Gary Kelly

About Gary C. Kelly

Gary C. Kelly (age 70) has served on Lincoln National Corporation’s (LNC) board since 2009 and is an independent director. He is Chair of the Audit Committee and a member of the Executive and Finance Committees. Kelly is Chairman Emeritus of Southwest Airlines and previously served as its CEO (2004–2022), Chairman (2008–2022), President (2008–2017), and Executive Chairman (Feb 2022–Nov 2024); he began his career as a CPA at a public auditing firm and held senior finance roles including CFO at Southwest. In 2024 he was appointed to the Board of Directors of the Federal Reserve Bank of Dallas and is currently the Deputy Chair .

Past Roles

External Roles

Board Governance

• Independence: The Board determined Kelly is independent; all members of the Audit, Compensation, Corporate Governance, and Finance Committees are independent .
• Committee assignments: Audit (Chair), Executive (Member), Finance (Member) .
• Audit Committee financial expert: Kelly, along with others, qualifies as an “audit committee financial expert” under SEC rules .
• Attendance and engagement: In 2024, the Board met six times; each incumbent director attended at least 75% of Board and relevant committee meetings. All directors attended the 2024 Annual Meeting except Mr. Mee (health reasons) .
• Executive sessions: Independent directors meet regularly in executive session; robust Lead Independent Director framework is in place .
• Committee activity levels (2024): Audit (8), Compensation (4), Corporate Governance (4), Executive (2), Finance (4), Corporate Action (0) .

Fixed Compensation

• Director compensation framework: Non-Lead directors receive $110,000 cash retainer and $180,000 in Deferred LNC Stock Units annually; Lead Independent Director receives $110,000 cash + $240,000 in Deferred LNC Stock Units .
• Benefits: Optional deferral of cash into Directors’ Deferred Compensation Plan with LNC Stock Fund option; financial planning reimbursement (up to $20,000 initial, $10,000 annual); participation at own expense in certain health and welfare benefits; matching charitable gifts up to $15,000 (additional $15,000 offered in 2024 for specified charity in memory of Mr. Mee) .

Performance Compensation

• Performance metrics: Directors do not have performance-conditioned equity; DSUs align value to LNC share price without operational metrics .
• Anti-hedging/pledging: Directors are prohibited from pledging, hedging, or speculating in Lincoln securities .

Other Directorships & Interlocks

• Potential network considerations: Shared Southwest board tenure with LNC director Cunningham may facilitate information flow and alignment but should be monitored for any perceived influence; no related-party transactions disclosed involving Kelly .

Expertise & Qualifications

• Skills: Business operations/strategic planning, finance and capital management, risk management, and accounting .
• Credentials: Former CEO/Chairman/President/CFO of Southwest; CPA background; current Deputy Chair at Federal Reserve Bank of Dallas .

Equity Ownership

• Ownership guidelines: Directors must hold 5x cash retainer ($550,000) within five years; all outside directors met the threshold as of 12/31/2024 (Mr. Morris exempt until 2030) .
• Prohibitions: No pledging or hedging of LNC securities allowed .
• Options: None held by directors as of 12/31/2024 .
• Group position: Directors and executive officers as a group held 0.88% of common stock plus stock units as of March 14, 2025 .

Governance Assessment

• Strengths:

  • Independent Audit Chair and SEC-designated financial expert; deep accounting/finance background enhances audit quality, IT/cyber oversight, and risk management .
  • Committee workload and attendance strong; board maintains executive sessions and thorough evaluation processes .
  • Director pay emphasizes equity via DSUs, reinforcing alignment; ownership guidelines are robust and met .
  • Prohibitions on pledging/hedging, clawback policy for incentive compensation, and double-trigger change-in-control vesting demonstrate shareholder-friendly governance .

• Watch items / RED FLAGS:

  • Derivative litigation naming Kelly and other directors alleges fiduciary breaches and securities law violations over disclosures and assumptions (cases consolidated and stayed pending related appeals). While vigorously defended, this is a governance overhang and may affect investor confidence until resolved .
  • Board leadership remains combined Chair/CEO; though mitigated by a strong Lead Independent Director structure, some investors may prefer separation in stressed periods .
  • Interlock with Cunningham at Southwest (historical) warrants awareness of perceived influence or network effects, though no related-party transactions are disclosed .

• Shareholder engagement: LNC engaged investors representing ~38% of shares outstanding in fall 2024 on compensation and governance topics; 2024 Say-on-Pay received 84% support, indicating generally favorable investor views of compensation governance .

• Director compensation structure analysis:

  • Equity retainer increased effective Jan 1, 2024; no change for 2025—maintains higher equity mix; no meeting fees paid in 2024; benefits modest and capped (financial planning, charitable match) .
  • No options for directors; DSUs avoid option repricing risks and reduce risk-taking incentives relative to options .

• Committee effectiveness: Audit Committee met eight times in 2024 and oversees financial reporting, compliance, and cybersecurity; processes for auditor oversight and pre-approval policies appear robust .