of another position with, that partnership, provided in each case the aggregate amount of the transaction does not exceed the greater of $200,000 or 5% of the other company’s annual revenue;

●

contributions or grants, or pledges of contributions or grants, by the Corporation, any of its subsidiaries, or The Northern Trust Company Charitable Trust to a charitable, nonprofit, or educational organization for which a related person serves as an executive officer, provided that the aggregate amount involved does not exceed the greater of $200,000 or 5% of the organization’s total annual receipts;

●

transactions where the related person’s interest arises solely from the ownership of the Corporation’s common stock and all stockholders receive the same benefit on a pro rata basis;

●

compensation paid to executive officers of the Corporation that is required to be reported in the Corporation’s proxy statement under Item 402 of Regulation S-K, or to executive officers that are not immediate family members of another related person and such compensation would be reported in the Corporation’s proxy statement under Item 402 of Regulation S-K if such executive officers were named executive officers, and the Corporation’s Compensation and Benefits Committee approved such compensation (or recommended it for approval by the Board); and

●

compensation paid to directors of the Corporation that is required to be reported in the Corporation’s proxy statement under Item 402 of Regulation S-K.

Any other related person transaction involving amounts in excess of $120,000 must be approved or ratified by the Audit Committee or the Audit Committee Chair. In considering related person transactions, the Audit Committee or the Audit Committee Chair will consider all relevant facts and circumstances and approve only those related person transactions that are in, or otherwise not inconsistent with, the best interests of the Corporation and its subsidiaries.

During 2016, certain related persons were clients of, and/or otherwise engaged in the types of transactions identified in the bullet points above with, the Corporation or one or more of its subsidiaries. The Corporation or its subsidiaries provided financial services to each of its directors, or persons related to such directors, except for Mr. Tribbett, in the ordinary course of business. Services provided included trust and related services, brokerage services, investment management, asset servicing, asset management, credit services and other banking services. These transactions were undertaken in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral for loan transactions) as those prevailing at the time for comparable transactions with other persons not related to the Corporation or any affiliated entities involved in the transactions. None of these transactions involved more than the normal risk of collectability or presented other unfavorable features, and any extensions of credit to directors and executive officers of the Corporation were permitted under the provisions of Section 13(k) of the Securities Exchange Act of 1934 (the “Exchange Act”). None of these transactions or any transactions in which the Corporation or any of its subsidiaries sold or purchased products and services to or from any of the Corporation’s directors, or persons or entities affiliated with its directors, were material to the Corporation or any affiliated entities involved in the transactions, and all such transactions were undertaken upon such other terms and conditions as permitted such transactions to qualify for pre-approval under the Related Person Transactions Policy. In addition to the foregoing, Kathleen Finley, Mr. Henderson’s daughter, has been employed by the Bank since 2005, currently serving as Vice President on the Client and Partner Experience team of the Bank. In such role, Ms. Finley earned compensation in excess of $120,000 in 2016, and received retirement, health and wellness benefits, all on comparable terms as those provided for other employees of the Bank. Pursuant to the Related Person Transactions Policy, our Audit Committee considered and approved Ms. Finley’s employment in conjunction with Mr. Henderson’s appointment to the Board. None of the foregoing transactions require disclosure pursuant to Item 404(a) of Regulation S-K of the Exchange Act, except with respect to the compensation earned by Ms. Finley.

Executive Sessions

The independent directors of the Corporation met in executive sessions separate from management six times during 2016. The Lead Director or, in his absence, another independent director designated by the Lead Director, presides at executive sessions of the independent directors. The standing committees of the Board also regularly held executive sessions during 2016. These sessions were led by the respective independent committee Chairs.

Board Leadership Structure; Lead Director

The current leadership structure of the Board consists of a combined Chairman and CEO position and a Lead Director appointed annually by the Corporation’s independent directors.

The Board has determined that combining the positions of Chairman and CEO is the most appropriate for the Corporation at this time. Having one person as Chairman and CEO provides unified leadership and direction to the Corporation and strengthens the ability of the CEO to develop and implement strategic initiatives and respond efficiently in crisis situations. Pursuant to our Corporate Governance Guidelines, the full Board is responsible for direct oversight of the strategic direction and initiatives of the Corporation and its subsidiaries. The Board believes the combination of the Chairman and CEO positions is appropriate in light of the substantial independent oversight provided by the Board. The Board also believes that the desire for independent leadership of the Board is sufficiently achieved by the prominent role of Mr. Rowe as Lead Director.

The Lead Director’s primary duties are described in the Corporation’s Corporate Governance Guidelines. Among other matters, the Lead Director’s duties include: (i) approving meeting agendas for the Board and the nature of information sent to the Board; (ii) approving Board meeting schedules to ensure that there is sufficient time for discussion of all Board agenda items; (iii) calling at any time deemed necessary or advisable by such Lead Director a special meeting of the Board or a special executive session of the independent directors; (iv) adding items to the agenda of any regular or special meeting of the Board deemed necessary or advisable by such Lead Director; (v) presiding at all regular and special meetings of the Board at which the Chairman is not present; (vi) presiding at all regular and any special executive sessions of the independent directors; (vii) serving as a liaison between the independent directors and the Chairman and CEO; (viii) conducting, by means of an interview with each director, including the Chairman and CEO, the Board’s annual self-evaluation of its performance, as well as the Board’s annual evaluation of the CEO’s performance, and then providing a summary report to the Board; and (ix) being available for consultation and direct communication with stockholders, as appropriate. Mr. Rowe has served as our Lead Director since 2010.

Risk Oversight

The Board provides oversight of risk management directly as well as through its Audit, Business Risk, Capital Governance and Compensation and Benefits Committees. The Board annually approves the Corporation’s enterprise risk management framework, risk universe and Corporate Risk Appetite Statement. The Corporate Risk Appetite Statement reflects the expectation that risk be consciously considered as part of the Corporation’s strategic decisions and in its day-to-day activities. The Corporation actively monitors employees using programs, policies, and other tools that are designed to ensure that they work within established risk frameworks and limits. The Business Risk Committee assumes primary responsibility and oversight with respect to credit risk, market and liquidity risk, fiduciary risk, operational risk, compliance risk and strategic risk. The Audit Committee provides oversight with respect to financial reporting and legal risk, while the Compensation and Benefits Committee oversees the development and operation of the incentive compensation program of the Corporation and its subsidiaries. The Compensation and Benefits Committee annually reviews management’s assessment of the effectiveness of the design and performance of the incentive compensation arrangements and practices in providing incentives that are consistent with the safety and soundness of the Corporation and its subsidiaries. This assessment includes an evaluation of whether these incentive compensation arrangements and practices discourage inappropriate risk-taking behavior by participants. Pursuant to its charter, the Compensation and Benefits Committee is required to have at least one member who is a member of the Business Risk Committee and at least one member who is a member of the Audit Committee. Among other responsibilities, the Capital Governance Committee oversees the capital adequacy assessments, forecasting, and stress testing processes and activities of the Corporation and its subsidiaries, including the annual CCAR exercise. Accordingly, the Capital Governance Committee provides oversight with respect to the linkage of the Corporation’s material risks to capital planning and stress testing. The charters for the Audit, Business Risk, Capital Governance and Compensation and Benefits Committees provide that the Committees may meet with the individuals who supervise day-to-day risk management responsibilities of the Corporation and other members of management, consultants or advisors, as each committee deems appropriate.

For a further description of the risk management policies and practices of the Corporation’s management, see the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” and “—Liquidity and Capital Resources—Liquidity Risk Management” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016.

Corporate Governance Guidelines

The Corporation has had Corporate Governance Guidelines in place since 2000. The Corporate Governance Committee reviews and reassesses the adequacy of the Corporate Governance Guidelines at least annually and recommends any changes to the Board for approval. The Corporation’s Corporate Governance Guidelines embody many of the Corporation’s long-standing practices and incorporate policies and procedures that strengthen its commitment to corporate governance best practices. A copy of the Corporate Governance Guidelines is available on the Corporation’s website at www.northerntrust.com.

Code of Business Conduct and Ethics

The Board of the Corporation has adopted a Code of Business Conduct and Ethics to:

●

promote honest and ethical conduct, including fair dealing and the ethical handling of actual or apparent conflicts of interest;

●

promote full, fair, accurate, timely and understandable public disclosure about the Corporation;

●

promote compliance with applicable laws and governmental rules, codes and regulations wherever the Corporation does business;

●

ensure the protection of the Corporation’s legitimate business interests; and

●

deter wrongdoing.

The Code of Business Conduct and Ethics satisfies applicable SEC and NASDAQ requirements and applies to all directors, officers (including the Corporation’s principal executive officer, principal financial officer and principal accounting officer) and employees of the Corporation and its subsidiaries. The Corporation intends to disclose any amendments to, or waivers from, the Code of Business Conduct and Ethics for directors and executive officers by posting such information on its website. A copy of the Code of Business Conduct and Ethics is available on the Corporation’s website at www.northerntrust.com.

Management Development and Succession Planning

The Board is responsible for succession planning for the position of CEO. The Board, led by the Compensation and Benefits Committee, annually conducts a formal management development and succession planning review with respect to the position of the CEO and other senior officers. This review focuses on CEO succession planning, as well as developing internal candidates for advancement within the Corporation. The Compensation and Benefits Committee makes recommendations to the Board concerning management development and succession planning, which recommendations reflect the Board’s annual management development and succession planning review, as well as Committee discussions with and without the CEO. The Corporate Governance Committee discusses succession planning in the event of the unexpected death, incapacity, or resignation of the CEO and recommends to the Board, after consultation with the Chairman of the Compensation and Benefits Committee, an appropriate successor under such circumstances.

Director Nominations and Qualifications

The Corporate Governance Committee is responsible for considering, evaluating, and recommending candidates for director. The Committee will consider persons nominated by stockholders in accordance with the nomination procedures specified in the Corporation’s By-laws or otherwise recommended by stockholders. The Corporation’s By-laws provide that stockholders may propose director nominations only if they give timely written notice, directed to the attention of the Corporation’s Corporate Secretary, not less than 120 days nor more than 150 days prior to the anniversary date of the prior year’s Annual Meeting of Stockholders. If such Annual Meeting of Stockholders is called for a date that is not within thirty days before or after the anniversary date of the prior year’s Annual Meeting of Stockholders, notice by the stockholder in order to be timely must be received within ten days after notice of such subsequent Annual Meeting of Stockholders is mailed or public disclosure of the date of such Annual Meeting of Stockholders is made, whichever occurs first. In either case, the notice must contain the information required by the Corporation’s By-laws. Stockholders may also recommend candidates for director by following the procedures for communicating with directors described below under “Communications with the Board and Independent Directors.”

In its evaluation of director candidates, including persons recommended by stockholders, the Corporate Governance Committee considers the factors specified in the Corporation’s Corporate Governance Guidelines to ensure the Board has a diversity of perspectives and backgrounds, including the nature of the expertise and experience required for the performance of the duties of a director of a corporation engaged in the Corporation’s business and such matters as relevant business and industry experience, professional background, age, current employment, community service and other board service. The Committee also considers the racial, ethnic, and gender diversity of the Board in assessing candidates. The Committee seeks to identify as candidates for director persons with a reputation for, and record of, integrity and good business judgment who: (i) have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are affiliated; (ii) are free from conflicts of interest that could interfere with a director’s duties to the Corporation and its stockholders; and (iii) are willing and able to make the necessary commitment of time and attention required for effective Board service. The Committee also takes into account a candidate’s level of financial literacy, and monitors the mix of skills and experience of the directors in order to ensure the Board has the necessary collective expertise to perform its oversight function effectively. Following its evaluation process, the Committee recommends director nominees to the full Board, and the Board makes the final determination of director nominees based on its consideration of the Committee’s recommendation.

