Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
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Aetna Inc.
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Table of Contents
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2017 Notice of
Annual Meeting |
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2017 Proxy
Statement and |
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2016 Annual Report
on Form 10-K |
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00.02.966.1 (3/17) |
aetna.com |
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Table of Contents
April 7, 2017
To Our
Shareholders:
Aetna delivered solid financial results
while firmly advancing our mission of building a healthier world one person,
one family and one community at a time.
In a rapidly evolving market, we grew
total revenue by nearly five percent to $63 billion and generated net income of
nearly $2.3 billion. We ended 2016 serving 23.1 million medical members in
communities across the country.
Our performance was driven by multiple
businesses, particularly our Government business, where Medicare membership grew
nearly 13 percent and premiums grew year-over-year by 15 percent. For the third
consecutive year, we increased the percentage of our Medicare Advantage members
enrolled in plans rated 4-stars or higher, reaching 92 percent in 2016 the
highest percentage among our publicly-traded peers. These strong star ratings
are a reflection of our commitment to improving quality of care and service,
which keeps our members out of the hospital and in their homes and communities.
Additionally, our Consumer Health and Services team is enhancing our care model
to proactively engage members using real-time data paired with predictive
analytics to improve health. We expect these improvements will provide members,
including those facing chronic illness, with a simpler way to navigate through
the health care system.
We also successfully advanced our strategy
to help transform the health care system from volume-based payment models to
care-based models that reward the quality and value provided to our members. At
the end of 2016, over 45 percent of Aetnas medical spend was running through a
value-based care model, positioning us to achieve our goal of 75 percent by
2020. We also announced new joint-venture agreements with Banner Health in
Arizona and Texas Health Resources, demonstrating our commitment to strong,
collaborative relationships with leading providers across the
country.
Improving the health of communities across
the nation is an important component of our mission. In 2016, the Aetna
Foundation, in partnership with the American Public Health Association and the
National Association of Counties, launched the Healthiest Cities and Counties
Challenge. Over the next several years, the Foundation will work to identify and
share best practices and proven innovations in communities across the country to
improve the social determinants of health including healthy behaviors,
community safety and environmental exposures.
Mark T.
Bertolini
Chairman and Chief Executive
Officer
Following a thorough business review and
in light of increasing losses, we decided to reduce our presence on the
individual public exchanges established by the Affordable Care Act. For the
full-year 2016, we reported $450 million in pre-tax losses in our individual
ACA-compliant products. As the health care policy debate moves beyond the ACA,
Aetna will be a positive voice for reforms that improve the quality and
affordability of heath care for all Americans. Going forward, we will continue
to advocate for policies that provide consumers with greater choice and
flexibility to meet their health care needs while facilitating a sustainable
marketplace for insurers, including Aetna, to serve the uninsured and
underserved markets.
Although we could not get to a successful
conclusion with our Humana acquisition, our strategy does not change. We will
deploy our capital efficiently to deliver on our commitment to build a
consumer-centered health care system that improves affordability, promotes
quality, and provides a simpler user experience. Our vision is for every
consumer to enjoy the healthiest life journey possible, and we are committed to
helping them realize that goal.
Thank you for your continued support and
investment in Aetna.
Mark T.
Bertolini
Chairman and
CEO
Table of Contents
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS OF AETNA INC.
Date and Time of Annual
Meeting
Friday, May 19, 2017 at 9:30 a.m.
Central time
Place of Annual
Meeting
Waldorf Astoria Chicago, in
Chicago, IL
Items of Business
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1. |
To elect as Directors of Aetna
Inc. the 12 nominees named in this Proxy Statement; |
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2. |
To approve the appointment of
KPMG LLP as the Companys independent registered public accounting firm
for 2017; |
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3. |
To approve the proposed amendment
of the Amended Aetna Inc. 2010 Stock Incentive Plan to increase the number
of shares authorized to be issued under the Plan; |
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4. |
To approve the Companys
executive compensation on a non-binding advisory basis; |
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5. |
To take a non-binding advisory
vote on the frequency of the vote on executive compensation; |
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6. |
To consider and act on two
shareholder proposals, if properly presented at the meeting;
and |
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To transact any other business
that may properly come before the Annual Meeting or any adjournment
thereof. |
Record Date
The Board of Directors has fixed the close of business on
March 17, 2017, as the record date for determination of the shareholders
entitled to vote at the Annual Meeting or any adjournment thereof.
The Annual Meeting is open to all
shareholders as of the record date, the close of business on March 17, 2017, or
their authorized representatives. Valet parking is available for a fee at the
Waldorf Astoria Chicago, in Chicago, IL. See page C-1 for directions to the
Waldorf Astoria Chicago, in Chicago, IL.
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Your vote is
important
It is important that your shares
be represented and voted at the Annual Meeting. We urge you to vote by
using any of the below methods. |
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By internet |
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www.proxyvote.com
available 24/7, follow
the instructions |
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By telephone |
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Call toll-free on a touchtone
telephone 1-800-690-6903 inside the United States or Puerto Rico and
follow the instructions |
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By mail |
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If you received a proxy/voting
instruction card by mail, you can mark, date, sign and return it in the
postage-paid envelope furnished for that purpose. |
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Vote in Person |
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If you attend the Annual Meeting,
you may vote in person if you wish, even if you have voted
previously. |
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Important Notice
This Notice of Annual Meeting and
Proxy Statement and Aetnas 2016 Annual Report on Form 10-K are available
on the Internet at www.proxyvote.com.
The Annual
Meeting will be audiocast live on the Internet at www.aetna.com/investor. |
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Important Information
If You Plan to Attend the Meeting in Person:
An admission ticket is required for
admission to the meeting. You must request a ticket in advance by
following the instructions on pages 81 and 87 of the attached Proxy
Statement. Aetnas Corporate Secretary must receive your written request
for an admission ticket on or before May 12, 2017. Your ticket will be
mailed to you prior to the meeting if you follow these instructions. Dont
forget your ticket and government issued photo ID. You will not be
admitted to the meeting if you do not have your ticket and
ID. |
If you hold your Aetna common shares
through a brokerage account (in street name), your request for an admission
ticket must include a copy of a brokerage statement reflecting stock ownership
as of the record date.
Please leave all weapons, cameras,
audio and video recording devices and other electronic devices at
home.
We are pleased to take advantage of
Securities and Exchange Commission rules that allow issuers to furnish proxy
materials to their shareholders on the Internet. As a result, beginning on or
about April 7, 2017, we are mailing a notice of Internet availability to many of
our shareholders instead of paper copies of our Proxy Statement and our 2016
Annual Report on Form 10-K. The notice contains instructions on how to
access those documents over the Internet. The notice also contains instructions
on how shareholders can receive a paper copy of our proxy materials, including
the Proxy Statement, our 2016 Annual Report on Form 10-K and Proxy
Card.
By order of the Board of
Directors,
Judith H. Jones
Vice President and Corporate Secretary
April 7, 2017
Table of Contents
TABLE OF CONTENTS
Table of Contents
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 19,
2017 |
This Proxy Statement and Aetna Inc.s
2016 Annual Report on Form 10-K are available at www.proxyvote.com.
Among other things, the QUESTIONS AND
ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING section of this Proxy
Statement, which begins on page 77, contains information regarding:
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The date, time and location of the
Annual Meeting; |
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A list of the matters being
submitted to shareholders for vote and the recommendations of the Board of
Directors of Aetna Inc., if any, regarding each of those matters; and
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Information about attending the
Annual Meeting and voting in person. |
Any control/identification number that a
shareholder needs to access his or her form of proxy is included with his or her
proxy or voting instruction card or notice of Internet availability of proxy
materials.
GOVERNANCE OF THE
COMPANY
At Aetna Inc. (Aetna), we believe
sound corporate governance principles are good for our business, our
industry, the competitive marketplace and all of those who place their
trust in us. We have embraced the principles behind the Sarbanes-Oxley Act
of 2002, as well as the governance rules for companies listed on the New
York Stock Exchange (NYSE). These principles are reflected in the
structure and composition of our Board of Directors (our Board) and in
the charters of our Board Committees, and are reinforced through Aetnas
Code of Conduct, which applies to every Aetna employee and every member of
the Board. |
Aetnas Corporate Governance
Guidelines
Aetnas Corporate Governance Guidelines
(the Guidelines) provide the framework for the governance of Aetna. The
governance rules for companies listed on the NYSE and those contained in the
Sarbanes-Oxley Act of 2002 are reflected in the Guidelines. The Guidelines
address the role of the Board (including advising on key strategic, financial
and business objectives); the composition of the Board and selection of
Directors; the functioning of the Board (including its annual self-evaluation);
the Committees of the Board; the compensation of Directors; and the conduct and
ethics standards for Directors, including a prohibition against any
nonmanagement Director having a direct or indirect material relationship with
Aetna and its subsidiaries (collectively, the
Company) except as authorized by the Board or the Nominating and Corporate
Governance Committee (the Nominating Committee), and a prohibition against
Company loans to, or guarantees of obligations of, Directors and their family
members. The Guidelines are available at www.aetna.com/governance.
The Board reviews the Companys corporate
governance practices at least annually. These reviews include a comparison of
our current practices to those suggested by various groups or authorities active
in corporate governance and to those of other public companies.
Table of Contents
GOVERNANCE
OF THE COMPANY |
Aetnas Board of
Directors
Aetnas business and affairs are managed
under the direction of the Board. Under Aetnas By-Laws, the size of the Board
may range from 3 to 21 members, with any change to the size of the Board to be
designated from time to time by the Board. The Board currently consists of 12
individuals. The Board appoints Aetnas senior officers, who serve at the
discretion of the Board.
Under Aetnas Articles of Incorporation,
at each annual meeting of shareholders, all of the Directors are elected to hold
office for a term of one year and until their successors are elected and
qualified. Proxies cannot be voted for a greater number of persons than the
number of Director nominees named in this Proxy Statement.
As a complement to our annual Board and
Committee self-evaluations and as part of the Boards desire for continuous
self-improvement, during 2015 the Board engaged an independent third-party
facilitator to conduct individual director interviews. This interview process
was designed to provide Directors an opportunity to share valuable feedback with
each other with the goal of maximizing individual effectiveness. The Board
expects to continue the use of a third-party facilitator periodically in the
future.
Director Elections Majority
Voting Standard
Aetnas Articles of Incorporation provide
for majority voting in uncontested elections of Directors. Under the Articles of
Incorporation, a Director nominee will be elected if the number of votes cast
for the nominee exceeds the number of votes cast against the nominee. An
abstention will not have any effect on the outcome of the election. In contested
elections, those in which there are more candidates for election than the number
of Directors to be elected and one or more candidates have been properly
proposed by shareholders, the voting standard will be a plurality of votes cast.
Under Pennsylvania law, if an incumbent Director nominee does not receive a
majority of the votes cast in an uncontested election, the incumbent Director
will continue to serve on the Board until his or her successor is elected
and qualified. To address this situation, the
Guidelines require any incumbent Director nominee in an uncontested election who
receives more against votes than for votes to promptly submit his or her
resignation for consideration by the Nominating Committee. The Nominating
Committee is then required to recommend to the Board the action to be taken with
respect to the resignation, and the Board is required to act on the resignation,
in each case within a reasonable period of time. Aetna will disclose promptly to
the public each such resignation and decision by the Board. New nominees not
already serving on the Board who fail to receive a majority of votes cast in an
uncontested election will not be elected to the Board in the first instance.
Director Retirement
Age
The Nominating Committee regularly
assesses the appropriate size and composition of the Board and, among other
matters, whether any vacancies on the Board are expected due to retirement or
otherwise. The current Director retirement age is
76. Each year, the Nominating Committee considers the characteristics and
performance of each individual Director candidate as part of its nomination
process, regardless of the candidates age.
Table of Contents
GOVERNANCE
OF THE COMPANY |
Executive Sessions
Aetnas nonmanagement Directors meet in
regularly scheduled executive sessions without management present at every
regular Aetna Board meeting. During 2016, the nonmanagement Directors, met seven
times to discuss certain Board policies, processes and practices, the
performance and proposed performance-based compensation of the Chairman and Chief Executive Officer, management
succession and other matters relating to the Company and the functioning of the
Board. In addition, Aetnas independent Directors met six times in executive
session during 2016 without management present.
Board Leadership Structure and
the Lead Director
The Board, assisted by the Nominating
Committee, regularly reviews the leadership structure of the Company, including
whether the position of Chairman should be held by an independent Director. The
Board believes that the decision to combine or separate the positions of
Chairman and Chief Executive Officer is highly dependent on the strengths and
personalities of the personnel involved and must take into account current
business conditions and the environment in which the Company operates. The Board
also strongly believes Mr. Bertolini, who continues to serve as Chief Executive
Officer, is a successful leader of the Board and an effective bridge between the
Directors and Company management. While the Board has decided to keep the roles of Chairman and Chief Executive Officer
combined at this time, the Board also has taken steps to ensure that it
effectively carries out its responsibility for independent oversight of
management. These steps include the election of a Lead Director (with
comprehensive and clearly delineated duties); the scheduling at every regular
Board meeting of an executive session of the independent Directors (without Mr.
Bertolini or other management attendees present); and assuring that
substantially all of the nonmanagement Directors are independent. In addition,
each Board Committee meets regularly in executive session without management
attendees.
The duties of the Lead
Director include the following: |
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presiding at all meetings of the
Board at which the Chairman is not present, including executive sessions
of the independent Directors; |
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approving meeting agendas and
schedules to assure there is sufficient time for discussion of all agenda
items; |
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approving information sent to the
Board; |
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calling special meetings of the
Board (including meetings of the independent Directors);
and |
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making himself or herself available
as appropriate for consultation and direct communication upon the
reasonable request of a major
shareholder. |
Edward J. Ludwig, an independent Director,
has served as the Lead Director since February 24, 2012. The Lead Director is
appointed annually.
Table of Contents
GOVERNANCE OF THE
COMPANY |
Communications with the Board
To contact Aetnas Chairman or its Lead
Director or to send a communication to the entire Board you may contact:
|
Mark T.
Bertolini Chairman and Chief
Executive Officer Aetna Inc. 151
Farmington Avenue Hartford, CT 06156 |
or |
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Edward J.
Ludwig Lead Director P.O. Box
370205 West Hartford, CT
06137-0205 |
Communications sent to Aetnas Chairman
will be delivered directly to him. All communications to the Lead Director or
addressed to the nonmanagement Directors will be kept confidential and forwarded
directly to the Lead Director. Items that are unrelated to a Directors duties
and responsibilities as a Board member, such as junk mail, may be excluded by
the Corporate Secretary.
Director Independence
The Board has established guidelines
(Director Independence Standards) to assist it in determining Director
independence. In accordance with the Director Independence Standards, the Board
must determine that each independent Director has no material relationship with
the Company other than as a Director and/or a shareholder of the Company.
Consistent with the NYSE listing standards, the Director Independence Standards
specify the criteria by which the independence of our Directors will be
determined, including guidelines for Directors and their immediate family
members with respect to past employment or affiliation with the Company or its
external auditor. The Director Independence Standards are available at
www.aetna.com/about-us/corporate-governance.html.
Pursuant to the Director Independence
Standards, the Board undertook its annual review of Director independence in
February 2017. The purpose of this review was to determine whether any
nonmanagement Directors relationships or transactions are inconsistent with a
determination that the Director is independent. During this review, the Board
considered transactions and relationships between each Director or any member of
his or her immediate family (or any entity of which a Director or an immediate
family member is a partner, major shareholder or officer) and the Company. The
Board also considered whether there were any transactions or relationships
between Directors or any member of their immediate family with members of the
Companys senior management or their affiliates.
As a result of this review, the Board
affirmatively determined in its business judgment that each of Fernando Aguirre,
Frank M. Clark, Betsy Z. Cohen, Molly J. Coye, M.D., Roger N. Farah, Jeffrey E.
Garten, Ellen M. Hancock, Richard J. Harrington,
Edward J. Ludwig, Joseph P. Newhouse and Olympia J. Snowe, each of whom also is
standing for election at the Annual Meeting, is independent as defined in the
NYSE listing standards and under Aetnas Director Independence Standards and
that any relationship with the Company (either directly or as a partner, major
shareholder or officer of any organization that has a relationship with the
Company) is not material under the independence thresholds contained in the NYSE
listing standards and under Aetnas Director Independence Standards. In 2016,
the Board affirmatively determined that Barbara Hackman Franklin was independent
under both such standards and that any such relationship with the Company was
not material. Ms. Franklin retired from the Board in May 2016.
In determining that each of the
nonmanagement Directors is independent, the Board considered that the Company in
the ordinary course of business sells products and services to, purchases
products and services from, and/or makes charitable contributions to companies
and other entities at which some of our Directors or their immediate family
members are or have been officers and/or significant equity holders or have
certain other relationships. Specifically, the Board considered the existence of
and approved the transactions described in the tables below, all of which were
made in the ordinary course of business, on terms and conditions substantially
similar to those with unrelated third parties, and which the Board believes were
in, or not inconsistent with, the best interests of the Company. The aggregate
amounts paid to or received from these companies or other entities in each of
the last three years did not exceed the threshold in the Director Independence
Standards (i.e., the greater of $1 million or 2% of the other companys
consolidated gross revenues) for 2016.
Table of Contents
GOVERNANCE OF THE
COMPANY |
2016 Sales and Other Amounts
Received by the Company
Director |
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Organization |
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Type of Organization |
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Relationship to Organization |
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Type of Transaction, Relationship
or Agreement(a) |
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2016 Amount(b) |
Roger N. Farah |
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Tory Burch LLC |
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Lifestyle Products |
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Executive Officer |
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Health Care Benefits
(Medical/Dental) |
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<1% |
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<$1,000,000 |
Jeffrey E.
Garten |
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Yale University |
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Educational
Institution |
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Employee |
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Health Care Benefits
(Medical/Life) |
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≈0.08% |
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>$1 million |
Olympia J. Snowe |
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McKernan Enterprises, Inc. |
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Consulting/Investment |
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Spouse is Executive Officer |
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Health Care Benefits
(Medical)(c) |
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≈0.13% |
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<$500,000 |
(a) |
All premiums and fees were
determined on the same terms and conditions as premiums and fees for our
other customers. |
(b) |
Percentages are determined by
dividing (1) calendar year 2016 payments due and owing to the Company by
(2) the applicable entitys most recently available annual consolidated
gross revenues. |
(c) |
Olympia J. Snowes husband is
an executive officer of McKernan Enterprises,
Inc. |
2016 Purchases by the
Company
Director |
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Organization |
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Type of Organization |
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Relationship to Organization |
|
Type of Transaction, Relationship
or Agreement(A) |
|
2016 Amount(B) |
Jeffrey E. Garten |
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Yale University |
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Educational Institution |
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Employee |
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Education/Opioid Study |
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≈0.01% |
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<$500,000 |
Joseph P.
Newhouse |
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Harvard
University |
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Educational
Institution |
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Employee |
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Medical content
for |
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≈0.01% |
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iTriage/Active
Health, |
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<$1
million |
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continuing education
and |
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corporate governance
roundtable |
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program fees,
and |
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research collaboration(C) |
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(A) |
None of the transactions or
relationships included consulting services provided to the
Company. |
(B) |
Percentages are determined by
dividing (1) calendar year 2016 purchases by the Company by (2) the
applicable entitys most recently available annual consolidated gross
revenues. |
(C) |
Aetna does not use Harvard for
any consulting or advisory services. Harvard provides the medical content
for iTriage and reviews Care Considerations for Active Health. Program
fees for attendance at seminars conducted by Harvard. Research
collaboration on foundational analytics. Dr. Newhouse had no interest or
involvement with Harvards relationship with the
Company. |
All members of the Audit Committee, the
Committee on Compensation and Talent Management (the Compensation Committee)
and the Nominating Committee are, in the business judgment of the Board,
independent Directors as defined in the NYSE listing standards and in Aetnas
Director Independence Standards.
Compensation Committee Interlocks and Insider
Participation
As of March 17, 2017, the members of the
Compensation Committee are Roger N. Farah (Chair), Frank M. Clark, Betsy Z.
Cohen, Jeffrey E. Garten and Edward J. Ludwig. None of the members of the
Compensation Committee has ever been an officer
or employee of the Company. There are no interlocking relationships between any
of our executive officers or Compensation Committee members.
Table of Contents
GOVERNANCE OF THE
COMPANY |
Meeting
Attendance
The Board and its Committees meet
throughout the year on a set schedule and also hold special meetings from time
to time, as appropriate. During 2016, the Board met twelve times. The average
attendance of Directors at all meetings during the year was 96.6%, and no
Director attended fewer than 75% of the aggregate number of Board and
Committee meetings that he or she was eligible to
attend. It is the policy of the Board that all Directors should be present at
Aetnas Annual Meeting of Shareholders. Eleven of the twelve Directors then in
office and standing for election attended Aetnas 2016 Annual Meeting of
Shareholders.
Aetnas
Code of Conduct
Aetnas Code of Conduct applies to every
Aetna employee and to every member of the Board and is available at
www.aetna.com/governance. The Code of Conduct is designed to ensure that Aetnas business is
conducted in a consistently legal and ethical manner. The Code of Conduct
includes policies on employee conduct, conflicts of interest and the protection
of confidential information and requires compliance with all applicable laws and
regulations. Aetna will disclose any amendments
to the Code of Conduct or waivers of the Code of Conduct relating to Aetnas
Directors, executive officers and principal financial and accounting officers or
persons performing similar functions on its website at www.aetna.com/governance within four business days following the date of any such amendment or
waiver. To date, no such waivers have been requested or granted.
Related
Party Transaction Policy
Under Aetnas Code of Conduct, the Board
or an independent Committee reviews any potential conflicts between the Company
and any Director. In addition, the Board has adopted a written Related Party
Transaction Policy (the Policy) which applies to Directors, executive
officers, significant shareholders and their immediate family members (each a
Related Person). Under the Policy, all transactions involving the Company in
which a Related Person has a direct or indirect material interest must be
reviewed and approved (1) by the Board or the Nominating Committee if involving
a Director, (2) by the Board or the Audit Committee if involving an executive
officer or (3) by the Board if involving a significant shareholder. The Board or
appropriate Committee considers relevant facts
and circumstances, which may include, without limitation, the commercial
reasonableness of the terms, the benefit to the Company, opportunity costs of
alternate transactions, the materiality and character of the Related Persons
direct or indirect interest, and the actual or apparent conflict of interest of
the Related Person. A transaction may be approved if it is determined, in the
Boards or appropriate Committees reasonable business judgment, that the
transaction is in, or not inconsistent with, the best interests of the Company
and its shareholders, and considering the interests of other relevant
constituents, when deemed appropriate. Determinations of materiality are made by
the Board or appropriate Committee, as applicable.
Table of Contents
GOVERNANCE OF THE
COMPANY |
BOARDS
ROLE IN THE OVERSIGHT OF RISK
The Company relies on its
comprehensive enterprise risk management (ERM) process to aggregate,
monitor, measure and manage risk. The ERM process is dynamic and ongoing.
It is designed to identify the most important risks facing the Company as
well as to prioritize those risks in the context of the Companys overall
strategy. The Companys ERM team is led by the Companys Chief Enterprise
Risk Officer, who is also the Companys Chief Financial Officer. In
collaboration with the Audit Committee and the Board, the ERM team
annually conducts a risk assessment of the Companys businesses. All of
our key business leaders are involved in the risk assessment process. The
risk assessment is presented to, and reviewed by, the Audit Committee and,
after reflecting the Audit Committees views, the list of enterprise risks
is then reviewed and approved by the Board. As part of their reviews, the
Audit Committee and the Board consider the internal governance structure
for managing risks, and the Board assigns responsibility for ongoing
oversight of each identified risk to a specific Committee of the Board or
to the Board. Discussions of assigned risks are then incorporated into the
agenda for each Committee (or the Board) throughout the year. Risk
management is ongoing, and the importance assigned to identified risks can
change and new risks can emerge during the year as the Company develops
and implements its strategy. Consequently, our Chief Enterprise Risk
Officer, in consultation with the Chairman and Chief Executive Officer,
monitors risk management and mitigation activities across the organization
throughout the year and reports periodically to the Audit Committee and
the Board concerning the Companys risk management profile and activities.
As a result, we believe having the same individual serve as both Chairman
and Chief Executive Officer assists the Board in performing its risk
oversight function because the Chairman and Chief Executive Officer is
directly involved in the Companys ERM process. The Audit Committee also
meets regularly in private sessions with the Companys Chief Enterprise
Risk Officer. |
Board and
Committee Membership; Committee Descriptions
Aetnas Board oversees and guides the
Companys management and its business. Committees support the role of the Board
on issues that are better addressed by smaller, more focused subsets of
Directors.
