Discover Financial Services : 2024 Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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  ☒ Definitive Proxy Statement
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DISCOVER FINANCIAL SERVICES

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check all boxes that apply):

• No fee required.

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• Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

Message from our independent chairman

"

Strengthening the confidence of all our stakeholders- customers, shareholders, regulators, employees, and communities- continues to be a primary objective.

This Proxy Statement is dated as of and being made first available to shareholders on March 15, 2024.

March 15, 2024

Dear Fellow Shareholders:

It is an honor to have the opportunity to once again write you as your independent Board Chairman and invite you to the Discover Financial Services virtual 2024 Annual Meeting of Shareholders.

2023 was not a typical year for Discover. Throughout the year, Discover and the Board met multiple challenges, including leadership transition, regulatory and compliance matters, and refocusing Discover's business on our core banking products. I, along with the other members of your Board, actively worked with senior management to respond to and overcome these challenges.

Last month, we announced Discover's next chapter: Combining with Capital One represents a unique opportunity to bring together two very successful companies and build a payments network that can compete with the largest payments networks and payments companies. The combined company represents tremendous upside for Discover's shareholders.

You will be voting on the proposed merger at a separate meeting, and there is still much to do before our combination can be completed. Until then, we will continue striving towards our vision of being the leading digital bank and payments partner; accomplishing our mission to help people spend smarter, manage debt better, and save more money so they may achieve a brighter financial future; and living our values of doing the right thing, innovation, simplicity, collaboration, openness, volunteerism, enthusiasm, and respect.

Over the past year, the Company has invested significant resources in risk management, compliance, legal, and corporate governance. Strengthening the confidence of all our stakeholders-customers, shareholders, regulators, employees, and communities-continues to be a primary objective. The Board, management, and over 21,000 Discover employees remain committed to strengthening our corporate culture of accountability and transparency, building and protecting long-term shareholder value, and positioning the Company for continued success.

We have a strong mix of expertise and tenure on our Board today. Since last year's Annual Meeting, we have added Kathy Lonowski, Daniela O'Leary-Gill, and Michael Shepherd to the Board. With these additions, we have supplemented our financial, banking operations, and regulatory compliance expertise. Also added to our Board in 2024 is the Company's new CEO, Michael Rhodes, whose appointment followed a comprehensive process to identify the right leader to help ensure Discover delivers on its strategic and financial goals.

Your vote is important! Whether or not you plan to attend the Annual Meeting, please read the enclosed Proxy Statement and vote as soon as possible via the Internet, telephone, or paper proxy card or voting instruction form. Important information about the matters to be acted upon at the meeting is included in the notice of meeting and Proxy Statement. All shareholders of record of our outstanding shares of common stock at the close of business on March 11, 2024, will be entitled to vote at the Annual Meeting.

On behalf of your Board and management team, I thank you for your continued support, investment, and engagement. I am very much looking forward to our 2024 Annual Meeting of Shareholders and for what the coming year holds in store

for Discover. Very truly yours,

Thomas G. Maheras

Independent Chairman

Discover | 2024 Proxy Statement

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Notice of 2024 annual meeting of shareholders

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting To Be Held on May 9, 2024: The Proxy Statement and our Annual Report, which includes our Form 10-K for the fiscal year ended December 31, 2023, for Discover Financial Services are available free of charge on our website at: www.discover.com.

You are cordially invited to attend the Annual Meeting via the website below, but whether or not you attend, you are urged to vote. Your prompt action will aid the Company in reducing the expense of proxy solicitation.

Date and Time	Website	Record Date
May 9, 2024	www.meetnow.global/	You are entitled to notice of and to vote
9:00 a.m., Central Time	MH7YUMP	at the meeting and at any adjournment
		or postponement of the meeting if you
		were a shareholder of record as of the
		close of business on March 11, 2024.

Items of Business	Board Recommendation
1	To elect 11 members of the Board named in the Proxy Statement as	FOR each director nominee
	nominees, each for a term of one year.
2	To conduct an advisory, non-binding vote to approve named executive	FOR
	officer compensation.
3	To ratify the appointment of Deloitte & Touche LLP as our independent	FOR
	registered public accounting firm for 2024.