Stockholder Engagement

The Corporation recognizes the importance of engaging with stockholders and other key constituents. Open and constructive dialogue with stockholders helps further their understanding of our performance and strategies and allows us to receive direct feedback on issues relating to the Corporation. Accordingly, it is the Corporation’s long-standing practice to engage proactively and routinely with stockholders throughout the year. This practice continued in 2016, with our CEO and/or CFO engaging with stockholders representing approximately 40% of our outstanding shares regarding matters pertaining to the Corporation’s performance, strategies and governance.

Communications with the Board and Independent Directors

Stockholders and other interested persons may communicate with any of the Corporation’s directors, including the Lead Director or the independent directors as a group, by writing a letter addressed to the applicable director(s), c/o Northern Trust Corporation, 50 South La Salle Street, M-9, Chicago, Illinois 60603, Attention: Corporate Secretary. Any stockholder or other interested person who has a particular concern regarding accounting, internal accounting controls, or other audit matters that he or she wishes to bring to the attention of the Audit Committee may communicate those concerns to the Audit Committee or its Chairman, using the address indicated above. The Corporation’s Corporate Secretary will forward communications to the appropriate member or members of the Board. The Corporate Secretary need not forward or retain any communications determined to be mass mailings, routine solicitations for business or contributions, or communications determined not to be relevant to the performance of the duties of the Board.

Securities Transactions Policy and Procedures and Policy Against Hedging

Our Securities Transactions Policy and Procedures prohibits directors, employees, including our named executive officers, and certain of their family members from purchasing or selling any type of security, whether issued by us or another company, while such persons are aware of material nonpublic information relating to the issuer of the security and from providing such material nonpublic information to any person who may trade while aware of such information. This policy also prohibits directors, employees, and certain of their family members from engaging in short selling, margining, pledging or hypothecating the Corporation’s securities, and from trading in options, warrants, puts, calls or similar instruments on the Corporation’s securities.

SECURITY OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

The following table shows the beneficial ownership of the Corporation’s common stock as of December 31, 2016 for each director, each named executive officer and all directors and executive officers of the Corporation as a group.


Name of Beneficial Owner	Shares (1) (2)		Shares under Exercisable Options (3)		Total Beneficial Ownership of Common Stock		Percent of Class
Non-Employee Directors:
Linda Walker Bynoe		17,385		—		17,385		*
Susan Crown		36,722		—		36,722		*
Dean M. Harrison		2,042		—		2,042		*
Jay L. Henderson		4,000		—		4,000		*
Dipak C. Jain		18,521		—		18,521		*
Jose L. Prado		7,026		—		7,026		*
Thomas E. Richards		1,149		—		1,149		*
John W. Rowe		30,122		—		30,122		*
Martin P. Slark		9,849		—		9,849		*
David H.B. Smith, Jr. (4)		30,552		—		30,552		*
Donald Thompson		1,743		—		1,743		*
Charles A. Tribbett III		17,722		—		17,722		*
Named Executive Officers:
Frederick H. Waddell		379,029		657,075		1,036,104		*
S. Biff Bowman		43,741		80,265		124,006		*
William L. Morrison		71,442		116,784		188,226		*
Michael G. O’Grady		52,587		212,261		264,848		*
Jana R. Schreuder		76,399		192,641		269,040		*
All directors and executive officers as a group (27 persons)		1,201,214		1,730,842		2,932,056		1.27	%

* Less than 1%.

(1) Except as noted below, the nature of beneficial ownership for shares shown in this table is sole voting and investment power (including shares as to which spouses and minor children of the individuals covered by this table have such power).

(2) Amount includes restricted stock units payable on a one-for-one basis in shares of the Corporation’s common stock that are scheduled to vest within sixty days of December 31, 2016 in the following amounts: Mr. Waddell – 29,437 units; Mr. Bowman – 6,949 units; Mr. Morrison – 14,624 units; Mr. O’Grady – 8,854 units; Ms. Schreuder – 8,854 units; and all directors and officers as a group – 122,719 units.

(3) Amount includes options that were exercisable as of December 31, 2016 and options that become exercisable within sixty days thereafter.

(4) Amount includes 1,704 shares held in a trust over which Mr. Smith shares voting and investment power as co-trustee with one other individual. Amount excludes 500 shares held in a trust over which Mr. Smith shares voting and investment power as co-trustee with three other individuals. Amount also excludes 1,362,880 shares held in a trust of which Mr. Smith is a beneficiary, as Mr. Smith has no investment or voting power with respect to such shares.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Corporation’s directors, executive officers and beneficial owners of more than 10% of the Corporation’s stock to file with the SEC initial reports of ownership and reports of changes in ownership of any equity securities of the Corporation. Based solely on the Corporation’s review of the reports that have been filed by or on behalf of such reporting persons in this regard and written representations from such reporting persons that no other reports were required, the Corporation believes that all reports required by Section 16(a) of the Exchange Act were made on a timely basis during or with respect to 2016, except for: (i) one Form 4 filed for Wilson Leech on November 28, 2016, which related to the exercise of options to purchase 10,142 shares of the Corporation’s common stock and the subsequent sale of such stock, each occurring on November 4, 2016, and (ii) one Form 4 filed for Jane Karpinski on December 14, 2016, which related to the exercise of options to purchase 244 shares of the Corporation’s common stock and the subsequent sale of such stock, each occurring on November 15, 2016. Each of the foregoing Form 4s was filed late due to administrative error.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table includes information concerning stockholders who were the beneficial owners of more than 5% of the outstanding shares of the Corporation’s common stock as of December 31, 2016.



Name and Address	Shares		Percent of Class

The Northern Trust Company (1) 50 South La Salle Street Chicago, Illinois 60603		20,136,222		8.8	%

The Vanguard Group, Inc. (2) 100 Vanguard Boulevard Malvern, Pennsylvania 19355		13,364,907		5.8	%

Wellington Management Group LLP (3) c/o Wellington Management Company LLP 280 Congress Street Boston, Massachusetts 02210		12,888,691		5.6	%

BlackRock, Inc. (4) 55 East 52nd Street New York, New York 10055		12,866,759		5.6	%

(1) As of December 31, 2016, the Bank and its affiliates individually acted as sole or co-fiduciary with respect to trusts and other fiduciary accounts which owned, held or controlled through intermediaries the shares reported. This aggregate number of shares includes 1,362,880 shares held by the trust

described in footnote 4 to the “Security Ownership by Directors and Executive Officers” table in this Proxy Statement, or approximately 0.60% of the outstanding common stock. Of the total shares owned, held or controlled by trusts and other fiduciary accounts for which the Bank and its affiliates acted as sole or co-fiduciary, the Bank and its affiliates had sole voting power with respect to 7,398,994 shares, or 3.24% of the outstanding common stock, and they shared voting power with respect to 11,263,277 shares, or 4.93% of the outstanding common stock. They had sole investment power with respect to 2,021,659 shares, or 0.88% of the outstanding common stock, and they shared investment power with respect to 12,056,105 shares, or 5.27% of the outstanding common stock.

(2) As reported on a Schedule 13G/A filed on February 10, 2017, of the shares reported, The Vanguard Group, Inc. (“Vanguard”) had sole voting power with respect to 336,193 shares, or 0.15% of the outstanding common stock, and shared voting power with respect to 38,471 shares, or 0.02% of the outstanding common stock. Vanguard had sole investment power with respect to 12,997,946 shares, or 5.69% of the outstanding common stock, and shared investment power with respect to 366,961 shares, or 0.16% of the outstanding common stock.

(3) As reported on a Schedule 13G/A filed by Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP on February 9, 2017, Wellington Management Group LLP, Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP each had shared voting power with respect to 5,035,273 shares, or 2.20% of the outstanding common stock, and shared investment power with respect to all shares reported. Wellington Management Company LLP had shared voting power with respect to 4,068,954 shares, or 1.78% of the outstanding common stock, and shared investment power with respect to 11,433,428 shares, or 5.00% of the outstanding common stock. None of the entities had sole voting or investment power with respect to any shares reported. Based on the Schedule 13G/A, the securities as to which the Schedule 13G/A was filed are owned of record by clients of one or more investment advisers identified therein directly or indirectly owned by Wellington Management Group LLP.

(4) As reported on a Schedule 13G/A filed on January 25, 2017, of the shares reported, BlackRock, Inc. (“BlackRock”) had sole voting power with respect to 11,074,996 shares, or 4.84% of the outstanding common stock, and it did not have shared voting power with respect to any shares reported. BlackRock had sole investment power with respect to all shares reported.

ITEM 2—ADVISORY VOTE ON EXECUTIVE COMPENSATION

Pursuant to Section 14A of the Exchange Act, and the rules and regulations promulgated thereunder by the SEC, the Corporation is required to include in this Proxy Statement a separate resolution, subject to an advisory vote, to approve the compensation of our named executive officers as disclosed in this Proxy Statement (commonly referred to as a “Say-on-Pay” advisory vote). In a nonbinding, advisory vote on the frequency of Say-on-Pay votes held at our 2011 Annual Meeting of Stockholders, stockholders voted in favor of conducting Say-on-Pay votes annually. In light of this result, and other factors considered by the Board, the Corporation has held Say-on-Pay votes on an annual basis since 2011. Accordingly, the Board is requesting that stockholders vote FOR approval of the following resolution:

“Resolved, that the compensation paid to the Corporation’s named executive officers, as disclosed in its Proxy Statement dated March 16, 2017, pursuant to Item 402 of Regulation S-K of the Exchange Act, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby APPROVED.”

As an advisory vote, this proposal is not binding on the Corporation. Although the vote is nonbinding, the Board and the Compensation and Benefits Committee value the opinions of our stockholders and, consistent with past practice, will consider the outcome of the vote when determining compensation policies and making future compensation decisions for our named executive officers.

The Corporation’s executive compensation program and the framework used in evaluating and making 2016 compensation decisions for our named executive officers are described in the Compensation Discussion and Analysis that begins on page 30 of this Proxy Statement. A proposal regarding the frequency with which Say-on-Pay votes should be held is included as Item 3 in this Proxy Statement.

The Board unanimously recommends that you vote FOR this proposal.

ITEM 3—ADVISORY VOTE ON THE FREQUENCY OF STOCKHOLDER VOTES ON EXECUTIVE COMPENSATION

Pursuant to Section 14A of the Exchange Act, and the rules and regulations promulgated thereunder by the SEC, the Corporation is required to include in this Proxy Statement a separate resolution, subject to an advisory vote, on the frequency with which stockholders shall conduct advisory Say-on-Pay votes on executive compensation, such as the proposal in Item 2 above.

The advisory vote on the frequency of Say-on-Pay votes is a nonbinding vote as to how often Say-on-Pay votes should occur: every year, every two years or every three years. Section 14A of the Exchange Act requires the Corporation to hold an advisory vote on the frequency of Say-on-Pay votes at least once every six years. We most recently held such an advisory vote at our 2011 Annual Meeting of Stockholders. At that meeting, stockholders voted in favor of conducting Say-on-Pay votes annually. In light of this result, and other factors considered by the Board, the Board determined that the Corporation would hold Say-on-Pay votes on an annual basis until the next advisory vote on such frequency. The Board continues to believe that an annual Say-on-Pay vote will allow us to obtain information on stockholders’ views of the compensation of our named executive officers on an appropriate basis. Additionally, we believe an annual Say-on-Pay vote aligns with our objective to engage in regular dialogue with our stockholders on corporate governance and executive compensation matters.

Although the Board recommends an annual Say-on-Pay vote, stockholders are not voting to approve or disapprove the Board’s recommendation. Rather, stockholders are being asked to vote on the following resolution:

“Resolved, that the stockholders of Northern Trust Corporation determine, on an advisory basis, that the frequency with which the stockholders shall have an advisory vote on executive compensation set forth in the Corporation’s Proxy Statement for its annual meeting of stockholders is (i) every year, (ii) every two years, or (iii) every three years.”

