Comerica Incorporated

 

Proxy Statement and Notice of

2007 Annual Meeting of Shareholders

 

 

Comerica Incorporated

Comerica Tower at Detroit Center

500 Woodward Avenue, MC 3391

Detroit, Michigan 48226

 

 

April 11, 2007

 

Dear Shareholder,

 

It is our pleasure to invite you to attend the 2007 Annual Meeting of Shareholders of Comerica Incorporated at 9:30 a.m., Central Time, on Tuesday, May 15, 2007 at the Nasher Sculpture Center, 2001 Flora Street, Dallas, Texas. Registration will begin at 8:30 a.m. Central Time. A map showing the location of the Annual Meeting is on the back cover of the accompanying Proxy Statement.

 

If you are unable to attend, you can still listen to an audio webcast of the Annual Meeting. If you choose to listen to the webcast, go to the Investor Relations section of our website at www.comerica.com shortly before the Annual Meeting time and follow the instructions provided. You also may listen to a replay of the webcast on our site beginning the afternoon of May 15, 2007.

 

The Annual Report, which we mailed to you, summarizes Comerica’s major developments during 2006 and includes the 2006 consolidated financial statements.

 

Whether or not you plan to attend the Annual Meeting, please complete and mail the enclosed proxy card promptly so that your shares will be voted as you desire. You may also vote by telephone or by the Internet by following the instructions for using the automated telephone and Internet voting systems provided on the proxy card.

 

Sincerely,

 

Ralph W. Babb, Jr.

Chairman and Chief Executive Officer

 

PROXY STATEMENT

 

TABLE OF CONTENTS

 

 

COMERICA INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 2007

 

 

Date:		May 15, 2007
Time:		9:30 a.m., Central Time
Place:		Nasher Sculpture Center 2001 Flora Street, Dallas, Texas 75201

 

 

We invite you to attend the Comerica Incorporated Annual Meeting of Shareholders to:

 

 

The record date for the Annual Meeting is March 16, 2007 (the “Record Date”). Only shareholders of record at the close of business on that date can vote at the Annual Meeting. Comerica mailed this Notice of Annual Meeting to those shareholders. Action may be taken at the Annual Meeting on any of the foregoing proposals on the date specified above or any date or dates to which the Annual Meeting may be adjourned or postponed.

 

Comerica will have a list of shareholders who can vote at the Annual Meeting available for inspection by shareholders at the Annual Meeting and, for 10 days prior to the Annual Meeting, during regular business hours at the offices of the Comerica Corporate Legal Department, Comerica Tower at Detroit Center, 500 Woodward Avenue, MC 3391, Detroit, Michigan 48226.

 

If you plan to attend the Annual Meeting but are not a shareholder of record because you hold your shares in street name, please bring evidence of your beneficial ownership of your shares (e.g., a copy of a recent brokerage statement showing the shares) with you to the Annual Meeting. See “Questions and Answers” in the Proxy Statement for a discussion of the difference between a shareholder of record and a street name holder.

 

Whether or not you plan to attend the Annual Meeting and whether you own a few or many shares of stock, the Board of Directors urges you to vote promptly. You may vote by signing, dating and returning the enclosed proxy card, by using the automated telephone voting system (for shares held in your own name or in Comerica’s employee benefit and stock purchase plans), or by using the Internet voting system (for shares held in your own name or in Comerica’s employee benefit and stock purchase plans). You will find instructions for voting by telephone and by the Internet on the enclosed proxy card.

 

By Order of the Board of Directors,

 

 

Jon W. Bilstrom
Executive Vice President — Governance, Regulatory Relations and Legal Affairs, and Corporate Secretary

 

April 11, 2007

 

Comerica Incorporated

Comerica Tower at Detroit Center

500 Woodward Avenue, MC 3391

Detroit, Michigan 48226

 

2007 PROXY STATEMENT

 

QUESTIONS AND ANSWERS

 

What is a proxy?

 

A proxy is a document, also referred to as a proxy card (which is enclosed), by which you authorize someone else to vote for you in the way that you want to vote. Comerica’s Board of Directors is soliciting this proxy. All references in this Proxy Statement to “you” will mean you, the shareholder, and to “yours” will mean the shareholder’s or shareholders’, as appropriate.

 

What is a proxy statement?

 

A proxy statement is a document the United States Securities and Exchange Commission (the “SEC”) requires to explain the matters on which you are asked to vote on the proxy card and to disclose certain related information. This Proxy Statement and accompanying proxy card were first mailed to the shareholders on or about April 11, 2007.

 

Who can vote?

 

Only record holders of Comerica’s common stock at the close of business on March 16, 2007, the Record Date, can vote at the Annual Meeting. Each shareholder of record has one vote for each share of common stock owned, on each matter presented for a vote at the Annual Meeting.

 

What is the difference between a shareholder of record and a “street name” holder?

 

If your shares are registered directly in your name, you are considered the shareholder of record with respect to those shares.

 

If your shares are held in a stock brokerage account or by a bank or other nominee, then the brokerage firm, bank or other nominee is considered to be the shareholder of record with respect to those shares. However, you still are considered the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank or other nominee how to vote their shares using the method described below under “How can I vote?”.

 

How can I vote?

 

You can vote in person, by telephone, by the Internet, or by using the enclosed proxy card. To vote by proxy, sign, date and return the enclosed proxy card. To vote by using the automated telephone voting system or the Internet voting system, your shares must be held in your name, and not in the name of a brokerage firm, bank or other nominee, and you must follow the instructions on the enclosed proxy card. If you return your signed proxy card to Comerica before the Annual Meeting, the persons named

as proxies on the card will vote your shares as you directed. You may revoke a proxy at any time before the proxy is exercised by:

 

 

If you hold your shares in “street name,” you must vote your shares in the manner prescribed by your brokerage firm, bank or other nominee. Your brokerage firm, bank or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the brokerage firm, bank or other nominee how to vote your shares.

 

What is a quorum?

 

There were 156,336,795 shares of Comerica’s common stock issued and outstanding on the Record Date. A majority of the issued and outstanding shares, or 78,168,398 shares, present or represented by proxy, constitutes a quorum. A quorum must exist to conduct business at the Annual Meeting.

 

What vote is required?

 

Directors:  If a quorum exists, the nominees for Class II Director receiving a majority of the votes cast (i.e., the number of shares voted “for” a director nominee exceeds the number of votes cast “against” that nominee) will be elected as Class II Directors. Votes cast will include only votes cast with respect to stock present in person or represented by proxy at the meeting and entitled to vote and will exclude abstentions. Therefore, shares not present at the meeting, broker non-votes (described below) and shares voting “abstain” have no effect on the election of directors.

 

Other Proposals:  If a quorum exists, the proposals to: i) ratify the appointment of independent auditors; and ii) adopt the shareholder proposal must receive the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal in question. Therefore, abstentions will have the same effect as voting against the applicable proposal. Broker non-votes (described below) will not be counted in determining the number of shares necessary for approval and, therefore, will have no effect on the outcome of the voting on the applicable proposal.

 

If you hold your shares in street name and do not provide voting instructions to your brokerage firm, bank or other nominee, your shares will not be voted on any proposal on which your brokerage firm, bank or other nominee does not have discretionary authority to vote under the rules of the stock exchange or other organization of which it is a member. In this situation, a “broker non-vote” occurs. Shares that constitute broker non-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum. If you do not provide voting instructions to your brokerage firm, bank or other nominee, under New York Stock Exchange Rules, your brokerage firm, bank or other nominee would have discretionary authority to vote your shares with respect to the election of directors and ratification of the appointment of Ernst & Young LLP as independent auditors, but not with respect to the shareholder proposal.

 

Comerica will vote properly executed proxies it receives prior to the Annual Meeting in the way you direct. If you do not specify instructions, the shares represented by those properly executed proxies will be voted (i) to elect the nominees for Class II Directors, (ii) to ratify the appointment of Ernst & Young LLP as independent auditors, and (iii) against the shareholder proposal. No other matters are currently scheduled to be presented at the Annual Meeting.

 

An independent third party, Wells Fargo Bank, N.A., will act as the inspector of the Annual Meeting and the tabulator of votes.

 

Who pays for the costs of the Annual Meeting?