The following table presents, as of March
17, 2017, the key standing Committees of the Board, the membership of such
Committees and the number of times each such Committee met in 2016. Charters
adopted by the Board for each of the six Committees listed below are available
at www.aetna.com/about-us/corporate-governance/committees-of-the-board.html.
|
Board
Committee |
|
|
Nominee/Director |
|
Audit |
|
Compensation and
Talent Management |
|
Executive |
|
Investment and
Finance |
|
Medical Affairs |
|
Nominating and Corporate Governance |
|
|
Fernando Aguirre |
|
✗ |
|
|
|
|
|
|
|
|
|
✗ |
|
|
Mark T. Bertolini |
|
|
|
|
|
|
|
✗ |
|
|
|
|
|
|
Frank M. Clark |
|
|
|
✗ |
|
|
|
|
|
|
|
✗ |
|
|
Betsy Z. Cohen |
|
|
|
✗ |
|
|
|
✗ |
|
|
|
✗ |
|
|
Molly J. Coye, M.D. |
|
|
|
|
|
✗ |
|
✗ |
|
|
|
|
|
|
Roger N. Farah |
|
|
|
|
|
✗ |
|
✗ |
|
|
|
|
|
|
Jeffrey E. Garten |
|
|
|
✗ |
|
|
|
|
|
✗ |
|
|
|
|
Ellen M. Hancock |
|
✗ |
|
|
|
✗ |
|
|
|
|
|
|
|
|
Richard J. Harrington |
|
|
|
|
|
✗ |
|
✗ |
|
✗ |
|
|
|
|
Edward J. Ludwig |
|
|
|
✗ |
|
✗ |
|
|
|
|
|
✗ |
|
|
Lead
Director |
|
|
|
|
|
|
|
|
Joseph P. Newhouse |
|
✗ |
|
|
|
|
|
|
|
✗ |
|
|
|
|
Olympia J. Snowe |
|
✗ |
|
|
|
|
|
|
|
✗ |
|
|
|
|
Number of Meetings in
2016 |
|
9 |
|
6 |
|
0 |
|
6 |
|
5 |
|
6 |
|
|
|
Committee
Chair |
Table of Contents
GOVERNANCE OF THE
COMPANY |
Committee
Functions and Responsibilities
Functions and responsibilities of the key
standing Committees of Aetnas Board are described below and on the following
pages.
|
|
|
|
|
|
|
|
|
|
|
Audit
Committee |
|
|
|
|
Richard J. Harrington |
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Board has determined in its
business judgment that all members of the Audit Committee meet the
independence, financial literacy and expertise requirements for audit
committee members set forth in the NYSE listing standards. Additionally,
the Board has determined in its business judgment that Messrs. Aguirre,
Harrington and Newhouse and Mrs. Hancock, based on his or her background
and experience (including that described in this Proxy Statement), has the
requisite attributes of an audit committee
financial expert as defined by the United States Securities and Exchange
Commission (the SEC). The Audit Committee assists the Board in its
oversight of (1) the integrity of the financial statements of the Company,
(2) the qualifications and independence of the Companys independent
registered public accounting firm (the Independent Accountants), (3) the
performance of the Companys internal audit function and the Independent
Accountants, and (4) compliance by the Company with legal and regulatory
requirements, including reasonable oversight of the Companys Medicare
Compliance Program. The Audit Committee periodically discusses
managements policies with respect to risk assessment and risk management,
and periodically discusses with the Independent Accountants, management
and the Companys Internal Audit department significant financial risk
exposures and the steps management has taken to monitor, control and
report such exposures. The Audit Committee is directly responsible for the
appointment, compensation, retention and oversight of the work of the
Independent Accountants and any other accounting firm engaged to perform
audit, review or attest services (including the resolution of any
disagreements between management and any auditor regarding financial
reporting). The Independent Accountants and any other such accounting firm
report directly to the Audit Committee. The Companys Chief Compliance
Officer is authorized to communicate promptly and personally to the Audit
Committee on all matters he or she deems appropriate, including, without
limitation, any matter involving criminal conduct or potential criminal
conduct. The Audit Committee is empowered, to the extent it deems
necessary or appropriate, to retain outside legal, accounting or other
advisers having special competence as necessary to assist it in fulfilling
its responsibilities and duties. The Audit Committee has available from
the Company such funding as the Audit Committee determines for
compensation to the Independent Accountants, any other accounting firm or
other advisers engaged, and for the Audit Committees ordinary
administrative expenses. The Audit Committee conducts an annual evaluation
of its performance. For more information regarding the role,
responsibilities and limitations of the Audit Committee, please refer to
the Report of the Audit Committee beginning on page 59.
The Audit Committee can be
confidentially contacted by those wishing to raise concerns or complaints
about the Companys accounting, internal accounting controls or auditing
matters by calling AlertLine®, an independent toll-free service, at
1-888-891-8910 (available seven days a week, 24 hours a day), or by
writing to: Corporate Compliance, P.O. Box 370205, West Hartford, CT
06137-0205. |
|
|
|
|
Table of Contents
GOVERNANCE OF THE
COMPANY |
|
|
|
|
|
|
|
|
|
|
|
Committee on
Compensation and Talent Management |
|
|
|
|
Roger N. Farah |
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Board has determined in its
business judgment that all members of the Compensation Committee meet the
independence requirements set forth in the NYSE listing standards and in
Aetnas Director Independence Standards. The Compensation Committee is
directly responsible for reviewing and approving the corporate goals and
objectives relevant to Chief Executive Officer and other executive officer
compensation; evaluating the Chief Executive Officers and other executive
officers performance in light of those
goals and objectives; and establishing the Chief Executive Officers and
other executive officers compensation levels based on this evaluation.
The Chief Executive Officers compensation is determined after reviewing
the Chief Executive Officers performance and consulting with the
nonmanagement Directors of the Board. The Compensation Committee also
evaluates and determines the compensation of the Companys executive
officers and other senior positions identified by the Compensation
Committee and oversees the compensation and benefit plans, policies and
programs of the Company. The Compensation Committee consults with the
Chief Executive Officer regarding the compensation of all executive
officers other than the Chief Executive Officer, but the Compensation
Committee does not delegate its authority with regard to these executive
compensation decisions. The Compensation Committee reviews and approves
executive compensation philosophy and strategy, including peer group and
target compensation positioning. The Compensation Committee also
administers Aetnas equity-based incentive compensation plans. The
Compensation Committee reviews and makes recommendations, as appropriate,
to the Board as to the development and succession plans for the CEO and
other key officers of the Company. The Compensation Committee also reviews
the Companys talent management and diversity strategies and conducts an
annual evaluation of its performance.
The Compensation Committee has the
authority to retain or obtain the advice of a compensation consultant,
independent legal counsel or other advisor as it may deem appropriate. The
Compensation Committee is directly responsible for the appointment,
compensation and oversight of the work of any such compensation
consultant, legal or other advisor retained by the Committee used to
assist the Compensation Committee and has the sole authority to approve
each consultants fees and other retention terms. When selecting a
compensation consultant, legal or other advisor, the Committee considers
(i) the provision of other services to the Company; (ii) the amount of
fees paid to the advisor as a percentage of the advisors total revenue;
(iii) the policies and procedures of the advisors employer that are
designed to prevent conflicts of interest; (iv) any business or personal
relationship between the advisor and a member of the Committee; (v) any
Company stock owned by the advisor; (vi) any business or personal
relationship of the advisor and an executive officer of the Company; and
(vii) any other factor deemed relevant to the advisors independence from
management. In accordance with this authority, the Compensation Committee
engaged Meridian Compensation Partners (Meridian) as independent outside
compensation consultants to advise the Compensation Committee on all
matters related to Chief Executive Officer and other executive
compensation. The Company may not engage Meridian for any services other
than in support of the Compensation Committee without the prior approval
of the Chair of the Compensation Committee. Meridian also advises the
Nominating Committee regarding Director compensation. The Company does not
engage Meridian for any services other than in support of these
Committees. A representative of Meridian attended five of the Compensation
Committees meetings in 2016. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Committee |
|
|
|
|
Mark T. Bertolini |
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This Committee is authorized to act
on behalf of the Board between regularly scheduled Board meetings, usually
when timing is critical. The Executive Committee has the authority to
retain counsel and other experts or consultants as it may deem
appropriate. |
|
|
|
|
Table of Contents
GOVERNANCE OF THE
COMPANY |
|
|
|
|
|
|
|
|
|
|
|
Investment and
Finance Committee |
|
|
|
|
Edward J. Ludwig |
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This Committee assists the Board in
reviewing the Companys investment policies, strategies, transactions and
performance and in overseeing the Companys capital and financial
resources. The Investment and Finance Committee has the authority to
retain counsel and other experts or consultants as it may deem
appropriate. The Investment and Finance Committee conducts an annual
evaluation of its performance. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Affairs
Committee |
|
|
|
|
Molly J. Coye, M.D. |
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This Committee provides general
oversight of the Companys medical-related strategies, policies and
practices that relate to promoting member health, enhancing access to
cost-effective quality health care, and advancing safety and efficacy of
care. The Medical Affairs Committee has the authority to retain counsel
and other experts or consultants as it may deem appropriate. The Medical
Affairs Committee conducts an annual evaluation of its
performance. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating and
Corporate Governance Committee |
|
|
|
|
Ellen M. Hancock |
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Board has determined in its
business judgment that all members of the Nominating Committee meet the
independence requirements set forth in the NYSE listing standards and in
Aetnas Director Independence Standards. The Nominating Committee assists
the Board in identifying individuals qualified to become Board members,
consistent with criteria approved by the Board; oversees the organization
of the Board to discharge the Boards duties and responsibilities properly
and efficiently; and identifies best
practices and recommends to the Board corporate governance principles.
Other specific duties and responsibilities of the Nominating Committee
include: annually assessing the size and composition of the Board;
annually reviewing and recommending Directors for continued service;
reviewing the compensation of, and benefits for, Directors; recommending
the retirement policy for Directors; coordinating and assisting the Board
in recruiting new members to the Board; reviewing potential conflicts of
interest or other issues arising out of other positions held or proposed
to be held by, or any changes in circumstances of, a Director;
recommending Board Committee assignments; overseeing the annual evaluation
of the Board; conducting an annual performance evaluation of the
Nominating Committee; conducting a preliminary review of Director
independence and the financial literacy and expertise of Audit Committee
members; and interpreting, as well as reviewing any proposed waiver of,
Aetnas Code of Conduct, the code of business conduct and ethics
applicable to Directors. The Nominating Committee has the authority to
retain counsel and other experts or consultants as it may deem
appropriate. The Nominating Committee has the sole authority to select,
retain and terminate any search firm used to identify Director candidates
and has the sole authority to approve any such search firms fees and
other retention terms.
The Board makes all Director
compensation determinations after considering the recommendations of the
Nominating Committee. In setting Director compensation, both the
Nominating Committee and the Board reviewed Director compensation data
obtained from Meridian. Meridian advises the Nominating Committee
regarding Director compensation, but neither the Nominating Committee nor
the Board delegates any Director compensation decision-making
authority. |
|
|
|
|
Table of Contents
GOVERNANCE OF THE
COMPANY |
Consideration of Director Nominees
● |
Shareholder Nominees.
The Nominating Committee will consider properly
submitted shareholder nominations for candidates for membership on the
Board as described below under Director Qualifications and Identifying
and Evaluating Nominees for Director. Any shareholder nominations of
candidates proposed for consideration by the Nominating Committee should
include the nominees name and qualifications for Board membership, and
otherwise comply with applicable rules and regulations, and should be
addressed to: |
|
Corporate Secretary Aetna
Inc. 151 Farmington Avenue,
RW61 Hartford, CT 06156 |
|
In addition, Aetnas By-Laws permit
shareholders to nominate Directors for consideration at a meeting of
shareholders at which one or more Directors are to be elected. For a
description of the process for nominating Directors in accordance with
Aetnas By-Laws, see Can I Propose Actions for Consideration at Next
Years Annual Meeting of Shareholders or Nominate Individuals to Serve as
Directors? beginning on page 84. |
● |
Director
Qualifications. The Nominating
Committee Charter sets out the criteria weighed by the Nominating
Committee in considering all Director candidates, including
shareholder-identified candidates. The criteria are re-evaluated
periodically and currently include: the relevance of the candidates
experience to the business of the Company; enhancing the diversity of the
Board; the candidates independence from conflict or direct economic
relationship with the Company; and the candidates ability to attend Board
meetings regularly and devote an appropriate amount of effort in
preparation for those meetings. It also is expected that nonmanagement
Directors nominated by the Board are individuals who possess a reputation
and hold positions or affiliations befitting a director of a large
publicly held company, and are actively engaged in their occupations or
professions or are otherwise regularly involved in the business,
professional or academic community. |
● |
Diversity.
The Nominating Committee believes that, in
addition to the traditional concepts of diversity (e.g., gender, race and
ethnicity), it also is important to achieve a diversity of knowledge,
experience and capabilities on the Board that supports the Companys
strategic direction. The Nominating
Committee and the Board believe that having a Board of Directors with a
broad background of skills, perspectives
and experiences is crucial to enhancing the quality of Board
decision-making and governance. As a result, identifying Director
candidates with diverse experiences, qualifications and skills that
complement those already present on the Board has been and will continue
to be central to the Nominating Committees Director nomination process.
Although the Board does not have a formal diversity policy, our Directors
come from many different fields, including academia, technology, retail,
service, consumer products, not-for-profit, public service and regulatory.
Our Director Nominees for 2017 include four women, one Latino male and one
African American male. |
|
The specific experiences,
qualifications, attributes and skills that the Nominating Committee and
the Board believe each Nominee possesses are set forth below each
Nominees biography beginning on page
14. |
● |
Identifying and Evaluating
Nominees for Director. The Nominating
Committee uses a variety of methods to identify and evaluate nominees for
Director. In recommending Director nominees to the Board, the Nominating
Committee solicits candidate recommendations from its own members, other
Directors and management. It also may engage the services and pay the fees
of a professional search firm to assist it in identifying potential
Director nominees. The Nominating Committee also reviews materials
provided by professional search firms or other parties in connection with
its consideration of nominees. The Nominating Committee regularly assesses
the appropriate size of the Board and whether any vacancies on the Board
are expected due to retirement or otherwise. If vacancies are anticipated,
or otherwise arise, the Nominating Committee considers whether to fill
those vacancies and, if applicable, considers various potential Director
candidates. These candidates are evaluated against the current Director
criteria at regular or special meetings of the Nominating Committee and
may be considered at any point during the year. As described above, the
Nominating Committee will consider properly submitted shareholder
nominations for candidates for the Board. Following verification of the
shareholder status of the person(s) proposing a candidate, a shareholder
nominee will be considered by the Nominating Committee at a meeting of the
Nominating Committee. If any materials are provided by a shareholder in
connection with the nomination of a Director candidate, such materials are
forwarded to the Nominating Committee. |
Table of Contents
GOVERNANCE OF THE COMPANY |
The Board and the Nominating Committee
each considered the characteristics and performance of the individual Directors
standing for election to the Board at the Annual Meeting against the foregoing
criteria, and, to the extent applicable, reviewed the impact of any change in
the principal occupations of all Directors during the last year. Upon completion
of its review process, the Nominating Committee reported to the Board its
conclusions and recommendations for nominations
to the Board, and the Board nominated the 12 Director nominees named in this
Proxy Statement based on those recommendations.
In 2016, the Nominating
Committee engaged and paid the fees of a professional search firm to assist the
Nominating Committee in identifying and evaluating potential
nominees.
Table of Contents
I. ELECTION OF DIRECTORS
PROPOSAL I |
|
Election
of 12 Directors |
The Board, acting upon the
recommendation of the Nominating Committee, has nominated the 12 Directors currently
serving for re-election as Directors. Each nominee who receives more for
votes than
against votes cast at the Annual Meeting will be elected a
Director. |
|
|
✓ |
The Board recommends a vote
FOR each of the 12 Director
nominees. |
This year, Aetna will nominate 12
individuals for election as Directors at the Annual Meeting (the Nominees) to
replace the current Board. The terms of office for the Directors elected at the
Annual Meeting will run until the next annual meeting and until their successors
are duly elected and qualified. The Nominating Committee recommended the 12
Nominees for nomination by the Board. Based on that recommendation, the Board
nominated each of the Nominees for election at the Annual Meeting.
All Nominees are currently Directors of
Aetna. The following pages list the names and ages of the Nominees as of the
date of the Annual Meeting, the year each first became a Director of Aetna or
one of its predecessors, the principal occupation of each Nominee as of March
17, 2017, the publicly traded company directorships and certain other
directorships held by each Nominee for the past five years, a brief description
of the business experience of each Nominee for at least the last five years, and
the specific experience, qualifications, attributes and skills that each Nominee
possesses. The specific experience, qualifications, attributes and skills listed
below for each Nominee are in addition to the
individual qualifications required for all nominees as outlined under
Consideration of Director Nominees-Director Qualifications on page 11.
Each of the 12 individuals listed below
(or such lesser number if the Board has reduced the number of Directors to be
elected at the Annual Meeting as described on page 84 under What If a Director
Nominee Is Unwilling or Unable to Serve?) who receives more for votes than
against votes cast at the Annual Meeting will be elected a Director. In
addition, as described in more detail on page 2 under Director Elections
Majority Voting Standard, Aetnas Corporate Governance Guidelines require any
incumbent nominee for Director in an uncontested election who receives more
against votes than for votes to promptly submit his or her resignation for
consideration by the Nominating Committee. The Nominating Committee and the
Board are then required to act on the resignation, in each case within a
reasonable period of time.
The Board recommends a vote FOR each of
the 12 Nominees. If you complete the enclosed proxy card, unless you direct to
the contrary on that card, the shares represented by that proxy card will be
voted FOR the election of all 12 Nominees.
Table of Contents
Nominees for Directorships
|
|
|
|
|
|
|
|
|
|
|
|
|
Fernando
Aguirre |
|
|
|
|
|
|
|
Independent Director |
|
|
|
|
|
|
|
Age: 59 |
|
Committees
Served: |
|
|
|
|
Director of Aetna Since:
2011 |
|
|
●Audit |
|
|
|
|
|
|
|
●Nominating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Aguirre served as President and
Chief Executive Officer from January 2004 to October 2012 and Chairman
from May 2004 to October 2012 of Chiquita Brands International, Inc.
(global distributor of consumer products). Prior to joining Chiquita, Mr.
Aguirre worked for more than 23 years in brand management, general
management and turnarounds at The Procter & Gamble Company (P&G)
(manufacturer and distributor of consumer products). Mr. Aguirre began his
P&G career in 1980, serving in various capacities including President
and General Manager of P&G Brazil, President of P&G Mexico, Vice
President of P&Gs global snacks and US food products, and President
of global feminine care. In July 2002, Mr. Aguirre was named President,
special projects, reporting to P&Gs Chairman and CEO, working on
strategy. He served as a director of Coveris from 2014 to 2015, Levi
Strauss from 2010 until August 2014, and Coca-Cola Enterprises Inc. from
2005 to 2010.
Experience, Qualifications,
Attributes and Skills Mr. Aguirre
brings to the Board extensive consumer products, global business and
executive leadership experience. As a former Chairman and CEO of a large
public company that produces and distributes consumer products worldwide,
he has significant brand management and international experience that is
valuable to the Boards strategic and operational understanding of global
markets. He possesses significant experience as a director, as
demonstrated by his current and prior service on other large public
company boards.
Other Public
Directorship: Barry Callebaut AG
(manufacturer of high-quality chocolate and cocoa products). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark T.
Bertolini |
|
|
|
|
|
|
|
Management Director |
|
|
|
|
|
|
|
Age: 60 |
|
Committees
Served: |
|
|
|
|
Director of Aetna Since:
2010 |
|
|
●Executive |
|
|
|
|
|
|
|
●Investment &
Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Bertolini is Chairman and Chief
Executive Officer of Aetna. He assumed the role of Chairman on April 8,
2011 and Chief Executive Officer on November 29, 2010. From July 2007 to
December 2014, he served as president, responsible for all of Aetnas
businesses and operations. Mr. Bertolini joined Aetna in 2003 as head of
Aetnas Specialty Products, and subsequently served as executive vice
president and head of Aetnas regional businesses. Before joining Aetna,
Mr. Bertolini held executive positions at Cigna, NYLCare Health Plans, and
SelectCare, Inc., where he was president and chief executive officer. Mr.
Bertolini also serves as a director of Massachusetts Mutual Life Insurance
Company (insurance and investment products), The Hole in the Wall Gang
Camp, a non-profit organization founded by Paul Newman that serves
children with cancer and other serious illnesses, and the Fidelco Guide
Dog Foundation, a non-profit organization that breeds, trains and places
German Shepherd guide dogs with people who have visual
disabilities.
Experience, Qualifications,
Attributes and Skills Mr. Bertolini
brings to his position as Chairman and Chief Executive Officer extensive
health care industry expertise, with over 30 years in the health care
business. He has strong leadership skills and business experience, as he
has demonstrated as President and then as Chairman and Chief Executive
Officer of Aetna and in several prior executive-level positions. He is a
well-recognized leader in the health care industry and possesses deep
insights into health care issues as well as broad knowledge and
appreciation of public policy issues affecting the Company.
Other Public
Directorship: Verizon Communications
Inc. (communications, information and entertainment products and
services). |
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Frank M. Clark |
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Independent Director |
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Age: 71 |
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Committees
Served: |
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Director of Aetna Since:
2006 |
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●Compensation |
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Mr. Clark is President of the
Chicago Board of Education. Mr. Clark retired in February 2012 as the
Chairman and Chief Executive Officer of Commonwealth Edison Company
(ComEd) (an electric energy distribution subsidiary of Exelon
Corporation), having served in this position since November 2005.
Previously, Mr. Clark served as President of ComEd from October 2001 to
2005 and Executive Vice President and Chief of Staff to the Exelon
Corporation Chairman from 2004 to 2005. After joining ComEd in 1966, Mr.
Clark held key leadership positions in operational and policy-related
responsibilities, including regulatory and governmental affairs, customer
service operations, marketing and sales, information technology, human
resources and labor relations, and distribution support services. Mr.
Clark served as a director of BMO Financial Corporation (financial
services) from May 2005 to December 2016, and its non-executive chairman
from December 2010 to December 2016.
Experience, Qualifications,
Attributes and Skills Mr. Clark
brings to the Board a broad background of senior leadership experience,
gained from his over 45 years of service with ComEd and Exelon
Corporation. He possesses significant management ability and business
acumen which gives Mr. Clark critical insights into the operational issues
facing a large public company. Mr. Clark is an experienced manager in a
business that is intensely customer service oriented, whose knowledge of
customer relations, marketing and human resources offers the Board
important perspectives on similar issues affecting the Company. Mr. Clark
also possesses significant public company board experience.
Other Public
Directorship: Waste Management, Inc.
(waste disposal services). |
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Betsy Z. Cohen |
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Independent Director
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Age: 75 |
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Committees
Served: |
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Director of Aetna or its
predecessors |
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●Compensation |
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since: 1994 |
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Finance |
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Mrs. Cohen serves as Chairman of
FinTech Acquisition Corp. II and Strategic Advisor of The Bancorp, Inc.
Previously, she served as Chief Executive Officer of The Bancorp, Inc. and
its subsidiary, The Bancorp Bank (internet banking and financial
services), from September 2000 to December 2014, having earlier served as
Chairman of The Bancorp Bank from November 2003 to February 2004. From
August 1997 to December 2010, Mrs. Cohen served as Chairman and a trustee
of RAIT Financial Trust (real estate investment trust) and until December
2006, she also held the position of Chief Executive Officer. From 1999 to
2000, Mrs. Cohen served as a director of Hudson United Bancorp (holding
company), the successor to JeffBanks, Inc., where she had been Chairman
and Chief Executive Officer since its inception in 1981 and also served as
Chairman and Chief Executive Officer of its subsidiaries, Jefferson Bank
(which she founded in 1974) and Jefferson Bank New Jersey (which she
founded in 1987) prior to JeffBanks merger with Hudson United Bancorp in
December 1999. From 1985 until 1993, Mrs. Cohen was a director of First
Union Corp. of Virginia (bank holding company) and its predecessor,
Dominion Bankshares, Inc. In 1969, she co-founded a commercial law firm
and served as a senior partner until 1984. Mrs. Cohen was recently
Chairman of FinTech Acquisition Corp. from February 2015 to July 2016;
FinTech was renamed to CardConnect Corp. following its acquisition of
CardConnect.
Experience, Qualifications,
Attributes and Skills Mrs. Cohen
brings to the Board a broad and diverse background in the financial
services industry, having founded and successfully led financial
institutions both in the U.S. and abroad. She possesses extensive
leadership and business management expertise focused on the financial
industry, an important knowledge base for the Board. Mrs. Cohen has
extensive legal, financial and real estate investment expertise and has
been recognized both nationally and internationally for her business
acumen and leadership skills, which contribute important expertise to the
Board.
Other Public
Directorships: CardConnect Corp.
(payment processing services) and FinTech Acquisition Corp. II (blank
check company). |
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Table of Contents
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Molly J. Coye,
M.D. |
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Independent
Director |
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Age: 70 |
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Committees
Served: |
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Director of Aetna Since:
2005 |
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Finance |
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Dr. Coye is Senior Executive in
Residence for Avia Health Innovation (a network for health systems), an
organization dedicated to helping healthcare providers select and
implement emerging tech-enabled solutions, a position she assumed in
August 2016. Previously, Dr. Coye served as Social Entrepreneur in
Residence for the Network for Excellence in Healthcare Innovation
(non-profit, nonpartisan health policy institute), from June 2015 to
August 2016, and Chief Innovation Officer of the UCLA Health System
(comprehensive health care organization), from September 2010 to May 2015.
She also served as President and Chief Executive Officer of CalRHIO
(non-profit California health information exchange organization), Chief
Executive Officer of the Health Technology Center (non-profit education
and research organization), which she founded in December 2000, and as a
Senior Advisor to the Public Health Institute until August 2010. Earlier,
Dr. Coye served in both the public and private sectors as Senior Vice
President of the West Coast Office of The Lewin Group (consulting) from
1997 to December 2000; Executive Vice President, Strategic Development, of
HealthDesk Corporation from 1996 to 1997; Senior Vice President, Clinical
Operations, Good Samaritan Health Hospital from 1993 to 1996; Director of
the California Department of Health Services from 1991 to 1993; Head of
the Division of Public Health, Department of Health Policy and Management,
Johns Hopkins School of Hygiene and Public Health from 1990 to 1991;
Commissioner of Health of the New Jersey State Department of Health from
1986 to 1989; Special Advisor for Health and the Environment, State of New
Jersey Office of the Governor from 1985 to 1986; and National Institute
for Occupational Safety and Health Medical Investigative Officer from 1980
to 1985. She formerly served as chair of PATH (non-profit organization
developing technologies for international health) and serves as chair of
the board of directors of Prosetta Biosciences, Inc. (biotechnology firm
developing assays and therapeutics).