The choice which receives the highest number of votes will be deemed the choice of the stockholders.

Although the vote on this proposal is nonbinding, the Board and the Compensation and Benefits Committee value the opinions of our stockholders and, consistent with past practice, will consider the outcome of the vote when determining the frequency with which to hold Say-on-Pay votes.

The Board unanimously recommends that you vote for the EVERY YEAR alternative with respect to the frequency with which the Corporation should hold advisory votes on executive compensation.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Our Named Executive Officers

This Compensation Discussion and Analysis describes how we compensate our executives, including our 2016 named executive officers, which consist of the following individuals.


Name		Title
Frederick H. Waddell		Chairman and Chief Executive Officer
S. Biff Bowman		Chief Financial Officer
William L. Morrison		Vice Chairman
Michael G. O’Grady		President
Jana R. Schreuder		Chief Operating Officer

The Corporation made a number of leadership changes across the organization in 2016 and 2017 to position the Corporation for continued success and expand the experience of its leaders. Changes affecting our named executive officers include the following: (i) effective October 1, 2016, Mr. Morrison transitioned from President of the Corporation to Vice Chairman, with Mr. Waddell assuming the role of President in addition to his roles as Chairman and Chief Executive Officer; (ii) effective January 1, 2017, Mr. O’Grady assumed the role of President from Mr. Waddell in addition to his role as President of Corporate & Institutional Services (“C&IS”); and (iii) in conjunction with certain other leadership changes, Peter B. Cherecwich, who is not a named executive officer, assumed the role of President of C&IS from Mr. O’Grady, effective February 1, 2017. The titles for our named executive officers provided throughout this Proxy Statement, including the table above, reflect their current titles.

Executive Summary

2016 Financial Performance

In 2016, we remained focused on the three pillars of our financial strategy:

●

Achieve Growth across the business, as demonstrated by continued growth in revenue and trust, investment and other servicing fees.

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Improve Profitability and Productivity, as demonstrated by our growth in net income and pre-tax income. In 2016, we made meaningful investments in our people and technology to support the continued growth of our businesses, the impact of which slowed our improvement in pre-tax margin and noninterest expense as a percentage of trust, investment and other servicing fees. Compensation decisions made with respect to each of our named executive officers for 2016 reflect such slowed improvement. We remain focused on improving these metrics going forward.

●

Increase Stockholder Returns through an improved return on equity, with return on equity moving further within our target range of 10%–15%, and increases in dividends.

Our overall financial performance compares favorably with that of our peer group discussed on page 39. Our average annual returns on equity for the three- and five-year periods ended December 31, 2016, were 11.1% and 10.5%, respectively, compared to peer-group medians of 9.7% and 9.8%, respectively. Further, our average annual revenue growth of 5.5%, 6.7% and 5.7% for the one-, three- and five-year periods ended December 31, 2016, respectively, significantly outpaced the peer-group medians of (0.1)%, 0.8% and 1.4%.

We achieved these financial results while continuing to maintain strong capital ratios, with all ratios exceeding those required for classification as “well capitalized” under federal bank regulatory capital requirements.

Key Strategic Achievements

Execution on our strategies also was demonstrated through various strategic achievements, including:

●

Further expansion of our client base, business development opportunities and client-servicing capabilities, including through receipt of regulatory approval for our Seoul, South Korea office’s branch license;

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Continued success in using technology to deliver innovative solutions and improve client experience, as evidenced by multiple awards that we have received with respect to cloud infrastructure, mobile experience, fund administration analytics, client reporting and foreign exchange services;

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Accelerated assets under management growth within our FlexShares^® ETF products, positioning us among the faster-growing ETF providers in the last five years;

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Continued execution of our location strategy, with more than 30% of our employees in our Bangalore, Limerick, Manila, Pune and Tempe locations as of December 31, 2016; and

●

Further deepening of our global equity expertise, distinctive research offerings and trading efficiencies.

2016 Compensation of our Chairman and CEO

For his performance in 2016, Mr. Waddell received total direct compensation—consisting of base salary, short-term annual cash incentive compensation and long-term incentive compensation—of $10,180,000. This compared to $11,000,000 for his 2015 performance, representing a decrease of 7.5%. Further information with respect to the performance factors impacting Mr. Waddell’s compensation for 2016 can be found under “2016 Performance Considerations” beginning on page 40.

The chart below summarizes Mr. Waddell’s total direct compensation for 2015 and 2016. Base salary for 2015 and 2016 reflects Mr. Waddell’s base salary, as determined by the Board in February 2015 and February 2016, respectively. Short-term annual cash incentive compensation represents amounts awarded in February 2016 and February 2017 for 2015 and 2016 performance, respectively. Long-term incentive compensation represents grants relating to 2015 and 2016 performance made in February 2016 and February 2017, respectively. It should be noted that the amounts in the chart below are different than the amounts in the Summary Compensation Table on page 53. The most significant difference is that the long-term incentive award amounts included in the Summary Compensation Table for 2015 and 2016 were granted in February 2015 and February 2016, respectively, for 2014 and 2015 performance. We believe the chart below may be useful in summarizing key incentive compensation decisions made for 2015 and 2016 performance.

LOGO

As illustrated by the chart below and consistent with our pay for performance philosophy, the Chairman and CEO’s pay mix heavily emphasizes incentive compensation, with the greatest weight placed on long-term incentives. Our long-term incentive mix emphasizes performance-based pay, with half of the long-term incentives being awarded in performance stock units earned based on our return on equity over a three-year period, one-quarter being awarded in stock options and one-quarter being awarded in restricted stock units.

LOGO

Compensation Governance Practices

We have implemented the compensation practices summarized below to ensure that our compensation program is effective in addressing stockholder objectives.


What We Do		What We Don’t Do
✓	Ensure our executives meet robust stock ownership guidelines	×	No excise tax gross-ups for any new executive severance agreements
✓	Ensure performance-based compensation comprises the most significant portion of incentive compensation	×	No short selling, margining, hedging, pledging or hypothecating company shares permitted under our Securities Transactions Policy and Procedures
✓	Position target pay at median levels among peer group companies	×	No compensation plans that encourage excessive risk-taking
✓	Subject long-term incentive awards granted to named executive officers to potential forfeiture or clawback in the event of a restatement of our financial statements and certain types of misconduct	× ×	No repricing of underwater options No dividend equivalents distributed on unvested performance or restricted stock unit awards
✓	Use an independent compensation consultant to advise the Compensation and Benefits Committee
✓	Closely align pay and performance, with the Compensation and Benefits Committee validating this alignment annually

Guiding Principles for Executive Compensation

Our compensation philosophy is to attract, motivate and retain talent, including executive-level talent, who will contribute to our long-term success. With the goals of solid long-term financial performance and creating long-term stockholder value, our executive compensation program and compensation decisions are framed by the four guiding principles described below.


Guiding Principle		Impact on Compensation Design
Linked to Long-Term Performance		● Performance stock units based on three-year return on equity constitute 50% of long-term incentive compensation
Aligned with Stockholder Interests		● Majority of pay delivered in long-term incentives (approximately 64% of the Chairman and CEO’s total direct compensation) ● Executives are subject to robust stock ownership guidelines
Positioned Competitively in the Marketplace		● Compensation levels are developed with reference to a peer group of comparable companies
Discourages Inappropriate Risk-Taking		● Long-term incentives are subject to potential forfeiture and clawback in the event of a restatement of our financial statements and certain types of misconduct ● Short-term cash incentive compensation awards are capped ● Compensation and Benefits Committee can exercise negative discretion to reduce incentives ● Compensation program balances short-term and long-term performance objectives

Risk Management

A key objective of our compensation program is to ensure that the incentive compensation design does not encourage inappropriate risk-taking. We have considered our incentive compensation program in light of the guidance provided by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) with respect to sound incentive compensation policies at financial institutions. We believe our compensation arrangements are consistent with our safety and soundness, in part because we are not involved with many of the lines of business that have exposed other financial institutions to excessive risk.

To reinforce the important role of effective risk management in our compensation framework, 50% of long-term incentive awards to named executive officers are provided in performance stock units. Performance stock units, which contain meaningful performance targets for named executive officers and are payable in shares if those targets are attained, discourage inappropriate risk-taking behavior because they can only be earned by attaining long-term performance goals and because the value of the award is less susceptible than stock options to short-term fluctuations in share value. All long-term incentive awards vest over a multi-year period and have an inherent risk adjustment factor based on changes in the value of our common stock. All long-term incentive compensation arrangements for named executive officers from February 14, 2012, through February 20, 2017, have included forfeiture and recoupment provisions. On February 20, 2017, we adopted a Policy on Recoupment containing similar forfeiture and recoupment provisions applicable to long-term incentive compensation arrangements entered into on or after such date. Further information with respect to these provisions for our named executive officers can be found under “Other Compensation Practices—Forfeiture and Recoupment.”

The Compensation and Benefits Committee annually reviews management’s assessment of the effectiveness of the design and performance of our incentive compensation arrangements and practices in providing risk-taking incentives that are consistent with the safety and soundness of the Corporation and its subsidiaries. This assessment includes an evaluation of whether our incentive compensation arrangements and practices discourage inappropriate risk-taking behavior by participants. In connection with the Committee’s assessment, the Corporation’s Chief Risk Officer presents an annual incentive compensation risk performance review, discussing his observations and assessments of risk performance for the performance year for the Corporation and each of its significant businesses. The Committee will continue to monitor and, if necessary, revise our incentive compensation program to ensure that it continues to balance appropriately the objectives of stockholders, the needs of the business and risk concerns.

Pursuant to its charter, the Compensation and Benefits Committee is required to have at least one member who is a member of the Business Risk Committee and at least one member who is a member of the Audit Committee. This overlap in composition is intended to ensure that compensation decisions reflect the input of the Audit and Business Risk Committees.

Executive Compensation Program Elements

The table below provides a brief description of the elements of our compensation program and how each element helps address our guiding principles for executive compensation.


Element	Link to Compensation Philosophy	Rationale/Key Features
Base Salary	● Targeted at competitive levels among peer group companies.	● Base salaries provide a fixed level of income consistent with a named executive officer’s position and responsibilities, competitive pay practices, and internal equity principles.
Short-Term Annual Cash Incentive	● Total incentive funding is established as a percentage of pre-tax income. ● Targeted at competitive levels among peer group companies.	● The Compensation and Benefits Committee determines annual incentive funding and awards based on both quantitative and qualitative considerations, including the individual performance of each executive officer and internal equity principles.
Long-Term Incentive Compensation	● Linked to long-term performance. ● Aligned with stockholders’ interests by motivating executive officers to act as owners. ● Targeted at competitive levels among peer group companies.	● Long-term incentives are the most significant element of overall compensation. ● Long-term incentive compensation is comprised of performance stock units (50%), restricted stock units (25%) and stock options (25%). The number of shares that is paid out upon the vesting of a performance stock unit award is determined based on our return on equity.
Retirement, Health and Welfare Benefits	● Targeted at competitive levels among peer group companies.	● Benefits are designed with broader employee populations in mind and are not specifically structured for executive officers.

Additional information with respect to each of the four principal elements of our compensation program can be found beginning on page 44.

Determining Awards

Role of the Compensation and Benefits Committee

During its February meeting each year, the Compensation and Benefits Committee determines the appropriate level of compensation for all executive officers. The Committee considers all elements of our executive compensation program holistically rather than each compensation element

individually, and makes executive compensation decisions after careful review and analysis of financial and nonfinancial performance information, as well as historical and market compensation data.