 

Comerica pays the cost of preparing and printing the Proxy Statement and soliciting proxies. Comerica will solicit proxies primarily by mail, but may also solicit proxies personally and by telephone, the Internet, facsimile or other means. Comerica will use the services of Georgeson Shareholder Communications Inc., a proxy solicitation firm, at a cost of $9,000 plus out-of-pocket expenses and fees for any special services. Officers and regular employees of Comerica and its subsidiaries may also solicit proxies, but they will not receive additional compensation for soliciting proxies. Comerica also will reimburse banks, brokerage houses and other custodians, nominees and fiduciaries for their out-of-pocket expenses for forwarding solicitation materials to beneficial owners of Comerica’s common stock.

 

How does the Board select nominees for the Board?

 

In identifying potential candidates for nomination as directors, the Corporate Governance and Nominating Committee considers the specific qualities and skills of potential directors. Criteria for assessing nominees include a potential nominee’s ability to represent the interests of Comerica’s four core constituencies: its shareholders, its customers, the communities it serves and its employees. Minimum qualifications for a director nominee are experience in those areas that the Board determines are necessary and appropriate to meet the needs of Comerica, including leadership positions in public companies, small or middle market businesses, or not-for-profit, professional or educational organizations.

 

For those proposed director nominees who meet the minimum qualifications, the Corporate Governance and Nominating Committee then assesses the proposed nominee’s specific qualifications, evaluates his or her independence, and considers other factors, including skills, geographic location, considerations of diversity, standards of integrity, memberships on other boards (with a special focus on director interlocks), and ability and willingness to commit to serving on the Board for an extended period of time and to dedicate adequate time and attention to the affairs of Comerica as necessary to properly discharge his or her duties.

 

The Corporate Governance and Nominating Committee utilizes, from time to time, a third-party search firm to provide names and biographies of director candidates for the Corporate Governance and Nominating Committee to consider.

 

The Corporate Governance and Nominating Committee will consider director nominees proposed by shareholders, as well as other shareholder proposals, provided such proposals comply with Comerica’s applicable procedures as described below.

 

When are shareholder proposals for the 2008 Annual Meeting due?

 

To be considered for inclusion in next year’s Proxy Statement, all shareholder proposals must comply with applicable laws and regulations, including SEC Rule 14a-8, as well as Comerica’s bylaws, and must be submitted in writing to the Corporate Secretary, Comerica Incorporated, Comerica Tower at Detroit Center, 500 Woodward Avenue, MC 3381, Detroit, Michigan 48226, and received by December 13, 2007.

 

Under Comerica’s bylaws, shareholders of Comerica must provide advance notice to Comerica if they wish to propose items of business at an Annual Meeting of Comerica’s shareholders. For the 2008 Annual Meeting of Shareholders, notice must be received by Comerica’s Corporate Secretary no later than the close of business on February 15, 2008 and no earlier than the close of business on January 16, 2008. If, however, Comerica moves the Annual Meeting of Shareholders to a date that is more than 30 days before or more than 60 days after the date which is the one year anniversary of this year’s Annual Meeting date (i.e., May 15, 2008), Comerica must receive your notice no earlier than the close of business on the 120th day prior to the new Annual Meeting date and no later than the close of business on the later of the 90th day prior to the new Annual Meeting date or the 10th day following the day on which Comerica first made a public announcement of the new Annual Meeting date.

 

For example, if the 2008 Annual Meeting were held on July 17, 2008 (more than 60 days after the one year anniversary of this year’s Annual Meeting) and the public announcement regarding the Annual Meeting date were made on March 16, 2008, we would need to receive your notice no earlier than the close of business on March 19, 2008 and no later than the close of business on April 18, 2008.

 

Comerica’s bylaws contain additional requirements for shareholder proposals. A copy of Comerica’s bylaws can be obtained by written request to the Corporate Secretary.

 

How can shareholders nominate persons for election as directors at the 2008 Annual Meeting?

 

All shareholder nominations of persons for election as directors must comply with applicable laws and regulations, as well as Comerica’s bylaws, and must be submitted in writing to the Corporate Secretary, Comerica Incorporated, Comerica Tower at Detroit Center, 500 Woodward Avenue, MC 3381, Detroit, Michigan 48226.

 

Under Comerica’s bylaws, shareholders of Comerica must provide advance notice to Comerica if they wish to nominate persons for election as directors at an Annual Meeting of Comerica’s Shareholders. For the 2008 Annual Meeting of Shareholders, notice must be received by Comerica’s Corporate Secretary no later than the close of business on February 15, 2008 and no earlier than the close of business on January 16, 2008.

 

If, however, Comerica moves the Annual Meeting of Shareholders to a date that is more than 30 days before or more than 60 days after the date which is the one year anniversary of this year’s Annual Meeting date (i.e., May 15, 2008), or if a special meeting of shareholders is called for the purpose of electing directors, Comerica must receive your notice no earlier than the close of business on the 120th day prior to the meeting date and no later than the close of business on the later of the 90th day prior to the meeting date or the 10th day following the day on which Comerica first made a public announcement of the meeting date (and, in the case of a special meeting, of the nominees proposed by the Board of Directors to be elected at such meeting).

 

If Comerica increases the number of directors to be elected to the Board at the Annual Meeting and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board at least 100 days prior to the first anniversary of the immediately preceding year’s Annual Meeting, then Comerica will consider your notice timely (but only with respect to nominees for any new positions created by such increase) if Comerica receives your notice no later than the close of business on the 10th day following the day on which Comerica first makes the public announcement of the increase in the number of directors.

 

In addition, Article III, Section 12 of the bylaws require a nominee for election or reelection as a director of Comerica to complete and deliver to the Corporate Secretary (in accordance with the time periods described above, in the case of director nominations by stockholders) a written questionnaire prepared by Comerica with respect to the background and qualification of the person and, if applicable, the background of any other person or entity on whose behalf the nomination is being made.

 

A nominee also must make certain representations and agree that he or she (A) will abide by the requirements of Article III, Section 13 of the bylaws (concerning, among other things, the required tendering of a resignation by a director who does not receive a majority of votes cast in an uncontested election), (B) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how, if elected as a director of Comerica, he or she will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to Comerica or (2) any Voting Commitment that could limit or interfere with his or her ability to comply, if elected as a director of Comerica, with his or her fiduciary duties under applicable law, (C) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than Comerica with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed, and (D) in his or her individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of Comerica, and would comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of Comerica.

 

You may receive a copy of Comerica’s bylaws specifying the advance notice and additional requirements for shareholder nominations requirements by making a written request to the Corporate Secretary of Comerica.

 

How many of Comerica’s directors are independent?

 

Comerica’s Board of Directors has determined that 11 of Comerica’s 13 current directors, or 84.6%, are independent. For a discussion of the Board of Directors’ basis for this determination, see the section of this Proxy Statement entitled, “Director Independence and Transactions of Directors with Comerica.”

 

Does Comerica have a Code of Ethics?

 

Yes, Comerica has a Code of Business Conduct and Ethics for Employees, which applies to employees and agents of Comerica and its subsidiaries and affiliates, as well as a Code of Business Conduct and Ethics for Members of the Board of Directors. Comerica also has a Senior Financial Officer Code of Ethics that applies to the Chief Executive Officer, Chief Financial Officer, Senior Vice President — Finance, Controller, and Treasurer of Comerica. The Code of Business Conduct and Ethics for Employees, the Code of Business Conduct and Ethics for Members of the Board of Directors and the Senior Financial Officer Code of Ethics are available on Comerica’s website at www.comerica.com. Copies of such codes can also be obtained by written request to the Corporate Secretary.

 

How many copies of the Annual Report and Proxy Statement should I receive?

 

The SEC has adopted a rule concerning the delivery of disclosure documents. The rule allows us to send a single set of any annual report, proxy statement, proxy statement combined with a prospectus, or information statement to any household at which two or more shareholders reside if they share the same last name or we reasonably believe they are members of the same family if they consent. This procedure is referred to as “Householding.” This rule benefits both Comerica and you. It reduces the volume of duplicate information received at your household and helps Comerica reduce expenses. Each shareholder subject to Householding will continue to receive a separate proxy card or voting instruction card.

 

Comerica will deliver promptly upon written or oral request a separate copy of the Annual Report or Proxy Statement, as applicable, to a shareholder at a shared address to which a single copy of the document was delivered. If you received a single set of disclosure documents for the current year, but

you would prefer to receive your own copy this year, you may direct requests for separate copies to the Corporate Secretary.