Experience, Qualifications,
Attributes and Skills
Dr. Coye brings to the Board
significant clinical, health policy and health-related technology
expertise. She has developed this expertise through over 35 years of
service in the public and private health care sectors, where she has
managed major research studies, led health technology initiatives and held
several senior advisory roles. Her in-depth knowledge of innovative health
information technology and global health issues provides the Board with
valuable insights into areas of growing importance to the
Company. |
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Roger N. Farah |
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Independent
Director |
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Age: 64 |
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Committees
Served: |
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Director of Aetna Since:
2007 |
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●Compensation |
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●Executive |
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Finance |
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Mr. Farah is Executive Director of
Tory Burch LLC (lifestyle products); previously he served as Co-Chief
Executive Officer and Director from September 2014 to February 2017. He is
former Executive Vice Chairman of Ralph Lauren Corporation (lifestyle
products) having served in that position from November 2013 to May 2014
and previously served as President and Chief Operating Officer from April
2000 to October 2013 and Director from April 2000 to August 2014. Earlier,
Mr. Farah served as Chairman of the Board of Venator Group, Inc. (now Foot
Locker, Inc.) from December 1994 to April 2000, and as its Chief Executive
Officer from December 1994 to August 1999. Mr. Farah served as President
and Chief Operating Officer of R.H. Macy & Co., Inc. (retailing) from
July 1994 to October 1994. From June 1991 to July 1994, he was Chairman
and Chief Executive Officer of Federated Merchandising Services
(retailing), the central buying and product development arm of Federated
Department Stores, Inc. (retailing). From 1988 to 1991, Mr. Farah served
as Chairman and Chief Executive Officer of Richs/Goldsmiths Department
Stores (retailing) and President of Richs/Goldsmiths Department Stores
from 1987 to 1988. He held a number of positions of increasing
responsibility at Saks Fifth Avenue, Inc. (retailing) from 1975 to 1987.
Mr. Farah is a non-executive director of Metro Bank PLC (an independent
U.K. bank).
Experience, Qualifications,
Attributes and Skills Mr. Farah
brings to the Board extensive business and leadership experience. He has
strong marketing, brand management and consumer insights developed in his
over 40 years of experience in the retail industry. His former position as
Executive Vice Chairman of Ralph Lauren Corporation and current position
as Executive Director of Tory Burch LLC give Mr. Farah an important
perspective on the complex financial and operational issues facing the
Company. He also possesses significant public company experience as
demonstrated by his past and current service on a number of public company
boards.
Other Public Directorships:
The Progressive Corporation (auto
insurance) and Tiffany & Co. (jewelry and specialty
products). |
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Jeffrey E.
Garten |
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Independent
Director |
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Age: 70 |
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Committees
Served: |
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Director of Aetna or its
predecessors |
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●Compensation |
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since: 2000 |
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●Medical Affairs |
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Mr. Garten is Dean Emeritus of the
Yale School of Management. Previously, he served as Yale Universitys Juan
Trippe Professor in the Practice of International Trade, Finance and
Business from 2005 to 2015. From 1995 to 2005, he served as Dean of the
Yale School of Management. Mr. Garten also served as Chairman of Garten
Rothkopf (global consulting firm), from 2005 to 2016. Earlier, Mr. Garten
held senior posts on the White House staff and at the U.S. Department of
State from 1973 to 1979. He joined Shearson Lehman Brothers (investment
banking) in 1979 and served as Managing Director from 1984 to 1987. In
1987, Mr. Garten founded Eliot Group, Inc. (investment banking) and served
as President until 1990, when he became Managing Director of The
Blackstone Group (private merchant bank). From 1992 to 1993, Mr. Garten
was Professor of Finance and Economics at Columbia Universitys Graduate
School of Business. He was appointed U.S. Under Secretary of Commerce for
International Trade in 1993 and served in that position until 1995. He is
the author of A Cold Peace: America, Japan,
Germany and the Struggle for Supremacy; The Big Ten: Big Emerging Markets
and How They Will Change Our Lives; The Mind of the CEO; The Politics of
Fortune: A New Agenda for Business Leaders; and From Silk to Silicon: The
Story of Globalization Through Ten Extraordinary Lives. Mr. Garten is a trustee of the International Rescue
Committee.
Experience, Qualifications,
Attributes and Skills Mr. Garten
brings to the Board extensive experience in global investment banking and
many years of government service during which he held senior policy
positions that focused on trade and investment. His background includes
work with corporations in the United States and abroad, Congress,
regulatory agencies and foreign governments. He possesses significant
business and leadership experience as the former Dean of the Yale School
of Management and as a former principal of Garten Rothkopf, an
international consulting firm. Mr. Garten is a recognized expert on
finance and international trade, and has written extensively on
leadership, the relationship between business and government and the
challenges of operating in a global marketplace. His experience leading a
national working group on accounting standards and as a former advisor to
the Public Company Accounting Oversight Board provides him with a thorough
understanding of accounting issues. Mr. Garten also possesses significant
public company board experience.
Other Public Directorships:
CarMax, Inc. (automotive retailer) and
nine Credit Suisse mutual funds. |
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Table of Contents
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Ellen M.
Hancock |
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Independent
Director |
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Age: 74 |
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Committees
Served: |
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Director of Aetna or its
predecessors |
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●Audit |
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since: 1995 |
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●Executive
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Mrs. Hancock served as the President
of Jazz Technologies, Inc. and President and Chief Operating Officer of
its predecessor, Acquicor Technology Inc., from August 2005 to June 2007.
Prior to its merger with Jazz Semiconductor, Inc., a wafer foundry, in
February 2007, Jazz Technologies (then known as Acquicor) was a blank
check company formed for the purpose of acquiring businesses in the
technology, multimedia and networking sector. Mrs. Hancock previously
served as Chairman of the Board and Chief Executive Officer of Exodus
Communications, Inc. (Internet system and network management services).
She joined Exodus in March 1998 and served as Chairman from June 2000 to
September 2001, Chief Executive Officer from September 1998 to September
2001, and President from March 1998 to June 2000. Mrs. Hancock held
various staff, managerial and executive positions at International
Business Machines Corporation (information-handling systems, equipment and
services) from 1966 to 1995. She became a Vice President of IBM in 1985
and served as President, Communication Products Division, from 1986 to
1988, when she was named General Manager, Networking Systems. Mrs. Hancock
was elected an IBM Senior Vice President in November 1992, and in 1993 was
appointed Senior Vice President and Group Executive, which position she
held until February 1995. Mrs. Hancock served as an Executive Vice
President and Chief Operating Officer of National Semiconductor
Corporation (semiconductors) from September 1995 to May 1996, and served
as Executive Vice President for Research and Development and Chief
Technology Officer of Apple Computer, Inc. (personal computers) from July
1996 to July 1997.
Experience, Qualifications,
Attributes and Skills Mrs. Hancock brings to the Board highly
relevant experience in the field of information technology and consumer
products, where she has held senior leadership positions and also led a
start-up company. Her technology background provides the Board with an
important perspective on the health technology challenges and
opportunities of the Company. Mrs. Hancock also has significant public
company board experience. Her experience positions her well as Chair of
the Nominating and Corporate Governance Committee.
Other Public Directorships:
Colgate-Palmolive Company (consumer
products). |
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Table of Contents
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Richard J.
Harrington |
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Independent
Director |
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Age: 70 |
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Committees
Served: |
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Director of Aetna Since: 2008 |
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●Audit |
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●Investment &
Finance |
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Affairs |
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Mr. Harrington is Chairman and
General Partner of The Cue Ball Group (a venture capital firm).
Previously, he served as President and Chief Executive Officer of The
Thomson Corporation (business technology and integrated information
solutions) prior to its acquisition of Reuters Group PLC in April 2008.
From April 2008 to October 2009, he served as Chairman of the Thomson
Reuters Foundation. Mr. Harrington held a number of senior leadership
positions within Thomson since 1982, including CEO of Thomson Newspapers,
and CEO of Thomson Professional Publishing. Mr. Harrington began his
professional career with Arthur Young & Co. (public accounting firm)
in 1972, where he became a licensed certified public accountant. In 2002,
he was presented an Honorary Doctorate of Laws from University of Rhode
Island. In 2007, he received the Legend in Leadership award from the
Yale University Chief Executive Leadership Institute; the CEO of the
Year award from the Executive Council; and the Man of the Year award
from the National Executive Council for his many philanthropic
activities.
Experience, Qualifications,
Attributes and Skills
Mr. Harrington brings to the Board
the skills and insights of a seasoned business leader with over 30 years
experience in the business technology and information solutions area. He
has strategic vision and leadership expertise, and led The Thomson
Corporation at the time of its acquisition of Reuters Group PLC. Mr.
Harringtons experience in change management and strategic differentiation
gives the Board a unique perspective on these important issues. Mr.
Harrington, who has worked as a certified public accountant, also chairs
the audit committee of Xerox Corporation. These experiences position him
well as Chair of the Audit Committee.
Other Public
Directorship: Xerox Corporation
(document management, technology and service enterprise) (expected to
retire in May 2017). |
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Edward J.
Ludwig |
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Independent
Director |
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Age: 65 |
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Committees
Served: |
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Director of Aetna Since: 2003 |
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Finance |
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Mr. Ludwig is former Chairman of the
Board of Becton, Dickinson and Company (BD) (global medical technology
company) having served in this position from February 2002 through June
2012. He also served as Chief Executive Officer from January 2000 to
September 2011 and as President from May 1999 to December 2008. Mr. Ludwig
joined BD as a Senior Financial Analyst in 1979. Prior to joining BD, Mr.
Ludwig was a senior auditor with Coopers and Lybrand (now
PricewaterhouseCoopers) where he earned his CPA, and served as a financial
and strategic analyst at Kidde, Inc. He serves on the board of directors
of POCARED Diagnostics Ltd. (diagnostics technology
manufacturer).
Experience, Qualifications,
Attributes and Skills
Mr. Ludwig brings to the Board
significant executive-level leadership experience and business expertise.
His more than 30 years of experience in the field of medical technology
give Mr. Ludwig a unique perspective on the Companys strategy. As the
former Chairman of BD, Mr. Ludwig brings a thorough appreciation of the
strategic and operational issues facing a large public company in the
health care industry. Mr. Ludwig served as chief financial officer of a
Fortune 500 company and has worked as a certified public accountant. He
offers the Board a deep understanding of financial, accounting and
audit-related issues. These experiences position Mr. Ludwig well to serve
as Lead Director and Chair of our Investment & Finance
Committee.
Other Public
Directorships: Boston Scientific
Corporation (medical devices; lead independent director) and Xylem Inc.
(water technology company) (expected to retire in May 2017). |
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Table of Contents
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Joseph P.
Newhouse |
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Independent
Director |
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Age: 75 |
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Committees
Served: |
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Director of Aetna Since: 2001 |
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●Audit |
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●Medical Affairs |
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Dr. Newhouse is the John D.
MacArthur Professor of Health Policy and Management at Harvard University,
a position he assumed in 1988. At Harvard, he also is the Director of the
Division of Health Policy Research and Education, the Director of the
Interfaculty Initiative on Health Policy, and a member of the faculties of
the John F. Kennedy School of Government, the Harvard Medical School, the
Harvard School of Public Health and the Faculty of Arts and Sciences.
Prior to joining Harvard, Dr. Newhouse held various positions at The RAND
Corporation from 1968 to 1988, serving as a faculty member of the RAND
Graduate School from 1972 to 1988, as Deputy Program Manager for Health
Sciences Research from 1971 to 1988, Senior Staff Economist from 1972 to
1981, Head of the Economics Department from 1981 to 1985 and as a Senior
Corporate Fellow from 1985 to 1988. Dr. Newhouse was the Founding Editor
of the Journal of Health
Economics, which he edited for 30
years. He is a Faculty Research Associate of the National Bureau of
Economic Research, a member of the National Academy of Medicine, a fellow
of the American Academy of Arts and Sciences, and a director of the
National Committee for Quality Assurance. Dr. Newhouse is a former member
of the New England Journal of Medicine
Editorial Board and the author
of Free for All: Lessons from the RAND
Health Insurance Experiment and Pricing the Priceless: A
Health Care Conundrum.
Experience, Qualifications,
Attributes and Skills
Dr. Newhouses experience of over 45
years in the health policy arena significantly enhances the Boards
understanding of health policy issues, which is particularly important in
the current public policy reform environment. He has written extensively
on U.S. health policy matters, and he is a highly-regarded expert in
economics and business. Dr. Newhouses expertise in health policy and
health care financing enhances the Boards understanding of these
issues. |
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Olympia J.
Snowe |
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Independent
Director |
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Age: 70 |
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Committees
Served: |
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Director of Aetna Since: 2014 |
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●Audit |
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●Medical Affairs |
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Senator Snowe is currently Chairman
and CEO of Olympia Snowe, LLC, a policy and communications consulting
firm, and a senior fellow at the Bipartisan Policy Center, where she is a
member of the board and co-chairs its Commission on Political Reform.
Senator Snowe served in the U.S. Senate from 1995-2013, and as a member of
the U.S. House of Representatives from 1979-1995. While in the U.S.
Senate, she served as chair and was the ranking member of the Senate
Committee on Small Business and Entrepreneurship, and served on the Senate
Finance Committee, the Senate Intelligence Committee, and the Senate
Commerce, Science and Technology Committee. Senator Snowe also served as
chair of the Subcommittee on Seapower for the Senate Armed Services
Committee. She received a B.A. in political science from the University of
Maine and has received honorary doctorate degrees from many colleges and
universities.
Experience, Qualifications,
Attributes and Skills Senator Snowes more than 30 years
of experience as an elected member of the U.S. Congress provides the
Company with an important perspective on the Companys strategy in the
evolving health care marketplace and the political and regulatory
environment in which the Company operates. Her past leadership positions
in both the U.S. Senate and the U.S. House of Representatives have given
her broad and extensive experience with complex issues relevant to the
Company, including health care policy, budget and fiscal responsibility,
foreign affairs and national security. She also brings to the Board
experience as a director of T. Rowe Price Group, Inc., Synchrony Financial
and Synchrony Bank which operate in the consumer marketplace, an area of
strategic focus for the Company.
Other Public Directorships:
Synchrony Financial (consumer credit
businesses) and T. Rowe Price Group, Inc. (investment
management). |
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Table of Contents
Director
Compensation Philosophy and Elements
Each year, the Nominating Committee
reviews compensation for nonmanagement Directors and makes recommendations
regarding the prospective level and composition of Director compensation to the
Board for its approval.
The Nominating Committees goal is to
develop a compensation program that:
● |
Attracts and retains qualified Directors; |
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Recognizes Directors
critical contributions; and |
● |
Aligns, through the offering of stock-based
compensation, the interests of Aetnas Directors with the long-term
interests of our shareholders. |
As part of their review, the Nominating
Committee and the Board consider, among other factors, the Director compensation
practices at a comparative group of public companies (the comparative group),
based on market comparison studies prepared by Meridian, an outside
consultant.
The primary elements of Aetnas Director
compensation program are annual cash retainer fees and annual restricted stock
unit (RSU) awards. Directors also receive certain benefits. Directors who are
officers of Aetna receive no additional compensation for membership on the Board
or any of its Committees.
Director
Stock Ownership Guidelines
The Board has established Director Stock
Ownership Guidelines under which each nonmanagement Director is required to own,
within five years of joining the Board, a specified dollar value of Aetna common
shares, par value $.01 per share (Common Stock), or stock units having a
dollar value equal to $500,000. At March 17, 2017, all of Aetnas nonmanagement
Directors were in compliance with these guidelines.
Aetnas Code of Conduct prohibits
Directors from engaging in hedging strategies using puts, calls or other types
of derivative securities based on the value of the Common Stock.
2016
Nonmanagement Director Compensation
On September 24, 2015 and December 3, 2015
the Nominating Committee and Meridian reviewed a director compensation study
prepared by Meridian, and on December 4, 2015, the Board approved the Director
compensation package for nonmanagement Directors for 2016. The Board set the
total value of target per-Director compensation for 2016 at approximately
$289,415 consisting of stock-based compensation, cash and benefits and excluding
the estimated cost of the Charitable Award Program and Aetna Foundation, Inc.s
charitable contribution matching program. The annual Board retainer was
increased from $85,000 to $95,000 for 2016. In addition, for 2016, the retainer
for the Chair of the Audit Committee was increased from $20,000 to $25,000,
while the retainer for each Audit Committee member remained at $10,000. Chair
retainers were increased from $15,000 to $25,000 for the Compensation Committee,
$8,000 to $13,000 for the Investment and Finance Committee and the Medical
Affairs Committee, and $10,000 to $15,000 for the
Nominating Committee. Committee member retainers remained at $4,000 for the
Executive Committee, the Investment and Finance Committee and the Medical
Affairs Committee; $5,000 for the Nominating Committee; and $7,500 for the
Compensation Committee. The annual retainer for the Lead Director also was
increased from $25,000 to $35,000. In addition, the target grant date fair value
of annual RSU awards to each Director under the Director Plan was increased from
$160,000 to $170,000.
The 2016 Director Compensation table sets
forth for 2016 the total compensation of each of the nonmanagement Directors.
Actual compensation for any Director, and amounts shown in the 2016 Director
Compensation table, may vary by Director due to the Committees on which a
Director serves and other factors described in footnote 4 to the 2016 Director
Compensation table.
Table of Contents
2016
Director Compensation
Name |
|
Fees Earned or Paid
in Cash(2) |
|
Stock
Awards(3) |
|
All
Other Compensation(4) |
|
Total |
Fernando Aguirre |
|
$110,000 |
|
$170,054 |
|
$15,776 |
|
$295,830 |
Frank M. Clark |
|
107,500 |
|
170,054 |
|
54,315 |
|
331,869 |
Betsy Z. Cohen |
|
110,250 |
|
170,054 |
|
54,315 |
|
334,619 |
Molly J. Coye, M.D. |
|
116,000 |
|
170,054 |
|
52,893 |
|
338,947 |
Roger N. Farah |
|
128,000 |
|
170,054 |
|
51,795 |
|
349,849 |
Barbara Hackman Franklin(1) |
|
44,791 |
|
0 |
|
52,152 |
|
96,943 |
Jeffrey E. Garten |
|
106,500 |
|
170,054 |
|
49,315 |
|
325,869 |
Ellen M. Hancock |
|
124,000 |
|
170,054 |
|
54,315 |
|
348,369 |
Richard J. Harrington |
|
132,000 |
|
170,054 |
|
17,288 |
|
319,342 |
Edward J. Ludwig |
|
159,500 |
|
170,054 |
|
52,893 |
|
382,447 |
Joseph P. Newhouse |
|
109,000 |
|
170,054 |
|
54,315 |
|
333,369 |
Olympia J. Snowe |
|
109,000 |
|
170,054 |
|
17,288 |
|
296,342 |
(1) |
Ms. Franklin retired from
Aetnas Board of Directors on May 20, 2016. |
(2) |
The amounts shown in this
column include any cash compensation that was deferred by Directors during
2016 under the Aetna Inc. Non-Employee Director Compensation Plan (the
Director Plan). See Additional Director Compensation Information
beginning on page 24 for a discussion of Director compensation deferrals.
Amounts in this column consist of one or more of the
following: |
|
|
|
|
|
Activity |
|
2016 Fees Earned
or Paid in Cash |
|
Annual Retainer Fee |
|
$95,000 |
|
Lead Director |
|
35,000 |
|
Chair of the Audit Committee |
|
25,000 |
|
Membership on the Audit Committee |
|
10,000 |
|
Chair of the Compensation Committee |
|
25,000 |
|
Membership on the Compensation Committee |
|
7,500 |
|
Chair of the Nominating Committee |
|
15,000 |
|
Membership on the Nominating Committee |
|
5,000 |
|
Chair of the Investment and Finance Committee |
|
13,000 |
|
Chair of the Medical Affairs Committee |
|
13,000 |
|
Committee Membership (except as set forth above) (other than
the Chairs) |
|
4,000 |
(3) |
Amounts shown in this column represent the
full grant date fair value for RSUs granted in 2016 computed in accordance
with FASB ASC Topic 718, excluding forfeiture estimates. Refer to pages
130-133 of Aetnas 2016 Annual Report on Form 10-K for all relevant
valuation assumptions used to determine the grant date fair value of the
stock awards included in this column. On May 20, 2016, Aetna granted each
nonmanagement Director then in office 1,537 RSUs. The full grant date fair
value is calculated by multiplying the number of units granted times the
closing price of Aetnas Common Stock on the grant date. See Additional
Director Compensation Information beginning on page 24 for a discussion
of RSU awards and related deferrals.
|
|
At December 31, 2016, the number of
outstanding RSU awards held by each Director was 1,537. Refer to the
Beneficial Ownership Table and related footnotes beginning on page 27 for
more information on Director holdings of Common
Stock. |
Table of Contents
(4) |
All Other Compensation
consists of the items in the following table. See Additional Director
Compensation Information beginning below for a discussion of certain
components of All Other Compensation. |
|
|
|
Group Life
Insurance and Business Travel Accident
Insurance Premiums |
|
Charitable Award Program(a) |
|
Matching Charitable Contributions(b) |
|
Total |
|
Fernando Aguirre |
|
$ |
776 |
|
$ |
0 |
|
$ |
15,000 |
|
$ |
15,776 |
|
Frank M. Clark |
|
|
3,710 |
|
|
35,605 |
|
|
15,000 |
|
|
54,315 |
|
Betsy Z. Cohen |
|
|
3,710 |
|
|
35,605 |
|
|
15,000 |
|
|
54,315 |
|
Molly J. Coye, M.D. |
|
|
2,288 |
|
|
35,605 |
|
|
15,000 |
|
|
52,893 |
|
Roger N. Farah |
|
|
1,190 |
|
|
35,605 |
|
|
15,000 |
|
|
51,795 |
|
Barbara Hackman Franklin |
|
|
1,547 |
|
|
35,605 |
|
|
15,000 |
|
|
52,152 |
|
Jeffrey E. Garten |
|
|
3,710 |
|
|
35,605 |
|
|
10,000 |
|
|
49,315 |
|
Ellen M. Hancock |
|
|
3,710 |
|
|
35,605 |
|
|
15,000 |
|
|
54,315 |
|
Richard J. Harrington |
|
|
2,288 |
|
|
0 |
|
|
15,000 |
|
|
17,288 |
|
Edward J. Ludwig |
|
|
2,288 |
|
|
35,605 |
|
|
15,000 |
|
|
52,893 |
|
Joseph P. Newhouse |
|
|
3,710 |
|
|
35,605 |
|
|
15,000 |
|
|
54,315 |
|
Olympia J. Snowe |
|
|
2,288 |
|
|
0 |
|
|
15,000 |
|
|
17,288 |
|
(a) |
Refer to Director Charitable Award Program on page 25
for information about the Charitable Award Program, which was discontinued
for any new Director joining the Board after January 25, 2008. Amounts
shown are pre-tax and do not reflect the anticipated tax benefit to the
Company from the charitable contributions under the Charitable Award
Program. Directors derive no personal financial or tax benefit from this
program. |
|
(b) |
These
amounts represent matching contributions made by Aetna Foundation, Inc.
pursuant to Aetnas charitable giving programs, which encourage
contributions by eligible persons to charitable organizations. Through the
2016 Aetna Foundation Matching Grants Program for Directors, up to $15,000
in eligible contributions per Director per program year are matched at
100% by Aetna Foundation, Inc. Amounts shown are pre-tax. Directors derive
no personal financial or tax benefit from this
program. |
Additional
Director Compensation Information
The amounts shown in the Fees Earned or
Paid in Cash and Stock Awards columns of the 2016 Director Compensation table
include amounts that were deferred by Directors during 2016 under the Director
Plan. Under the Director Plan, nonmanagement Directors may defer payment of some
or all of their annual retainer fees, vested RSUs and dividend equivalents paid
on stock units to an unfunded stock unit account or unfunded interest account
until after they have resigned or retired (as defined in the Director Plan) from
the Board or elect to diversify their deferred stock unit holdings as described
below.
During the period of deferral, amounts
deferred to the stock unit account track the value of the Common Stock and earn
dividend equivalents. During the period of deferral, amounts deferred to the interest account accrue interest pursuant to a
formula equal to the rate of interest paid from time to time under the fixed
interest rate fund option of Aetnas 401(k) Plan (the 401(k) Plan), which was
2.05% for the period January to March 2016; 2.10% for the period April to June
2016; 2.10% for the period July to October 2016; and 2.15% for the period
October to December 2016.
Under the Director Plan, beginning at age
68, Directors are allowed to make an annual election to diversify up to 100% of
their voluntary deferrals into the stock unit account out of stock units and
into an interest account. During 2016, no Director made such a diversification
election. Directors who make a diversification election remain subject to the
Boards Director Stock Ownership Guidelines.