The Committee has the discretion to determine compensation in the context of individual performance in nonfinancial areas that are important to long-term growth and the enhancement of stockholder value. This flexibility allows the Committee to modify individual incentive payouts and long-term incentive opportunities to reflect:

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our business model and strategy;

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prevailing market trends;

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evolution in the financial and regulatory environment;

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cross-function executive assignments; and

●

risk management objectives.

As discussed under “2016 Compensation Decisions and Design—2016 Performance Considerations” beginning on page 40 of this Proxy Statement, the Committee also evaluates the performance of our Chairman and CEO against his objectives for the past year. The Committee shares this evaluation with the Board in order for the Board to set the Chairman and CEO’s compensation.

Role of the Chairman and CEO

The Chairman and CEO presents the Compensation and Benefits Committee with recommendations on the total compensation for each of our other executive officers based in part upon competitive market data for our peer group. The Chairman and CEO’s evaluations of the other executive officers are based on performance against the past year’s performance expectations, and are comprised of a mix of financial and nonfinancial performance factors, which are not formulaically weighted or scored. With input from our Chief Risk Officer, the Chairman and CEO also evaluates each of the other executive officer’s performance with regard to business risks and individual adherence to risk and compliance policies and procedures. The Committee gives substantial weight to the recommendations of the Chairman and CEO, but retains the ultimate oversight and responsibility to set compensation for all executive officers, except for the Chairman and CEO, whose compensation is set by the Board with consideration given to the recommendations of the Committee.

Role of Human Resources

The Human Resources function provides materials to assist the Compensation and Benefits Committee in making executive compensation decisions, including current and historical compensation data for executive officers. Our Executive Vice President, Human Resources attends and participates in all Committee meetings. The Human Resources function also assists the Chairman and CEO in formulating his compensation recommendations for all other executive officers. The Human Resources function provides historical and current market data for executive pay in the industry and information concerning the historical and current compensation of executive officers.

Role of the Compensation and Benefits Committee’s Independent Compensation Consultant

The Compensation and Benefits Committee has retained Compensation Advisory Partners (“CAP”), a nationally recognized executive compensation consulting firm, as its independent compensation consultant. The Committee confers with its independent compensation consultant to ensure that decisions and actions are consistent with stockholders’ long-term interests and compensation-related best practices within the financial services industry. The Committee also references market data provided by its independent compensation consultant when considering compensation for executive officers. A representative of CAP attended all meetings of the Committee during 2016. CAP provides insights into compensation trends and market practices, presents views on the compensation proposed by the Committee and participates in Committee meeting discussions and executive sessions.

Use of Peer Group and Market Data

To help to inform its decision-making, the Compensation and Benefits Committee reviews peer group data regarding competitive pay levels in the market place. The peer group currently utilized by the Committee consists of the Corporation’s two most comparable trust and custody peers—The Bank of New York Mellon Corporation and State Street Corporation—as well as certain other banking, wealth management and asset management firms similar to the Corporation in certain respects, but not necessarily representing direct business competitors. This peer group, reflected below, was developed by the Committee, working with CAP and management’s executive compensation consultant, Towers Watson, in 2015 and was used when setting 2016 base salaries and determining the size of short-term annual cash incentive awards and long-term incentive grants made in 2017 and 2016 based on 2016 and 2015 performance, respectively. The Compensation and Benefits Committee believes that the current peer group provides the Committee with a representative view of the market for executive talent and reflects our business mix, complexity and global footprint.


Current Peer Group
● Comerica Incorporated		● State Street Corporation
● Fifth Third Bancorp		● SunTrust Banks Inc.
● Franklin Resources, Inc.		● T. Rowe Price Group, Inc.
● Invesco Ltd.		● The Bank of New York Mellon Corporation
● KeyCorp		● The PNC Financial Services Group, Inc.
● Legg Mason, Inc.		● U.S. Bancorp

When making compensation decisions, the Compensation and Benefits Committee considers how the recommended compensation levels will compare to the median compensation for comparable positions among the peer group companies. The Committee also considers market data for comparable positions reported in certain financial services industry surveys. However, the Committee recognizes that the compensation levels may vary from market median compensation levels based on our performance or specific individual circumstances, including the executive’s tenure in the role, the nature of the responsibilities of the executive and the executive’s individual performance.

The Committee regularly reviews the composition of the Corporation’s peer group and will make further updates, as appropriate, based on changes within the peer group companies, industry consolidation and the Corporation’s own evolving global presence.

Deductibility of Executive Compensation

The Compensation and Benefits Committee views the tax deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), as a factor in determining the forms and amounts of executive compensation. The Committee reviews each material element of compensation on a continuing basis and takes steps to ensure deductibility if that can be accomplished without sacrificing flexibility or other important elements of the overall executive compensation program. For example, the Committee approves all short-term annual cash incentives for U.S.-based executive officers under the provisions of the stockholder-approved Management Performance Plan to ensure such awards qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code.

2016 Advisory Vote on Executive Compensation

Our 2015 named executive officer compensation was approved on an advisory basis by our stockholders at our April 19, 2016 Annual Meeting of Stockholders. Approximately 90% of the votes present and entitled to vote at the meeting, together with abstentions, supported approval of 2015 named executive officer compensation. Although such advisory votes are nonbinding, the Board reviews and thoughtfully considers the voting results when determining compensation policies and making future compensation decisions for named executive officers. Additionally, as mentioned under “Corporate Governance—Stockholder Engagement” beginning on page 23 of this Proxy Statement, it is our practice to engage proactively and routinely with stockholders throughout the year to help further their understanding of our performance and strategies and to allow us to receive direct feedback on issues relating to the Corporation. The decisions made by the Board and the Compensation and Benefits Committee with respect to compensation in 2016—including the decision to maintain the overall structure of our executive compensation program—reflect the Board and the Committee’s belief, based on the results of the advisory vote on 2015 named executive officer compensation and our ongoing dialogue with stockholders, that our stockholders generally support our overall executive compensation program.

2016 Compensation Decisions and Design

2016 Performance Considerations

In determining total compensation for the named executive officers, the Compensation and Benefits Committee considered a variety of performance factors. The Committee considered the Corporation’s 2016 financial performance, as well as how well each officer fulfilled his or her individual performance objectives. Further detail with respect to factors considered in determining the total compensation for the named executive officers is set forth below.

Frederick H. Waddell

As the Corporation’s Chairman and CEO, Mr. Waddell is responsible for, among other things: developing and implementing our corporate strategies; managing and developing our senior leaders; and embodying our guiding principles of service, expertise and integrity. In determining his compensation for 2016, the Compensation and Benefits Committee and the Board considered the performance of the Corporation under Mr. Waddell’s leadership, as well as how well Mr. Waddell fulfilled his specific individual performance objectives. Mr. Waddell’s individual performance

objectives are set in February of each year at the direction of the Compensation and Benefits Committee and the full Board. Mr. Waddell’s individual performance objectives are divided into the following three categories: Operating Performance, Client Development and Satisfaction and Leadership Development. In January of each year, the Compensation and Benefits Committee and the Board evaluate an assessment of Mr. Waddell’s performance against the individual objectives established in February of the prior year. The Committee and the Board consider not only whether Mr. Waddell satisfied each of his individual performance objectives, but also how he satisfied such objectives. The Committee and the Board also consider whether Mr. Waddell appropriately prioritized his individual performance objectives with his other responsibilities as Chairman and CEO, recognizing that the needs of the Corporation and its stockholders evolve as a given performance year progresses.

In determining Mr. Waddell’s compensation for 2016, the Compensation and Benefits Committee and the Board considered the following performance factors, many of which correlate to the individual performance objectives established for Mr. Waddell in February 2016:

Operating Performance

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Growth in our net income, with net income in 2016 exceeding $1.0 billion for the first time in the Corporation’s history.

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Improvement in our return on equity from 11.5% in 2015 to 11.9% in 2016, continuing a multi-year trend of moving further within our target range.

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Our continued financial strength, including our strong balance sheet demonstrating high asset quality, ample liquidity and a strong capital base.

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Growth in our trust, investment and other servicing fees from $3.0 billion to $3.1 billion, an increase of 4%.

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Our pre-tax margin of 30.6% and noninterest expense as a percentage of trust, investment and other servicing fees of 112% in 2016, compared to 31.2% and 110%, respectively, in 2015, representing slowed progress in our efforts to improve these metrics.

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Mr. Waddell’s oversight of the CCAR process and 2016 capital plan, which was not objected to by the Federal Reserve.

Client Development and Satisfaction

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Mr. Waddell’s role in maintaining and developing client relationships across the globe through client outreach and engagement efforts.

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Our continued high levels of client satisfaction.

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Mr. Waddell’s oversight of our continued efforts to respond to new regulations impacting the financial sector and our clients, including the implementation of U.S. money market mutual fund reform.

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Mr. Waddell’s contributions to our strong new business performance in 2016.

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Mr. Waddell’s oversight of our progress in the areas of building data platforms, digital innovation and process optimization, all of which support the evolving requirements of our clients and client growth.

Leadership Development

●

Mr. Waddell’s role in overseeing the various leadership changes discussed under “Our Named Executive Officers” on page 30, including Mr. Morrison’s transition to Vice Chairman, effective October 1, 2016, and Mr. O’Grady’s appointment as President and a director of the Corporation, effective January 1, 2017.

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Mr. Waddell’s role in developing senior leaders, maintaining a strong group of leaders in our succession plans and attracting and retaining talent throughout the Corporation, particularly in 2016 within Wealth Management.

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Mr. Waddell’s role in advancing diversity and inclusion initiatives across the Corporation and driving our high level of employee engagement and low levels of employee turnover.

S. Biff Bowman

As the Corporation’s Chief Financial Officer, Mr. Bowman is primarily responsible for financial reporting and control, management reporting and analysis, liquidity management, capital planning and investor relations. To determine Mr. Bowman’s 2016 compensation, the Compensation and Benefits Committee considered how well Mr. Bowman fulfilled his responsibilities in 2016. In doing so, the Committee considered the following performance factors:

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Mr. Bowman’s contributions to our 2016 financial performance, including with respect to:

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Improvement in our return on equity from 11.5% in 2015 to 11.9% in 2016;

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Growth in our diluted earnings per share from $3.99 in 2015 to $4.32 in 2016, an increase of 8%; and

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Our continued financial strength, with ample liquidity and a high-quality securities portfolio contributing to sound credit ratings.

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Mr. Bowman’s role in our successful offering of $500.0 million of our Series D Non-Cumulative Perpetual Preferred Stock.

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Mr. Bowman’s contributions to our CCAR process, capital management policies and 2016 capital plan, which was not objected to by the Federal Reserve, enabling us to return $754.7 million in capital to common stockholders in 2016 through quarterly dividends and share repurchases.

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The strength of our investor relations program and Mr. Bowman’s contributions to the quality of our dialogue with stockholders.

William L. Morrison

Effective October 1, 2016, Mr. Morrison was named Vice Chairman of the Corporation. Prior to such date, Mr. Morrison served as President. As the Corporation’s President, Mr. Morrison was primarily responsible for driving business growth and overseeing the Corporation’s client-facing businesses and corporate marketing and strategy functions. To determine Mr. Morrison’s 2016 compensation, the Compensation and Benefits Committee considered how well Mr. Morrison fulfilled these responsibilities in 2016. In doing so, the Committee considered the following performance factors:

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Continued growth in each of our client-facing businesses, with the Corporation’s total consolidated revenue growing from $4.7 billion in 2015 to $5.0 billion in 2016, an increase of 6%.

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Growth in trust, investment and other servicing fees from 2015 to 2016 of 5% within our C&IS business and 3% within our Wealth Management business.

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Our continued high levels of client satisfaction, which helped drive strong new business results for our C&IS and Wealth Management businesses.