 

If you are a registered shareholder who resides at the same address as another shareholder and you would prefer to receive your own set of the Annual Report and/or Proxy Statement in future years, you may contact our transfer agent, Wells Fargo Shareowner Services, at 1-877-602-7615. You will need to enter your account number and Comerica number 114. Alternatively, you may write to our transfer agent at the following address: Wells Fargo Shareowner Services, Attn: Householding, P.O. Box 64854, St. Paul, MN 55164-0854. If you hold your shares in street name, you may revoke your consent to Householding by contacting your brokerage firm, bank or other nominee or by following the directions set forth on the voting instruction card you received with the proxy materials. If you are currently receiving multiple copies of the Annual Report and/or Proxy Statement and want to receive only a single copy in the future through Householding, follow the same instructions set forth above for registered shareholders or street name holders, as applicable.

 

Can I receive future Annual Reports and Proxy Statements electronically instead of receiving paper copies through the mail?

 

Yes. If your shares are registered directly in your name (i.e., you do not hold them in street name) and you have access to the Internet, you can receive Comerica’s Annual Report and Proxy Statement over the Internet rather than in printed form. Enrolling in this service will take just a few minutes of your time. It will give you faster delivery of the documents and will save Comerica the cost of printing and mailing. To agree to access the electronic versions of Comerica’s Annual Report and Proxy Statement instead of receiving the printed versions by mail, go to www.econsent.com/cma and follow the instructions. If you agree to electronic delivery, once the Annual Report and Proxy Statement are available on our website, we will mail you a notice with the website address that you should use to access the information and voting instructions for Internet, telephone or mail voting. Paper copies of the Annual Report and Proxy Statement would not be sent unless you request them. Comerica also may choose to send one or more items to you in paper form despite your consent to receive them electronically.

 

By consenting to electronic delivery, you are stating that you currently have access to the Internet and expect to have access in the future. If you do not have access to the Internet, or do not expect to have access in the future, please do not consent to electronic delivery, because Comerica may rely on your consent and not deliver paper copies of future Annual Meeting materials. In addition, if you consent to electronic delivery, you will be responsible for the costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, in connection with the electronic delivery of the Annual Report and Proxy Statement.

 

If you do not consent to access Comerica’s proxy materials through the Internet, you will continue to receive the materials in the mail.

 

The following table contains information about the number of shares of Comerica’s common stock beneficially owned by Comerica’s incumbent directors and director nominees, the officers named in the Summary Compensation Table presented in this Proxy Statement (the “named executive officers”) and all incumbent directors, nominees and executive officers as a group. The number of shares each individual beneficially owns includes shares over which the person has or shares voting or investment power as of March 16, 2007 and also any shares which the individual can acquire by May 15, 2007 (60 days after the Record Date), through the exercise of any stock option or other right. Unless indicated otherwise, each individual has sole investment and voting power (or shares those powers with his or her spouse or other family members) with respect to the shares listed in the table.

 

		Amount and Nature				Percent
Name of Beneficial Owner		of Beneficial Ownership				of Class
Elizabeth S. Acton			167,399	(1)		*
Ralph W. Babb, Jr.			984,887	(2)		*
Lillian Bauder			28,907	(3)(13)(15)		*
Mary Constance Beck			82,573	(4)		*
Joseph J. Buttigieg, III			580,412	(5)		*
James F. Cordes			44,687	(6)(13)(15)		*
Roger A. Cregg			0	(7)
Peter D. Cummings			106,882	(8)(9)(13)(15)		*
T. Kevin DeNicola			0	(7)
Anthony F. Earley, Jr.			21,467	(6)(13)(14)(15)		*
John D. Lewis			610,992	(10)		*
Dennis J. Mooradian			191,466	(11)		*
Alfred A. Piergallini			63,009	(12)(13)(15)		*
Robert S. Taubman			29,719	(9)(13)(15)		*
Reginald M. Turner, Jr.			56	(13)(15)		*
William P. Vititoe			24,424	(9)(13)(15)		*
Kenneth L. Way			37,318	(6)(13)(15)		*
Directors, nominees and executive officers as a group (28 people)			4,376,135	(14)(15)(16)		2.8%

 

Footnotes:

 

 

 

Section 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) requires that Comerica’s directors, executive officers and persons who own more than ten percent of a registered class of Comerica’s equity securities file reports of stock ownership and any subsequent changes in stock ownership with the SEC and the New York Stock Exchange not later than specified deadlines. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, Comerica believes that, during the year ended December 31, 2006, each of its executive officers, directors and greater than ten percent shareholders complied with all such applicable filing requirements.

 

The following table provides information about Comerica’s current executive officers. The Board has determined that the current officers who are in charge of principal business units, divisions or functions and officers of Comerica or its subsidiaries who perform significant policy making functions for Comerica are (1) the members of the Management Policy Committee, (2) the Controller and (3) the Senior Vice President-Finance. The current members of the Management Policy Committee are the Chairman, President and Chief Executive Officer (Mr. Babb), the Vice Chairman (Mr. Buttigieg), the Executive Vice President and Chief Financial Officer (Ms. Acton), the Executive Vice President, Retail Bank (Ms. Beck), the Executive Vice President and Chief Information Officer (Mr. Beran), the Executive Vice President, Governance, Regulatory Relations and Legal Affairs and Corporate Secretary (Mr. Bilstrom), the Executive Vice President, General Auditor (Mr. Duprey), the Executive Vice President of Comerica Incorporated and the President and Chief Executive Officer of Comerica Bank-Western Market (Mr. Fulton), the Executive Vice President and Chief Credit Policy Officer

(Mr. Greene), the Executive Vice President of Comerica Incorporated and the President and Chief Executive Officer of Comerica Bank-Texas Market (Mr. Gummer), the Senior Vice President, Corporate Planning, Development and Risk Management (Mr. Michalak), the Executive Vice President, Wealth and Institutional Management (Mr. Mooradian), the Executive Vice President of Comerica Incorporated and the President of Comerica Bank-Michigan Market (Mr. Ogden) and the Executive Vice President, Chief Human Resources Officer (Ms. Wolf). The Controller is Mr. Elenbaas and the Senior Vice President-Finance is Mr. McDermott.

 

 

Footnote:

 

 

 

Overview

 

Comerica’s executive compensation program and the components thereof are designed to attract, retain and motivate key officers of the organization. The executive compensation program includes an annual assessment of executive salaries, short-term and long-term incentive awards under the Management Incentive Plan, long-term incentive awards under the Long-Term Incentive Plan, deferred compensation programs, benefits, perquisites and change in control employment agreements.

 

Objectives and Elements of Comerica’s Compensation Program

 

The overall objectives of Comerica’s executive compensation program are to attract, motivate, reward and retain superior executive talent. Comerica believes that in order to achieve such objectives, its programs must be competitive with executive compensation arrangements generally provided to other executive officers in the financial services industry. At the same time, Comerica believes it is important to align management incentives with shareholder interests. The various components of Comerica’s executive compensation program are designed to maintain the focus of our executive officers on business goals over immediate, short-term and long-term horizons and to be competitive with our peers.

 

The principal components of executive compensation are base salaries, short and long-term management incentive awards, long-term stock incentive awards, retirement benefits, health benefits and a limited number of perquisites. Certain executives, including the named executive officers, are also provided with change in control employment agreements (described in the “Employment Contracts and Severance or Change in Control Agreements” section below).

 

Base Salaries

 

Comerica pays base salaries to compensate executive officers for current service. The base salaries of the named executive officers were originally determined when they first joined Comerica or when they were promoted from within Comerica. The Compensation Committee annually considers possible adjustments to salaries based on such officers’ individual performance and contribution to the organization’s success.

 

Base salary increases for Mr. Babb, the Chief Executive Officer, are made by the Compensation Committee without any recommendations from management. Base salary increases for the named executive officers other than the Chief Executive Officer are made by the Compensation Committee upon the recommendation of Mr. Babb. In determining increases to base salaries, the Compensation Committee considers the recommendations of Mr. Babb (in the case of the named executive officers other than himself), prevailing economic conditions and external forecasts provided by compensation surveys, as well as information provided by Hewitt Associates LLC (“Hewitt”), a nationally known executive compensation consulting firm retained by the Compensation Committee with respect to executive compensation matters. Hewitt also has advised the Corporate Governance and Nominating Committee with respect to director compensation matters. In each case, Hewitt provides market analyses and consulting services on compensation matters to such committees. Hewitt is independent and has not been separately retained by Comerica’s management to provide any other services.