Table of Contents
Restricted
Stock Unit Awards |
On May 20, 2016, Aetna granted each
nonmanagement Director then in office 1,537 RSUs under the Director Plan. The
full grant date fair value of the RSUs granted to each nonmanagement Director
was $170,054. The RSUs vest in quarterly increments over a one-year period
beginning May 20, 2016, and are payable at the end of the one-year period in
shares of Common Stock or can be deferred under the Director Plan to a stock
unit account or an interest account as described above. The RSUs granted
to a nonmanagement Director will vest
immediately if the Director ceases to be a Director because of death,
disability, retirement or acceptance of a position in government service. All
RSUs granted to nonmanagement Directors also will vest upon a change in control
of Aetna (as defined in the Director Plan). The unvested RSUs granted to
nonmanagement Directors do not earn dividend equivalents, have no voting rights
and are not transferable.
Director
Charitable Award Program |
Prior to January 26, 2008, Aetna
maintained a Director Charitable Award Program (the Program) for nonmanagement
Directors serving on the Board. After a review of the Program and competitive
practices, the Board decided to close the Program, and any Director who first
joins the Board after January 25, 2008 is not eligible to participate. However,
to recognize pre-existing commitments, the Program remains in place for
Directors serving prior to that date. Under the Program, Aetna will make a
charitable contribution of $1 million in ten equal annual installments allocated
among up to five charitable organizations recommended by a participating
Director once he or she reaches age 72. For Mr. Farah, who joined the Board in
2007, contributions would occur once he reaches age 75. The Program may be
funded indirectly by life insurance on the lives of the participating Directors.
Messrs. Aguirre and Harrington and Senator Snowe are not eligible to participate
in the Program because they joined the Board after the Program closed to new
Directors.
Beneficiary organizations recommended by
Directors must be, among other things, tax exempt under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended (the Code). Donations Aetna
ultimately makes are expected to be deductible from Aetnas taxable income for
purposes of U.S. federal and other income taxes. Directors derive no personal
financial or tax benefit from the Program, since all insurance proceeds and
charitable deductions accrue solely to Aetna.
The Program values included in footnote 4
to the 2016 Director Compensation table represent an estimate of the present
value of the total annual economic net cost of the Program, pre-tax, for current
and former Directors, allocated equally among the Directors still participating
in the Program. The present value calculation considers estimates of (a)
premiums paid on whole life insurance policies purchased with respect to certain
of the Directors to fund part of the Program; (b) the expected future charitable
contributions to be paid by Aetna on behalf of current and former Directors; (c)
expenses associated with administering the Program; and (d) the expected future
proceeds from such whole life insurance policies which are, in turn, based on
expected mortality, as well as assumptions related to future investment returns
of the policies.
Aetna provides $150,000 of group life
insurance and $100,000 of business travel accident insurance (which includes
accidental death and dismemberment coverage) for its nonmanagement Directors.
Optional medical, dental and long-term care coverage for nonmanagement Directors
and their eligible dependents also is available to Directors at a cost similar
to that charged to Aetna employees and may be continued into retirement by
eligible Directors.
Aetna also reimburses nonmanagement
Directors for the out-of-pocket expenses they incur that pertain to Board
membership, including travel expenses incurred in connection with attending
Board, Committee and shareholder meetings, and for other Aetna business-related
expenses (including the business-related travel expenses of spouses if they are
specifically invited to attend an event).
From time to time, Aetna also may
transport Directors to and from Board meetings or Directors and their guests to
and from other Aetna business functions on Company aircraft.
Table of Contents
2017
Nonmanagement Director Compensation |
On September 29, 2016 and December 1, 2016
the Nominating Committee and Meridian reviewed a director compensation study
prepared by Meridian, and on December 2, 2016, the Board approved the Director
compensation package for nonmanagement Directors for 2017. The Board did not
change the total value of target per-Director compensation for 2017, and kept it
at approximately $289,415 consisting of stock-based compensation, cash and
benefits and excluding the estimated cost of the Charitable Award Program and
Aetna Foundation, Inc.s charitable contribution matching program. The annual
Board retainer remains at $95,000 for 2017. For 2017, Chair retainers
remain at $25,000 for the Audit Committee, $25,000 for
the Compensation Committee, $13,000 for the Investment and Finance Committee and
the Medical Affairs Committee, and $15,000 for the Nominating Committee.
Committee member retainers remain at $10,000 for the Audit Committee; $7,500 for
the Compensation Committee; $4,000 for the Executive Committee, the Investment
and Finance Committee and the Medical Affairs Committee; and $5,000 for the
Nominating Committee. The annual retainer for the Lead Director remains at
$35,000. In addition, the target grant date fair value of annual RSU awards to
each Director under the Director Plan continues to be $170,000.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934 requires our Directors, our executive officers and certain other
persons to file reports of holdings and transactions in our Common Stock with
the SEC. Based on our records and other information, we believe that during our
fiscal year ended December 31, 2016, our Directors and executive officers timely
met all applicable SEC filing requirements, except that one report covering one transaction (a charitable gift) was filed
late by Mr. Bertolini. In addition, one Form 4 filed by Francis S. Soistman, Jr.
was amended after it was filed to reflect a transfer of funds out of the
employer stock fund in the 401(k) Plan. That transaction, which involved 193
shares, was inadvertently excluded from the filed form.
Security
Ownership of Certain Beneficial Owners, Directors, Nominees and Executive
Officers
The following table presents, as of
December 31, 2016, the names of the only persons known to Aetna to be the
beneficial owners of more than 5% of the outstanding shares of our Common Stock.
The information set forth in the table below and in the related footnotes was
furnished by the identified persons to the SEC.
Name and Address of Beneficial Owner |
|
Amount and Nature of Beneficial
Ownership |
|
|
Percent(1) |
|
BlackRock, Inc. |
|
30,646,586 |
(2) |
|
8.71 |
% |
55 East 52nd Street |
|
|
|
|
|
|
New York, NY
10055 |
|
|
|
|
|
|
T. Rowe Price Associates, Inc. |
|
28,458,963 |
(3) |
|
8.09 |
% |
100 E. Pratt Street |
|
|
|
|
|
|
Baltimore, MD 21202 |
|
|
|
|
|
|
The Vanguard Group |
|
22,278,948 |
(4) |
|
6.33 |
% |
100 Vanguard Boulevard |
|
|
|
|
|
|
Malvern, PA
19355 |
|
|
|
|
|
|
State Street Corporation |
|
21,629,539 |
(5) |
|
6.15 |
% |
State Street Financial Center |
|
|
|
|
|
|
One Lincoln Street |
|
|
|
|
|
|
Boston, MA 02111 |
|
|
|
|
|
|
(1) |
Based on the number of
outstanding shares of Common Stock at December 31, 2016:
351,685,839. |
(2) |
Of the reported shares of
Common Stock, BlackRock, Inc. reports that it has sole voting power with
respect to 27,337,075 shares, shared voting and dispositive power with
respect to 12,079 shares and sole dispositive power with respect to
30,634,507 shares. |
(3) |
Of the reported shares of
Common Stock, T. Rowe Price Associates, Inc., reports that it has sole
voting power with respect to 8,638,313 shares, shared voting and
dispositive power with respect to no shares and sole dispositive power
with respect to all 28,458,963 shares. |
Table of Contents
(4) |
Of the reported shares of
Common Stock, The Vanguard Group reports that it has sole voting power
with respect to 550,636 shares, shared voting power with respect to 71,948
shares, sole dispositive power with respect to 21,662,140 shares and
shared dispositive power with respect to 616,808 shares. |
(5) |
Of the reported shares of
Common Stock, State Street Corporation reports that it has shared voting
and shared dispositive power with respect to all 21,629,539 shares. Of the
reported shares of Common Stock, 6,985,497 shares are held by State Street
Corporation in its capacity as the trustee of the 401(k)
Plan. |
Beneficial
Ownership Table
The following table presents, as of March
17, 2017, the beneficial ownership of shares of our Common Stock of each current
Director, each Nominee, each executive officer named in the 2016 Summary
Compensation Table on page 41 and Aetnas Directors and executive officers as a
group. The information set forth in the table below and in the related footnotes
has been furnished by the respective persons.
Amount and Nature of Beneficial
Ownership |
Name of Beneficial
Owner and Position |
|
Common
Stock |
|
|
Percent
of Common Stock |
Fernando Aguirre |
|
8,724 |
|
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Frank M. Clark |
|
14,779 |
(1) |
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Betsy Z. Cohen |
|
43,024 |
|
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Molly J. Coye, M.D. |
|
7,517 |
|
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Roger N. Farah |
|
3,000 |
|
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Jeffrey E. Garten |
|
9,439 |
(2) |
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Ellen M. Hancock |
|
46,954 |
|
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Richard J. Harrington |
|
6,563 |
(2) |
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Edward J. Ludwig |
|
11,688 |
(3) |
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Joseph P. Newhouse |
|
4,064 |
(4) |
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Olympia J. Snowe |
|
1,420 |
|
|
* |
|
(current Director and Nominee) |
|
|
|
|
|
|
Mark T. Bertolini |
|
2,789,634 |
(5) |
|
* |
|
(Chairman and Chief Executive Officer,
current Director, Nominee and named executive officer) |
|
|
|
|
|
|
Shawn M. Guertin |
|
182,347 |
(6) |
|
* |
|
(named executive officer) |
|
|
|
|
|
|
Gary W. Loveman, Ph.D. |
|
64,202 |
(7) |
|
* |
|
(named executive officer) |
|
|
|
|
|
|
Karen S. Lynch |
|
257,069 |
(8) |
|
* |
|
(named executive officer) |
|
|
|
|
|
|
Thomas J. Sabatino, Jr. |
|
34,441 |
(9) |
|
* |
|
(named executive officer) |
|
|
|
|
|
|
Directors and Executive Officers as a group
(19 persons) |
|
3,825,766 |
(10) |
|
1.14 |
% |
Unless noted in the following
footnotes, each person currently has sole voting and investment powers over the
shares set forth in the Beneficial Ownership Table. None of the shares reported
are pledged as security.
Table of
Contents
(1) |
Includes 10,295 shares held in an irrevocable trust of
which Mr. Clark is sole trustee; and 1,000 shares held jointly with Mr.
Clarks spouse, as to which Mr. Clark shares voting and investment
powers. |
(2) |
All shares held jointly with the Directors spouse, as
to which the Director shares voting and investment
powers. |
(3) |
Includes 4,729 shares held in a revocable trust of which
Mr. Ludwig is sole trustee; and 6,959 shares held jointly with Mr.
Ludwigs spouse, as to which Mr. Ludwig shares voting and investment
powers. |
(4) |
Includes 2,000 shares held jointly with Dr. Newhouses
spouse, as to which Dr. Newhouse shares voting and investment
powers. |
(5) |
Includes 1,864,317 shares that Mr. Bertolini has the
right to acquire currently or within 60 days of March 17, 2017, upon the
exercise of SARs; and 454,071 shares held in a grantor retained annuity
trust of which Mr. Bertolini is the sole trustee and 120,000 shares held
in a charitable lead annuity trust of which Mr. Bertolini is the sole
investment advisor. |
(6) |
Includes 125,174 shares that Mr. Guertin has the right
to acquire currently or within 60 days of March 17, 2017, upon the
exercise of SARs; and 622 shares held through the 401(k) Plan by Mr.
Guertin. |
(7) |
Includes 54,412 shares that Mr. Loveman has the right to
acquire currently or within 60 days of March 17, 2017, upon the exercise
of SARs; and 115 shares held through the 401(k) Plan by Mr.
Loveman. |
(8) |
Includes 191,687 shares that Ms. Lynch has the right to
acquire currently or within 60 days of March 17, 2017, upon the exercise
of SARs; and 50,512 shares held in a revocable trust of which Ms. Lynch is
the sole trustee. |
(9) |
Includes 34,441 shares that Mr. Sabatino has the right
to acquire currently or within 60 days of March 17, 2017, upon the
exercise of SARs. |
(10) |
Directors and executive
officers as a group have sole voting and investment power over 1,272,176
shares, share voting and investment power with respect to 28,722 shares
(including 2,761 shares held through the 401(k) Plan). Also includes
2,524,868 shares that executive officers have the right to acquire
currently or within 60 days of March 17, 2017, upon the exercise of SARs.
At March 17, 2017, there were no outstanding SARs held by nonmanagement
Directors. |
Table of
Contents
COMPENSATION DISCUSSION AND ANALYSIS
I. |
2016 A Year of Strong Operating
Performance and Effective Execution of Our
Strategy |
A. 2016 Company Performance At-a-Glance
Total Shareholder
Return:
16% |
|
Net Income
per Share:
$6.41 |
|
Operating earnings per
share:
$8.23 |
|
Total Revenue
and Operating Revenue (each):
$63 billion |
|
Continued
Dividend of
$1.00 per share (annual) |
Three-year
cumulative total shareholder return of 86% |
|
5% decrease in
net income per share from 2015 primarily due to increased restructuring
costs and Humana transaction and integration related costs |
|
7% increase in
operating earnings per share over 2015 |
|
Nearly 5%
increase over 2015 (each) |
|
In February
2017, the Company announced an increased dividend of $2.00 per share
(annualized) |
Net income refers to net income
attributable to Aetna reported in Aetnas GAAP Consolidated Statements of
Income. Unless otherwise indicated, all references in this Proxy Statement to
net income, net income per share, operating earnings, and operating earnings per
share are based on net income attributable to Aetna, which excludes amounts
attributable to non-controlling interests. Operating earnings per share,
operating revenue, pre-tax operating margin, adjusted operating expense ratio
and adjusted selling, general and administrative expense ratio are non-GAAP
financial measures. Refer to Annex A to this Proxy Statement for a
reconciliation of these and other non-GAAP financial measures to the most
directly comparable GAAP measures.
B. |
2016
Company Performance and Related Impact on Compensation
Decisions |
The Companys financial performance in
2016 was strong and continued to reflect the Companys attention to effective
execution of our strategy. During 2016, the Company delivered:
● |
Strong
Shareholder Returns. During 2016, our stock price increased 15%
from $108.12 on December 31, 2015 to $124.01 on December 31, 2016. On
March 17, 2017, our stock closed at $131.80. Our total shareholder return
for 2016 was 16%, and our three-year cumulative total shareholder return
was 86%. |
Total Shareholder
Return |
|
Table of
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COMPENSATION
DISCUSSION AND ANALYSIS |
● |
Solid
Earnings. For 2016, we reported net income per share of $6.41
compared to $6.78 in 2015, a 5 percent decrease. We reported 2016
operating earnings per share of $8.23, a 7% increase over 2015, consistent
with our long-term targeted range. The year-over-year decline in net
income per share was primarily driven by an increase in restructuring
costs, higher Humana Inc. (Humana) transaction related costs and the
favorable impact of litigation related proceeds recorded in 2015. The
year-over-year increase in operating earnings per share represents solid
earnings growth, despite lack of share repurchases during the year and
significant pressure from our Affordable Care Act compliant
products. |
Net Income per
Share |
|
Operating Earnings per
Share |
|
● |
Strong
Revenue. In 2016, we reported annual total revenue and operating
revenue of $63 billion (each), a nearly 5% increase over 2015 (each). This
growth in total revenue and operating revenue was driven primarily by
higher health care premium yields and membership growth in the Government
business in our Health Care segment. |
● |
Dividend.
In 2016, we maintained our quarterly cash dividend, reflecting continued
confidence in our strategy and our commitment to enhancing total return
for our shareholders. Our merger agreement with Humana restricted our
ability to increase our dividend during the term of the agreement, which
ended on February 14, 2017. On February 17, 2017, the Company announced
that it will increase its quarterly dividend to $.50 per share ($2.00
annualized). The prior 5-year dividend growth rate, exclusive of the 2017
increase, was approximately 67%. |
Dividend
Payments* |
|
● |
Medical
Membership. In 2016, we ended the year with 23.1 million medical
members, consistent with our year-end membership
projections. |
● |
After-tax Net
Income Margin. Aetna reported a 2016 after-tax net income margin of
3.6%, a 40 basis point decrease compared to 2015, primarily due to an
increase in restructuring costs and Humana-related transaction and
integration related costs. |
● |
Pre-tax
Operating Margin in High Single Digits. Aetna reported a 2016
pre-tax operating margin of 8.3%, consistent with our high single-digit
target. |
● |
Total Company
Expense Ratio. Our full year 2016 total company expense ratio was
19.1%, consistent with 2015. |
● |
Adjusted
Operating Expense Ratio. Our full year adjusted operating expense
ratio was 18.1%, an 80 basis point improvement over 2015. This
year-over-year improvement resulted from our disciplined focus on managing
costs while growing operating revenue. |
● |
Progress on
Strategic Initiatives. While we are disappointed in the United
States District Courts decision to block our proposed acquisition of
Humana (the Humana acquisition) and the
resulting |
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COMPENSATION DISCUSSION AND ANALYSIS |
termination of
the transaction, our commitment to our strategy has never been stronger. We
continue to make investments in digital tools and differentiated care models to
provide our members with access to simple, high quality, affordable products
that help them achieve their best health. These investments position the Company
to continue to be part of the solution in the evolving health care landscape. In
2016, we delivered 45% of our medical costs through value-based arrangements and
launched new consumer-centric insurance products in select geographies, often
backed by accountable care organizations or value-based network
agreements.
The Companys executive pay decisions
reflect the alignment between executive compensation and Company
performance:
● |
Annual Bonus
Payments Above Target. Our annual bonus program (ABP), which for
2016 was weighted 70% on annual financial metrics and 30% on quantitative
constituent measures, was funded at 114.7% of target. |
● |
CEO Special
Retention PSU. The Compensation Committee determined that the
special retention PSU granted to Mr. Bertolini in August 2013 vested below
target level (74.6%) based on Company performance against the stretch
cumulative three-year pre-tax operating income goal (excluding net
investment income) set at the time the grant was awarded. Under the terms
of the award, the special retention PSU was deferred to an unfunded deferred stock unit account which is
payable to Mr. Bertolini six months following his termination of
employment. |
● |
CEO Special
Performance Stock Appreciation Right vested below target. The
Compensation Committee determined that the 2013 Performance Stock
Appreciation Rights (PSARs) granted to Mr. Bertolini vested below target
level (83.3%) based on Company performance against the three-year relative
total shareholder return performance goal set at the time the award was
granted. |
C.
|
2016 Say on Pay Vote/Compensation Plan Design
Changes |
At our 2016 annual meeting, 93.7% of the
votes cast at the meeting supported the Companys 2015 Named Executive Officer
(NEO or Named Executive Officer) compensation, reflecting strong concurrence
with the Companys executive compensation programs. Annually, the Compensation
Committee reviews trends and best practices in executive compensation and
related governance areas. The Compensation Committee also considers the
alignment between the current compensation programs and the Companys business
strategy. Based on this review and consideration, and given this solid
shareholder vote supporting our executive compensation programs, the
Compensation Committee did not make any material changes to the executive
compensation program design for 2016.
II.
|
Objectives of Our Executive Compensation
Program |
An understanding of our executive
compensation program begins with the program objectives. These
include:
● |
Aligning the interests of our
executives and shareholders. We align the interests of our executives with
those of our shareholders through equity-based compensation that is
settled in shares of Common Stock and executive share ownership and share
retention requirements. |
● |
Linking rewards to performance. We
implement a pay-for-performance philosophy by tying a significant portion
of our executives compensation to achieving financial and quantitative
constituent goals that are linked to the
Companys business strategy and each executives contributions towards
achieving those goals. |
● |
Offering competitive compensation.
We offer an executive compensation program that is competitive and that
helps us attract, motivate and retain top performing executives in the
highly competitive global market for health care
talent. |
We continue to believe that a significant
portion of executive compensation should be variable and based on stock price
change and meeting or exceeding defined performance goals (i.e., at risk). Our
program meets this goal by delivering compensation in the form of equity and
other performance-based awards.
Table of
Contents
COMPENSATION
DISCUSSION AND ANALYSIS |
The charts below show the 2016 mix of
target compensation opportunity for Mr. Bertolini and for the other NEOs as a
group.
Mr. Bertolini |
|
Average: Other NEOs |
|
|
|
III. |
Summary of 2016 Chief Executive Officer Compensation
Decisions |
Mr. Bertolinis
Compensation |
|
|
|
|
|
|
2015 |
|
|
2016 |
|
Salary |
$1,000,000 |
|
|
$1,200,000 |
|
Annual Bonus(1) |
|
|
|
|
|
Target = 300% of Salary |
153% of target |
|
|
115% of target |
|
Cash Delivered |
$1,840,000 |
|
|
$1,656,000 |
|
Equity Delivered |
$2,760,000 |
|
|
$2,484,000 |
|
Long-term Incentive Opportunity |
$11,594,377 |
(2) |
|
$12,443,861 |
(3) |
(1) |
Bonus amount was paid 40% in cash and 60% in RSUs. The RSUs for
performance year 2016 were granted on February 17, 2017 and will vest over
a 36-month period (one-third per year). Due to Securities and Exchange
Commission reporting rules for equity awards, the RSUs granted in 2016 for
performance year 2015 are reported in the 2016 Summary Compensation Table
on page 41, and the RSUs granted in 2017 for performance year 2016 will be
reported in Aetnas 2018 Proxy Statement. |
(2) |
Reflects the grant date fair value of SARs ($8,144,312) and PSUs
($3,450,065) granted March 2, 2015. |
(3) |
Reflects the grant date fair value of SARs ($8,693,798) and PSUs
($3,750,063) granted February 19, 2016. |
Below is a summary of the Compensation
Committees compensation decisions for Mr. Bertolini:
● |
2016 Compensation
Opportunity |
|
Mr. Bertolinis 2016 total direct
compensation opportunity, $17.3 million at target, was at the
75th percentile of the chief executive officer pay of the
comparison group we use to assess compensation. The Compensation
Comparison Group is listed on page 40. The Compensation Committee felt
this opportunity and its relative positioning were appropriate in light of
Company performance and the fact that Mr. Bertolini continues to be a
recognized thought leader who serves as a positive and constructive
influence on not only the transformation of
the health care system, but also on important social policy issues
affecting the Company and our nation. |
|
Within the total direct compensation
opportunity, Mr. Bertolinis 2016 annual bonus target was set at 300% of
his annual base salary. Of this amount, 60% is paid in RSUs which are tied
directly to the value of Aetna shares and which vest over three years. The
Compensation Committee recognizes that Mr. Bertolinis annual bonus
opportunity is high compared to the annual bonus targets of his peers in
the Compensation Comparison Group when viewed in isolation. However, when
this bonus opportunity was first established on his appointment as CEO,
there was a corresponding |
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS |
|
reduction to Mr. Bertolinis annual
long-term incentive equity grant value to keep his total compensation
levels at an appropriate market level. This change in mix of pay
opportunity, coupled with the additional vesting required for the equity
portion of the annual bonus award, was made to more directly align Mr.
Bertolinis total direct compensation opportunity with the Companys
annual financial performance, while continuing the focus on creation of
long-term shareholder value and retention. |
|
Mr. Bertolinis 2016 long-term
incentive opportunity was set at $12.4 million. This grant was delivered
70% in SARs ($8.69 million) and 30% in PSUs ($3.75 million). The SARs and
PSUs granted in 2016 are described on page 34. The SARs vest in three
substantially equal annual installments beginning on February 19, 2017,
and the PSUs will vest 36 months from the grant date, in each case subject
to Mr. Bertolinis continued employment and, with respect to PSUs, Company
performance. |
● |
Compensation
Decisions for 2016 |
|
Base Salary. Mr. Bertolinis salary was increased by 20% in 2016. Mr.
Bertolinis salary had not been adjusted since his appointment as CEO in
November 2010. The Compensation Committee changed Mr. Bertolinis base
salary due to Mr. Bertolinis performance and due to the fact that it had
begun to significantly lag the base salaries of the CEOs in the
Compensation Comparison Group. |
|
Annual
Bonus. Mr. Bertolinis annual bonus for 2016 was determined
primarily based on the Companys financial performance against the ABP
goals described in detail beginning on page 35 and paid out at 115% of
target. In addition to the strong financial performance, the Compensation
Committee and the Board also considered growth in the Companys individual
Medicare membership, expansion of our individual Medicare Advantage
footprint (six new states for 2017), our Medicare star ratings performance
(best in class among publicly traded peers), and the acceleration of our
consumer strategy. While the Company is disappointed in the court decision
to block the Humana acquisition and the resulting termination of the
transaction, throughout the process the Company was able to exceed its
financial objectives and continue its focus on executing its Vision 2020
strategy as a stand-alone company. |
|
Mr. Bertolini continues to be a
recognized thought leader who serves as a positive and constructive
influence on not only the transformation of the health care system, but
also important social policy issues affecting the Company and our nation.
He is the recipient of numerous awards, including being named one
of Fortunes 50 Greatest Leaders and Modern Healthcares 100 Most Influential
People in Healthcare (ranked 4th in 2016). His work in recent
years to raise the minimum base wage and enhance employee benefits for the
Companys lowest paid employees sparked a wider societal dialogue on these
issues. Further, Mr. Bertolini continues to build a strong leadership team
which, under his direction, is driving the business and executing the
Companys strategy, while keeping the focus on long-term success. Mr.
Bertolinis annual bonus for 2016 was paid 40% in cash and 60% in RSUs
that will vest in three equal annual installments over a 36-month
period. |
● |
Long-Term
Incentive Awards |
|
CEO Special Retention
PSU. The Compensation Committee
determined that the special retention PSU granted to Mr. Bertolini in
August 2013 vested below target level (74.6%) based on Company performance
against the stretch cumulative three-year pre-tax operating income goal
(excluding net investment income) set at the time the award was granted.