●

Mr. Morrison’s role in overseeing the comprehensive brand refresh implemented by the Corporation during 2016.

In connection with his transition to Vice Chairman, the Compensation and Benefits Committee awarded Mr. Morrison a $1,500,000 retention award consisting of 21,142 restricted stock units, effective October 18, 2016. This award reflects expectations for Mr. Morrison’s continued contributions to the Corporation. Pursuant to its terms, 100% of such retention award will vest on October 18, 2018. The award will be forfeited if Mr. Morrison retires or voluntarily terminates his employment prior to such date.

Michael G. O’Grady

Effective January 1, 2017, Mr. O’Grady assumed the role of President of the Corporation. Prior to such date, including for the entirety of 2016, Mr. O’Grady served as President of C&IS. As the Corporation’s President of C&IS, Mr. O’Grady was primarily responsible for the overall performance of such business. To determine Mr. O’Grady’s 2016 compensation, the Compensation and Benefits Committee considered how well Mr. O’Grady fulfilled these responsibilities in 2016, as well as his appointment as President. In doing so, the Committee considered the following performance factors:

●

Mr. O’Grady’s role in implementing C&IS’s long-term growth strategies.

●

Growth in C&IS assets under custody/administration from $7.3 trillion at December 31, 2015 to $8.0 trillion at December 31, 2016, a 10% increase.

●

Growth in C&IS trust, investment and other servicing fees from $1.7 billion in 2015 to $1.8 billion in 2016, an increase of 5%.

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Growth in C&IS revenue, on a fully taxable equivalent basis, from $2.5 billion in 2015 to $2.7 billion in 2016, an increase of 8%.

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Growth in C&IS net income from $484.6 million in 2015 to $497.2 million in 2016, a 3% increase.

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Continued expansion of C&IS product capabilities to enhance C&IS’s competitive position within our target markets.

Jana R. Schreuder

As the Corporation’s Chief Operating Officer, Ms. Schreuder is primarily responsible for business operations and enabling the Corporation’s businesses to grow faster, more efficiently and more profitably. To determine Ms. Schreuder’s 2016 compensation, the Compensation and Benefits Committee considered how well Ms. Schreuder fulfilled her responsibilities in 2016. In doing so, the Committee considered the following performance factors:

●

Ms. Schreuder’s leadership in progressing initiatives designed to enable sustainable and profitable growth of our businesses and prioritizing our capital expenditures.

●

Ms. Schreuder’s contributions to our efforts to deliver increased productivity, high-value service and innovative solutions for clients using emerging technologies.

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Our continued introduction of agile solutions to enable our success in an increasingly complex, fast-paced and digitally connected global environment.

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Ms. Schreuder’s role in the continued implementation of our location strategy and the expansion of our enterprise optimization plan to include various digitalization activities.

●

The recognition we have received for our technology, including awards relating to cloud infrastructure, mobile experience, fund administration analytics, client reporting and foreign exchange services.

Base Salary

The Compensation and Benefits Committee believes that base salaries should provide a fixed level of annual income consistent with an executive officer’s position and responsibilities, competitive pay practices and internal equity among executive officers.

The Committee uses discretion in determining base salaries, considering the following factors:

●

individual performance over the prior year relative to established goals and expectations for the position;

●

targeted base salary levels that balance market pay practices with internal equity principles;

●

experience and qualifications of the individual executive;

●

the executive officer’s tenure in the position or a position of similar level; and

●

significant changes in assignment or scope of responsibility.

For new and recently promoted executives, the Committee’s approach is to increase incrementally base salary to the appropriate target pay level as the executive officer gains experience and tenure in the new position.

In February 2016, based on competitive salary market data among our peer group companies and to account for additional experience and tenure in their current roles, the Committee increased the base salary for: Mr. Bowman — from $550,000 to $625,000; Mr. O’Grady — from $600,000 to $625,000; and Ms. Schreuder — from $675,000 to $750,000. No other named executive officer’s base salary was increased in 2016.

Short-Term Annual Cash Incentive

Annual cash incentives provide an opportunity for our executive officers to receive additional cash compensation based on our financial performance, as well as each executive officer’s individual performance. The overall annual bonus pool is funded based on a targeted percentage of pre-tax income. The maximum funding for each officer’s annual cash incentive award is a percentage of the consolidated net income generated by us in the applicable year. The annual cash incentive maximums for executive officers are as follows:

●

annual cash incentives for the Chairman and CEO may not exceed 0.6% of consolidated net income;

●

annual cash incentives for the President, Chief Operating Officer and Vice Chairman may not exceed 0.4% of consolidated net income;

●

annual cash incentives for all other executive officers may not exceed 0.3% of consolidated net income; and

●

no annual incentives can be paid in the absence of positive net income.

The final determination of annual cash incentives is not tied to any specific formula, rather the process that the Compensation and Benefits Committee uses to determine incentives relies on a discretionary assessment of quantitative and qualitative performance criteria for Northern Trust as a whole, specific businesses and individual executive officers. The Committee believes that its use of discretion:

●

allows the Committee to assess performance holistically across multiple dimensions of performance;

●

provides for a year-end assessment of how challenging the operating environment was and how well we performed relative to our direct peers; and

●

ensures that the Committee has the ability to adjust incentives for how results were achieved (i.e., degree of risk taken, sustainability of results).

In determining overall annual incentive funding and how incentives will be allocated among different businesses, the Committee considers the following factors:

●

Our overall financial performance, with a focus on key metrics, including:

●

Pre-tax income relative to plan and prior year

●

Return on equity

●

The performance of individual businesses in the following areas:

●

Growth (fees and revenue)

●

Productivity (expense management and ratio of noninterest expense to trust, investment and other servicing fees)

●

Profitability (pre-tax margin and return on equity)

●

Risk management

●

Internal equity principles

The Committee then uses negative discretion to set the final awards based on consideration of our overall performance, the individual executive officer’s performance, internal equity principles and peer group compensation levels. Using this process, the Committee recommended the short-term cash annual incentive for our Chairman and CEO to the Board for approval. For the other named executive officers, the Chairman and CEO recommended a short-term cash annual incentive which was approved by the Committee. The table below summarizes the 2016 short-term annual cash incentives for the named executive officers awarded in February 2017, along with 2015 short-term annual cash incentives awarded in February 2016 for comparative purposes.


Short-Term Annual Cash Incentives
Executive	Title	2016		2015
Frederick H. Waddell	Chairman and Chief Executive Officer	$	2,700,000	$	2,800,000
S. Biff Bowman	Chief Financial Officer		825,000		850,000
William L. Morrison	Vice Chairman		1,200,000		1,400,000
Michael G. O’Grady	President		955,000		1,000,000
Jana R. Schreuder	Chief Operating Officer		950,000		1,000,000

Long-Term Incentive Compensation

Long-term incentive compensation is the most significant element of overall compensation and is designed to reward the performance of executive officers over time. For long-term incentive awards made in February 2017 and February 2016 for performance in 2016 and 2015, respectively, we have granted the long-term incentive awards to named executive officers as a mix of performance stock units, restricted stock units and stock options. The relative mix of these components is as follows.

LOGO

In February 2017, the Compensation and Benefits Committee established long-term incentive award opportunities for our Chairman and Chief Executive Officer and approved long-term incentive recommendations for our other named executive officers after receiving input from our Chairman and CEO. In establishing long-term incentive award opportunities for our named executive officers, the Committee considers an executive’s performance, as well as potential for future contributions to the organization, while also taking into account internal equity principles.

The table below summarizes the long-term incentive awards for our named executive officers made in February 2017 and February 2016 for performance in 2016 and 2015, respectively.


Long-Term Incentive Awards
Executive	Title	2016			2015
Frederick H. Waddell	Chairman and Chief Executive Officer	$	6,480,000		$	7,200,000
S. Biff Bowman	Chief Financial Officer		2,025,000			2,250,000
William L. Morrison	Vice Chairman		1,200,000	(1)		3,500,000
Michael G. O’Grady	President		3,150,000			2,250,000
Jana R. Schreuder	Chief Operating Officer		2,925,000			3,000,000

(1) Amount excludes a retention award granted to Mr. Morrison effective October 18, 2016 in the amount of $1,500,000, as discussed on page 43. The long-term incentive award granted to Mr. Morrison in February 2017 for performance in 2016 reflects his transition to Vice Chairman, effective October 1, 2016.

Performance Stock Units. Performance stock units make up 50% of our long-term incentive award opportunity and typically the largest portion of the total compensation mix for our named executive officers. Our performance stock units are earned based on our average return on equity

performance over a three-year period relative to pre-established goals. Return on equity is the primary financial performance metric used internally and externally to assess our long-term performance. The following charts illustrate the vesting requirements for the performance stock unit grants to named executive officers in 2016 and 2017.


Performance Stock Unit Performance Schedule February 2016 Grants			Performance Stock Unit Performance Schedule February 2017 Grants
Average Annual Rate of Return on Equity	Percentage of Stock Units Vested		Average Annual Rate of Return on Equity	Percentage of Stock Units Vested
Less than 7.5%		0%	Less than 7.5%		0%
7.5%		50%	7.5%		25%
11.0%		100%	9.0%		50%
13.0%		115%	12.0%		100%
³ 15.0%		125%	³ 15.0%		150%

As it is possible that there will be no payout under the performance stock units, these awards are completely “at-risk” compensation. Since performance stock units were reintroduced as an element of the Corporation’s long-term incentive compensation program in 2012, the average annual rate of return on equity required for awards to become 100% vested has increased from 8.0% to 12.0%. These increases emphasize the “at-risk” element of these awards.

On January 17, 2017, shares of common stock underlying performance stock units granted in 2014 were distributed. The number of shares distributed was equal to 106.6% of target based on the Corporation’s average annual return on equity of 11.1% during the three-year performance period ended December 31, 2016.

Further discussion with respect to the performance stock units granted to our named executive officers is set forth in the “Description of Certain Awards Granted in 2016” section beginning on page 57 of this Proxy Statement.

Restricted Stock Units. Restricted stock units are an effective tool to align executives with stockholder interests by making them owners of our stock. Another critical aspect of our restricted stock unit design is that they generally vest over four years, with 50% vesting at the third anniversary of grant and the remaining 50% vesting at the fourth anniversary of grant. This vesting schedule is effective in helping us to retain critical talent and ensuring that executives have significant outstanding unvested equity value over the course of their careers. Further discussion with respect to the restricted stock units granted to our named executive officers is set forth in the “Description of Certain Awards Granted in 2016” section beginning on page 57 of this Proxy Statement.

Stock Options. Stock options are included as part of our long-term incentive compensation to ensure that our executives remain focused on increasing our stock price over time. When used in combination with performance stock units and restricted stock units, stock options help to ensure that executives will take a balanced view towards risk-taking. The key features of our stock option program are summarized below:

●

option exercise price equals the closing sale price on the date of grant;

●

option awards vest 25% per year over the first four anniversaries of the grant date; and

●

option awards expire on the tenth anniversary of the grant date.

It is the view of the Compensation and Benefits Committee that stock options are a performance-based form of compensation, as they only have value to the extent that the stock price appreciates from the grant date price. The Committee also believes that with a ten-year term, stock options encourage executives to focus on long-term, sustainable performance. Further discussion with respect to the stock options granted to our named executive officers is set forth in the “Description of Certain Awards Granted in 2016” section beginning on page 57 of this Proxy Statement.

Total Direct Compensation for 2016 and Overall Pay Mix

The table below provides a comprehensive summary of each named executive officer’s total direct compensation for 2016. Base salary reflects the applicable named executive officer’s salary, as determined in February 2016. Short-term annual cash incentive compensation represents amounts awarded in February 2017 for 2016 performance. Long-term incentive compensation represents grants made in February 2017 relating to 2016 performance.