 

Effective the beginning of 2006, Mr. Babb, received a 3.0% increase, or $27,000, to his base salary. Messrs. Buttigieg and Mooradian each received a 3.6% increase to their base salaries, or $22,000 and $20,000 respectively, Ms. Beck received a 3.7% increase, or $20,000, and Ms. Acton received a 3.0% increase, or $14,000.

 

Management Incentive Plan

 

Comerica maintains a Management Incentive Plan for senior officers (i.e., First Vice President level officers and above — approximately 426 individuals) that provides cash incentives that are driven by Comerica’s performance. Under the Management Incentive Plan, there are two parts to the incentives, one that is based on performance over a one-year period and another that is based on performance over a three-year period. The annual management incentive awards are intended to reward the attainment of short-term goals, while the three-year management incentive awards are intended to reward sustained performance over the long term.

 

Currently, the primary measures of performance under the Management Incentive Plan are based on return on common equity and earnings per share growth in relation to Comerica’s peer group. These two metrics have been chosen because they are two of the most commonly used metrics by investors and analysts to evaluate a bank’s performance. In addition, unlike other metrics that may be calculated differently, return on common equity and earnings per share growth have a generally prescribed formula, allowing these metrics to be easily validated and compared to Comerica’s peers.

 

The 2006 peer group consisted of the following 14 domestic bank holding companies: BB&T Corporation, Compass Bancshares, Inc., Fifth Third Bancorp, Huntington Bancshares Incorporated, KeyCorp, Marshall & Ilsley Corporation, M&T Bank Corporation, National City Corporation, The PNC Financial Services Group, Inc., Regions Financial Corporation, SunTrust Banks, Inc., UnionBanCal Corporation, U.S. Bancorp and Zions Bancorporation. The Compensation Committee has determined that this peer group is the appropriate one to use for purposes of the Management Incentive Plan because the group consists of the domestic bank holding companies that the Compensation Committee believes are the most comparable to Comerica in business focus and size.

 

At the beginning of each year, the Compensation Committee determines the funding formula that will be applied to management incentive awards under the Management Incentive Plan, depending on Comerica’s ranking as compared with its peer group. The 2006 funding formula was based on one-year return on common equity and one-year earnings per share growth (for the short-term incentive) and on three-year average return on common equity and three-year average earnings per share growth (for the long-term incentive).

 

The Compensation Committee, in accordance with the terms of the Management Incentive Plan, may make adjustments to return on equity and earnings per share growth when such adjustments are necessary to fairly compare Comerica to its peers (such as for restructuring costs due to merger and acquisition activity or, with respect to periods prior to the effective date of Statement of Financial Accounting Standards No. 123R, to expense stock options for bank holding companies in the peer group).

 

Each of the named executive officers had a maximum annual and three-year incentive opportunity under the Management Incentive Plan for the performance periods ended December 31, 2006 (which represented a percentage of the respective named executive officer’s base salary). For the Chief Executive Officer, Mr. Babb, the maximum annual incentive opportunity was 200% of his base salary and the maximum three-year incentive opportunity was 100% of his base salary. For Mr. Buttigieg, the Vice Chairman, the maximum annual incentive opportunity was 180% of his base salary and the maximum three-year incentive opportunity was 80% of his base salary. For Ms. Acton, the Chief Financial Officer, and Ms. Beck and Mr. Mooradian, each an Executive Vice President, the maximum annual incentive opportunity was 130% of their respective base salaries, and the maximum three-year incentive opportunity was 45% of their respective base salaries. Mr. Lewis was not eligible to receive any short-term or long-term incentive under the Management Incentive Plan because he ceased serving as an executive officer effective April 14, 2006.

 

The Management Incentive Plan provides a greater maximum opportunity for the short-term incentive than for the long-term incentive because it is balanced by the Long-Term Incentive Plan (discussed in the “Stock-Based Awards Under the Long-Term Incentive Plan” section below), which places more of

an emphasis on long-term goals. In this way, Comerica’s overall executive compensation program rewards high performance in a balanced manner, both short-term and long-term.

 

The maximum incentive opportunity amount is used as the baseline for downward adjustments, depending on Comerica’s performance as compared to its peers. The overall maximum incentive amount could only be attained if Comerica ranked number one in both return on equity and earnings per share growth in relation to the peer group for the short-term and long-term performance periods, as set forth in the funding formula below.

 

For each of the Management Incentive Plan performance measurements (one-year return on common equity, one-year earnings per share growth, three-year average return on common equity and three-year average earnings per share growth), the funding formula assigns specific incentive payouts (i.e., percentages of the maximum incentive amounts) for each ranking (one through 15) that Comerica could achieve as compared to its peer group. If Comerica ranks poorly in relation to its peers on the funding formula criteria, executives will receive less of an incentive, or no incentive at all, depending on what the formula dictates. There is no discretion to increase a bonus for named executive officers, only discretion to decrease a bonus for a particular executive if he or she has not performed at an optimal level. Comerica believes that this strict formulaic approach to incentives is important as it causes executives to be held accountable for corporate performance.

 

The 2006 funding formula was as follows:

 

 

In January 2007, Comerica’s independent accountants, at the request of the Compensation Committee, issued a report applying certain agreed-upon procedures to assist the Compensation Committee in determining that the computations for the incentive awards issued for periods ended December 31, 2006 were made in conformity with the Management Incentive Plan. The report addressed Comerica’s 2006 rankings in relation to the peer group for the annual and three-year performance periods, using the measurement components set by the Compensation Committee. In order to facilitate making the peer comparison computations in a timely manner, Comerica’s data is taken from calendar year-end periods, whereas peer data is taken from periods ending in the third calendar quarter. For example, Comerica’s performance for the annual performance period that began on January 1, 2006 and ended on December 31, 2006 would be compared against peers’ performance for the four quarters that began on October 1, 2005 and ended on September 30, 2006.

Based on the performance levels, the Compensation Committee established an incentive pool for distribution under the incentive plan. For the one-year performance period ended on December 31, 2006, Comerica’s one-year adjusted return on common equity was 17.24 percent, which placed Comerica at number 5 among its peer group; its one-year adjusted earnings per share growth was 7.44 percent, which placed Comerica at number 11 among its peer group. For the three-year performance period ended on December 31, 2006, Comerica’s three-year adjusted average return on common equity was 16.07 percent, which placed Comerica at number 9 among its peer group; and its three-year adjusted average earnings per share growth was 16.87 percent, which placed Comerica at number 2 among its peer group.

 

Based on Comerica’s performance under the Management Incentive Plan formula, the named executive officers received the following incentives for the one-year performance period ended December 31, 2006: Mr. Babb: $1,205,132 (130.0% of 2006 base salary); Ms. Acton: $408,980 (84.5% of 2006 base salary); Ms. Beck: $473,200 (84.5% of 2006 base salary); Mr. Buttigieg: $733,590 (117.0% of 2006 base salary); and Mr. Mooradian: $491,790 (84.5% of 2006 base salary). For the three-year performance period ended December 31, 2006, the named executive officers received the following incentives under the Management Incentive Plan formula: Mr. Babb: $718,444 (77.5% of 2006 base salary); Ms. Acton: $168,795 (34.9% of 2006 base salary); Ms. Beck: $141,050 (25.2% of 2006 base salary); Mr. Buttigieg: $388,740 (62.0% of 2006 base salary); and Mr. Mooradian: $202,973 (34.9% of 2006 base salary). Mr. Lewis did not receive any short-term or long-term incentive under the Management Incentive Plan because he ceased serving as an executive officer effective April 14, 2006.

 

Stock-Based Awards under the Long-Term Incentive Plan

 

Comerica’s officers and employees, including all of the named executive officers, are eligible to receive stock-based awards under Comerica’s Long-Term Incentive Plan, which was approved at the May 16, 2006 Annual Meeting of Shareholders. The Long-Term Incentive Plan is designed to align the interests of officers and employees of Comerica receiving awards with those of shareholders by providing an incentive to contribute to the long-term goals of Comerica. Comerica believes that equity-based compensation assists in the attraction and retention of qualified employees and provides them with additional incentive to devote their best efforts to pursue and sustain Comerica’s superior long-term performance, enhancing the value of Comerica for the benefit of its shareholders.

 

The Long-Term Incentive Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards under the Long-Term Incentive Plan.