Other business as may properly come before the meeting or any adjournment or postponement of the meeting

Advance voting methods

A separate Proxy Statement will be delivered, and a separate Special Meeting of Shareholders will be held, in connection with the Agreement and Plan of Merger, between Discover, Capital One Financial Corporation, and Vega Merger Sub, Inc., a wholly-owned subsidiary of Capital One. This annual meeting does not relate to the special meeting that will be held in connection with our proposed merger with

Capital One.

It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares by completing and returning your Proxy Card or by voting on the Internet or by telephone. The only voting securities of the Company are shares of our common stock, $0.01 par value per share (the "Common Stock"), of which there were 250,564,864 shares outstanding as of the Record Date (excluding treasury stock). See the "Questions and answers about the annual meeting and voting" section beginning on page 117 for more details.

Attending the virtual annual meeting

The 2024 Annual Meeting for Discover® will be a virtual meeting, conducted via live audio webcast. No physical meeting will be held. If you plan to attend the meeting virtually via the website listed above, please follow the registration instructions as outlined in the "Questions and answers about the annual meeting and voting" section beginning on page 117 for more details.

These proxy materials contain our Notice of Annual Meeting and 2024 Proxy Statement. Our 2023 Annual Report contains information about our Company and its financial performance, and our 2022 ESG Report, which was our inaugural full ESG Report, contains additional information about the many environmental sustainability, social, and corporate governance practices and activities taking place at Discover. Our ESG Report is not a part of our proxy solicitation materials.

By Order of the Board of Directors,

Hope D. Mehlman

Executive Vice President, Chief Legal Officer, General Counsel, and Corporate Secretary

March 15, 2024

• Discover | 2024 Proxy Statement

Table of contents

Message from our independent chairman Notice of 2024 annual meeting of shareholders Proxy statement tear sheet

Company highlights Proxy statement summary Election of directors

Proposal 1: Election of directors

Our board of directors Overview

Biographies of our director nominees

Director independence

Selection of directors

Director compensation

Elements of director compensation

Director compensation policies and practices 2023 director compensation

Corporate governance

Highlights of our corporate governance practices Board structure and operations

The board's role and responsibilities

Shareholder engagement and director communications

Other governance policies and practices Executive compensation

Proposal 2: Advisory vote to approve named executive officer compensation

Compensation discussion and analysis Executive summary

Executive compensation decision- making process

Components of compensation Individual performance

Other arrangements, policies and practices related to our executive compensation program

Report of the compensation and leadership development committee

2023 Executive compensation tables

2023 Summary compensation table Grants of plan-based awards for 2023

1	Outstanding equity awards at 2023 year-end	97
2	Stock vested for 2023	98
2023 Pension benefits	99
4
2023 Nonqualified deferred compensation	99
6
Potential payments upon a termination or	100

11 change in control

18	2023 CEO pay ratio	104
18	Pay versus performance	106
19	Audit matters	110
19	Proposal 3: Ratification of appointment of	110
24	independent registered public accounting firm
35	Selection and engagement of audit firm	110
36	Policy regarding pre-approval of independent	111
38	registered public accounting firm services
Independent registered public accounting	111
38
firm fees
39
Report of the audit committee	112
41
Stock ownership information	114
43
Beneficial ownership of company common stock	114
43
Insider trading information	116
44
Questions and answers about the annual meeting	117
52
and voting
58
Other matters	122
60	Certain transactions	122
62	Family relationships	122
Shareholder proposals and director nominations	123

62 for the 2025 annual meeting

	Forward-looking statements	124
63	Information not incorporated by reference into	124
63	this proxy statement
72	Service mark, trademark, and	124
	copyright information
79	Glossary	125
85	Annex A: Reconciliation of GAAP to non-GAAP	126
89
financial measures
91

92

92

95

Except as otherwise indicated or unless the context otherwise requires, "Discover Financial Services," "Discover," "DFS," "we," "us," "our," and "the Company" refer to Discover Financial Services and

its subsidiaries.

Discover | 2024 Proxy Statement

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Proxy statement tear sheet

The following table provides high-level information on many aspects of our policies and practices that are of interest to shareholders. This table is not, however, a substitute for a complete reading of this year's Proxy Statement. Shareholders should read the entire Proxy Statement before voting their shares.