Total Direct Compensation
Executive	Title	Salary		Short-Term Annual Cash Incentive		Performance Stock Units		Stock Options		Restricted Stock Units			Total
Frederick H. Waddell	Chairman and Chief Executive Officer	$	1,000,000	$	2,700,000	$	3,240,000	$	1,620,000	$	1,620,000		$	10,180,000
S. Biff Bowman	Chief Financial Officer		625,000		825,000		1,012,500		506,250		506,250			3,475,000
William L. Morrison	Vice Chairman		800,000		1,200,000		600,000		300,000		300,000	(1)		3,200,000
Michael G. O’Grady	President		625,000		955,000		1,575,000		787,500		787,500			4,730,000
Jana R. Schreuder	Chief Operating Officer		750,000		950,000		1,462,500		731,250		731,250			4,625,000

(1) Amount excludes a retention award granted to Mr. Morrison effective October 18, 2016 in the amount of $1,500,000, as discussed on page 43.

Other Compensation Practices

Retirement, Health and Welfare Benefits

Retirement benefits are generally designed with our entire workforce in mind and are not specifically structured for the executive officers. The design of our retirement program for employees, including executive officers:

●

reflects competitiveness in that we target total retirement benefits at approximately the median level of retirement benefits of peer group companies; and

●

encourages employees to contribute to their individual retirement savings through participation in TIP and the Northern Trust Corporation Supplemental Thrift-Incentive Plan (“Supplemental TIP”).

Our executive officers also participate in our health and welfare benefits, including medical, retiree medical, dental, disability and life insurance programs, on the same terms as other employees.

Severance Benefits and Employment Security Arrangements

We provide a severance plan to provide reasonable benefits to employees who are involuntarily terminated without cause due to a reduction in force, job elimination or similar reasons specified in the severance plan. We believe that the availability of severance benefits allows us to compete with our peer group companies in attracting and retaining talent. Executive officers participate in this plan on the same terms as all other eligible and similarly situated employees.

Our executive officers generally are eligible to receive severance benefits that include:

●

a lump sum payment of two weeks of base salary for each year of completed service up to, but less than 26 years, or 52 weeks of base salary for 26 years or more of completed service to us; and

●

a COBRA subsidy based on their length of service to help cover the costs of continuation coverage under the employer’s medical and dental plans, full vesting under TIP, Supplemental TIP, The Northern Trust Company Pension Plan (the “Pension Plan”), and the Northern Trust Corporation Supplemental Pension Plan (the “Supplemental Pension Plan”), enhanced early retirement eligibility under the Pension Plan for employees who have reached age 54 with 14 years of credited service and outplacement assistance.

These benefits are contingent upon execution of a release, waiver and settlement agreement with us. These benefits are also limited to the lesser of two times the applicable executive officer’s salary or two times the maximum amount that may be taken into account under a qualified plan pursuant to Internal Revenue Code Section 401(a)(17). In 2015 and 2016, these limits effectively capped benefits at $530,000. Further, these severance payments would be reduced by any severance payments made under employment security agreements or any other benefit plan, program or individual contract.

In addition to the severance benefits discussed above, we have entered into employment security arrangements with certain executive officers of the Corporation, including each named executive officer. The purpose of these agreements is to provide an executive with sufficient security to remain focused on his or her responsibilities before, during and after a change in control transaction without undue concern for his or her personal circumstances. We believe the employment security agreements are critical to our ability to attract and retain key executives in light of the fact that all named executive officers are employed at will and change in control benefits for executives are a standard element of a competitive compensation program at peer group companies.

Further discussion with respect to our employment security agreements, including disclosure of potential change in control benefits payable to each named executive officer, assuming a change in control of the Corporation and termination of employment on December 31, 2016, is set forth in the “Potential Payments Upon Termination of Employment or a Change in Control of the Corporation” section beginning on page 71 of this Proxy Statement.

Perquisites

We provide a limited number of perquisites intended to assist executive officers in the performance of their duties on behalf of the Corporation. We provide financial consulting and tax return preparation services and personal use of company automobiles as perquisites to our executive officers. If circumstances warrant and if pre-approved by our Chairman and CEO, we permit personal

use of private aircraft on a limited basis. We also reimburse executive officers for the payment of personal income taxes in connection with the use of company vehicles in certain circumstances and taxable relocation expenses. The Compensation and Benefits Committee periodically reviews the types and costs of perquisites to ensure they remain aligned with our compensation philosophy.

Stock Ownership Guidelines

Supporting our guiding principle of alignment with stockholders’ interests, we have a long-standing practice of emphasizing stock ownership and maintaining robust stock ownership guidelines for named executive officers at or above industry practice. Each executive officer is expected to meet his or her respective minimum ownership level within five years of becoming an executive officer. Until such time as any executive officer meets the minimum ownership level requirement, he or she is expected to retain 100% of the net, after-tax shares received upon vesting of equity awards or stock option exercises. As of December 31, 2016, our Chairman and CEO and each of our other named executive officers met or exceeded our stock ownership guidelines.


Stock Ownership Guidelines
Expected Ownership as Multiple of Base Salary
Chairman & CEO			10x
President, Chief Operating Officer and Vice Chairman			7x
Chief Financial Officer and Business Presidents			5x
All Other Executive Officers			3x

Forfeiture and Recoupment

All awards granted to named executive officers since 2012 under our long-term incentive compensation program are subject to forfeiture or recoupment in the event of a restatement of the Corporation’s financial statements and certain types of misconduct. Such awards also are subject to forfeiture and recoupment provisions relating to “ex-post” risk, meaning risk resulting from the recipient’s inappropriate risk-taking that does not materialize until after the performance period in which such inappropriate risk-taking takes place. Additionally, since 2013, all restricted stock unit awards to named executive officers are subject to forfeiture or recoupment if it is determined that the applicable named executive officer has engaged in inappropriate risk-taking which resulted in certain events deemed to be “significant risk outcomes.” An analysis of significant risk outcomes is completed annually to determine if such significant risk outcomes were tied to inappropriate risk-taking. The results of this analysis are reviewed by the Compensation and Benefits Committee.

With respect to long-term incentive compensation awards made prior to February 21, 2017, the foregoing forfeiture and recoupment requirements are contained in the individual award agreements between the Corporation and our named executive officers. Forfeiture and recoupment requirements applicable to long-term incentive compensation awards made on or after such date are contained in the Policy on Recoupment adopted by the Compensation and Benefits Committee on February 20, 2017.

Hedging Policy

We maintain a Securities Transactions Policy and Procedures which, among other things, prohibits directors, employees, and certain of their family members from engaging in short selling, margining, pledging or hypothecating our securities, and from trading in options, warrants, puts, calls or similar instruments on our securities.

Compensation and Benefits Committee Report

The Compensation and Benefits Committee is responsible for providing oversight of the compensation of the directors and executive officers of the Corporation. In fulfilling its oversight responsibilities, the Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based upon this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and this Proxy Statement for the 2017 Annual Meeting of Stockholders, each of which is filed with the SEC.

Compensation and Benefits Committee

Charles A. Tribbett III (Chair)

Linda Walker Bynoe

Thomas E. Richards

John W. Rowe

Martin P. Slark

Summary Compensation Table

The following table sets forth the information concerning the compensation paid to or earned by the named executive officers for 2016, 2015 and 2014.


Name and Principal Position(1)	Year		Salary ($)		Bonus ($)(2)	Stock Awards ($)(3)	Option Awards ($)(4)		Non-Equity Incentive Plan Compensation ($)(5)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6)		All Other Compensation ($)(7)		Total ($)
Frederick H. Waddell Chairman and Chief Executive Officer		2016	$	1,000,000	—	$5,400,067	$	1,637,386	$	2,700,000		$333,477	$	96,392	$	11,167,322
		2015		993,750	$2,413,689	4,987,508		1,477,612		2,800,000		—		87,991		12,760,550
		2014		975,000	—	4,987,571		1,329,507		2,300,000		2,762,043		81,401		12,435,522
S. Biff Bowman Chief Financial Officer		2016		568,750	—	1,687,561		511,696		825,000		434,598		26,507		4,054,112
		2015		537,500	—	1,500,037		444,407		850,000		31,870		20,545		3,384,359
		2014		493,750	—	1,237,506		329,879		650,000		583,444		39,759		3,334,338
William L. Morrison Vice Chairman		2016		800,000	—	4,125,062		795,963		1,200,000		218,018		39,974		7,179,017
		2015		800,000	1,206,845	2,437,550		722,145		1,400,000		—		35,908		6,602,448
		2014		800,000	—	2,437,590		649,766		1,200,000		387,764		44,155		5,519,275
Michael G. O’Grady President		2016		606,250	—	1,687,561		511,696		955,000		80,023		24,750		3,865,280
		2015		600,000	724,107	1,500,037		444,407		1,000,000		62,938		18,000		4,349,489
		2014		600,000	—	1,500,013		399,854		900,000		56,828		21,135		3,477,830
Jana R. Schreuder Chief Operating Officer		2016		693,750	—	2,250,081		682,256		950,000		765,294		37,562		5,378,943
		2015		656,250	724,107	1,875,028		555,495		1,000,000		8,270		34,588		4,853,738
		2014		600,000	—	1,500,013		399,854		900,000		1,363,916		31,781		4,795,564

(1) Positions reflected in this column reflect current positions. In addition to the leadership changes described under “Our Named Executive Officers” on page 30, the Corporation had previously implemented certain leadership changes in 2014, certain of which were applicable to our current named executive officers. Namely, prior to September 1, 2014: (i) Mr. Bowman served as Executive Vice President, Human Resources; (ii) Mr. Morrison served as President and Chief Operating Officer; (iii) Mr. O’Grady served as Chief Financial Officer; and (iv) Ms. Schreuder served as President of Wealth Management.

(2) Amounts in this column represent long-term cash incentive awards, granted in February 2012 for 2011 performance, which vested in February 2015. Long-term cash incentive awards were granted to named executive officers in February 2012 due to changes in the long-term incentive compensation plan design and no such awards have been granted since February 2012. The amount of the award granted to each named executive officer in February 2012 is as follows: Mr. Waddell: $2,333,333; Mr. Morrison: $1,166,667; Mr. O’Grady: $700,000; and Ms. Schreuder: $700,000. Amounts in this column also include interest credited on such awards from the date of grant through the vesting date at a rate equal to the mid-term applicable federal rate for the month of February 2012, compounded annually, in accordance with the terms of such awards.

(3) Amounts in this column represent the grant date fair value of the restricted stock unit and performance stock unit awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (“FASB ASC Topic 718”). See “Note 22—Share-Based Compensation Plans” to the consolidated financial statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of the assumptions made by the Corporation in the valuation of these stock unit awards. This column includes the following amounts in 2016 with respect to performance stock units, which are based on achievement of target

performance levels: Mr. Waddell: $3,600,025; Mr. Bowman: $1,125,041; Mr. Morrison: $1,750,005; Mr. O’Grady: $1,125,041; and Ms. Schreuder: $1,500,054. If the maximum level of performance were attained, the value of the performance stock units would be as follows: Mr. Waddell: $4,500,046; Mr. Bowman: $1,406,330; Mr. Morrison: $2,187,521; Mr. O’Grady: $1,406,330; and Ms. Schreuder: $1,875,068. See the narrative under “Description of Certain Awards Granted in 2016” beginning on page 57 of this Proxy Statement for more information on these awards.

(4) Amounts in this column represent the grant date fair value of the option awards computed in accordance with FASB ASC Topic 718. See “Note 22—Share-Based Compensation Plans” to the consolidated financial statements included in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of the assumptions made by the Corporation in the valuation of these option awards. See the narrative under “Description of Certain Awards Granted in 2016” beginning on page 57 of this Proxy Statement for more information on these awards.