 

The maximum number of shares of Comerica’s common stock available under the Long-Term Incentive Plan is 11 million, plus (i) any shares of common stock available for future awards under an earlier version of the Long-Term Incentive Plan (the “Prior LTIP”); and (ii) any shares of common stock that are represented by awards granted under the Prior LTIP that are forfeited, expire or are cancelled without delivery of the shares or that result in the forfeiture of shares back to Comerica. The Compensation Committee may not utilize more than one million shares for stock options that qualify as “incentive stock options” as defined in Section 422 of the Internal Revenue Code. In addition, not more than 2.2 million of the shares available for awards may be used for awards other than stock options and stock appreciation rights (e.g., restricted stock grants), and no individual may be granted awards with respect to more than 350,000 shares in any calendar year. To the extent that any award is forfeited, or terminates, expires or lapses without exercise or settlement, the shares subject to such awards forfeited or not delivered as a result thereof will again be available for awards under the Long-Term Incentive Plan.

 

Awards in 2006 consisted of stock option and restricted stock grants, which were made as part of the total compensation package. Comerica believes that it is important to provide its named executive officers with both stock options and restricted stock because they serve different purposes.

 

Comerica believes that stock options, in particular, encourage management to achieve long-term goals because they only have value to the recipient if there are gains in the stock price. The 2006 stock options vest ratably over four years, and no gain is realizable prior to the vesting of such options. Because executives and other employees receive value from stock option grants only in the event of stock price appreciation, Comerica believes stock options are a strong incentive to improve long-term financial performance and to increase shareholder value.

 

Restricted stock, on the other hand, serves a dual purpose. While it encourages management to achieve high long-term performance (because the restricted stock will be worth more if the stock price increases), it also serves as an important retention tool, because it normally will have some value even if the stock price has remained flat or declined. The 2006 restricted stock grants to the named executive officers vest five years from the date of the grant, sometimes referred to as “cliff vesting”. Because the executive officer loses rights in respect of the restricted stock grant if he or she voluntary leaves Comerica prior to the expiration of the five-year period, the executive officer is motivated to remain with Comerica long-term. Vesting may be accelerated by the Compensation Committee in its discretion, as permitted by the Long-Term Incentive Plan. However, acceleration is typically only considered by the Compensation Committee in limited retirement situations, and consideration would be subject to the departing officer executing a non-solicitation agreement and, if the departing officer is a First Vice President or higher, a non-compete agreement.

 

Comerica believes that this combination approach of granting stock options and restricted stock allows it to successfully retain and motivate its named executive officers. Grants of stock options and restricted stock to the named executive officers are allocated from a pool of stock that is created each year based on a percentage of each officer’s base salary. Distribution from the pool to the named executive officers is based on the Compensation Committee’s assessment of the officer’s future potential to contribute to Comerica (as evidenced, in part, by individual performance and levels of responsibility) and of competitive data. Comerica generally allocates the awards between stock options and restricted stock by determining a dollar value to be granted to an individual, and then apportioning half of that dollar value to stock options and the other half to restricted stock. With respect to all the named executive officers other than himself, the Chief Executive Officer makes grant recommendations to the Compensation Committee. The Compensation Committee considers his recommendations and survey information provided by Comerica’s independent compensation consultant, Hewitt, in making its grant determinations. With respect to the Chief Executive Officer, the Compensation Committee determines the amount of his grant without receiving any recommendation from management, although it does consider survey information provided by Hewitt.

 

Prior to 2006, grants of stock options and restricted stock were determined at the regularly scheduled January or February Compensation Committee meetings, and the grant dates were set into the future to follow, by two business days, the release of the first quarter’s earnings so that the stock price would not be artificially high or low and to give the market sufficient time to digest Comerica’s earnings report. The price at which the options may be exercised is the closing price on the New York Stock Exchange for Comerica stock on the grant date.

 

In 2006, the grants were made at the regularly scheduled January Compensation Committee meeting, with the grant dates set as February 15, 2006 (approximately three weeks into the future). The 2006 grant date was set mid-February rather than two business days following the release of the first quarter’s earnings to move the grant date closer to both the date of the Compensation Committee meeting and the date the named executive officers received notification of their incentives under the Management Incentive Plan (which also occurred in February). In that way, executives were able to receive more cohesive communications about multiple benefits — their restricted stock, stock options and incentives under the Management Incentive Plan — at approximately the same time without

compromising Comerica’s continued prompt communication to stock option recipients concerning their grants in accordance with Statement of Financial Accounting Standards No. 123R.

 

In November 2006, the Compensation Committee adopted a Stock Granting Policy. Under the Stock Granting Policy, Comerica generally will make stock-based grants to eligible employees, including named executive officers, once per year at the first regularly scheduled meeting of the Compensation Committee of the Board of Directors of the calendar year. The grant date will be the date of such regularly scheduled Compensation Committee meeting, unless (a) such meeting does not occur on a day in which the New York Stock Exchange is open for trading (“NYSE Trading Day”) or (b) such meeting does not occur during a Trading Window (as defined in Comerica’s Insider Trading Policy). In either such case, the grant date will be the first NYSE Trading Day immediately following the first regularly scheduled meeting of the Compensation Committee that calendar year that also occurs in a Trading Window.

 

Comerica also may award stock-based grants during the year to newly hired employees as part of their compensation package. In the case of stock option or restricted stock grants to newly hired employees who are to be covered employees within the meaning of Section 162(m) of the Internal Revenue Code (“Covered Employees”) or officers subject to Section 16 of the Securities Exchange Act of 1934 (“Section 16 Officers”), including newly hired named executive officers, the Stock Granting Policy calls for them to be made by the Compensation Committee at any special or regularly scheduled Compensation Committee meeting. If the grant(s) is/are approved at a special meeting of the Compensation Committee, the grant date for such newly hired employees will depend upon their actual start dates. For an employee whose start date falls between the first and the 15th day of the month, the grant date will be the last day of such month or, if the last day of such month is not a NYSE Trading Day, then the first NYSE Trading Day immediately preceding the last day of such month. If the start date of such employee falls between the 16th and the last day of the month, the grant date will be on the 15th day of the following month or, if the 15th day of the following month is not a NYSE Trading Day, then the first NYSE Trading Day immediately preceding the 15th day of such month. If the grant(s) is/are approved at a regularly scheduled meeting of the Compensation Committee, the grant date will be the date of such regularly scheduled Compensation Committee meeting, unless (a) such meeting does not occur on a NYSE Trading Day or (b) such meeting does not occur during a Trading Window. In either such case, the grant date will be the first NYSE Trading Day immediately following the regularly scheduled meeting of the Compensation Committee that also occurs in a Trading Window.

 

The Stock Granting Policy provides that stock option grants and restricted stock grants for special recognition or retentions purposes, if any, to existing employees who are Covered Employees or Section 16 Officers are made by the Compensation Committee only at a regularly scheduled Compensation Committee meeting. If the grant(s) is/are approved, the grant date will be the date of such regularly scheduled Compensation Committee meeting, unless (a) such meeting does not occur on a NYSE Trading Day or (b) such meeting does not occur during a Trading Window. In either such case, the grant date will be the first NYSE Trading Day immediately following the regularly scheduled meeting of the Compensation Committee that also occurs in a Trading Window.

 

In accordance with the Stock Granting Policy, the Compensation Committee granted the named executive officers (other than Mr. Lewis) stock options and restricted stock on January 23, 2007, at the first regularly-scheduled meeting of the Compensation Committee in 2007. The meeting was held on a NYSE Trading Day and fell within a regularly scheduled Trading Window. As with the 2006 stock options, the exercise price for the 2007 stock options is the closing price of Comerica’s common stock on the grant date, and the stock options vest ratably over four years. Similarly, the 2007 restricted stock grants to the named executive officers are subject to five-year cliff vesting, just like the 2006 restricted stock grants to named executive officers. None of the named executive officers received off-cycle grants in 2006.

 

Employee Stock Purchase Plan

 

Comerica has an Employee Stock Purchase Plan (“ESPP”), under which a total of five million shares of Comerica’s common stock may be sold or awarded to eligible Comerica employees. The ESPP provides participating employees a convenient and affordable way to purchase shares of Comerica common stock without being charged a brokerage fee. This encourages share ownership, which helps to align the interests of Comerica’s employees with those of its shareholders. Employees may contribute to the plan through regular after-tax payroll deductions, or they may make after-tax lump sum contributions during two window periods during the year. Comerica provides a matching contribution equal to 15 percent of the contributions made during the previous quarter, provided there have been no withdrawals during that quarter. Comerica also provides a matching contribution equal to five percent of the contributions made during the first of the previous two plan years, provided there have been no withdrawals during the previous two plan years and the participant is still employed on the last day of the second plan year. No matches are made on contributions exceeding $25,000 per year. Following a contribution, the plan administrator purchases shares of stock for a participant’s account. Such purchases are generally made on the open market at the current market price as soon as practicable under the plan. In addition, under the ESPP, Comerica may, in its discretion, make service award contributions to the accounts of those employees whom it wishes to recognize for service to Comerica. Such service award contributions are used to purchase shares of Comerica stock at the current market price. Mr. Buttigieg was the only named executive officer to receive a service award in 2006. He received 10 shares of Comerica common stock in recognition of 35 years of employment.