Governance, environmental, social, or
compensation topic	Discover's practice
	Board and leadership
Number of director nominees	11
Number of Independent directors	10
Independence of Audit; Compensation; NGPR; and Risk	100%
Oversight Committees under NYSE listing standards
Separate Chairman and CEO	Yes
Average director nominee age	60
Mandatory director retirement age	75 unless an exception is made
Average director nominee tenure	4 years
Tenure limit for directors	Beginning with nominations related to the 2025 Annual
	Meeting of Shareholders, generally, 14 years for non-
	employee directors
Gender diversity of the director nominees	45%
Racial/ethnic diversity of the director nominees	27%
Overall diversity of the director nominees	55%
Board skills and diversity matrix	Yes, a director-by-director skills and diversity matrix is
	disclosed in this year's Proxy Statement
Limit on overboarding	Generally, no director shall serve on more than a total of
	four public company boards. A director who is an executive
	officer of a publicly traded company may only serve on a
	total of two public company boards.
Board evaluations	Typically conducted at the Board-,committee-, and
	director-levels; engaged a third-party consultant to
	facilitate the individual director discussions during 2023
Director onboarding and ongoing education	Yes, enhanced during 2023
Director election voting standard	Majority - Discover has a resignation policy if a director fails
	to receive a majority of votes cast; the acceptance or
	rejection of a director's resignation would be subject to
	Board action and subsequent disclosure
Director election frequency	Annual
Blank check preferred stock	Yes, but Discover's capital plan is submitted to the
	Federal Reserve
Number of Board meetings held in 2023	22
Number of Board and committee meetings held in 2023	88
Average meeting attendance for the Board and each	At least 95%
standing committee in 2023
Executive Sessions with only independent directors	Occurs regularly
Access to management and other employees	Yes, the Board has direct access
Overall diversity among the executive officers	13%
	Shareholder rights
Right to call special meetings	Yes, 25% threshold
Right to act by written consent	Not permitted
One share, one vote policy	Yes
Dual-class common stock	No

• Discover | 2024 Proxy Statement

	PROXY STATEMENT TEAR SHEET
Governance, environmental, social, or
compensation topic	Discover's practice
Cumulative voting	Not permitted
Confidential voting	Yes
Supermajority voting requirements	No
Poison pill	No
Proxy access bylaw	Yes, 3% Common Stock ownership (up to 20 shareholders
	may aggregate shares) for 3 years needed to nominate up
	to the greater of 20% or 2 of the Board seats
Exclusive forum bylaw	Yes, for certain actions
Fee shifting bylaw	No
Other governance information
Corporate governance shareholder engagement	Yes, new program for 2023
Council of Institutional Investors member	Yes
Independent auditor	Deloitte & Touche LLP, since 2007
Environmental and social practices and disclosures
Board oversight of environmental and social matters	Yes, through the NGPR Committee
Annual ESG Report	Yes, first full report published for 2022
SASB Index disclosed	Yes, included within our ESG Report
GRI Index disclosed	Yes, included within our ESG Report
Political contributions disclosure	Yes
Supplier Code of Conduct	Yes
EEO-1 data disclosure	Yes
Diversity goals	Yes, we have adopted "North Star Goals" with respect to
	diversity hiring and promotion
Executive compensation
CEO Pay Ratio	145:1
Pay-versus-performance metric	Adjusted PBTR
Stock ownership guidelines	Yes, 7x of base salary for CEO and 3x of base salary for
	other NEOs
Prohibition on director and executive officer hedging and	Yes
pledging of Discover stock
Clawback policy	Yes, we have adopted a clawback policy in accordance with
	NYSE listing standards
Say-on-pay vote frequency	Annual
Double-triggerchange-in-control provisions	Yes
Excise tax gross-ups	No
Independent compensation consultant	Pay Governance
Corporate information
Common stock symbol	DFS
Stock Exchange	NYSE
Record Date	March 11, 2024
Common stock outstanding as of the Record Date	250,564,864
State of incorporation	Delaware
Corporate headquarters	2500 Lake Cook Road, Riverwoods, Illinois 60015
Registrar and transfer agent	Computershare
Corporate website	discover.com
Investor Relations website	investorrelations.discover.com