(5) Amounts in this column represent the annual cash incentives earned by the named executive officers in the applicable years under the Management Performance Plan.

(6) Amounts in this column represent the aggregate increase in actuarial present values of accumulated benefits under the Pension Plan and the Supplemental Pension Plan. At December 31, 2014, the applicable discount rate used to calculate the pension decreased from 5.00% down to 4.25%, resulting in an increase in the present value of benefits under the Traditional Formula for each named executive officer relative to December 31, 2013, except for Mr. O’Grady, whose benefits are accrued under the Pension Plan’s “Pension Equity Plan (PEP) Formula.” At December 31, 2015, the applicable discount rate increased to 4.71%, resulting in a decrease in the present value of benefits under the Traditional Formula. This decrease was more than offset by increases in the present value of benefits attributable to other factors for Mr. Bowman and Ms. Schreuder, while the present value of benefits for Mr. Waddell and Mr. Morrison decreased by $387,577 and $102,918, respectively. At December 31, 2016, the applicable discount rate decreased to 4.46%, resulting in an increase in the present value of benefits under the Traditional Formula. See “Pension Benefits” beginning on page 64 of this Proxy Statement for additional information.

(7) The following table sets forth a detailed breakdown of the items which comprise “All Other Compensation” for 2016.


Name	Contributions to TIP and Supplemental TIP ($)(a)		Perquisites and Other Personal Benefits ($)(b)		Tax Reimbursements ($)(c)		Total ($)
Mr. Waddell	$	30,000	$	44,424	$	21,968	$	96,392
Mr. Bowman		17,063		9,044		400		26,507
Mr. Morrison		24,000		14,204		1,770		39,974
Mr. O’Grady		18,188		6,534		28		24,750
Ms. Schreuder		20,813		16,350		399		37,562

(a) Includes matching contributions made by the Corporation on behalf of named executive officers participating in TIP and Supplemental TIP.

(b) With respect to Mr. Waddell, represents financial consulting and tax return preparation services ($16,500) and personal use of company automobiles ($27,924). With respect to Mr. Bowman, represents financial consulting and tax return preparation services ($8,900), including tax preparation

services in conjunction with an overseas assignment, and personal use of company automobiles ($144). With respect to Mr. Morrison, represents financial consulting and tax return preparation services ($12,100) and personal use of company automobiles ($2,104). With respect to Mr. O’Grady, represents financial consulting and tax return preparation services ($6,500) and personal use of company automobiles ($34). With respect to Ms. Schreuder, represents financial consulting and tax return preparation services ($15,740) and personal use of company automobiles ($610).

(c) Represents tax reimbursements provided in connection with personal use of company automobiles and, with respect to Mr. Bowman, taxable expenses relating to an overseas assignment.

Grants of Plan-Based Awards


			Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)					Estimated Future Payouts Under Equity Incentive Plan Awards (2)						All Other Stock Awards: Number of Shares of Stock or Units (#)(3)		All Other Option Awards: Number of Securities Underlying Options (#)(4)		Exercise or Base Price of Option Awards ($/sh)		Grant Date Fair Value of Stock and Option Awards ($)(5)
Name	Grant Date		Thres- hold ($)	Target ($)		Maximum ($)		Thres- hold (#)		Target (#)		Maximum (#)
Mr. Waddell		—		$	2,800,000	$	6,195,000
		2/16/2016															110,362	$	58.25	$	1,637,386
		2/16/2016													30,902						1,800,042
		2/16/2016							30,902		61,803		77,254								3,600,025
Mr. Bowman		—			850,000		3,097,500
		2/16/2016															34,489		58.25		511,696
		2/16/2016													9,657						562,520
		2/16/2016							9,657		19,314		24,143								1,125,041
Mr. Morrison		—			1,400,000		4,130,000
		2/16/2016															53,649		58.25		795,963
		2/16/2016													15,022						875,032
		10/18/2016													21,142						1,500,025
		2/16/2016							15,022		30,043		37,554								1,750,005
Mr. O’Grady		—			1,000,000		3,097,500
		2/16/2016															34,489		58.25		511,696
		2/16/2016													9,657						562,520
		2/16/2016							9,657		19,314		24,143								1,125,041
Ms. Schreuder		—			1,000,000		4,130,000
		2/16/2016															45,985		58.25		682,256
		2/16/2016													12,876						750,027
		2/16/2016							12,876		25,752		32,190								1,500,054

(1) These columns show information regarding payouts under the Management Performance Plan. The amount set forth under the Maximum column represents the highest potential payout under the plan based on the Corporation’s 2016 performance. Although the plan does not provide for a target or threshold, the amount set forth under the Target column represents the amount actually awarded to the named executive officer in 2016 in respect of 2015 performance.

(2) The amounts set forth under the Threshold, Target and Maximum columns represent the number of shares of common stock that would be paid out under the performance stock units granted in February 2016 if the Corporation achieves a three-year return on equity of 7.5%, 11.0% or 15.0% or greater, respectively.

(3) This column shows the number of restricted stock units granted to the named executive officers in 2016.

(4) This column shows the number of shares that may be issued to the named executive officers upon exercise of stock options granted in 2016.

(5) Represents the grant date fair value of each equity award, computed in accordance with FASB ASC Topic 718 (using the target level of performance for performance stock unit awards), disregarding any estimated forfeitures.

Description of Certain Awards Granted in 2016

Performance Stock Units

Each performance stock unit constitutes the right to receive a share of the Corporation’s common stock and vests over a three-year performance period, subject to satisfaction of specified performance targets (“performance conditions”) that are a function of return on equity and continued employment until the end of the vesting period. Dividend equivalents on performance stock units granted prior to February 16, 2016 are paid in cash on a current basis prior to vesting and distribution. Dividend equivalents on performance stock units granted on or after February 16, 2016, including performance stock units granted for 2015 and 2016 performance, will be deferred into a cash account and paid, with interest credited at a rate equal to the mid-term applicable federal rate for the month in which the grant was made, compounded annually, only with respect to the portion of the cash account attributable to performance stock units that actually vest upon satisfaction of the applicable performance conditions.

If, during the performance period relating to performance stock units granted to an executive, such executive retires or terminates employment under certain circumstances entitling the executive to benefits under the Corporation’s severance plan, such executive’s performance stock units will be eligible for pro rata vesting and distribution at the end of the performance period, subject to certain conditions, including satisfaction of the performance conditions. In addition, for awards granted prior to February 21, 2017, if a named executive officer terminates employment on or after attainment of age 55, the executive will be eligible for pro rata vesting and distribution at the end of the performance period, subject to certain conditions, including satisfaction of the performance conditions. For awards granted on or after February 21, 2017, if during the performance period an executive terminates employment under certain circumstances entitling the executive to benefits under the Corporation’s severance plan, such executive’s performance stock units will be eligible for pro rata vesting (with an extra twelve months of vesting) and distribution at the end of the performance period, subject to certain conditions, including satisfaction of the performance conditions. In addition, for awards granted on or after February 21, 2017, if an executive retires after satisfying applicable age and service requirements, such executive’s performance stock units will be eligible for full vesting and distribution at the end of the performance period, subject to certain conditions, including satisfaction of the applicable performance conditions. Upon the death or disability of an executive during the performance period, performance stock units granted prior to February 17, 2015 will be eligible for pro rata vesting and distribution at the end of the performance period, subject to certain conditions, including satisfaction of the performance conditions. With respect to performance stock units granted on or after February 17, 2015, the performance stock units will be eligible for full vesting and distribution at the end of the performance period, subject to certain conditions, including satisfaction of the performance conditions.

Upon a change in control, for awards granted prior to February 21, 2017, a pro rata portion of each performance stock unit award (based on the portion of the performance period that has elapsed as of the change in control) is eligible to vest based on the Corporation’s actual performance at the time of the change in control and is to be paid out at the end of the performance period, subject to accelerated distribution upon a qualifying termination. The remainder of the performance award converts at the target level of performance specified in the performance stock unit agreement into an award with

respect to the acquirer of an equal economic value and vests subject only to the continued employment of the recipient through the remainder of the applicable performance period and is paid out at the end of the performance period, subject to acceleration of vesting upon a qualifying termination, in which event the units are distributed at that time. For awards granted on or after February 21, 2017, both the portion of each performance stock unit award that is based on actual performance and the portion that is based on the target level of performance, convert into an award with respect to the acquirer of an equal economic value, vest subject only to the continued employment of the recipient through the remainder of the applicable performance period, and are paid out at the end of the performance period, subject to acceleration of vesting upon a qualifying termination, in which event the units are distributed at that time. In the event that both a change in control occurs and the acquirer refuses or is unable to agree to the foregoing conversion and vesting provisions, the award will be vested at the time of the change in control, and will be distributed in accordance with the provisions of Section 409A of the Internal Revenue Code, to the extent applicable. The performance stock unit awards provide that in such event the distribution may be in cash. The foregoing notwithstanding, each of our current named executive officers is party to an employment security agreement, pursuant to which all performance stock units granted to such named executive officer would become fully vested at the target level in the event of a change in control. See “Potential Payments Upon Termination of Employment or a Change in Control of the Corporation” beginning on page 71 for further information.

Restricted Stock Units

Restricted stock units generally vest 50% on the third anniversary of the date of grant and 50% on the fourth anniversary of the date of grant. Each restricted stock unit award entitles an executive to receive one share of common stock when the award vests. For restricted stock units granted prior to February 21, 2017, dividend equivalents are paid in cash on a current basis prior to vesting and distribution. Dividend equivalents on restricted stock units granted on or after February 21, 2017, including grants made in 2017 for 2016 performance, will be deferred into a cash account and paid, with interest credited at a rate equal to the mid-term applicable federal rate for the month in which the grant was made, compounded annually, only with respect to the portion of the cash account attributable to restricted stock units that actually vest.

If, during the vesting period relating to restricted stock units granted to an executive for awards granted prior to February 21, 2017, such executive retires or terminates employment under certain circumstances entitling the executive to benefits under the Corporation’s severance plan, the executive will be entitled to receive a distribution of a prorated number of restricted stock units. In addition, for awards granted prior to February 21, 2017, if a named executive officer is age 55 or older on the date of termination of employment, and does not compete with the Corporation during the vesting period, a prorated number of restricted stock units on each remaining vesting date in the vesting period become vested and are eligible for distribution. For awards granted on or after February 21, 2017, if an executive terminates employment under certain circumstances entitling the executive to benefits under the Corporation’s severance plan, the executive will be entitled to receive a distribution of a prorated number of restricted stock units which will provide for an extra twelve months of vesting. In addition, for awards granted on or after February 21, 2017, if an executive retires after satisfying applicable age and service requirements, such executive’s restricted stock units will continue to vest in accordance with their terms. Upon the death or disability of an executive during the vesting period, such executive will be entitled to receive a distribution of a prorated number of any unvested restricted stock units granted prior to February 17, 2015. With respect to restricted stock units granted on or after

February 17, 2015, such executive will be entitled to the full vesting and distribution of any unvested restricted stock units.

Upon a change in control of the Corporation, all restricted stock units granted to executive officers would, under the terms and conditions of the applicable award agreements, be converted into units of the acquirer and continue to vest in accordance with the regular vesting schedule; provided, however, that they become fully vested in connection with a change in control if the executive experiences a qualifying termination of employment following the change in control (in which case they are distributed within sixty days). In the event that both a change in control occurs and the acquirer refuses or is unable to agree to the foregoing conversion and vesting provisions, the award will be vested and will be distributed in accordance with the provisions of Section 409A of the Internal Revenue Code, to the extent applicable. The restricted stock unit awards provide that in such event the distribution may be in cash. The foregoing notwithstanding, each of our current named executive officers is party to an employment security agreement which specifies that in the event of a change in control all restricted stock units granted to such named executive officer would become fully vested. See “Potential Payments Upon Termination of Employment or a Change in Control of the Corporation” beginning on page 71 for further information.