 

Stock Ownership Guidelines

 

Because Comerica believes it is important to align the interests of its senior officers with those of the shareholders, Comerica has stock ownership guidelines that encourage senior officers to own a significant number of shares of Comerica’s common stock. The stock ownership guidelines are calculated based on the senior officer’s annual base salary times a certain multiple. Comerica encourages its senior officers to achieve the targeted stock ownership levels within five years of being promoted or named to the applicable senior officer position. As of December 31, 2006, all named executive officers who had held their current title for at least five years had met their respective stock ownership guideline levels.

 

 

 

Retirement Benefits

 

Comerica provides retirement benefits to attract and retain employees and to encourage employees to save for retirement.

 

The Company sponsors a tax-qualified defined benefit retirement plan for employees hired on or before December 31, 2006 that provides a retirement benefit based on a salaried employee’s years of service and final average monthly pay. Final average monthly pay is a participant’s highest aggregate monthly compensation for 60 consecutive calendar months within the last 120 calendar months before

the earlier of retirement or separation from service, divided by 60. The Company also sponsors a Benefit Equalization Plan for Employees of Comerica Incorporated (the “SERP”) to restore benefits to participants whose benefits are capped under the tax-qualified plan due to IRS limits on annual compensation, annual benefit amounts and the absence of top heavy accruals to key employees if the plan becomes top-heavy. Comerica provides the SERP in keeping with competitive practices in the external marketplace.

 

The Company also maintains a 401(k) savings plan for all employees. In 2006, Comerica provided two types of matching with respect to participant contributions. The first type of matching was called a core match. It consisted of a 50 percent match on the first $1,000 of qualified compensation the participant contributed, plus a 25 percent match on the next $2,000 of qualified compensation the participant contributed up to a maximum contribution of $1,000.

 

The second type of matching was called a performance-based match. If Comerica met its financial goals, 401(k) savings plan contributors received a performance-based match in addition to the core match. The match amount varied and was made on contributions up to three percent of an individual’s salary subject to the IRS annual compensation limit of $220,000 in 2006. The match amount was determined based on Comerica’s overall performance compared to that of its peer banks. In 2006, the performance-based match was $.50 for each $1.00 of a participant’s qualifying contributions, up to 3% of the participant’s salary (subject to the Internal Revenue Service compensation limit of $220,000 in 2006). The matched amounts vested at the end of the calendar year.

 

Effective January 1, 2007, the 401(k) savings plan match was revised by discontinuing the current core and performance-based matches and replacing them with a 100 percent match on the first four percent of a participant’s qualified earnings that have been contributed to the 401(k) savings plan. The match will be placed in the employee’s current investment selections and will vest immediately rather than at the end of the calendar year. Under both the old and the new system, the matching criteria is the same for all employees, so the named executive officers do not receive a benefit that is not also available to other employees.

 

A salaried employee hired on or after January 1, 2007 will not be eligible to participate in the defined benefit pension plan but will be eligible for a company contribution pursuant to the Defined Contribution (DC) Feature under the 401(k) savings plan. The annual company contribution pursuant to the DC Feature is made on behalf of participants who complete at least 1,000 hours of service during the plan year and equals a percentage of compensation that is based on the participant’s total age and years of service points as follows:

 

 

Company contribution accounts under the DC Feature are 100% vested after 3 years of service or at normal retirement age (65) or upon death while an employee. Payment of vested accounts may be made in a lump sum or as an annuity. No in-service distributions or loans from the company contribution accounts under the DC Feature are permitted.

 

Health Benefits

 

The Company’s health benefits are provided to all full-time and part-time employees. Employees pay a portion of the cost of healthcare. The only difference in coverage for incentive-level officers, including the named executive officers, is that Comerica provides an annual physical at its cost. Comerica believes it is in its best interest to encourage the health maintenance of its leadership, since their well-being allows them to continue focusing on the business needs of Comerica, thereby promoting the health of Comerica. The cost of an annual physical averages around $1,500.

 

Perquisites

 

During 2006, there were limited perquisites provided to the named executive officers. These included several perquisites that Comerica recently terminated for named executive officers, because it determined that they were no longer necessary to provide the named executive officers with competitive compensation and benefits. The terminated perquisites were comprised of a home telephone/fax line (which was terminated for the only named executive officers receiving them, Mr. Babb and Mr. Buttigieg, effective October 1, 2006, and Mr. Lewis, effective August 22, 2006), a home security system (which was terminated for the only named executive officers receiving them, Mr. Babb, Mr. Buttigieg and Mr. Lewis, effective October 1, 2006, November 27, 2006 and February 28, 2007, respectively) and the use of security personnel for trips to and from work (which use was discontinued by the only named executive officer receiving it, Mr. Babb, effective September 1, 2006). Other perquisites provided to named executive officers in 2006 included an annual physical (described above), a company vehicle, club memberships (to the extent used for personal purposes) and tax return preparation, in each case, grossed-up for taxes. Comerica determined that it was in its best interest to continue providing these perquisites as part of a competitive pay package, which assists in recruiting and maintaining talented executives, as well as for the convenience of the named executive officers. Many of these perquisites were used primarily for business purposes, though a portion of their use may have had a personal aspect. For example, club memberships are provided for work-related purposes, such as client entertainment, though the named executive officers may also use the club memberships for personal purposes.

 

Comerica has historically prohibited, and continues to prohibit, the use of any corporate aircraft by the named executive officers for personal purposes.

 

Employment Contracts and Severance or Change in Control Agreements

 

Ralph W. Babb, Jr.

 

At the time Ralph W. Babb, Jr. was first hired in 1995, Comerica entered into a Supplemental Pension and Retiree Medical Agreement with him, which is designed to make Mr. Babb whole with respect to pension benefits that he lost when he left his prior employer to come to Comerica. This supplemental pension provides Mr. Babb a benefit equal to the amount to which he would have been entitled under Comerica’s Pension Plan had he been employed by Comerica since October 1978 (an additional 17 years of service), less amounts received by him under both Comerica’s Pension Plan and the defined benefit pension plans of his prior employer. In addition, Comerica will provide Mr. Babb and his spouse with retiree medical and accidental insurance coverage for his and her lifetime on a basis no less favorable than such benefits were provided to them as of the date of the agreement.

 

John D. Lewis

 

Comerica entered into a Restrictive Covenants and General Release Agreement dated March 13, 2006 with John D. Lewis, who retired effective June 30, 2006. In connection with the agreement, Mr. Lewis provided Comerica with a release and became subject to certain restrictive covenants (including two year non-competition and non-solicitation restrictions that prohibit him from engaging in any business in competition with the businesses conducted by Comerica in Michigan, California, Texas, Arizona and Florida and from soliciting the customers and employees of Comerica). The

agreement provided that, until June 30, 2006, Mr. Lewis continued to be paid and be eligible to participate in the benefit plans and programs of Comerica on the same basis as applied to him at the time he entered into the agreement. Under the terms of the agreement, he received a lump sum payment of $1,057,800 on December 31, 2006. In addition, pursuant to the agreement, Comerica recommended to the Compensation Committee of its Board of Directors that it accelerate as of June 30, 2006 the vesting of 26,000 shares of restricted Comerica stock held by Mr. Lewis. The Compensation Committee subsequently approved the acceleration of the vesting of Mr. Lewis’ restricted Comerica stock.

 

All Named Executive Officers

 

Each named executive officer is a party to a change in control employment agreement with Comerica. Comerica believes that the change in control employment agreements help to aid Comerica in attracting and retaining executives by reducing the personal uncertainty that arises from the possibility of a future business combination. Moreover, the change in control employment agreements are designed to offset the uncertainty of executives as to their own futures if a change in control actually occurs. Comerica believes that the change in control employment agreements help to increase shareholder value by making the executives neutral to change in control transactions that are in the best interests of Comerica and its shareholders.