Under the terms of the award, the special retention PSU was deferred to an
unfunded deferred stock unit account which is payable to Mr. Bertolini six
months following his termination of employment. |
|
CEO Special Performance
SAR. The Compensation Committee
determined that the 2013 PSAR granted to Mr. Bertolini vested below target
level (83.3%) based on Company performance against the three-year relative
total shareholder return performance goal set at the time the award was
granted. |
More information about the rationale
behind the special retention PSU and PSAR grants is set forth in the Companys
Current Report on Form 8-K filed with the SEC on August 5, 2013.
Table of
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COMPENSATION DISCUSSION AND ANALYSIS |
IV. 2016 Compensation Policies
Elements of the Companys Executive Compensation
Program
The 2016 compensation program for our
Named Executive Officers consisted of the following components:
Component |
|
Description |
|
Purpose |
Base Salary |
|
Fixed cash compensation based on the
executives past and potential future performance, scope of
responsibilities, experience and competitive market pay
practices. |
|
Provide a fixed, baseline level of
compensation that is not contingent upon Company
performance. |
Performance-Based Annual
Bonus(1) |
|
Cash payment tied to meeting annual
performance goals set for the fiscal year that are tied to the Companys
annual business plan and individual performance. |
|
Motivate executives to achieve
superior annual financial and operational performance. |
Long-Term Equity
Incentives:(2) |
|
|
|
|
PSUs |
|
Performance-based stock units which
pay out, if at all, based on the Companys performance against a
three-year adjusted operating earnings per share compound annual growth
financial goal. If the goal is met, the PSUs granted in 2016 will vest in
a single installment at the end of a 36-month vesting period as described
on page 37. |
|
Align achievement of specific
multi-year internal financial performance objective with the creation of
shareholder value, increase executive stock ownership and provide
retention incentives. |
RSUs |
|
Time-vested stock units that vest in
substantially equal annual installments typically over 36
months. |
|
Align compensation with changes in
Company stock price and the creation of shareholder value, and strengthen
retention. |
SARs |
|
Stock appreciation rights that vest
in substantially equal annual installments over 36 months. |
|
Align compensation with changes in
Company stock price and the creation of shareholder
value. |
(1) |
A portion of Mr. Bertolinis 2016 annual bonus was paid in RSUs
that vest over 36 months as described on page 32. |
(2) |
All awards are settled in stock and are subject to stock ownership
requirements. |
The Company also provides health, welfare
and retirement benefits to its employees generally, including its executive
officers.
Determining Total Cash and Equity Compensation
We generally set total cash and equity
compensation opportunity (including base salary, performance-based annual bonus
and long-term incentive equity awards) for senior executives at an amount that
is competitively reasonable and appropriate for our business needs and
circumstances. For the Named Executive Officers, the Compensation Committee
reviews the cash and equity compensation opportunities available to similarly
positioned executives of companies in the Compensation Comparison Group. The
Compensation Committee also reviews third-party compensation surveys. The
third-party compensation surveys are purchased from outside compensation vendors
selected by our human resources department, and the data provided by the vendors
is reviewed by the Compensation Committees independent compensation consultant.
The data presented to the Compensation Committee includes a regression analysis
(market compensation data adjusted to account for company size based on revenue)
where available. The compensation of our Named Executive Officers is compared
across the Named Executive Officer group and with the compensation of other
senior executives of the Company for internal pay
relativity purposes. The Compensation Committee, however, has not established
specific internal pay relativity guidelines.
Our compensation program is generally
designed to deliver above-median total compensation for above-median performance
and below-median total compensation for below-median performance. For executives
with compensation opportunities that are more highly variable, including the
Named Executive Officers, total cash and equity compensation opportunity may be
above the median, but at risk amounts are paid only if performance goals are
achieved or exceeded. In addition, the value of the equity awards is directly
subject to Company stock price change. The Compensation Committee does not
formulaically set the target compensation opportunity at a specific level
compared to the Compensation Comparison Group. Instead, the Compensation
Committee uses the Compensation Comparison Group information as a reference
point to make what is ultimately a subjective decision that balances (i) a
competitive level of compensation for a position; (ii) the executives
experience and scope of responsibility; (iii) individual performance; (iv)
percent of pay at risk; and (v) retention. There is no pre-defined formula
that determines which of these factors is more or less important, and the
emphasis placed on a specific factor may vary among executive officers and will
reflect market conditions and business needs at the time the pay decision is
made.
Table of
Contents
COMPENSATION DISCUSSION AND ANALYSIS |
Base Salary
In making annual base salary
determinations, the Compensation Committee considers:
● |
the terms of any employment
agreement with the executive; |
● |
the recommendations of our CEO (as
to executives other than himself); |
● |
the salary paid to persons in
comparable positions in the Compensation Comparison
Group; |
● |
the executives experience and scope
of responsibility; and |
● |
a subjective assessment of the
executives individual past and potential future contribution to Company
results. |
Base salary as a percent of total
compensation also differs based on the executives position and function.
Although the Compensation Committee has not established a specific ratio of base
salary to total compensation, in general, executives with the highest level and
broadest scope of responsibility have the lowest percentage of their
compensation fixed as salary and have the highest percentage of their
compensation subject to performance-based standards (performance-based annual
bonus and long-term incentives).
In 2016, Karen Lynch received a salary
increase of 3.5%. This adjustment was consistent with the Company-wide salary
increase pool for 2016. Mr. Guertins salary was not adjusted because his total
direct compensation was at the market median. Due to the recent hire dates of
Mr. Loveman and Mr. Sabatino, their salaries were not adjusted. Mr. Bertolinis
2016 salary increase is described on page 33.
Annual Performance-based Bonuses
Except for a portion of Mr. Bertolinis
bonus (described on page 33), 2016 annual bonuses were paid in cash. All
executive officers and managers are eligible to participate in the ABP. The
Compensation Committee, after consulting with the Board, establishes specific
financial and operational goals at the beginning of each performance year.
Annual bonus funding is linked directly to achieving these annual goals.
Following the completion of the performance year, the Compensation Committee
assesses performance against the pre-established performance goals to determine
bonus funding for the year. The ABP goals, described in more detail below, come
directly from our strategic and business operating plan approved by the Board.
These annual goals were selected to balance the delivery of financial results
with the achievement of internal and external constituent goals. The Company
believes it is important to consider non-financial, but quantifiable,
constituent goals because they focus on our longer-term success and the quality
of our brand and reputation. In 2016, the non-financial constituent goals had a
30% weighting.
Under the ABP, if all of the goals are met
at the target level in the aggregate, then up to 100% of the target bonus pool
is funded. If the goals are exceeded in the aggregate by a sufficient margin,
then up to a maximum of 200% of the target bonus pool is funded. At the
threshold performance level, 25% of the target bonus pool is funded. The bonus
pool is not funded if aggregate performance falls below the threshold
level.
For 2016, bonus pool funding under the ABP
was determined as set forth below:
Weight |
|
Measure |
|
Threshold |
|
Target |
|
Maximum |
|
Actual Performance |
|
Performance Level |
|
Weighted Points |
70% |
|
Financial Performance |
|
25% |
|
100% |
|
200% |
|
|
|
|
|
|
50% |
|
Operating earnings per
share(1) |
|
$7.71 |
|
$8.16 |
|
$8.67 |
|
$8.23 |
|
>target |
|
55.1 |
10% |
|
Operating Revenue(2) |
|
$60,389 |
|
$61,989 |
|
$63,589 |
|
$63,046 |
|
<maximum |
|
15.7 |
10% |
|
Adjusted SG&A ratio(3) |
|
18.8% |
|
18.0% |
|
17.2% |
|
17.6% |
|
>target |
|
11.9 |
30% |
|
Constituent Index
Performance |
|
|
|
|
|
|
|
|
|
|
|
|
10% |
|
Consumer(4) |
|
25% |
|
100% |
|
200% |
|
100% |
|
target |
|
10.0 |
10% |
|
Provider(5) |
|
25% |
|
100% |
|
200% |
|
163% |
|
<maximum |
|
16.3 |
10% |
|
Talent and Culture(6) |
|
25% |
|
100% |
|
200% |
|
57% |
|
<target |
|
5.7 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
114.7 |
(1) |
Operating earnings per share is a non-GAAP financial measure used
in connection with the ABP. Refer to Annex A to this Proxy Statement for a
reconciliation of operating earnings per share to the most directly
comparable GAAP measure. Operating earnings per share excludes from net
income attributable to Aetna (a) net realized capital gains or losses; (b)
amortization of other acquired intangible assets; and (c) other items, if
any, that neither relate to the ordinary course of our business nor
reflect our underlying business performance. These adjustments are
established when the target is set at the start of the
year. |
(2) |
Operating revenue is a non-GAAP financial measure used in
connection with the ABP. Refer to Annex A to this Proxy Statement for a
reconciliation of operating revenue to the most directly comparable GAAP
measure. Operating revenue excludes from total revenue (a) net realized
capital gains or losses; and (b) other items, if any, that neither relate
to the ordinary course of our business nor reflect our underlying business
performance. These adjustments are established when the target is set at
the start of the year. |
Table of Contents
COMPENSATION
DISCUSSION AND ANALYSIS |
(3) |
Adjusted selling, general and
administrative expenses as a percentage of operating revenue is a non-GAAP
financial measure used in connection with the ABP. Refer to Annex A to
this Proxy Statement for a reconciliation of adjusted SG&A ratio to
the most directly comparable GAAP measure. Adjusted SG&A ratio is
calculated by dividing total operating expenses, excluding incentive
compensation expense and other items, if any, that neither relate to the
ordinary course of our business nor reflect our underlying business
performance, by operating revenue. These adjustments are established when
the target is set at the start of the year. |
(4) |
This goal measures consumer
experience in 4 new geographies (58% at target) and Medicare Star Ratings
(88% at target). |
(5) |
This goal measures membership
growth in accountable care/joint venture organizations (33.8% at target),
and customers achieving clinical transformation quality program objectives
where the number of accountable care organizations meet or exceed targets
(6 at target). |
(6) |
This goal measures employee
engagement and culture determined through responses to the Companys
all-employee survey, as well as performance against diversity
initiatives. |
After applying the weightings noted above,
the Compensation Committee set the Company-wide 2016 ABP bonus pool funding at
114.7% of target. Within this pool funding, the Compensation Committee set
actual bonus amounts after conducting a subjective review of each Named
Executive Officers individual performance for the year against the business
unit and qualitative performance goals established at the start of the year and
considering Mr. Bertolinis recommendations (as to executives other than
himself). In determining the annual bonus for Mr. Bertolini, the Compensation
Committee consulted with the non-management members of the Board. The factors
considered in determining individual bonus amounts for the Named Executive
Officers are set forth below.
Named Executive Officer |
|
2016
Annual Bonus Target as a Percent of Base
Salary(1) |
|
|
2016
Actual Bonus as a Percent of Target |
|
Individual Discretionary
Factors |
Mr.
Bertolini |
|
300% |
(2) |
|
115% |
|
●Described on pages 32-33 |
Mr. Guertin |
|
110% |
|
|
111% |
|
●Leadership to drive Company financial results above
targets
●Achievement of productivity savings vs.
targets
●Talent development
●Compliance |
Mr.
Loveman |
|
110% |
|
|
120% |
|
●Leadership to re-align organization around consumer
capabilities and building of new care model designed to proactively engage
members and help them improve their health
●Exceeding cost reduction targets
●Development of new Company brand, including strategic
alliance with Apple Inc.
●Talent development |
Ms. Lynch |
|
120% |
|
|
111% |
|
●Financial results above target
●Execution of local market strategy
●Talent development |
Mr.
Sabatino |
|
100% |
|
|
110% |
|
●Compliance, including perfect CMS compliance program
effectiveness score
●Legal support to execution of ACO/joint venture strategy
to support our value-based consumer model
●Robust defense of Humana
acquisition |
(1) |
For NEOs other than Messrs.
Bertolini and Sabatino, the target was based on base salary paid during
2016. For Messrs. Bertolini and Sabatino, the target was based on base
salary in effect on December 31, 2016. |
(2) |
Mr. Bertolinis bonus was paid
40% in cash and 60% in RSUs that vest over 36 months as described on page
32. |
Long-term Incentive Equity Awards
(SARs and PSUs)
The Companys 2016 long-term incentive
equity award program was delivered in the form of SARs (70%) and PSUs (30%). The
objective of the SAR and PSU awards is to advance the longer-term interests of
the Company and our shareholders by directly aligning executive compensation
with increases in our stock price and providing incentives for executives to
meet the specified PSU performance goal set at the time of grant. These awards
complement cash incentives tied to annual performance as they motivate
executives to increase earnings and shareholder value over time. The 70%
allocation to SARs aligns the majority of the long-term incentive value directly
with shareholder interest in increasing our stock price; the award has no value
if the stock price declines after the award is granted. Because SARs have a
10-year term, this design supports our long-term strategy and emphasizes the
creation of long-term shareholder value. The remaining 30% of the long-term
incentive value also is tied to the value of our stock and achievement of a
specific financial operating goal. The SARs granted in 2016 to the Named
Executive Officers vest in substantially equal annual installments over a
36-month period. The PSUs granted in 2016 vest in a single installment at the
end of a 36-month period based on attaining the three-year performance goal set
at the time of grant. The SAR and PSU awards are settled in Common Stock, net of
applicable withholding taxes, in order to reduce shareholder dilution resulting
from the awards. The Company does not pay dividend equivalents on unvested
equity awards.
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS |
PSU Performance
Goal
The PSUs granted in 2016 vest at 100% if
the Company attains a three-year operating earnings per share compound annual
growth rate goal. This goal is difficult as it requires the Company to exceed
its operating earnings growth objectives for the 2016-2018 performance period.
This goal was selected to emphasize the importance of operating earnings growth
to our strategic objectives. If this performance goal is met, the PSUs will vest
at the end of the 36-month vesting period. At maximum performance, the PSUs vest
at 200% of the units granted.
Consideration of Prior Equity
Grants When Making Compensation Decisions
In making individual long-term incentive
equity award decisions, the Compensation Committee does not specifically take
into account prior equity grants or amounts realized on the exercise or vesting
of prior equity grants in determining the equity value to be granted. The
Companys philosophy is to pay an annualized market value for the executives
position, sized according to the performance level of the individual in the
position. The Compensation Committee does, however, consider prior equity grants
to executives in evaluating the overall design, timing and size of the long-term
incentive equity program. In addition, in assessing the recruitment/retention
risk for executives, the Compensation Committee considers the value of unvested
equity awards.
Grant Date of Equity
Awards
The effective date of the annual long-term
incentive equity grant in 2016 was the stock market trading day of the February
Board of Directors and Compensation Committee meetings which followed the
release of our annual earnings. The grant price of any annual award is the
closing price of our Common Stock on the day the award is granted. The
Compensation Committee selected this timing so that the award value reflected
our most recent full-year earnings information and outlook. The Compensation
Committee also makes grants during the year, primarily in connection with hiring
and promotions. Under our policy, off-cycle grants made in connection with
hiring are generally effective on the date of hire or the 10th day of
the month following the date of hire.
Health, Welfare and Pension
Benefits
To attract and retain employees at all
levels, we offer a subsidized health and welfare benefits program that includes
medical, dental, life, accident, disability, vacation and severance benefits.
Our subsidy for employee health benefits is graduated so that executives pay a
higher contribution than more moderately paid employees.
The Company makes the 401(k) plan
available to substantially all of our U.S.-based employees, including the Named
Executive Officers. We also offer a Supplemental 401(k) Plan (the Supplemental
401(k) Plan) to provide benefits above Code contribution limits. There is no
Aetna matching contribution under the Supplemental 401(k) Plan. The Companys
Pension Plan (the Pension Plan) was frozen as of December 31, 2010, and the
Companys Supplemental Pension Plan (the Supplemental Pension Plan) was frozen
in January 2007. Interest continues to accrue on outstanding pension cash
balance accruals.
Employee Stock Purchase
Plan
Our tax-qualified employee stock purchase
plan is available to substantially all employees, including the Named Executive
Officers. This program allows our employees to buy our Common Stock at a 5%
discount to the market price on the purchase date (up to a maximum of $25,000
per year). We offer this program because we believe it is important for all
employees to focus on increasing the value of our Common Stock and to have an
opportunity to share in our success.
Other Compensation to the Named
Executive Officers
The Company provides certain other
compensation to the Named Executive Officers (see the All Other Compensation
table in footnote 10 to the 2016 Summary Compensation Table on page 43). In the
interest of security, with certain exceptions, the Company requires that the CEO
use corporate aircraft for personal travel whenever use of the aircraft is not
required for a business purpose. Other Named Executive Officers are also
permitted to use corporate aircraft for personal travel at the discretion of the
CEO. The Compensation Committee believes this practice is reasonable and
appropriate given security concerns, efficiency of travel and the demands put on
our Named Executive Officers time. A financial planning reimbursement, not to
exceed $10,000, is provided to Named Executive Officers to assure sound
financial planning and tax compliance and to provide more time for the executive
to focus on the needs of our business. The Company does not provide any tax
gross-ups related to other compensation, including perquisites (other than in
connection with relocation benefits provided in connection with an executives
relocation of residence on behalf of the Company).
Severance Following Termination of
Employment
The narrative disclosure and tables
beginning on page 51 outline the potential payments that would be made to the
Named Executive Officers following their termination of employment under various
scenarios. The difference in treatment among the Named Executive Officers is due
to the dynamics of negotiation at the time the executive was hired (or
promoted), the executives position in the Company, market practices and Company
policies in effect at the time of entry into an executives agreement with the
Company.
Table of Contents
COMPENSATION
DISCUSSION AND ANALYSIS |
V. Governance
Policies
Governance
Highlights |
The Company seeks to maintain best
practice standards with respect to the oversight of executive
compensation. The following policies and practices were in effect during
2016: |
✓ |
Compensation Committee composed
solely of independent Directors; |
✓ |
use of an independent compensation
consultant retained directly by the Compensation Committee who performs no
consulting or other services for management of the Company;
|
✓ |
annual review and approval of our
executive compensation strategy by the Compensation Committee, including a
review of our compensation-related risk; |
✓ |
robust stock ownership requirements
for our executive officers and related stock retention policy;
|
✓ |
a policy prohibiting all employees,
including the Named Executive Officers, from engaging in hedging
transactions with respect to equity securities of the Company;
|
✓ |
a compensation claw back policy
that permits the Company to recoup performance-based compensation if the
Board determines that a senior executive has engaged in fraud or
misconduct that has caused a material restatement of financial results;
|
✓ |
no tax gross-up benefits upon a
change-in-control; and |
✓ |
no tax gross-ups on perquisites and
personal benefits, other than in connection with relocation benefits
provided in connection with an executives relocation of residence on
behalf of the Company. |
Many of these policies are described more
fully below.
Independent Compensation
Consultant
During 2016, the Compensation Committee
engaged Meridian to provide independent compensation consulting services to the
Compensation Committee. The role of the independent compensation consultant is
to ensure that the Compensation Committee has objective information needed to
make informed decisions in the best interests of shareholders based on
compensation trends and practices in public companies. During the past year, the
Compensation Committee requested Meridian to: (i) assist in the development of
agendas and materials for Compensation Committee meetings; (ii) provide market
data and alternatives to consider for making compensation decisions for the CEO
and other executive officers; (iii) assist in the design of the Companys
long-term compensation program; and (iv) keep the Compensation Committee and the
Board abreast of changes in the executive compensation environment. Meridian
also advised the Nominating Committee regarding Director compensation. In
accordance with Compensation Committee policy, the Company does not engage its
independent compensation consultant for any services other than in support of
these two Committees. Meridian had no relationships with any member of the
Compensation Committee or any executive officer of the Company. The Compensation
Committee has the sole authority to determine the compensation for and to
terminate the services of the independent compensation consultant. The
Compensation Committee has reviewed the independence of the independent
compensation consultant pursuant to applicable independence rules and determined
that its engagement does not raise any conflicts of interest.
Role of the CEO and the Board of
Directors in Determining Compensation
The CEO personally reviews and reports to
the Compensation Committee on the performance of select senior executives
(including all of the Named Executive Officers other than himself) and provides
specific compensation recommendations to the Compensation Committee. The
Compensation Committee considers this information in making compensation
decisions for these executives, but the Compensation Committee does not delegate
its decision-making authority to the CEO. The CEO also provides a
self-evaluation to the Compensation Committee. The CEO does not, however,
present a recommendation for his own compensation. Prior to making any decisions
regarding CEO compensation, the Compensation Committee consults with the
non-management Directors and receives input from its independent compensation
consultant. After discussing proposed compensation decisions for the CEO with
the non-management Directors, the Compensation Committee determines the CEOs
compensation. The CEO is not present when his performance or compensation is
evaluated and determined, unless invited by the Compensation
Committee.
Compensation Committee Review of
Tally Sheets
In setting executive officer compensation,
the Compensation Committee reviews tally sheets prepared for each executive
officer. The tally sheets provide information that is in addition to the
information shown in the 2016 Summary Compensation Table. The tally sheets show
not only current
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS |
year compensation, but also historical
equity gains and the in-the-money value of outstanding equity awards (vested and
unvested). The tally sheets also show amounts that would be paid under various
termination of employment scenarios. While compensation decisions are based on
competitive market pay data and individual performance, the Compensation
Committee uses the tally sheets as a reference point and as a basis for
comparing program participation across the executive group. During 2016, the
information in the tally sheets was consistent with the Compensation Committees
expectations and, therefore, the tally sheets did not have a specific effect on
individual compensation decisions.
Compensation Committee Review of
Risk
Annually, as part of its compensation
review process, the Compensation Committee requests the Companys chief
enterprise risk officer to oversee a review of the Companys compensation
policies for executives and other employees to determine whether those programs
create risks that, individually or in the aggregate, are reasonably likely to
have a material adverse effect on the Company. As part of this risk review
process in 2016, the chief enterprise risk officer, assisted by human resources
personnel, inventoried Company compensation programs and established a financial
framework, consistent with other enterprise risk management protocols, to
identify compensation policies or practices that could have a material adverse
effect on the Company. This review included the structure and material features
of each program, the behaviors the programs are intended to reward, as well as
program features or Company policies that operate to mitigate risk. After
conducting the review and assessing potential risks, the Company determined, and
the Compensation Committee concurred, that the design of each incentive program
contains sufficient design features, controls, limits and/or financial
requirements so that the program does not create risks that are reasonably
likely to have a material adverse effect on the Company.
Although a significant
portion of the Companys executive compensation is performance-based, we do not
believe that our programs encourage excessive or unnecessary risk-taking.
Overall, our compensation mix, including the use of equity and other long-term
incentives, is generally consistent with competitive market practice. While risk
is a necessary part of growing a business, our executive compensation program
attempts to mitigate risk and align the Companys compensation policies with the
long-term interests of the Company. The Company does so by utilizing performance
goals that are directly aligned with the Companys strategic plan, balancing
annual and longer-term incentives, using multiple performance measures
(including financial and non-financial measures) and applying program caps.
Other risk mitigation features include the Companys executive stock ownership
requirements and the Companys claw back policy both of which are described
below.
Executive Stock Ownership
Requirements
The CEO and other senior executives are
subject to minimum stock ownership requirements. The ownership requirements are
based on the executives pay opportunity and position within the Company. The
ownership levels (which include shares owned and vested stock units but not
SARs, stock options or unvested PSUs) are as follows:
Stock Ownership as a Multiple of Base
Salary
Position |
Multiple of
Salary |
Chief Executive Officer |
5x |
President |
4x |
Other Named Executive Officers |
3x |
Other Executives |
.5x to 3x |
Executive officers who do not meet their
individual ownership requirement at the time the equity vests or is exercised
are required to retain 50% of the after-tax equity payout in shares of Common
Stock until the executive officers termination of employment with the Company.
All NEOs are in compliance with the Companys stock ownership and/or retention
policy.
Policy on Hedging or Pledging
Company Stock
The Companys Code of Conduct prohibits
all employees (including executives) and Directors from engaging in hedging
strategies using puts, calls or other types of derivative securities based upon
the value of our Common Stock. No Directors or Named Executive Officers entered
into a pledge of Common Stock in 2016.
Company Claw Back/Recoupment
Policy
Under the Companys recoupment policy, if
the Board determines that a senior executive of the Company has engaged in fraud
or intentional misconduct that has caused a material restatement of the
Companys financial statements, the Board will review the performance-based
compensation earned by that senior executive on the basis of the Companys
performance during the periods materially affected by the restatement. If, in
the Boards view, the performance-based compensation would have been lower if it
had been based on the restated results, the Board may seek to recoup the portion
of the performance-based compensation that would not have been awarded to that
senior executive. This policy applies to the Companys executive officers as
well as the Chief Accounting Officer and Head of Internal Audit. In addition,
equity awards issued to employees include a provision that allows the Company to
recoup gains if the employee violates covenants that prohibit terminated
employees from soliciting our customers and employees, disclosing confidential
information and providing services to certain competitors of the
Company.
Table of Contents
COMPENSATION
DISCUSSION AND ANALYSIS |
Internal Revenue Code Section
162(m)
Prior to 2013, Section 162(m) of the Code
limited the tax deductibility of compensation in excess of $1 million paid to
certain executive officers, unless the payments were made under plans that
satisfy the technical requirements of the Code. It had been the Companys policy
to maximize the tax-deductibility of payments as performance-based
compensation under Section 162(m) to the extent practicable. As part of the
federal health care reform legislation enacted in 2010, Section 162(m) was
revised with respect to compensation paid by health insurance companies, including the Company. Starting
in 2013, an annual deduction limit of $500,000 per person applies to the
compensation we pay to any of our employees and certain service providers. The
tax deduction limitation applies whether or not the compensation is
performance-based or is provided pursuant to a shareholder-approved plan. As a
result, the Company has suspended the application of the technical requirements
needed to qualify compensation as performance-based under Section 162(m),
although our annual bonus and other incentive programs continue to be
performance-based.
