The decision-making process We use the following process to determine compensation for the CEO, all executive leadership team members including the named executives, and heads of control functions. The executive leadership team is made up of our most senior leaders who have responsibility for setting our strategy. Base salaries are set in February of each year and any changes generally go into effect on March 1. Annual incentive funding is approved and awards are finalized in February of each year after the end of the prior fiscal year. Equity-based incentives are granted in February or March of each year following the release of our financial results. Review plan design Management presents its initial recommendations for compensation structure and supporting rationale for the upcoming year to the management resources and compensation committee. See page 52 for this This includes: year’s compensation • compensation components program • compensation mix • performance measures The management resources and compensation committee discusses the recommendations and provides feedback to management. The committee seeks advice and guidance about compensation issues from its independent compensation advisor, and may seek feedback from shareholders and proxy advisory firms The risk committee reviews the risk management aspects of the program Once the recommendations are finalized, the management resources and compensation committee recommends the compensation program and structure to the board for approval Set performance goals The board approves the individual performance goals of the CEO and other senior executives See pages 55 and 62 The management resources and compensation committee: for this year’s • reviews, approves and recommends to the board the individual performance goals performance goals of the executive leadership team and heads of control functions • reviews, approves and recommends to the board the business performance measures and financial targets for incentive plan purposes. Targets are aligned with the board-approved plans and are intended to be achievable yet provide a performance “stretch” • reviews stress tests of different scenarios to set appropriate financial targets, performance peer group composition and plan changes Ongoing review of The management resources and compensation committee: market and trends • reviews and approves changes to the composition of the compensation and performance peer groups See page 50 for more • reviews the competitive positioning of target compensation about compensation against desired market positioning benchmarking • reviews ongoing trends 108 Manulife Financial Corporation