 

The agreements generally provide for severance benefits to be paid in the event that, during the 30-month period following a change in control, the executive’s employment is terminated by Comerica without “cause” or the executive resigns for “good reason”, such as following an adverse change in duties, compensation or location of employment. Comerica’s change in control agreements also contain a provision that permits the named executive officers to resign for any reason within the 30-day period following the first anniversary of the change in control. This feature, sometimes referred to as a window period provision, is designed to provide incentives for the named executive officers to be available to an acquiror during a one-year transition period following a change in control. Comerica believes that the window period feature may serve the interests of Comerica and its shareholders by the anticipation that the employee, in order to satisfy the prerequisite for guaranteed severance benefits, will be available and render services both during the pendency of a takeover proposal and during the crucial one-year transition period following a change in control.

 

If the executive becomes entitled to receive severance benefits under his or her agreement, he or she will receive, in addition to other benefits he or she may have under any other agreement with, or benefit plan or arrangement of, Comerica:

 

 

 

In our view, the severance multiple of three times base salary and bonus that each named executive officer would receive is appropriate as it is consistent with what many senior executives in the financial services industry receive.

 

The change in control agreements also incorporate provisions to deal with the impact of the federal excise tax on excess parachute payments. The so-called “golden parachute” tax rules subject “excess parachute payments” to a dual penalty: the imposition of a 20% excise tax upon the recipient and non-deductibility of such payments by the paying corporation. While the excise tax is seemingly evenhanded, the excise tax can discriminate against long-serving employees in favor of new hires, against individuals who do not exercise options in favor of those who do and against those who elect to defer compensation in favor of those who do not. For these reasons, we provide an excise tax gross-up in the change in control agreements.

 

For more information on the terms and conditions of the change in control agreements, see the section entitled, “Potential Payments upon Termination or Change in Control.”

 

Deductibility of Executive Compensation

 

Comerica’s executive compensation programs are designed to maximize the deductibility of executive compensation under the Internal Revenue Code. However, the Compensation Committee reserves the right in the exercise of its business judgment to establish appropriate compensation levels for executive officers that may exceed the limits on tax deductibility established under Section 162(m) of the Internal Revenue Code and would not be deductible.

 

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and, based on that review and those discussions, it recommended to the Board of Directors that the foregoing Compensation Discussion and Analysis be included in Comerica’s proxy statement.

 

The Compensation Committee

 

Kenneth L. Way, Chairman

Peter D. Cummings

Anthony F. Earley, Jr.

Alfred A. Piergallini

 

March 27, 2007

The following tables summarize the compensation of the Chief Executive Officer of Comerica, the Chief Financial Officer of Comerica and the three other most highly compensated executive officers of Comerica who were serving at the end of the fiscal year ended December 31, 2006, as well as John D. Lewis, who would have been included in that category but for the fact that he was not serving as an executive officer at the end of the fiscal year ended December 31, 2006 (collectively, the “named executive officers”).

 

												Change in
												Pension
												Value and
												Nonqualified
										Non-Equity		Deferred
						Stock		Option		Incentive Plan		Compensation		All Other
						Awards		Awards		Compensation		Earnings		Compensation
				Salary		(1)(2)		(3)		(4)		(5)		(6)(7)(8)		Total
Name and Principal Position (a)		Year		($)		($)		($)		($)		($)		($)		($)
Ralph W. Babb, Jr.		2006		927,025		2,139,189		2,588,650		1,923,576		946,572		82,479		8,607,491
Chairman of the Board, President
and Chief Executive Officer,
Comerica Incorporated and
Comerica Bank
Elizabeth S. Acton		2006		484,000		817,490		734,550		577,775		101,876		33,022		2,748,713
Executive Vice President
and Chief Financial Officer,
Comerica Incorporated and
Comerica Bank
Joseph J. Buttigieg, III		2006		627,000		1,107,915		1,272,510		1,122,330		434,231		64,600		4,628,586
Vice Chairman,
Comerica Incorporated and
Comerica Bank
Dennis J. Mooradian		2006		582,000		1,000,518		890,657		694,763		149,582		42,331		3,359,851
Executive Vice President
Comerica Incorporated and
Comerica Bank
Mary Constance Beck		2006		560,000		695,618		661,450		614,250		165,911		40,062		2,737,291
Executive Vice President
Comerica Incorporated and
Comerica Bank

 

												Change in
												Pension
												Value and
												Nonqualified
						Stock		Option		Non-Equity		Deferred		All Other
						Awards		Awards		Incentive Plan		Compensation		Compensation
				Salary		(1)(2)		(3)		Compensation (4)		Earning (5)		(6)(7)(8)		Total
Name and Principal Position(a)		Year		($)		($)		($)		($)		($)		($)		($)
John D. Lewis		2006		323,425		743,827		1,337,910		0		500,312		1,124,134(9)		4,029,608
Vice Chairman (Retired),
Comerica Incorporated and
Comerica Bank

 

Footnotes:

 

 

The following table provides information on grants of awards to named executive officers in the fiscal year ended December 31, 2006 under Comerica plans.

 

 

																						All
																						Other				All Other
																						Stock				Option
																						Awards:				Awards:				Exercise				Grant
										Estimated Future Payouts												Number				Number of				or Base				Date Fair
		Date Award								Under Non-Equity Incentive												of Shares				Securities				Price of				Value of
		Approved by								Plan Awards(2)												of Stock				Underlying				Option				Stock and
		Compensation				Grant				Threshold				Target				Maximum(3)				or Units(4)				Options(5)				Awards				Option
Name(1)		Committee				Date				($)				($)				($)				(#)				(#)				($/Sh)(6)				Awards(7)
Ralph W. Babb, Jr.			—				—				0				2,781,075				2,781,075				—				—				—				—
			1/24/2006				2/15/2006				—				—				—				29,000				—				—				1,637,630
			1/24/2006				2/15/2006				—				—				—								100,000				56.47				1,225,000
Elizabeth S. Acton			—				—				0				847,000				847,000				—				—				—				—
			1/24/2006				2/15/2006				—				—				—				7,000				—				—				395,290
			1/24/2006				2/15/2006				—				—				—				—				32,000				56.47				392,000
Joseph J. Buttigieg, III			—				—				0				1,630,200				1,630,200				—				—				—				—
			1/24/2006				2/15/2006				—				—				—				14,000				—				—				790,580
			1/24/2006				2/15/2006				—				—				—				—				50,000				56.47				612,500
Dennis J. Mooradian			—				—				0				1,018,500				1,018,500				—				—				—				—
			1/24/2006				2/15/2006				—				—				—				9,000				—				—				508,230
			1/24/2006				2/15/2006				—				—				—				—				34,000				56.47				416,500
Mary Constance Beck			—				—				0				980,000				980,000				—				—				—				—
			1/24/2006				2/15/2006				—				—				—				9,000				—				—				508,230
			1/24/2006				2/15/2006				—				—				—				—				34,000				56.47				416,500

 

Footnotes:

 

 

The following table provides information on stock option and restricted stock awards for each named executive officer that were outstanding as of the end of the fiscal year ended December 31, 2006. Each outstanding award is shown separately. The market value of the stock awards is based on the closing market price of Comerica stock on December 31, 2006 of $58.68 per share. The vesting schedule for each award is described in the footnotes to this table.

 

 

Footnotes:

 

 

 

The following table provides information concerning the exercise of stock options and the vesting of stock, including restricted stock, during the fiscal year ended December 31, 2006, for each of the named executive officers.

 

		Option Awards								Stock Awards
		Number of Shares				Value				Number of Shares				Value
		Acquired on				Realized				Acquired				Realized
		Exercise				on Exercise				on Vesting				on Vesting
Name		(#)				($)				(#)				($)
Ralph W. Babb, Jr.(1)			0				0				7,500				426,525
Elizabeth S. Acton			0				0				0				0
Joseph J. Buttigieg, III(2)			18,000				271,939				7,500				426,525
Dennis J. Mooradian(3)			0				0				17,500				1,011,675
Mary Constance Beck			0				0				0				0
John D. Lewis(4)			37,500				1,159,500				33,500				1,778,265

 

Footnotes:

 

 

The following table gives information with respect to each plan that provides for payments or other benefits at, following, or in connection with retirement, including, without limitation, tax-qualified defined benefit plans and supplemental executive retirement plan, but excluding tax-qualified defined contribution plans and nonqualified defined contribution plans. In the table below, the Comerica Incorporated Retirement Plan is referred to as the “Pension Plan” and the supplemental executive retirement plan is referred to as the “SERP”.