VI. Compensation Comparison
Group Companies
A consolidated Compensation Comparison
Group was developed in 2016, combining our former health care and cross-industry
comparison groups. Anticipated healthcare industry consolidation coupled with
our expanding business footprint created the need to consolidate our former
comparison groups into one group, the Compensation Comparison Group. The
companies in the Compensation Comparison Group are listed below. The companies
were selected from the FORTUNE 200 and are
companies that we compete against for talent and capital, while maintaining
diverse industry representation. The selected companies represent companies with
revenues ranging from .5 to 2x our projected 2016 revenue. The pay information
for the group was developed using market pay survey data purchased from
third-party compensation vendors.
Compensation Comparison
Group:(1)
American International Group, Inc. |
Honeywell International Inc. |
PepsiCo, Inc. |
The Allstate Corporation |
Humana Inc. |
Pfizer Inc. |
Anthem, Inc. |
International Business Machines
Corporation |
The Procter & Gamble
Company |
Caterpillar Inc. |
Intel Corporation |
Target Corporation |
Cigna Corporation |
Johnson & Johnson |
UnitedHealth Group Incorporated |
The Coca-Cola Company |
Lockheed Martin Corporation |
United Parcel Service, Inc. |
Comcast Corporation |
Lowes Companies, Inc. |
United Technologies Corporation |
CVS Health Corporation |
MetLife, Inc. |
The Walt Disney Company |
HCA
Holdings, Inc. |
|
Wells Fargo & Company |
(1) |
If pay data for a comparable
position is not available from a company on this list, the company is not
included in the Compensation Comparison Group for that
position |
Third-Party Compensation
Surveys:
● |
Frederic W. Cook & Co., Inc.
Long-Term Incentive Survey; |
● |
Pearl Meyer Executive and Senior
Management Total Compensation Survey; |
● |
Mercers Integrated Health Network
Survey; |
● |
Aon Hewitt Total Compensation
Measurement Survey; and |
● |
Radford Global Technology
Survey. |
Table of Contents
EXECUTIVE
COMPENSATION
The 2016 Summary Compensation Table
summarizes the total compensation paid or earned for the fiscal year ended
December 31, 2016 and applicable comparative data for 2015 and 2014 by our
Chairman and Chief Executive Officer, any person who served as our Chief
Financial Officer during 2016 and our three other most highly paid executive
officers (collectively, the NEOs or Named Executive Officers). When setting
compensation for each of the NEOs, the Compensation Committee reviews tally
sheets which show the executives current compensation, including equity and
non-equity based compensation.
The cash ABP award amounts for 2016 are
disclosed in the 2016 Summary Compensation Table as Non-Equity Incentive Plan
Compensation and are not categorized as a Bonus payment under SEC rules. The
amounts listed under Non-Equity Incentive Plan Compensation were approved by
the Compensation Committee in February 2017. The amount listed under Bonus was
approved by the Compensation Committee and paid to Mr. Sabatino in recognition
of his career move. Please refer to the 2016 Grants of Plan-Based Awards table
and related footnotes beginning on page 44 for information about the number of
RSUs, PSUs, and SARs, as applicable, awarded to each of the NEOs in the fiscal
year ended December 31, 2016.
The Company has entered into employment
arrangements with certain of the NEOs. Refer to Agreements with Named Executive
Officers beginning on page 56 for a discussion of those employment
arrangements.
2016 Summary Compensation
Table
The following table shows the compensation
provided by Aetna to each of the Named Executive Officers in 2016 and applicable
comparative data for 2015 and 2014.
Name and Principal
Position(1) |
|
Year |
|
Salary |
|
Bonus |
|
Stock Awards(2) |
|
|
Option
Awards |
|
|
Non-Equity Incentive Plan
Compensation(8) |
|
Change in Pension Value
and Nonqualified Deferred
Compensation Earnings(9) |
|
All Other
Compensation(10) |
|
Total |
Mark T.
Bertolini |
|
2016 |
|
$1,141,762 |
|
$ |
0 |
|
$6,510,109 |
(3)(4) |
|
$8,693,798 |
(6) |
|
$1,656,000 |
|
$ |
9,075 |
|
$651,562 |
|
$18,662,306 |
Chairman and |
|
2015 |
|
1,034,483 |
|
|
0 |
|
5,970,103 |
|
|
8,144,312 |
|
|
1,840,000 |
|
|
2,073 |
|
271,908 |
|
17,262,879 |
Chief Executive Officer |
|
2014 |
|
996,169 |
|
|
0 |
|
5,070,050 |
|
|
6,908,918 |
|
|
1,680,000 |
|
|
23,386 |
|
388,799 |
|
15,067,322 |
Shawn M. Guertin Executive Vice
President, CFO and Chief Enterprise Risk Officer |
|
2016 |
|
796,935 |
|
|
0 |
|
1,230,021 |
(3) |
|
2,851,587 |
(6) |
|
979,000 |
|
|
0 |
|
28,124 |
|
5,885,667 |
|
2015 |
|
773,946 |
|
|
0 |
|
1,230,040 |
|
|
2,945,460 |
|
|
1,437,503 |
|
|
0 |
|
27,080 |
|
6,414,029 |
|
2014 |
|
697,318 |
|
|
0 |
|
810,035 |
|
|
1,865,430 |
|
|
913,920 |
|
|
0 |
|
165,804 |
|
4,452,507 |
Gary W. Loveman,
Ph.D. |
|
2016 |
|
796,935 |
|
|
0 |
|
1,200,020 |
(3) |
|
2,782,035 |
(6) |
|
1,057,000 |
|
|
0 |
|
568,411 |
|
6,404,401 |
Executive Vice President, |
|
2015 |
|
137,990 |
|
|
0 |
|
4,200,104 |
|
|
3,324,828 |
|
|
319,550 |
|
|
0 |
|
23,242 |
|
8,005,714 |
Consumer Health and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen S.
Lynch |
|
2016 |
|
919,483 |
|
|
0 |
|
1,530,026 |
(3) |
|
3,547,079 |
(6) |
|
1,229,000 |
|
|
0 |
|
101,938 |
|
7,327,526 |
President |
|
2015 |
|
919,828 |
|
|
0 |
|
1,500,063 |
|
|
3,541,015 |
|
|
1,728,000 |
|
|
0 |
|
69,882 |
|
7,758,788 |
|
|
2014 |
|
672,414 |
|
|
0 |
|
825,065 |
|
|
1,899,972 |
|
|
776,250 |
|
|
0 |
|
68,924 |
|
4,242,625 |
Thomas J. Sabatino,
Jr. |
|
2016 |
|
502,874 |
|
|
600,000 |
|
4,550,128 |
(5) |
|
3,765,090 |
(7) |
|
822,000 |
|
|
0 |
|
748,413 |
|
10,988,505 |
Executive Vice President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Counsel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Principal position at December
31, 2016. Mr. Sabatino joined Aetna in April 2016. Mr. Loveman joined
Aetna in October 2015. |
Table of Contents
(2) |
The amounts reported in this
column represent the aggregate grant date fair value of the stock awards
granted in the relevant year computed in accordance with FASB ASC Topic
718, excluding forfeiture estimates. Refer to pages 130-133 of Aetnas
2016 Annual Report on Form 10-K for all relevant valuation assumptions
used to determine the grant date fair value of the stock awards included
in this column. Amounts shown in this column for 2016 include the grant
date fair value of PSUs and RSUs granted to the NEOs in 2016. The PSU
grant date fair values are based upon the probable outcome of the
performance conditions associated with these PSUs as of the grant date.
Each vested PSU represents one share of Common Stock and will be paid in
shares of Common Stock, net of taxes. |
(3) |
The grant date fair value of
the PSUs granted to these NEOs on February 19, 2016 assuming the highest
level of performance conditions associated with these PSUs occurs is as
follows: Mr. Bertolini $7,500,125; Mr. Guertin $2,460,041; Mr. Loveman
$2,400,040; and Ms. Lynch $3,060,051. The PSUs granted on February 19,
2016 will vest, if at all, based on achievement of the three-year Compound
Annual Growth Rate of adjusted operating earnings per share target set by
the Compensation Committee at the time of the grant. The Compensation
Committee will determine the Companys achievement of this performance
goal following December 31, 2018. Vesting of the PSUs granted to these
NEOs on February 19, 2016 will occur, if at all, on February 19, 2019, and
is subject to continued employment of the applicable NEO on February 19,
2019. |
(4) |
Includes $2,760,046 grant date
fair value of RSUs granted to Mr. Bertolini in February 2016 as part of
his 2016 ABP award. |
(5) |
Includes sign-on PSUs, PSUs
and RSUs granted to Mr. Sabatino on May 10, 2016. The grant date fair
value of the sign-on PSUs and PSUs granted to Mr. Sabatino on May 10, 2016
assuming the highest level of performance conditions associated with these
PSUs occurs is $2,000,074 and $2,200,112, respectively. The sign-on PSUs
and PSUs granted on May 10, 2016 will vest, if at all, based on
achievement of the three-year Compound Annual Growth Rate of adjusted
operating earnings per share target set by the Compensation Committee at
the time of the grant. The Compensation Committee will determine the
Companys achievement of this performance goal following December 31,
2018. Vesting of the sign-on PSUs granted in May 2016 will occur, if at
all, on May 10, 2019, and under certain circumstances is not subject to
continued employment of Mr. Sabatino on May 10, 2019. Vesting of the PSUs
granted on May 10, 2016 will occur, if at all, on May 10, 2019, and is
subject to continued employment of Mr. Sabatino on May 10, 2019. The grant
date fair value of the RSUs granted to Mr. Sabatino on May 10, 2016 is
$2,500,035. |
(6) |
Grant date fair value of the
SARs granted to these NEOs on February 19, 2016. These SARs have an
exercise price of $103.45 (the closing price of the Common Stock on
February 19, 2016) and will vest in three substantially equal annual
installments beginning on February 19, 2017. The SAR values are calculated
using a modified Black-Scholes Model for pricing options. Refer to page
130 of Aetnas 2016 Annual Report on Form 10-K for all relevant valuation
assumptions used to determine the grant date fair value of these
SARs. |
(7) |
Grant date fair value of the
SARs granted to Mr. Sabatino on May 10, 2016. These SARs have an exercise
price of $114.46 (the closing price of the Common Stock on May 10, 2016)
and will vest in three equal annual installments beginning on May 10,
2017. The SAR value is calculated using a modified Black-Scholes Model for
pricing options. The assumptions used to determine the grant date fair
value of these SARs were: |
Expected term (in years): |
7.37 |
|
Volatility: |
30.7 |
% |
Risk-free interest rate: |
1.56 |
% |
Dividend yield: |
0.90 |
% |
Initial price: |
$114.46 |
|
(8) |
Amounts shown in this column
represent cash bonus awards for the relevant calendar year under the ABP.
For 2016, bonus pool funding under the ABP depended upon Aetnas
performance against certain measures discussed under Annual
Performance-based Bonuses beginning on page 35. Mr. Bertolini s 2016 ABP
award was paid 40% ($1,656,000) in cash and 60% ($2,484,000) in RSUs with
a grant date of February 17, 2017, that vest over three years (one-third
per year). These RSUs will be included in the 2017 Grants of Plan-Based
Awards Table in Aetnas 2018 Proxy Statement. |
(9) |
Amounts in this column only
reflect pension values and do not include earnings on deferred
compensation amounts because such earnings are neither above-market nor
preferential. Refer to the 2016 Nonqualified Deferred Compensation table
and Deferred Compensation Narrative beginning on page 49 for a
discussion of deferred compensation. The following table presents the
change in present value of accumulated benefits under the Pension Plan and
Supplemental Pension Plan from December 31, 2015 through December 31,
2016. See Pension Plan Narrative beginning on page 48 for a discussion
of pension benefits and the economic assumptions behind the figures in
this table. |
Named Executive
Officer |
Pension
Plan |
|
Supplemental
Pension Plan |
Mr.
Bertolini |
$2,673 |
|
$6,402 |
Mr.
Guertin** |
0 |
|
0 |
Mr.
Loveman** |
0 |
|
0 |
Ms.
Lynch** |
0 |
|
0 |
Mr.
Sabatino** |
0 |
|
0 |
** |
Messrs. Guertin, Loveman and
Sabatino and Ms. Lynch are not eligible to participate in the Pension Plan
because they joined the Company after the Pension Plan was frozen on
December 31, 2010. Messrs. Guertin, Loveman and Sabatino and Ms. Lynch are
not eligible to participate in the Supplemental Pension
Plan. |
Table of Contents
(10) |
All Other Compensation consists
of the following for 2016: |
|
|
|
Mr.
Bertolini |
|
Mr.
Guertin |
|
Mr.
Loveman |
|
Ms.
Lynch |
|
Mr.
Sabatino |
|
Personal Use of Corporate Aircraft(a) |
|
$ |
602,781 |
|
$ |
0 |
|
$ |
537,626 |
|
$ |
55,453 |
|
$ |
4,261 |
|
Personal Use of Corporate Vehicles(b) |
|
|
18,206 |
|
|
0 |
|
|
0 |
|
|
21,111 |
|
|
0 |
|
Professional Organization/Club Dues(c) |
|
|
3,671 |
|
|
1,220 |
|
|
750 |
|
|
0 |
|
|
700 |
|
Business Entertainment Event(d) |
|
|
1,004 |
|
|
1,004 |
|
|
0 |
|
|
1,004 |
|
|
1,004 |
|
Relocation Expenses(e) |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
726,548 |
|
Financial Planning |
|
|
10,000 |
|
|
10,000 |
|
|
14,135 |
|
|
8,470 |
|
|
0 |
|
Company Matching Contributions Under the 401(k)
Plan(f) |
|
|
15,900 |
|
|
15,900 |
|
|
15,900 |
|
|
15,900 |
|
|
15,900 |
|
TOTAL |
|
$ |
651,562 |
|
$ |
28,124 |
|
$ |
568,411 |
|
$ |
101,938 |
|
$ |
748,413 |
|
(a) |
The calculation of incremental cost for personal use of
Company aircraft includes only those variable costs incurred as a result
of personal use, such as fuel and allocated maintenance costs, and
excludes non-variable costs which the Company would have incurred
regardless of whether there was any personal use of the
aircraft. |
|
(b) |
Represents the aggregate incremental cost to the Company
of personal use of a Company driver and vehicle. |
|
(c) |
Represents annual membership dues to professional and
business organizations. |
|
(d) |
Represents costs associated with attendance at offsite
event with a guest. |
|
(e) |
Represents reimbursement of certain of Mr. Sabatinos
relocation expenses, including $313,750 of broker commissions, $232,012
for carrying costs, $130,305 of moving costs, as well as temporary living
expenses, tax assistance, closing costs on sale of a home, executive
support, miscellaneous expenses and allowances, and
interest. |
|
(f) |
Represents actual match received under the 401(k) Plan
attributable to the 2016 plan year. |
Table of Contents
2016
Grants of Plan-Based Awards
The following table sets forth information
concerning plan-based equity and non-equity awards granted by Aetna during 2016
to the Named Executive Officers.
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive Plan
Awards(9) |
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards(11) |
|
All
Other Stock Awards: Number of Shares of Stock or
Units (#) |
|
All
Other Stock Awards: Number
of Securities Underlying Options(13) |
|
Exercise or Base Price
of Option Awards ($)(14) |
|
Grant Date Fair Value of
Stock and Option Awards ($)(15) |
Name |
|
Grant Date |
|
Approval
Date |
|
Threshold ($) |
|
Target
($) |
|
|
Maximum
($) |
|
Threshold (#)(12) |
|
Target
(#) |
|
Maximum (#) |
|
|
|
|
Mark T. |
|
2/19/2016 |
(1) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
9,063 |
|
36,250 |
|
72,500 |
|
|
|
|
|
|
|
3,750,063 |
Bertolini |
|
2/19/2016 |
(2) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
253,242 |
|
$103.45 |
|
8,693,798 |
|
|
2/19/2016 |
(3) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,680 |
|
|
|
|
|
2,760,046 |
|
|
|
|
|
|
|
0 |
|
1,440,000 |
(10) |
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shawn M. |
|
2/19/2016 |
(1) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
2,973 |
|
11,890 |
|
23,780 |
|
|
|
|
|
|
|
1,230,021 |
Guertin |
|
2/19/2016 |
(2) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,064 |
|
$103.45 |
|
2,851,587 |
|
|
|
|
|
|
|
0 |
|
880,000 |
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary W. |
|
2/19/2016 |
(1) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
2,900 |
|
11,600 |
|
23,200 |
|
|
|
|
|
|
|
1,200,020 |
Loveman, Ph.D. |
|
2/19/2016 |
(2) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,038 |
|
$103.45 |
|
2,782,035 |
|
|
|
|
|
|
|
0 |
|
880,000 |
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen S. Lynch |
|
2/19/2016 |
(1) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
3,698 |
|
14,790 |
|
29,580 |
|
|
|
|
|
|
|
1,530,026 |
|
|
2/19/2016 |
(2) |
|
2/18/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,323 |
|
$103.45 |
|
3,547,079 |
|
|
|
|
|
|
|
0 |
|
1,108,350 |
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas J. |
|
5/10/2016 |
(4) |
|
3/30/2016 |
|
|
|
|
|
|
|
|
2,185 |
|
8,737 |
|
17,474 |
|
|
|
|
|
|
|
1,000,037 |
Sabatino, Jr. |
|
5/10/2016 |
(5) |
|
3/30/2016 |
|
|
|
|
|
|
|
|
2,294 |
|
9,174 |
|
18,348 |
|
|
|
|
|
|
|
1,050,056 |
|
|
5/10/2016 |
(6) |
|
3/30/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,237 |
|
$114.46 |
|
1,429,796 |
|
|
5/10/2016 |
(7) |
|
3/30/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,086 |
|
$114.46 |
|
2,335,294 |
|
|
5/10/2016 |
(8) |
|
3/30/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,842 |
|
|
|
|
|
2,500,035 |
|
|
|
|
|
|
|
0 |
|
750,000 |
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents PSUs
granted under the Amended Aetna Inc. 2010 Stock Incentive Plan (the 2010
Stock Plan) in the respective amounts listed. The Compensation Committee
approved the grant of these PSUs at a meeting on February 18, 2016, with
an effective grant date of February 19, 2016. The PSUs do not earn
dividend equivalents and have no voting rights. See the discussion of
long-term incentive equity awards in Long-term Incentive Equity Awards
(SARs and PSUs) on page 36 for a discussion of the vesting of these
awards based on the Compensation Committees determination that the
Company has attained the applicable performance metrics. Refer to footnote
3 on page 42 for a discussion of how the number of vested PSUs will be
determined. |
(2) |
Represents SARs
granted under the 2010 Stock Plan in the respective amounts listed. The
Compensation Committee approved the grant of these SARs at a meeting on
February 18, 2016, with an effective grant date of February 19, 2016.
These SARs vest in three substantially equal annual installments beginning
on February 19, 2017. |
(3) |
Represents 60% of
Mr. Bertolinis 2015 ABP award which was awarded in RSUs awarded under the
2010 Stock Plan with a grant date of February 19, 2016 that vest in three
substantially equal annual installments beginning on February 19,
2017. |
(4) |
Represents sign-on
PSUs granted under the 2010 Stock Plan. The Compensation Committee
approved the grant of these PSUs at a meeting on March 30, 2016, with an
effective grant date of May 10, 2016. The PSUs do not earn dividend
equivalents and have no voting rights. See the discussion of long-term
incentive equity awards in Long-term Incentive Equity Awards (SARs and
PSUs) on page 36 for a discussion of the vesting of these awards based on
the Compensation Committees determination that the Company has attained
the applicable performance metrics. Refer to footnote 5 on page 42 for a
discussion of how the number of vested sign-on PSUs will be
determined. |
(5) |
Represents PSUs
granted under the 2010 Stock Plan. The Compensation Committee approved the
grant of these PSUs at a meeting on March 30, 2016, with an effective
grant date of May 10, 2016. The PSUs do not earn dividend equivalents and
have no voting rights. See the discussion of long-term incentive equity
awards in Long-term Incentive Equity Awards (SARs and PSUs) on page 34
for a discussion of the vesting of these awards based on the Compensation
Committees determination that the Company has attained the applicable
performance metrics. Refer to footnote 5 on page 42 for a discussion of
how the number of vested PSUs will be
determined. |
Table of Contents
(6) |
Represents sign-on SARs
granted under the 2010 Stock Plan. The Compensation Committee approved the
grant of these SARs at a meeting on March 30, 2016, with an effective
grant date of May 10, 2016. These SARs vest in three equal annual
installments beginning on May 10, 2017. |
(7) |
Represents SARs granted under
the 2010 Stock Plan. The Compensation Committee approved the grant of
these SARs at a meeting on March 30, 2016, with an effective grant date of
May 10, 2016. These SARs vest in three equal annual installments beginning
on May 10, 2017. |
(8) |
Represents RSUs granted under
the 2010 Stock Plan. The Compensation Committee approved the grant of
these RSUs at a meeting on March 30, 2016, with an effective grant date of
May 10, 2016. These RSUs vest in three substantially equal annual
installments beginning on May 10, 2017. |
(9) |
Represents the range of
possible cash bonus amounts available for 2016 under the ABP. See Annual
Performance-based Bonuses beginning on page 35 for a discussion of bonus
metrics and payouts. |
(10) |
Mr. Bertolinis 2016 annual
bonus opportunity at target was set at 300% of his base salary. Mr.
Bertolinis 2016 ABP award was paid 40% ($1,656,000) in cash and 60%
($2,484,000) in RSUs with a grant date of February 17, 2017 that vest in
three equal annual installments beginning on February 17,
2018. |
(11) |
Each vested PSU represents one
share of Common Stock and will be paid in shares of Common Stock, net of
taxes, as a result of a determination by the Compensation
Committee. |
(12) |
Results that do not meet the
threshold performance level will result in zero vesting and forfeiture of
the award. |
(13) |
Each SAR represents a stock
appreciation right and will be settled in shares of Common Stock, net of
taxes, when exercised. |
(14) |
The exercise price of each SAR
is equal to the closing price of the Common Stock on the applicable grant
date. |
(15) |
Refer to pages 130-133 of
Aetnas 2016 Annual Report on Form 10-K and footnote 7 to the 2016 Summary
Compensation Table for all relevant valuation
assumptions. |
Table of Contents
Outstanding Equity Awards at 2016 Fiscal
Year-End
The following table sets forth information
concerning outstanding SARs, RSUs and PSUs as of December 31, 2016 held by the
Named Executive Officers. The Compensation Committee determined that the PSUs
granted in 2014 met the performance goal set at the time of grant at maximum
performance (200% of target). Vesting of the PSUs
granted in 2014 is subject to the continued employment of the applicable NEO
through the vesting date. Unearned PSUs granted in 2015 and 2016 are shown at
maximum performance (200% of target).