Stock Options

Stock options are granted with an exercise price equal to the closing sale price of the common stock on the date of grant and expire ten years after the date of the grant. Stock options generally vest in equal annual installments over a four-year vesting period.

If an executive retires after satisfying applicable age and service requirements, the executive’s outstanding stock options continue to vest in accordance with their terms and, once vested, may be exercised until the earlier of five years following retirement or the expiration date of the option. If the executive’s employment is terminated under certain circumstances entitling the executive to severance benefits, the executive’s stock options (whether vested or unvested) may be exercised until the earlier of 180 days following termination of employment or the expiration date of the option, provided that if the executive is retirement eligible upon his or her termination of employment under the severance plan, the executive’s stock options (whether vested or unvested) become vested upon the executive’s termination of employment and may be exercised until the earlier of five years from the executive’s effective date of retirement or the expiration of the option. If an executive dies or becomes disabled, the executive’s outstanding stock options become vested and may be exercised until the earlier of five years following death or disability or the expiration date of the option. In other instances, in the absence of a change in control, vested stock options expire on the earlier of three months following termination of employment or the expiration date of the option, and unvested stock options expire on termination of employment.

Upon a change in control of the Corporation, all stock options granted prior to December 31, 2012 become vested and exercisable. Stock options granted after December 31, 2012 convert to options relating to the stock of the acquirer and continue to vest in accordance with the regular vesting schedule; provided, however, that they become fully vested in connection with a change in control if the executive experiences a qualifying termination of employment following the change in control (in which case the options on the acquirer stock remain exercisable until the expiration of the option), or if they are not assumed in the transaction (in which case the employee is entitled to a cash payment equal to the “spread” between the transaction consideration and the option exercise price). The foregoing

notwithstanding, each of our current named executive officers is party to an employment security agreement which specifies that in the event of a change in control all options granted to such named executive officer would become fully vested. See “Potential Payments Upon Termination of Employment or a Change in Control of the Corporation” beginning on page 71 for further information.

Outstanding Equity Awards at Fiscal Year-End



	Option Awards							Stock Awards

Name	Number of Securities Underlying Unexercised Options Exercisable (#)		Number of Securities Underlying Unexercised Options Unexercisable (#)	Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares of Units of Stock That Have Not Vested ($)(1)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2)
Mr. Waddell		205,923	—	$	50.99		2/15/2020		97,679(7)	$	8,698,315		204,756(12)	$	18,233,522
		227,964	—		52.64		2/14/2021
		70,994	23,664(3)		52.69		2/11/2023
		40,982	40,982(4)		60.85		2/10/2024
		19,733	59,197(5)		70.21		2/17/2025
		—	110,362(6)		58.25		2/16/2026
Mr. Bowman		11,768	—		50.99		2/15/2020		27,117(8)		2,414,769		58,895(13)		5,244,600
		11,399	—		52.64		2/14/2021
		16,014	5,338(3)		52.69		2/11/2023
		10,169	10,168(4)		60.85		2/10/2024
		5,935	17,804(5)		70.21		2/17/2025
		—	34,489(6)		58.25		2/16/2026
Mr. Morrison		42,118	—		71.23		2/19/2018		69,037(9)		6,147,745		99,868(14)		8,893,245
		—	11,921(3)		52.69		2/11/2023
		20,030	20,028(4)		60.85		2/10/2024
		9,644	28,931(5)		70.21		2/17/2025
		—	53,649(6)		58.25		2/16/2026
Mr. O’Grady		96,700	—		38.78		10/18/2021		29,741(10)		2,648,436		62,490(15)		5,564,735
		48,110	—		43.65		2/13/2022
		21,352	7,117(3)		52.69		2/11/2023
		12,326	12,325(4)		60.85		2/10/2024
		5,935	17,804(5)		70.21		2/17/2025
		—	34,489(6)		58.25		2/16/2026
Ms. Schreuder		71,239	—		52.64		2/14/2021		34,740(11)		3,093,597		74,988(16)		6,677,681
		48,110	—		43.65		2/13/2022
		21,352	7,117(3)		52.69		2/11/2023
		12,326	12,325(4)		60.85		2/10/2024
		7,419	22,254(5)		70.21		2/17/2025
		—	45,985(6)		58.25		2/16/2026

(1) The market value of the restricted stock units included in this column is based on a price of $89.05 per share (the closing market price of the Corporation’s common stock on December 30, 2016).

(2) The market value of the performance stock units included in this column is based on a price of $89.05 per share (the closing market price of the Corporation’s common stock on December 30, 2016).

(3) Options originally granted February 11, 2013, with 25% of the award vesting on each anniversary of the grant date. Accordingly, all remaining unvested options vest on February 11, 2017.

(4) Options originally granted February 10, 2014, with 25% of the award vesting on each anniversary of the grant date. Accordingly, the remaining unvested options vest in equal portions on each of February 10, 2017 and 2018.

(5) Options originally granted February 17, 2015, with 25% of the award vesting on each anniversary of the grant date. Accordingly, the remaining unvested options vest in equal portions on each of February 17, 2017, 2018 and 2019.

(6) Options originally granted February 16, 2016, with 25% of the award vesting on each anniversary of the grant date. Accordingly, the remaining unvested options vest in equal portions on each of February 16, 2017, 2018, 2019 and 2020.

(7) Consists of 13,661 units vesting on February 10, 2017, 15,776 units vesting on February 11, 2017, 13,661 units vesting on February 10, 2018, 11,840 units vesting on February 17, 2018, 15,451 units vesting on February 16, 2019, 11,839 units vesting on February 17, 2019, and 15,451 units vesting on February 16, 2020.

(8) Consists of 3,390 units vesting on February 10, 2017, 3,559 units vesting on February 11, 2017, 3,389 units vesting on February 10, 2018, 3,561 units vesting on February 17, 2018, 4,829 units vesting on February 16, 2019, and 3,561 units vesting on February 17, 2019, and 4,828 units vesting on February 16, 2020.

(9) Consists of 6,677 units vesting on February 10, 2017, 7,947 units vesting on February 11, 2017, 6,676 units vesting on February 10, 2018, 5,787 units vesting on February 17, 2018, 21,142 units vesting on October 18, 2018, 7,511 units vesting on February 16, 2019, 5,786 units vesting on February 17, 2019, and 7,511 units vesting on February 16, 2020.

(10) Consists of 4,109 units vesting on February 10, 2017, 4,745 units vesting on February 11, 2017, 4,108 units vesting on February 10, 2018, 3,561 units vesting on February 17, 2018, 4,829 units vesting on February 16, 2019, 3,561 units vesting on February 17, 2019, and 4,828 units vesting on February 16, 2020.

(11) Consists of 4,109 units vesting on February 10, 2017, 4,745 units vesting on February 11, 2017, 4,108 units vesting on February 10, 2018, 4,451 units vesting on February 17, 2018, 6,438 units vesting on February 16, 2019, 4,451 units vesting on February 17, 2019, and 6,438 units vesting on February 16, 2020.

(12) Consists of the following maximum number of shares Mr. Waddell may receive under performance stock units: 68,304 shares underlying performance stock units granted in 2014; 59,198 shares underlying performance stock units granted in 2015; and 77,254 shares underlying performance stock units granted in 2016. The distribution of shares underlying the performance stock units granted in 2014 took place on January 17, 2017, with 58,249 shares actually being distributed to Mr. Waddell. The actual number of shares distributed with respect to performance stock units granted in 2015 and 2016 will be based upon the satisfaction of certain performance conditions. Accordingly, it is possible that no shares of common stock will be distributed under these performance stock units.

(13) Consists of the following maximum number of shares Mr. Bowman may receive under performance stock units: 16,948 shares underlying performance stock units granted in 2014; 17,804 shares underlying performance stock units granted in 2015; and 24,143 shares underlying performance stock units granted in 2016. The distribution of shares underlying the performance stock units granted in 2014 took place on January 17, 2017, with 14,453 shares actually being distributed to Mr. Bowman. The actual number of shares distributed with respect to performance stock units granted in 2015 and 2016 will be based upon the satisfaction of certain performance conditions. Accordingly, it is possible that no shares of common stock will be distributed under these performance stock units.

(14) Consists of the following maximum number of shares Mr. Morrison may receive under performance stock units: 33,383 shares underlying performance stock units granted in 2014; 28,931 shares underlying performance stock units granted in 2015; and 37,554 shares underlying performance stock units granted in 2016. The distribution of shares underlying the performance stock units granted in 2014 took place on January 17, 2017, with 28,469 shares actually being distributed to Mr. Morrison. The actual number of shares distributed with respect to performance stock units granted in 2015 and 2016 will be based upon the satisfaction of certain performance conditions. Accordingly, it is possible that no shares of common stock will be distributed under these performance stock units.

(15) Consists of the following maximum number of shares Mr. O’Grady may receive under performance stock units: 20,543 shares underlying performance stock units granted in 2014; 17,804 shares underlying performance stock units granted in 2015; and 24,143 shares underlying performance stock units granted in 2016. The distribution of shares underlying the performance stock units granted in 2014 took place on January 17, 2017, with 17,519 shares actually being distributed to Mr. O’Grady. The actual number of shares distributed with respect to performance stock units granted in 2015 and 2016 will be based upon the satisfaction of certain performance conditions. Accordingly, it is possible that no shares of common stock will be distributed under these performance stock units.

(16) Consists of the following maximum number of shares Ms. Schreuder may receive under performance stock units: 20,543 shares underlying performance stock units granted in 2014; 22,255 shares underlying performance stock units granted in 2015; and 32,190 shares underlying performance stock units granted in 2016. The distribution of shares underlying the performance stock units granted in 2014 took place on January 17, 2017, with 17,519 shares actually being distributed to Ms. Schreuder. The actual number of shares distributed with respect to performance stock units granted in 2015 and 2016 will be based upon the satisfaction of certain performance conditions. Accordingly, it is possible that no shares of common stock will be distributed under these performance stock units.

Option Exercises and Stock Vested

The following table sets forth information regarding exercises of stock options and vesting of stock awards for each named executive officer in 2016.



	Option Awards				Stock Awards

Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)(1)		Number of Shares Acquired On Vesting (#)		Value Realized On Vesting ($)(2)
Mr. Waddell		557,527		$10,596,677		78,882		$4,935,909
Mr. Bowman		36,230		844,538		21,612		1,335,160
Mr. Morrison		257,566		3,982,783		39,738		2,486,538
Mr. O’Grady		—		—		23,724		1,484,489
Ms. Schreuder		191,224		3,412,197		23,724		1,484,489

(1) The value realized on the exercise of stock options represents the pre-tax difference between the option exercise price and the fair market value of the common stock on the date of exercise.

(2) The value realized on the distribution of stock units represents the number of stock units that vested multiplied by the fair market value of the common stock on the date of vesting.

Pension Benefits

Information with respect to accrued benefits of each named executive officer under the Pension Plan as of December 31, 2016 is as follows.



Name	Plan Name	Number of Years Credited Service (#)		Present Value of Accumulated Benefit ($)		Payments During Last Fiscal Year ($)
Mr. Waddell	Qualified Pension Plan		35.0		$1,937,591		—
	Supplemental Pension Plan		35.0		19,048,263		—
Mr. Bowman	Qualified Pension Plan		31.5		1,148,697		—
	Supplemental Pension Plan		31.5		2,152,917		—
Mr. Morrison	Qualified Pension Plan		20.8		910,861		—
	Supplemental Pension Plan		20.8		4,071,093		—
Mr. O’Grady	Qualified Pension Plan		5.4		58,648		—
	Supplemental Pension Plan		5.4		245,631		—