Discover | 2024 Proxy Statement

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Company highlights

The following summary sections highlight selected information about the matters to be voted on at the Annual Meeting. You should read the entire Proxy Statement before voting. For more complete information regarding the Company's 2023 performance, please review the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

New for this year's proxy statement

Shareholders and other readers should notice a significantly revamped Proxy Statement for 2024. We have worked with internal and external partners to revise the layout, flow, and language throughout the document, with the goals of transparency and readability. Further, we have focused on increasing the number of tables, charts, and info graphics to assist in digesting information and breaking up dense text. The reader experience was kept in mind during the uplift process.

We have also added several new features and sections this year. For example, this year's Proxy Statement includes a new "Proxy statement tear sheet" that compiles much of the information that shareholders may review before deciding how to vote their shares. Similarly, significant effort was put into this year's "Company highlights" and "Proxy statement summary" in an effort to summarize the key voting issues and related information for shareholders. Also new this year is a new section highlighting our strategy and business operations. Shareholders are, however, encouraged to read the entire Proxy Statement before casting their votes. We have built out and/or created new sub-sections within "Corporate governance," which is also now a standalone section, such as corporate governance shareholder engagement and board refreshment. We have also expanded the discussion to highlight our robust environmental and social programs, goals, and progress at Discover.

Company overview

Our business

Discover is a digital banking and payment services company known for its credit cards offering leading rewards, award-winning customer service, and no annual fee; however, we are much more than our credit cards. Discover also offers online banking services and personal and home loans and, through January of this year, offered private student loans.

Additionally, Discover operates the Discover Network, the PULSE® network, and Diners Club International®, which are collectively known as the Discover Global Network. The Discover Network processes transactions for Discover-branded credit and debit cards and provides payment transaction processing and settlement services. PULSE operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE network with access to ATMs domestically and internationally, as well as merchant acceptance throughout the U.S. for debit card transactions. Diners Club is a global payments network of licensees, which are generally financial institutions, that issue Diners Club branded charge cards and/or provide card acceptance services.

• Discover | 2024 Proxy Statement

COMPANY HIGHLIGHTS

We manage our business activities in two segments: Digital Banking and Payment Services. Our Digital Banking segment includes consumer banking and lending products, specifically Discover-branded credit cards issued to individuals on the Discover Network and other consumer banking products and services, including private student loans, personal loans, home loans, and deposit products. Our Payment Services segment includes PULSE, Diners Club, and our Network Partners business, which provides payment transaction processing and settlement services on the Discover Global Network.

Additional information can be found under "Business - Introduction" and "Business - Operating Model" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Strategy linked to value

Strategic planning

Our central strategy is to be a digital provider of banking, lending, and payments services. This strategy derives from our unique business model, in which we are a leading card issuing bank and owner of credit and debit card networks, as well as offering other consumer loans and a range of savings and deposit products. We distinguish our products through the absence of fees by offering no-fee savings and deposit accounts, and no annual fee credit cards. We also offer consumers a financial incentive to use our credit card and debit card products in the form of a cashback reward. This cashback award is funded by our merchant discount rate, around which we have sustainable and defensible economics. We offer superior service in our entirely on-shore 24/7 call center-based service model. We believe we have a differentiated approach to loan underwriting, which focuses on meeting the everyday spending, borrowing, and liquidity needs of our customer base. This strategy has produced resilient economic returns through a range of economic environments while maintaining high standards of customer care.

Discover values and behaviors

At Discover, our Values drive us and provide a roadmap of how we conduct our business. Along with our Behaviors, our Values dictate how we will operate. Each of our Behaviors is linked to one or more Values to help the Company's employees live out the Values. The following table demonstrates how Discover's Values are supported by our Behaviors.

Behaviors supporting our values	Discover values
We set ambitious goals	Innovation
We take responsibility	Doing the right thing
We stay ahead	Innovation
We are curious	Innovation
We innovate & simplify	Innovation, Simplicity
We develop ourselves	Openness
We are good partners	Collaboration, Volunteerism
We create positive energy	Enthusiasm, Respect
We develop others	Openness

Discover | 2024 Proxy Statement

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