|
|
Option Awards |
|
Stock Awards |
Name |
|
Number
of Securities Underlying Unexercised Options Exercisable (#) |
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercisable Options (#) |
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares
or Units of Stock That
Have Not Vested (#)(1) |
|
|
Market Value of
Shares or Units of Stock That
Have Not Vested ($)(7) |
|
Number
of Unearned Units of Shares or Units of Stock
(#)(8) |
|
|
Market Value
of Unearned Units of Shares or Units of Stock
($)(7) |
Mark T. Bertolini |
|
148,138 |
|
|
|
|
|
42.57 |
|
2/08/2017 |
|
135,979 |
(2) |
|
16,862,756 |
|
141,158 |
(9)(11) |
|
17,505,004 |
|
|
308,642 |
|
|
|
|
|
48.65 |
|
7/26/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
197,897 |
|
|
|
|
|
50.70 |
|
2/07/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
299,751 |
|
|
|
|
|
32.11 |
|
2/12/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
500,000 |
|
|
|
|
|
64.25 |
|
8/04/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
203,084 |
|
101,542 |
|
|
|
72.26 |
|
3/2/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
84,494 |
|
168,986 |
|
|
|
100.50 |
|
3/1/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
253,242 |
|
|
|
103.45 |
|
2/18/2026 |
|
|
|
|
|
|
|
|
|
|
Shawn M. Guertin |
|
14,833 |
|
27,417 |
|
|
|
72.26 |
|
3/2/2024 |
|
22,420 |
(3) |
|
2,780,304 |
|
47,768 |
(10)(11) |
|
5,923,710 |
|
|
25,716 |
|
51,430 |
|
|
|
100.50 |
|
3/1/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
3,805 |
|
7,610 |
|
|
|
116.44 |
|
9/23/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,064 |
|
|
|
103.45 |
|
2/18/2026 |
|
|
|
|
|
|
|
|
|
|
Gary W. |
|
27,399 |
|
54,797 |
|
|
|
107.80 |
|
10/25/2025 |
|
27,830 |
(4) |
|
3,451,198 |
|
45,464 |
(11)(12) |
|
5,637,991 |
Loveman, Ph.D. |
|
|
|
81,038 |
|
|
|
103.45 |
|
2/18/2026 |
|
|
|
|
|
|
|
|
|
|
Karen S. Lynch |
|
55,849 |
|
27,924 |
|
|
|
72.26 |
|
3/2/2024 |
|
22,836 |
(5) |
|
2,831,892 |
|
59,432 |
(9)(11) |
|
7,370,162 |
|
|
36,737 |
|
73,472 |
|
|
|
100.50 |
|
3/1/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,323 |
|
|
|
103.45 |
|
2/18/2026 |
|
|
|
|
|
|
|
|
|
|
Thomas J. |
|
|
|
39,237 |
|
|
|
$114.46 |
|
5/9/2026 |
|
21,842 |
(6) |
|
2,708,626 |
|
35,822 |
(13) |
|
4,442,286 |
Sabatino, Jr. |
|
|
|
64,086 |
|
|
|
$114.46 |
|
5/9/2026 |
|
|
|
|
|
|
|
|
|
|
(1) |
Each vested RSU and
PSU represents one share of Common Stock and will be paid in shares of
Common Stock, net of taxes. |
(2) |
Consists of 9,549
RSUs that vest in one installment on March 3, 2017; 16,716 RSUs that vest
in two equal annual installments beginning on March 2, 2017; 26,680 RSUs
that vest in three substantially equal annual installments beginning on
February 19, 2017; and 41,517 PSUs granted on March 3, 2014 that will vest
on March 3, 2017. |
(3) |
Consists of 11,210
PSUs granted on March 3, 2014 that will vest on March 3,
2017. |
(4) |
Consists of 27,830
RSUs that vest in one installment on October 26, 2018. |
(5) |
Consists of 11,418
PSUs granted on March 3, 2014 that will vest on March 3,
2017. |
(6) |
Consists of 21,842
RSUs that vest in one installment on May 10, 2018. |
(7) |
Market value
calculated using the December 31, 2016 closing price of the Common Stock
of $124.01. |
(8) |
Refer to footnotes
3 and 5 on page 42 for a description of how the number of vested PSUs will
be determined for PSUs granted in 2016. Each vested PSU represents one
share of Common Stock and will be paid in shares of Common Stock, net of
taxes. |
(9) |
Consists of PSUs
granted on March 2, 2015 that may vest on March 2, 2018, based on
achievement of the three-year cumulative adjusted operating earnings per
share and cumulative adjusted revenue targets set by the Compensation
Committee at the time of the grant. The number of PSUs granted is as
follows: Mr. Bertolini: 34,329; and Ms. Lynch
14,926. |
Table of Contents
(10) |
Consists of 10,448 PSUs
granted on March 2, 2015 that may vest on March 2, 2018 and 1,546 PSUs
granted on September 24, 2015 that may vest on September 24, 2018, in each
case based on achievement of the three-year cumulative adjusted operating
earnings per share and cumulative adjusted revenue targets set by the
Compensation Committee at the time of the grant. |
(11) |
Consists of PSUs granted on
February 19, 2016 that may vest on February 19, 2019, based on achievement
of the three-year compound annual growth rate of adjusted operating
earnings per share target set by the Compensation Committee at the time of
the grant. The number of PSUs granted is as follows: Mr. Bertolini:
36,250; Mr. Guertin: 11,890; Mr. Loveman: 11,600; and Ms. Lynch:
14,790. |
(12) |
Consists of 11,132 PSUs
granted on October 26, 2015 that may vest on October 26, 2018 based on
achievement of the three-year cumulative adjusted operating earnings per
share and cumulative adjusted revenue targets set by the Compensation
Committee at the time of the grant. |
(13) |
Consists of 8,737 sign-on PSUs
and 9,174 PSUs, each granted on May 10, 2016 that may vest on May 10, 2019
based on achievement of the three-year compound annual growth rate of
adjusted operating earnings per share target set by the Compensation
Committee at the time of the grant. |
2016
Option Exercises and Stock Vested
The following table sets forth information
concerning the gross number of SARs exercised and RSUs and PSUs vested during
2016 for the Named Executive Officers.
|
|
Option Awards |
|
Stock Awards |
Name |
|
Number of
Shares Acquired on Exercise (#) |
|
|
Value Realized on
Exercise ($) |
|
Number of
Shares Acquired on Vesting (#) |
|
|
Value Realized On
Vesting(6) ($) |
Mark T. Bertolini |
|
106,570 |
(1) |
|
7,877,654 |
|
295,695 |
(3) |
|
30,340,834 |
Shawn M. Guertin |
|
40,000 |
(2) |
|
1,915,600 |
|
42,632 |
(4) |
|
4,406,870 |
Gary W. Loveman, Ph.D. |
|
0 |
|
|
0 |
|
0 |
|
|
0 |
Karen S. Lynch |
|
0 |
|
|
0 |
|
40,500 |
(5) |
|
4,186,485 |
Thomas J. Sabatino, Jr. |
|
0 |
|
|
0 |
|
0 |
|
|
0 |
(1) |
Consists of 106,570
shares acquired upon the exercise of SARs granted June 30,
2006. |
(2) |
Consists of 40,000
shares acquired upon the exercise of SARs granted March 3,
2014. |
(3) |
Consists of 193,971
shares acquired upon the vesting of MSUs granted February 1, 2013; 74,608
shares acquired upon the vesting of PSUs granted August 5, 2013; 9,208
shares acquired upon the vesting of RSUs granted February 1, 2013; 9,549
shares acquired upon the vesting of RSUs granted March 3, 2014; and 8,359
shares acquired upon the vesting of RSUs granted March 2,
2015. |
(4) |
Consists of 42,632
shares acquired upon the vesting of MSUs granted February 1,
2013. |
(5) |
Consists of 40,500
shares acquired upon the vesting of MSUs granted February 1,
2013. |
(6) |
Calculated by
multiplying the number of shares of Common Stock acquired on vesting by
the closing price of the Common Stock on the vesting date or the first
business day after the vesting date when the vesting date is not a
business day. |
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2016
Pension Benefits
The following table sets forth information
concerning the present value of the Named Executive Officers respective
accumulated benefits under the Pension Plan and Supplemental Pension Plan. The
present value shown below was determined for each participant based on their
accrued benefit as of December 31, 2016, and the discount rates that Aetna used
for its 2016 year-end pension disclosures and assumes continued employment to
age 65 for Mr. Bertolini. Pursuant to SEC rules, the valuations shown below
do not take into account any assumed future pay
increases. Messrs. Guertin, Loveman and Sabatino and Ms. Lynch are not eligible
to participate in the Pension Plan because they joined the Company after the
Pension Plan was frozen on December 31, 2010. Messrs. Guertin, Loveman and
Sabatino and Ms. Lynch are not eligible to participate in the Supplemental
Pension Plan. No NEO received any payment from the Pension Plan or the
Supplemental Pension Plan during 2016.
Name |
Plan
Name(1) |
|
Number of
Years Credited Service |
|
Present Value
of Accumulated Benefit(2) |
Mark T. Bertolini |
Pension Plan |
|
11.08 |
|
$145,467 |
|
Supplemental Pension Plan |
|
7.08 |
|
234,590 |
Shawn M. Guertin |
Pension Plan |
|
0 |
|
0 |
|
Supplemental Pension Plan |
|
0 |
|
0 |
Gary W. Loveman, Ph.D. |
Pension Plan |
|
0 |
|
0 |
|
Supplemental Pension Plan |
|
0 |
|
0 |
Karen S. Lynch |
Pension Plan |
|
0 |
|
0 |
|
Supplemental Pension Plan |
|
0 |
|
0 |
Thomas J. Sabatino, Jr. |
Pension Plan |
|
0 |
|
0 |
|
Supplemental Pension Plan |
|
0 |
|
0 |
(1) |
As of January 1,
2007, the Supplemental Pension Plan is no longer used to accrue benefits
that exceed the Code limits, but interest continues to accrue on the
outstanding cash balance accruals. In addition, the Supplemental Pension
Plan may continue to be used to credit benefits for special pension
agreements. Refer to Pension Plan Narrative below. |
(2) |
Refer to pages
122-128 of Aetnas 2016 Annual Report on Form 10-K for a discussion of the
valuation methods used to calculate the amounts in this column. In
calculating the present value of the accumulated benefit under the Pension
Plan and the Supplemental Pension Plan, the following economic assumptions
were used: |
|
|
Pension
Plan |
|
Supplemental Pension
Plan |
|
Discount Rate |
4.23% |
|
3.97% |
|
Future Cash Balance Interest Rate |
2.50% |
|
2.50% |
|
5-Year Average Cost of Living Adjustment |
2.30% |
|
2.30% |
Pension
Plan Narrative
Prior to January 1, 2011, the Company
provided the Pension Plan, a non-contributory, defined benefit pension plan, for
most of its employees. In 1999, the Pension Plan was amended to convert the
Pension Plans final average pay benefit formula to a cash balance design. Under
this design, the pension benefit is expressed as a cash balance account. Each
year through December 31, 2010, a participants cash balance account was
credited with (i) a pension credit based on the participants age, years of
service and eligible pay for that year, and (ii) an interest credit based on the
participants account balance as of the beginning
of the year and an interest rate that equals the average 30-year U.S. Treasury
bond rate for October of the prior calendar year. For 2016, the interest rate
was 2.89%. For purposes of the Pension Plan, eligible pay was generally base
pay and certain other forms of cash compensation, including annual performance
bonuses, but excluding long-term incentive compensation and proceeds from stock
option and SAR exercises and other equity grants. The maximum eligible pay under
the Pension Plan was set annually by the Internal Revenue Service.
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Effective December 31, 2010, the Pension
Plan was frozen. No further pension service credits will be earned after that
date. However, participants cash balance accounts will continue to be credited
with the interest credit. Under the Pension Plan, benefits are paid over the
lifetime of the employee (or the joint lives of the employee and his or her
beneficiary) except that the employee may elect to take up to 100% of his or her
benefits in a lump sum payment following termination of employment.
The Code limits the maximum annual benefit
that may be accrued under and paid from a tax-qualified plan such as the Pension
Plan. As a result, Aetna established the Supplemental Pension Plan, an unfunded, non-tax qualified supplemental
pension plan that provides benefits (included in the amounts listed in the 2016
Pension Benefits table above on page 48), that exceed the Code limit.
Supplemental Pension Plan benefits are paid out in five equal annual
installments commencing six months following termination of employment. As of
January 1, 2007, the Supplemental Pension Plan is no longer used to accrue
benefits that exceed the Code limits, but interest continues to accrue on the
outstanding cash balance accruals.
2016
Nonqualified Deferred Compensation
The following table sets forth information
concerning compensation deferrals during 2016 by the Named Executive Officers.
No NEO received any withdrawal or distribution from a deferred compensation
account during 2016.
Name |
|
Executive Contributions in Last
FY(1) ($) |
|
Aggregate Earnings
in Last FY(2) ($) |
|
Aggregate Balance
at Last FY(2) ($) |
Mark T. Bertolini |
|
7,113,757 |
|
1,983,515 |
|
9,337,704 |
Shawn M. Guertin |
|
0 |
|
0 |
|
0 |
Gary W. Loveman, Ph.D. |
|
76,628 |
|
651 |
|
77,279 |
Karen S. Lynch |
|
91,948 |
|
5,529 |
|
328,247 |
Thomas J. Sabatino, Jr. |
|
0 |
|
0 |
|
0 |
(1) |
The following table provides
additional information about the contributions that the NEOs made to their
nonqualified deferred compensation accounts during 2016. Except as set
forth in footnote (a) to the table below, the contributions during 2016
came from the base salary and/or annual bonus that are reported for the
NEO in the Salary and Non-Equity Incentive Plan Compensation columns
of the 2016 Summary Compensation Table on page 41. All amounts contributed
by a NEO and by the Company in prior years have been reported in the
Summary Compensation Tables in Aetnas previously filed proxy statements
in the year earned to the extent such person was a named executive officer
for purposes of the SECs executive compensation
disclosure. |
|
Name |
2016 Contributions
into Stock Unit Account ($) |
|
|
2016 Cash Contributions
into Supplemental 401(k)
Plan ($) |
|
Total
2016 Contributions ($) |
|
Mark T. Bertolini |
7,113,757 |
(a) |
|
0 |
|
7,113,757 |
|
Shawn M. Guertin |
0 |
|
|
0 |
|
0 |
|
Gary W. Loveman, Ph.D. |
0 |
|
|
76,628 |
|
76,628 |
|
Karen S. Lynch |
0 |
|
|
91,948 |
|
91,948 |
|
Thomas J. Sabatino, Jr. |
0 |
|
|
0 |
|
0 |
(a) |
On January 28, 2016, the
Compensation Committee determined that the special retention PSU granted
to Mr. Bertolini on August 5, 2013 vested below the target level (74.6%)
based on Company performance against the stretch three-year pre-tax
operating income goal (excluding net investment income) set by the
Compensation Committee at the time of the grant. Under the terms of the
award, the special retention PSU payout was deferred to an unfunded
deferred stock unit account, which is payable to Mr. Bertolini six months
following his termination of
employment. |
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(2) |
The following table
details the aggregate earnings on nonqualified deferred compensation
accrued to each NEO during 2016. During 2016, no NEO had any balance in a
deferred compensation interest account. |
|
Name |
|
Appreciation (Depreciation) On Stock
Unit Account ($) |
|
Dividend Equivalents on Stock
Unit Account ($) |
|
Interest
on Supplemental 401(k) Plan ($) |
|
Total ($) |
|
Mark T. Bertolini |
|
1,924,340 |
|
54,126 |
|
5,049 |
|
1,983,515 |
|
Shawn M. Guertin |
|
0 |
|
|
|
0 |
|
0 |
|
Gary W. Loveman, Ph.D. |
|
0 |
|
|
|
651 |
|
651 |
|
Karen S. Lynch |
|
0 |
|
|
|
5,529 |
|
5,529 |
|
Thomas J. Sabatino, Jr. |
|
0 |
|
|
|
0 |
|
0 |
(3) |
The
aggregate nonqualified deferred compensation account balances of each NEO
at December 31, 2016 consist only of the
following: |
|
Name |
|
Stock
Unit Account ($) |
|
Supplemental 401(k) Plan Account ($) |
|
Total ($) |
|
Mark T. Bertolini |
|
9,092,223 |
|
245,481 |
|
9,337,704 |
|
Shawn M. Guertin |
|
0 |
|
0 |
|
0 |
|
Gary W. Loveman, Ph.D. |
|
0 |
|
77,279 |
|
77,279 |
|
Karen S. Lynch |
|
0 |
|
328,247 |
|
328,247 |
|
Thomas J. Sabatino, Jr. |
|
0 |
|
0 |
|
0 |
Deferred
Compensation Narrative
The Salary and Non-Equity Incentive
Plan Compensation columns in the 2016 Summary Compensation Table include cash
compensation that was deferred by the Named Executive Officers during 2016. The
Company permits executives to defer up to 40% of eligible pay (which includes
base salary and annual bonus) into the 401(k) Plan (subject to deferral limits
established by the Code in 2016, $18,000 ($24,000 for individuals age 50 and
older)). The 401(k) Plan, which is available to all eligible employees of the
Company, is a funded arrangement that provides twenty investment options, as
well as a self-directed brokerage option. Aetna matches 100% of the amount
deferred by employees, including the NEOs, under the 401(k) Plan up to 6% of
eligible pay. Under the 401(k) Plan, benefits are paid to the employee
(including NEOs) after termination of employment on the date selected by the
employee.
Aetna established the Supplemental 401(k)
Plan to provide the deferral that would have been credited to the 401(k) Plan
but for limits imposed by the Employee Retirement Income Security Act of 1974,
as amended (ERISA), and the Code. The Supplemental 401(k) Plan allows eligible
employees, including the NEOs, to defer up to an additional 10% of base salary.
Aetna does not match employees contributions to the Supplemental 401(k) Plan.
The Supplemental 401(k) Plan is an unfunded plan that credits interest at a
fixed rate pursuant to a formula equal to the
rate of interest paid from time to time under the fixed interest rate fund
option of the 401(k) Plan. The 401(k) Plan interest rate is set quarterly to
better align the credited rates with the underlying fixed income investment
earning rates achieved in the fund. In 2016, this fixed interest rate was 2.05%
from January to March, 2.10% from April to June, 2.10% from July to September
and 2.15% from October to December. In 2017, this fixed interest rate is 2.00%
from January to March. Under the Supplemental 401(k) Plan, benefits are paid to
the executive on the later of six months or January 1 following termination of
employment.
The Company also permits executives to
defer up to 100% of their annual bonus. The deferral arrangement for annual
bonuses is also unfunded and permits investment in either an interest account or
a stock unit account. The interest account credits interest at the same rate as
the Supplemental 401(k) Plan. The stock unit account tracks the value of the
Common Stock. The stock unit account earns dividend equivalents, paid in the
manner of the individuals selection. This arrangement pays out on a date
selected by the executive at the time of deferral. The Compensation Committee
may also require or permit other compensation to be deferred.
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Potential
Post-Employment Payments
Regardless of the manner in which a Named
Executive Officers employment terminates, he or she is entitled to receive
certain amounts earned during his or her term of employment, including the
following: (a) accrued salary; (b) deferred compensation amounts; (c) amounts
accrued and vested through the 401(k) Plan and Supplemental 401(k) Plan; and (d)
amounts accrued and vested through the Pension Plan and Supplemental Pension
Plan. In addition, except as provided in the tables below, each NEO is eligible
to receive vested equity awards upon a termination of employment for any reason
(other than for cause). Equity awards (other than PSUs) continue to vest for all
employees during any period of severance or salary continuation. The actual
amounts paid to any NEO can only be determined at the time of the executives
separation from the Company. Section 409A of the Code may require the Company to
delay the payment of certain payments for six months following termination of
employment. Refer to the 2016 Nonqualified Deferred Compensation table and
Deferred Compensation Narrative beginning on page 49 for a discussion of the
deferred compensation plan, 401(k) Plan and Supplemental 401(k) Plan. Refer to
the 2016 Pension Benefits table and Pension Plan Narrative beginning on page
48 for a discussion of the Pension Plan and Supplemental Pension Plan. Refer to
the Outstanding Equity Awards at 2016 Fiscal Year-End table beginning on page 46
for a discussion of outstanding equity awards at December 31, 2016.
Unless otherwise indicated, each of the
tables for the NEOs below assumes a termination of employment (or change in
control and termination of employment without Cause and/or for Good Reason, as
defined below, as applicable) as of December 31, 2016, and assumes a Common
Stock price of $124.01 per share (the closing price of the Common Stock on
December 31, 2016) and, for illustrative purposes, an immediate sale of equity
awards upon termination of employment at $124.01 per share. Change in control
severance benefits (base salary and bonus payments, if any) to each NEO are paid
pursuant to a double-trigger, which means that to receive such benefits
employment must terminate both: (1) as a result of a qualifying termination of
employment, and (2) after a change in control as detailed in the agreements
described below and under Agreements with Named Executive Officers beginning
on page 56. Unless otherwise indicated, the amounts set forth in the tables that follow under PSUs were calculated
based upon the Compensation Committees determination that the Company achieved
maximum performance of 200% of target for PSUs granted in 2014. For Termination
after Change-in-Control, PSUs granted in 2014 are assumed to vest at actual
performance. The PSUs granted in 2015 and 2016 are assumed to vest at target
performance both in the case of a change in control and in the case of certain
qualified terminations (pro-rated for the number of months employed during the
vesting period). The performance metric for the 2015 PSUs is cumulative adjusted
operating EPS and cumulative revenue from January 1, 2015 through December 31,
2017. If performance were calculated at December 31, 2016, these PSUs would
perform below target. Actual performance of and payouts of the 2015 PSUs may
change significantly by December 31, 2017. The performance metric for the 2016
PSUs is a three-year compound annual growth rate of adjusted operating earnings
per share target from January 1, 2016 through December 31, 2018. If performance
were calculated at December 31, 2016, these PSUs would perform below target.
Actual performance of and payouts of the 2016 PSUs may change significantly by
December 31, 2018. Refer to footnotes 3 and 5 to the 2016 Summary Compensation
Table for information on the grant date fair value of the PSUs granted in 2016
at maximum performance.
The NEOs equity award agreements define
Change in Control as the occurrence of any of the following events: (a) a
person or group acquires 20% or more of the combined voting power of the
Companys then outstanding securities; (b) during any period of 24 consecutive
months, the individuals who, at the beginning of such period, constitute the
Board cease for any reason (other than death) to constitute a majority of the
Board, unless any such new Director was elected, recommended or approved by at
least two-thirds of the other Directors then in office; or (c) a transaction
requiring shareholder approval for the acquisition of the Company by an entity
other than the Company or a subsidiary of the Company through the purchase of
assets, or by merger, or otherwise.
As of December 31, 2016, Mr. Bertolini was
considered retirement eligible for purposes of equity vesting. Under her
employment agreement, Ms. Lynch is considered retirement eligible for purposes
of the vesting provisions of her equity awards upon certain terminations of her
employment.
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The following table reflects additional
payments that would be made to Mr. Bertolini upon termination of his employment
on December 31, 2016, under various scenarios. Mr. Bertolinis employment
agreement defines Cause as the occurrence of one or more of the following: (a)
a willful and continued failure to attempt in good faith to perform duties,
which failure is not remedied within fifteen business days following written
notice of such failure; (b) material gross negligence or willful malfeasance in
performance of duties; (c) with respect to the Company, commission of an act
constituting fraud, embezzlement or any other act constituting a felony; or (d)
commission of any act constituting a felony which has or is likely to have a
material adverse economic or reputational impact on the Company. Mr. Bertolinis
employment agreement defines Good Reason as the occurrence of one or more of
the following without Mr. Bertolinis consent: (a) a reduction by the Company of
base salary or target cash bonus opportunity (except in the event of a ratable
reduction prior to a change in control affecting
all senior officers of the Company); (b) within 24 months following a change of
control, a reduction in the level of the long-term incentive plan opportunity
from that afforded him immediately prior to the change in control; (c) any
failure of a successor of the Company to assume and agree to perform the
Companys entire obligations under the employment agreement; (d) reporting to
any person other than the Companys Board of Directors; (e) any action or
inaction by the Company that constitutes a material breach of the employment
agreement; (f) removal of Mr. Bertolini as President, Chief Executive Officer or
Director; or (g) the appointment of any person to the position of executive
Chairman. Mr. Bertolinis employment agreement contains a change in control
cutback policy which, under certain circumstances, would reduce the amount due
to Mr. Bertolini following a change in control to an amount that maximizes the
net after tax amount retained by him to the extent permitted under Section 409A
of the Code.
Payment
Type |
|
Retirement
or Voluntary Termination by Mr. Bertolini |
|
|
Termination
by Aetna without Cause or by Mr. Bertolini for Good
Reason |
|
|
Termination after
Change- in-Control |
|
|
Termination by Aetna for Cause |
|
|
Death
or Disability |
|
Base Salary |
|
$ |
0 |
|
|
$ |
2,400,000 |
(1) |
|
$ |
2,400,000 |
(1) |
|
$ |
0 |
|
|
$ |
0 |
|
Bonus |
|
|
0 |
|
|
|
4,320,000 |
(1) |
|
|
4,320,000 |
(1) |
|
|
0 |
|
|
|
0 |
|
Long-term Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs |
|
|
2,584,740 |
(2) |
|
|
6,381,927 |
(5) |
|
|
6,565,709 |
(8) |
|
|
0 |
(9) |
|
|
6,565,709 |
(10) |
PSUs |
|
|
13,171,226 |
(3) |
|
|
18,799,916 |
(6) |
|
|
19,049,548 |
(8) |
|
|
0 |
(9) |
|
|
19,049,548 |
(11) |
SARs |
|
|
8,976,781 |
(4) |
|
|
14,434,315 |
(7) |
|
|
14,434,315 |
(8) |
|
|
0 |
(9) |
|
|
14,434,315 |
(12) |
TOTAL |
|
$ |
24,732,747 |
|
|
$ |
46,336,158 |
|
|
$ |
46,769,572 |
|
|
$ |
0 |
|
|
$ |
40,049,572 |
|
(1) |
Represents 24 months of cash
compensation (calculated as annual base salary and target cash bonus
opportunity) plus a pro rata portion of Mr. Bertolinis target cash bonus
opportunity for the year in which termination of employment occurs.
Amounts would be paid bi-weekly during the severance
period. |
(2) |
Represents pro-rated vesting
of RSU grants awarded March 3, 2014, March 2, 2015 and February 19,
2016. |
(3) |
Represents pro-rated vesting
of PSU grants awarded March 3, 2014, March 2, 2015 and February 19, 2016.
Actual payment would occur following March 3, 2017, March 2, 2018 and
February 19, 2019, respectively, in shares of Common Stock, net of taxes.
The PSU grant awarded March 3, 2014 performed at 200% of target. The PSU
grants awarded March 2, 2015 and February 19, 2016 are assumed to perform
at target. Actual payouts may differ from target. |
(4) |
Represents full accelerated
vesting of a SAR grant awarded March 3, 2014 and partial accelerated
vesting of SAR grants awarded March 2, 2015 and February 19, 2016. These
SARs have an exercise price of $72.26, $100.50 and $103.45, respectively,
the closing price of the Common Stock on the applicable grant
date. |
(5) |
Represents full vesting of RSU
grants awarded March 3, 2014 and March 2, 2015 and pro-rated vesting of
RSU grant awarded February 19, 2016. |
(6) |
Represents full vesting of PSU
grants awarded March 3, 2014 and March 2, 2015 and pro-rated vesting of
PSU grant awarded February 19, 2016. Actual payment would occur following
March 3, 2017, March 2, 2018 and February 19, 2019, respectively, in
shares of Common Stock, net of taxes. The PSU grant awarded March 3, 2014
performed at 200% of target. The PSU grants awarded March 2, 2015 and
February 19, 2016 are assumed to perform at target. Actual payouts may
differ from target. |
(7) |
Represents full vesting of SAR
grants awarded March 3, 2014, March 2, 2015 and February 19,
2016. |
(8) |
Represents full accelerated
vesting of all outstanding unvested equity awards. PSUs would vest at the
greater of target or actual Company performance as of the date of the
Change in Control (as defined in Mr. Bertolinis equity award
agreements). |
(9) |
Unvested RSUs, PSUs and SARs
are subject to forfeiture if there is a termination by Aetna for Cause (as
defined in Mr. Bertolinis employment agreement). |
(10) |
Represents full accelerated
vesting of RSU grants awarded March 3, 2014, March 2, 2015 and February
19, 2016. |
(11) |
Represents full vesting of PSU
grants awarded March 3, 2014, March 2, 2015 and February 19, 2016. Actual
payment would occur following March 3, 2017, March 2, 2018 and February
19, 2019, respectively, in shares of Common Stock, net of taxes. The PSU
grant awarded March 3, 2014 performed at 200% of target. The PSU grants
awarded March 2, 2015 and February 19, 2016 are assumed to perform at
target. Actual payouts may differ from target. |
(12) |
Represents full accelerated
vesting of SAR grants awarded March 3, 2014, March 2, 2015 and February
19, 2016. |
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The following table reflects additional
payments that would be made to Mr. Guertin upon termination of his employment on
December 31, 2016, under various scenarios.