 

 

				Number of Years		Present Value of		Payments During
				Credited Service		Accumulated Benefit		Last Fiscal Year
Name		Plan Name		(#)(2)		($)(3)		($)
		Pension Plan		10.58		778,977		0
Ralph W. Babb, Jr.		SERP		28.58		5,874,011		0
		Total Pension Value				6,652,988		0
		Pension Plan		3.75		76,639		0
Elizabeth S. Acton		SERP		3.75		291,741		0
		Total Pension Value				368,380		0
		Pension Plan		34.58		1,210,574		0
Joseph J. Buttigieg, III		SERP		34.58		5,122,240		0
		Total Pension Value				6,332,814		0
		Pension Plan		2.08		54,785		0
Dennis J. Mooradian		SERP		2.08		257,460		0
		Total Pension Value				312,245		0
		Pension Plan		1.08		39,092		0
Mary Constance Beck		SERP		1.08		150,231		0
		Total Pension Value				189,323		0
		Pension Plan		36.08		1,289,080		52,138
John D. Lewis(4)		SERP		36.08		4,432,238		156,212
		Total Pension Value				5,721,318		208,350

 

Footnotes:

 

 

Comerica maintains the Comerica Incorporated Retirement Plan, a tax-qualified defined benefit pension plan (the “Pension Plan”). The Pension Plan is a consolidation of the former Manufacturers National Corporation Pension Plan, the Comerica Incorporated Retirement Plan and pension plans of other companies acquired by Comerica. The Pension Plan in general covers salaried employees who are age 21 and have at least one year of service. New employees after December 31, 2006 will not be eligible to participate in the Pension Plan.

 

Normal retirement age under the Pension Plan is 65, and early retirement age is 55. A participant with 10 years of service may retire at early retirement age and receive payment of his or her accrued benefit, reduced by an early retirement reduction factor for commencement prior to normal retirement age. Of the named executive officers, Ralph W. Babb, Jr. and Joseph J. Buttigieg currently are eligible for early retirement. John D. Lewis was eligible for early retirement when he retired on June 30, 2006.

 

A participant who retires under the Pension Plan receives a pension comprised of two parts. The first part is the pension based on the service the participant accrued under one of the aforementioned

plans on the day prior to the January 1, 1994 merger of those plans into the Pension Plan. The second part is the sum of (i) nine-tenths of one percent times the participant’s final average monthly compensation, times the participant’s years of benefit service since January 1, 1994 (total service not to exceed 35); plus (ii) seven tenths of one percent times the participant’s final average monthly compensation in excess of the participant’s covered compensation (the average of the taxable wage bases in effect for each calendar year during the 35-year period ending on the last day of the calendar year prior to the participant’s attainment of Social Security Retirement Age), times the participant’s years of benefit service since January 1, 1994 (total service not exceeding 30).

 

Final average monthly compensation is a participant’s aggregate monthly compensation for the 60 consecutive calendar months that fall within the 120 calendar months preceding the participant’s retirement or separation from service prior to retirement, which results in the highest aggregate monthly compensation, divided by 60. Compensation under the Pension Plan is defined as wages, salary and any other amounts received for personal service actually rendered in the course of the employee’s employment with the employer, to the extent such amounts are includible in gross income, plus bonuses earned under the annual management incentive program. Compensation also includes pre-tax contributions to the employer’s cafeteria plan, Preferred Savings Plan, and any transportation fringe benefit plan sponsored by the employer.

 

Compensation does not include amounts includible in income upon making an election to include the value or restricted property in income in the year of receipt, paid or reimbursed moving expenses, contributions to or distributions from a deferred compensation plan, amounts realized from the exercise of a non-qualified stock option, amounts realized when restricted stock becomes freely transferable or is no longer subject to a substantial risk of forfeiture, amounts realized from the sale exchange or disposition of stock acquired under a qualified stock option, premiums paid by the employer toward the purchase of group term life insurance, the cost to the employer or the value of fringe benefits, the cost to the employer or value of awards of an irregular nature, expense reimbursements, amounts paid for customer or business referrals, any amount in addition to the employee’s regular salary paid in settlement of any employment-related claim, any severance payment in excess of an employee’s regular base salary, or any amount paid to an employee in addition to his or her regular base salary during an interim period as an inducement to continue employment for a temporary period pending the elimination of his or her position.

 

The Pension Plan also provides a funding mechanism intended to help retiring employees purchase additional health care insurance. This is a level benefit to all employees that is not based on compensation but is based on “points”. “Points” are the Participant’s age plus service at termination or retirement. This benefit provides $1.50 per “point” payable monthly commencing on the participant’s normal retirement date. Participants eligible to retire early under the pension plan who have also attained age 60 with 10 years of service or who have accumulated 80 points, are entitled to a benefit equal to $3.00 per point payable monthly commencing on their early retirement date and ending on their normal retirement date. For example, a participant retiring at age 60 and with 20 years of service, would receive a monthly payment of $240 until their normal retirement date, and a monthly benefit of $120 thereafter. Those vested employees not meeting the age 60 and 10 years of service or 80 point criteria would receive a flat $1.50 per point monthly benefit commencing on their normal retirement date.

 

Certain participants are entitled to receive an additional normal retirement benefit under the Pension Plan if the regular formula produces an amount that is less than the amount they would receive using the 2005 compensation limit and a stated annual addition amount. The named executive officers who are eligible for the additional normal retirement benefit under the Pension Plan include: Mr. Babb, with an additional annual benefit of $78,852 and Mr. Buttigieg with an additional annual benefit of $39,888.

 

The 2006 limit under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) on the maximum annual pension that any participant, including any named executive officer, may

receive under a tax-qualified defined benefit plan is $175,000. The maximum annual compensation of any participant that Comerica can consider in computing a pension under a qualified plan is $220,000.

 

A participant who is unmarried at the time of retirement generally receives a pension in the form of a single life annuity. A participant who is married at the time of retirement generally receives a pension in the form of a joint and 50% survivor annuity, the amount of which is actuarially equivalent to the single life annuity. The pension amounts appearing in the Pension Benefits Table assume that retirement will occur at the normal retirement age of 65 and the benefit will be paid in the form of a single life annuity.

 

The amounts set forth in the table above are not subject to deduction for Social Security or other offset amounts. The pension benefit formula under each of these plans is designed so that the pension benefits payable are integrated with the Social Security taxable wage base.

 

In addition to the Pension Plan, Comerica maintains the SERP, which is a consolidation of the nonqualified retirement plans previously maintained by Comerica and Manufacturers National Corporation. The SERP makes up the portion of the retirement benefits lost by participants in the Pension Plan due to IRS limits on tax-qualified retirement plans that cap annual compensation which can be taken into account in determining pension benefits, cap the annual benefit that can be paid to any participant and set restrictions when a plan is top-heavy. The SERP includes the amount of certain deferrals that are not included within the compensation definition in the Pension Plan. The SERP benefits are calculated in the form of a 100% joint and survivor annuity if a participant is married, and in the form of a single life annuity if a participant is not married when payments commence.

 

The SERP also provides the supplemental pension to Ralph W. Babb, Jr. that is described in the May 28, 1998 Supplemental Pension and Retiree Medical Agreement between Comerica and Mr. Babb, referenced on page 21, “Employment Contracts and Severance or Change in Control Agreements”, which serves to equalize the effect that the departure from his prior employer had on Mr. Babb’s pension (the “Supplemental Pension”).

 

The following table provides information on the non-qualified deferred compensation of the named executive officers with respect to the fiscal year ended December 31, 2006. The plans under which these deferrals were made are described in the section entitled, “Employee Deferred Compensation Plans” below.

 

 

		Executive			Registrant			Aggregate			Aggregate			Aggregate
		Contributions			Contributions			Earnings			Withdrawals/			Balance
		in Last FY			in Last FY			in Last FY			Distributions			at Last FYE
Name		($)(1)			($)			($)			($)			($)(2)
Ralph W. Babb, Jr.			0			0			138,284			0			1,931,152
Elizabeth S. Acton			0			0			2,288			0			31,950
Joseph J. Buttigieg, III			0			0			0			0			0
Dennis J. Mooradian			994,203			0			92,244			0			2,275,825
Mary Constance Beck			888,825			0			89,838			0			1,307,016
John D. Lewis			324,800			0			251,179			0			2,808,785