Payment Type |
|
Retirement or Voluntary Termination
by Mr. Guertin |
|
|
Termination by Aetna without
Cause |
|
|
Termination after
Change- in-Control |
|
|
Termination by Aetna for
Cause |
|
|
Death or Disability |
|
Base Salary |
|
$ |
0 |
|
|
$ |
800,000 |
(2) |
|
$ |
800,000 |
(2) |
|
$ |
0 |
|
|
$ |
0 |
|
Bonus |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Long-term Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSUs |
|
|
0 |
(1) |
|
|
3,794,086 |
(3) |
|
|
5,742,159 |
(5) |
|
|
0 |
(1) |
|
|
3,794,086 |
(3) |
SARs |
|
|
0 |
(1) |
|
|
2,621,459 |
(4) |
|
|
4,393,353 |
(5) |
|
|
0 |
(1) |
|
|
4,393,353 |
(6) |
TOTAL |
|
$ |
0 |
|
|
$ |
7,215,545 |
|
|
$ |
10,935,512 |
|
|
$ |
0 |
|
|
$ |
8,187,439 |
|
(1) |
Unvested PSUs and SARs are
subject to forfeiture if Mr. Guertin retires or terminates voluntarily or
if there is a termination by Aetna for cause. |
(2) |
Represents 52 weeks of base
salary continuation. Amounts would be paid bi-weekly during the severance
period. |
(3) |
Represents pro-rated vesting
of PSU grants awarded March 3, 2014, March 2, 2015, September 24, 2015 and
February 19, 2016. Actual payment would occur following March 3, 2017,
March 2, 2018, September 24, 2018 and February 19, 2019, respectively, in
shares of Common Stock, net of taxes. The PSU grant awarded March 3, 2014
performed at 200% of target. The PSU grants awarded March 2, 2015,
September 24, 2015 and February 19, 2016 are assumed to perform at target.
Actual payouts may differ from target. |
(4) |
Represents full vesting of SAR
grant awarded March 3, 2014 and partial vesting of SAR grants awarded
March 2, 2015, September 24, 2015 and February 19, 2016. These SARs have
an exercise price of $72.26, $100.50, $116.44 and $103.45, respectively,
the closing price of the Common Stock on the applicable grant
date. |
(5) |
Represents full accelerated
vesting of all outstanding unvested equity awards. PSUs would vest at the
greater of target or actual Company performance as of the date of the
Change in Control (as defined in Mr. Guertins equity award
agreements). |
(6) |
Represents full accelerated
vesting of SAR grants awarded March 3, 2014, March 2, 2015, September 24,
2015 and February 19, 2016. |
The following table reflects additional
payments that would be made to Mr. Loveman upon termination of his employment on
December 31, 2016, under various scenarios. Mr. Lovemans letter agreement
defines Cause as the occurrence of one or more of the following: (a) willful
failure to perform substantially his duties after reasonable notice from the
Company; (b) engagement in serious misconduct that is injurious to the Company,
any subsidiary or any affiliate; (c) conviction of, or entrance of a plea of
nolo contendre to, a crime that constitutes a felony; (d) breach of any written
covenant or agreement not to compete with the Company, any subsidiary or any
affiliate; or (e) breach of Mr. Lovemans duty of loyalty to the Company, which
includes without limitation (i) any disclosure of
confidential information pertaining to the Company, any subsidiary or any
affiliate, (ii) harmful interference in the business or operations of the
Company, any subsidiary or any affiliate, (iii) any attempt directly or
indirectly to induce any employee, insurance agent, insurance broker or
broker-dealer of the Company, any subsidiary or any affiliate to be employed or
perform services elsewhere, (iv) any attempt, directly or indirectly, to solicit
the trade of any customer or supplier, or prospective customer or supplier, of
the Company to do business other than with the Company or (v) any breach or
violation of the Companys Code of Conduct.
Table of Contents
Payment
Type |
|
Retirement
or Voluntary Termination by Mr. Loveman |
|
|
Termination by Mr. Loveman for Good
Reason |
|
|
Termination by Aetna without Cause |
|
|
Termination after
Change- in-Control |
|
|
Termination by Aetna for Cause |
|
|
Death
or Disability |
|
Base Salary |
|
$ |
0 |
|
|
$ |
800,000 |
(2) |
|
$ |
800,000 |
(2) |
|
$ |
800,000 |
(2) |
|
$ |
0 |
|
|
$ |
0 |
|
Bonus |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Long-term Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs |
|
|
0 |
(1) |
|
|
0 |
(1) |
|
|
2,492,601 |
(3) |
|
|
3,451,198 |
(6) |
|
|
0 |
(1) |
|
|
3,451,198 |
(7) |
PSUs |
|
|
0 |
(1) |
|
|
0 |
(1) |
|
|
936,648 |
(4) |
|
|
2,818,995 |
(6) |
|
|
0 |
(1) |
|
|
936,648 |
(4) |
SARs |
|
|
0 |
(1) |
|
|
0 |
(1) |
|
|
999,509 |
(5) |
|
|
2,554,401 |
(6) |
|
|
0 |
(1) |
|
|
2,554,401 |
(8) |
TOTAL |
|
$ |
0 |
|
|
$ |
800,000 |
|
|
$ |
5,228,758 |
|
|
$ |
9,624,594 |
|
|
$ |
0 |
|
|
$ |
6,942,247 |
|
(1) |
Unvested RSUs, PSUs and SARs
are subject to forfeiture if Mr. Loveman retires or terminates voluntarily
(including for good reason) or if there is a termination by Aetna for
cause. Good reason means Mr. Loveman is required to report to an officer
other than the chief executive officer. |
(2) |
Represents 52 weeks of base
salary continuation. Amounts would be paid bi-weekly during the severance
period. |
(3) |
Represents pro-rated vesting
of RSU grant awarded October 26, 2015. |
(4) |
Represents pro-rated vesting
of PSU grants awarded October 26, 2015 and February 19, 2016. Actual
payment would occur following October 26, 2018 and February 19, 2019,
respectively, in shares of Common Stock, net of taxes. Each PSU grant is
assumed to perform at target. Actual payouts may differ from
target. |
(5) |
Represents partial vesting of
SAR grants awarded October 26, 2015 and February 19, 2016. These SARs have
an exercise price of $107.80 and $103.45, respectively, the closing price
of the Common Stock on the applicable grant date. |
(6) |
Represents full accelerated
vesting of all outstanding unvested equity awards. PSUs would vest at the
greater of target or actual Company performance as of the date of the
Change in Control (as defined in Mr. Lovemans equity award
agreements). |
(7) |
Represents full accelerated
vesting upon death or continued vesting upon disability of RSU grant
awarded October 26, 2015. |
(8) |
Represents full accelerated
vesting of SAR grants awarded October 26, 2015 and February 19,
2016. |
The following table reflects additional
payments that would be made to Ms. Lynch upon termination of her employment on
December 31, 2016, under various scenarios. Ms. Lynchs employment agreement
defines Cause as the occurrence of one or more of the following: (a) a willful
and continued failure to attempt in good faith to perform duties which failure
is not remedied within fifteen business days following written notice of such
failure; (b) material gross negligence or willful malfeasance in performance of
duties; (c) with respect to the Company, commission of an act constituting
fraud, embezzlement or any other act constituting a felony; or (d) commission of
any act constituting a felony which has or is likely to have a material adverse
economic or reputational impact on the Company.
Ms. Lynchs employment agreement defines Good Reason as the occurrence of one
or more of the following without Ms. Lynchs consent: (a) a reduction by the
Company of base salary or target cash bonus opportunity (except in the event of
a ratable reduction affecting all senior officers of the Company); (b) any
failure of a successor of the Company to assume and agree to perform the
Companys entire obligations under the employment agreement; (c) reporting to
any person other than the Companys chief executive officer; (d) removal of Ms.
Lynch as President; or (e) any action or inaction by the Company that
constitutes a material breach of the employment agreement.
Payment
Type |
|
Retirement
or Voluntary Termination by Ms. Lynch |
|
|
Termination by Aetna without Cause or by Ms.
Lynch for Good Reason |
|
|
Termination after
Change- in-Control |
|
|
Termination by Aetna for Cause |
|
|
Death
or Disability |
|
Base Salary |
|
$ |
0 |
|
|
$ |
1,863,000 |
(2) |
|
$ |
1,863,000 |
(2) |
|
$ |
0 |
|
|
$ |
0 |
|
Bonus |
|
|
0 |
|
|
|
3,353,400 |
(2) |
|
|
3,353,400 |
(2) |
|
|
0 |
|
|
|
0 |
|
Long-term Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSUs |
|
|
0 |
(1) |
|
|
4,185,213 |
(3) |
|
|
6,516,974 |
(5) |
|
|
0 |
(1) |
|
|
4,185,213 |
(3) |
SARs |
|
|
0 |
(1) |
|
|
5,296,715 |
(4) |
|
|
5,296,715 |
(5) |
|
|
0 |
(1) |
|
|
5,296,715 |
(6) |
TOTAL |
|
$ |
0 |
|
|
$ |
14,698,328 |
|
|
$ |
17,030,089 |
|
|
$ |
0 |
|
|
$ |
9,481,928 |
|
(1) |
Unvested PSUs and SARs are
subject to forfeiture if Ms. Lynch retires or terminates voluntarily
(other than for Good Reason) or if there is a termination by Aetna for
cause. |
Table of Contents
(2) |
Represents 24 months of cash
compensation (calculated as annual base salary and target cash bonus
opportunity) plus a pro rata portion of Ms. Lynchs target cash bonus
opportunity for the year in which termination of employment occurs.
Amounts would be paid bi-weekly during the severance
period. |
(3) |
Represents pro-rated vesting
of PSU grants awarded March 3, 2014, March 2, 2015 and February 19, 2016.
Actual payment would occur following March 3, 2017, March 2, 2018 and
February 19, 2019, respectively, in shares of Common Stock, net of taxes.
The PSU grant awarded March 3, 2014 performed at 200% of target. The PSU
grants awarded March 2, 2015 and February 19, 2016 are assumed to perform
at target. Actual payouts may differ from target. |
(4) |
Represents full vesting of SAR
grants awarded March 3, 2014, March 2, 2015 and February 19, 2016. These
SARs have an exercise price of $72.26, $100.50 and $103.45, respectively,
the closing price of the Common Stock on the applicable grant
date. |
(5) |
Represents full accelerated
vesting of all outstanding unvested equity awards. PSUs would vest at the
greater of target or actual Company performance as of the date of the
Change in Control (as defined in Ms. Lynchs equity award
agreements). |
(6) |
Represents full accelerated
vesting of SAR grants awarded March 3, 2014, March 2, 2015 and February
19, 2016. |
The following table reflects additional
payments that would be made to Mr. Sabatino upon termination of his employment
on December 31, 2016, under various scenarios. Mr. Sabatinos letter agreement
defines Cause as (a) willful and material violation of any of the Companys
policies; (b) material and willful failure or refusal to perform any duties or
responsibilities to the Company or any of its affiliates, in each case if and
only if such failure or refusal is capable of cure and the failure or refusal is not cured within ten days following
receipt of written notice specifying such failure or refusal; (c) failure to
follow a lawful instruction if and only if such failure is capable of cure and
the failure is not cured within ten days following receipt of written notice
specifying such failure; or (d) commission of an act constituting a fraud,
embezzlement or other act constituting a felony.
Payment
Type |
|
Retirement
or Voluntary Termination by Mr. Sabatino |
|
|
Termination by Aetna without Cause |
|
|
Termination after
Change- in-Control |
|
|
Termination by Aetna for Cause |
|
|
Death
or Disability |
|
Base Salary |
|
$ |
0 |
|
|
$ |
750,000 |
(2) |
|
$ |
750,000 |
(2) |
|
$ |
0 |
|
|
$ |
0 |
|
Bonus |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Long-term Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs |
|
|
0 |
(1) |
|
|
2,708,626 |
(3) |
|
|
2,708,626 |
(6) |
|
|
0 |
(1) |
|
|
2,708,626 |
(7) |
PSUs |
|
|
0 |
(1) |
|
|
1,304,709 |
(4) |
|
|
2,221,143 |
(6) |
|
|
0 |
(1) |
|
|
431,927 |
(8) |
SARs |
|
|
0 |
(1) |
|
|
578,720 |
(5) |
|
|
986,735 |
(6) |
|
|
0 |
(1) |
|
|
986,735 |
(9) |
TOTAL |
|
$ |
0 |
|
|
$ |
5,342,055 |
|
|
$ |
6,666,504 |
|
|
$ |
0 |
|
|
$ |
4,127,288 |
|
(1) |
Unvested RSUs, PSUs and SARs
are subject to forfeiture if Mr. Sabatino retires or terminates
voluntarily or if there is a termination by Aetna for
cause. |
(2) |
Represents 52 weeks of base
salary continuation. Amounts would be paid bi-weekly during the severance
period. |
(3) |
Represents full vesting of
sign-on RSU grant awarded May 10, 2016 as provided in the applicable
equity award agreement. |
(4) |
Represents full vesting of
sign-on PSU grant and pro-rated vesting of PSU grant, each awarded May 10,
2016, as provided in the applicable equity award agreement. Actual payment
of the sign-on PSU would be in cash at target upon forfeiture of unvested
PSUs. Actual payment for PSU would occur following May 10, 2019 in shares
of Common Stock, net of taxes. The PSU grant awarded May 10, 2016 is
assumed to perform at target. Actual payout may differ from
target. |
(5) |
Represents full vesting of
sign-on SAR grant and partial vesting of SAR grant, each awarded May 10,
2016, as provided in the applicable equity award agreement. The sign-on
SARs and SARs both have an exercise price of $114.46, the closing price of
the Common Stock on the grant date. |
(6) |
Represents full accelerated
vesting of all outstanding unvested equity awards. PSUs would vest at the
greater of target or actual Company performance as of the date of the
Change in Control (as defined in Mr. Sabatinos equity award
agreements). |
(7) |
Represents full accelerated
vesting upon death or continued vesting upon disability of sign-on RSU
grant awarded May 10, 2016. |
(8) |
Represent pro-rated vesting of
all PSU grants awarded May 10, 2016. Actual payments would occur following
May 10, 2019 in shares of Common Stock, net of taxes. Each PSU grant is
assumed to perform at target. Actual payouts may differ from
target. |
(9) |
Represents full accelerated
vesting of all SAR grants awarded May 10,
2016. |
Table of Contents
Agreements
with Named Executive Officers
Aetna and Mr. Bertolini amended his
amended and restated employment agreement effective August 4, 2013. The
amendment extended the remaining term of the agreement to December 31, 2016,
with automatic one-year extensions thereafter. Under his agreement, Mr.
Bertolini is entitled to an annual salary of $1 million, and a full year target
bonus opportunity of at least 300% of his base salary. Not greater than 40% of
his bonus opportunity is payable in cash, and the noncash amount is payable
through equity-based compensation vehicles. Effective in April 2016, Mr.
Bertolinis base salary was increased to $1,200,000. If Aetna terminates Mr.
Bertolinis employment other than for Cause (as defined in the agreement),
death or disability, or Mr. Bertolini terminates his employment for Good
Reason (as defined in the agreement), he will be entitled to 24 months of cash
compensation (calculated as annual base salary and target cash bonus
opportunity) plus a pro rata portion of his target cash bonus opportunity for
the year of termination. Under certain circumstances the amounts payable to Mr.
Bertolini following a change in control will be reduced to an amount that
maximizes the net after tax amount retained by him to the extent permitted under
Section 409A of the Code. Under the non-competition agreement entered into in
July 2007 between Aetna and Mr. Bertolini, Mr. Bertolini agreed not to compete
against the Company for a period of one year following termination of his
employment. The applicable table above under Potential Post-Employment
Payments reflects the provisions of Mr. Bertolinis agreements with the
Company.
Under his letter agreement with the
Company, Mr. Guertin was hired with an annual base salary of $500,000 and a full
year target bonus opportunity of 80% of his base salary. Mr. Guertins base
salary was increased to $700,000 and his full year target bonus opportunity was
increased to 100% of his base salary upon his promotion to Chief Financial
Officer in 2013. Effective March 9, 2015, Mr. Guertins full year target bonus
opportunity was increased to 110% of his base salary (pro-rated for performance
year 2015), and effective April 6, 2015 and September 24, 2015, Mr. Guertins
base salary was increased to $750,000 and $800,000, respectively. If Mr.
Guertins employment is involuntarily terminated under circumstances that would
call for severance pay benefits and/or salary continuation benefits under the
Companys severance and salary continuation plan then in effect, Mr. Guertin
will receive payment for 52 weeks of salary continuation in lieu of amounts
payable under such severance and salary continuation benefits plan. Under his
agreements with Aetna, Mr. Guertin has agreed not to compete against the Company
for a period of one year following termination of his employment. The applicable
table above under Potential Post-Employment
Payments reflects the provisions of Mr. Guertins agreements with the
Company.
Under his letter agreement with the
Company, Mr. Loveman was hired with an annual base salary of $800,000 and a full
year target bonus opportunity of 110% of his base salary (pro-rated for 2015).
Mr. Lovemans salary will not be reduced without his consent other than in
connection with a ratable reduction affecting all senior officers of the
Company. In addition, management has agreed to recommend to the Compensation
Committee that future PSU grants to Mr. Loveman have associated performance
measures that will be specific to the businesses under his direction and have a
maximum unit multiplier of 300% or higher. If Mr. Lovemans employment is
involuntarily terminated other than for Cause (as defined in Mr. Lovemans
agreement) or Mr. Loveman resigns because he is required to report to an officer
other than the Companys chief executive officer, Mr. Loveman will receive
payment for 52 weeks of salary in lieu of amounts payable under any Company
severance and salary continuation benefits plan upon delivery of a release of
employment-related claims against Aetna. The agreement also permits Mr. Loveman
to remain the non-executive Chairman of Caesars Entertainment Corporation until
his anticipated departure from that role in May 2016. Under his agreements with
Aetna, Mr. Loveman has agreed not to compete against the Company for a period of
one year following termination of his employment. The applicable table above
under Potential Post-Employment Payments reflects the provisions of Mr.
Lovemans agreements with the Company.
On December 10, 2014, Aetna and Ms. Lynch
entered into an employment agreement following her appointment as President of
Aetna effective January 1, 2015. Under the agreement, commencing January 1,
2015, Ms. Lynchs base salary is $900,000, and her annual bonus opportunity at
target performance is at least 120% of her base salary. Effective in April 2016,
Ms. Lynchs base salary was increased to $931,500. If Ms. Lynchs employment is
involuntarily terminated by Aetna other than for Cause (as defined in the
agreement), or if Ms. Lynch terminates her employment for Good Reason (as
defined in the agreement) (each, a Qualifying Event), she will receive, in
addition to previously earned compensation: (a) cash compensation in periodic
payments over twenty-four (24) months of two times the sum of her highest base
salary in effect during the six months prior to termination of her employment
and her annual bonus opportunity for the year of termination of employment
(which is defined in the agreement as at least 120% of base salary then in
effect) and (b) a pro rata annual bonus at target performance for the year of
termination of
Table of Contents
employment (subject in certain
circumstances to meeting applicable performance requirements). In addition, Ms.
Lynch will be treated as retirement eligible for purposes of the vesting and
exercise terms of all her outstanding equity awards. These payments are
conditioned upon Ms. Lynch delivering a release of employment-related claims to
Aetna. The initial employment term under the agreement was through December 31,
2015. The employment term automatically renewed on December 31, 2015 and will
automatically renew on December 31 of each subsequent year, unless Aetna or Ms.
Lynch provides notice of its or her intention not to extend the employment term.
If Ms. Lynch terminates her employment at the end of the employment term upon
Aetnas notice of non-renewal, she will receive the benefits described above for
a termination of employment due to a Qualifying Event. Either Aetna or Ms. Lynch
can terminate the agreement at any time. Under her agreements with Aetna, Ms.
Lynch has agreed not to compete against the Company for a period of one year
following termination of her employment. The applicable table above under
Potential Post-Employment Payments reflects the provisions of Ms. Lynchs
agreements with the Company.
Under his letter agreement with the
Company, Mr. Sabatino was hired with an annual base salary of $750,000 and a
full year target bonus opportunity of 100% of his base salary, which will not be
pro-rated for the 2016 performance year. In addition, a one-time payment of
$600,000 (less applicable withholding and taxes) was made in recognition of Mr.
Sabatinos career move. If Mr. Sabatino voluntarily terminates his employment or is terminated for Cause (as defined in Mr.
Sabatinos agreement) within 12 months after his start date, he will be
responsible for repaying the full amount of his one-time payment. If he
voluntarily terminates his employment or is terminated for Cause after 12
months, but before 18 months after his start date, Mr. Sabatino will be
responsible for repaying 50% of his one-time payment. Mr. Sabatino will receive
payment for 52 weeks of salary in lieu of amounts payable under any Company
severance and salary continuation benefits plan upon delivery of a release of
employment-related claims against Aetna. In addition, under Mr. Sabatinos
agreement, the Company provided him with six months temporary living in
Hartford, Connecticut, and relocation assistance, which includes home sale
assistance and moving of household goods and personal property and the purchase
of residences. If Mr. Sabatino voluntarily terminates his employment or is
terminated for Cause within 12 months of his start date, he will be responsible
for repaying the full amount of his relocation expenses paid by Aetna. If he
voluntarily terminates his employment or is terminated for Cause after 12
months, but before 18 months after his start date, Mr. Sabatino will be
responsible for repaying 50% of his relocation expenses paid by Aetna. Under his
agreements with Aetna, Mr. Sabatino has agreed not to compete against the
Company for a period of one year following termination of his employment. The
applicable table above under Potential Post-Employment Payments reflects the
provisions of Mr. Sabatinos agreements with the Company.
Job
Elimination Benefits Plan
Aetna administers a Job Elimination
Benefits Plan under which eligible employees, including Aetnas executive
officers, terminated by Aetna due to re-engineering, reorganization or staff
reduction efforts may receive a maximum of 52 weeks of continuing salary
depending on years of service and pay level. Under certain circumstances,
determined on a case-by-case basis, additional severance pay benefits may be
granted for the purpose of inducing employment of senior officers or rewarding
past service. The tables above under Potential Post-Employment Payments
reflect any benefits payable under the Job Elimination Benefits Plan to the
extent NEOs are not entitled to severance under individual agreements. Certain
health and other employee benefits continue for part of the severance
period.
The Board has approved provisions for
certain benefits of eligible Company employees upon a change in control of Aetna
(as defined). The provisions provide that the Job Elimination Benefits Plan
shall provide an enhanced benefit and shall become noncancelable for a period of
two years following a change in control. Upon a change in control, PSUs granted
on or after January 1, 2010 that have not yet vested will become vested and
immediately exercisable, and bonuses payable under the Annual Incentive Plan
will become payable based on the target award for participants. Upon a change in
control, stock options, SARs and RSUs granted on or after January 1, 2010 vest
upon a termination of employment by the Company other than for cause within 24
months after the change in control. Provision also has been made to maintain the
aggregate value of specified benefits for one year following a change in
control.
Table of Contents
Equity
Compensation Plans
The following table gives information
about Common Stock that may be issued upon the exercise of SARs, PSUs, RSUs,
options, warrants, rights and any other outstanding awards under all of our
equity compensation plans as of December 31, 2016. In 2016, our executives
annual equity-based incentive compensation value was granted 70% in SARs and 30% in PSUs. PSUs are settled in shares of
Common Stock, net of taxes, after final performance is reviewed and approved and
the awards have vested. SARs are settled in shares of Common Stock, net of
taxes, when exercised. RSUs are settled in shares of Common Stock, net of taxes,
when the awards vest.
Plan
Category |
|
Number of
securities to be issued upon exercise of outstanding
options, warrants and rights(3) (a) |
|
Weighted-average exercise price of outstanding
options, warrants and rights(4) (b) |
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a)(5) (c) |
Equity compensation plans approved by security
holders(1) |
|
12,048,134 |
|
$77.15 |
|
16,155,962 |
Equity compensation plans not approved by security
holders(2) |
|
317,282 |
|
N/A |
|
0 |
TOTAL |
|
12,365,416 |
|
N/A |
|
16,155,962 |
(1) |
Consists of the Aetna Inc.
2000 Stock Incentive Plan (the 2000 Stock Plan), the 2010 Stock Plan,
the Aetna Inc. 2010 Non-Employee Director Compensation Plan (the 2010
Director Plan) and the 2016 Employee Stock Purchase Plan (the Existing
ESPP). |
(2) |
Consists of the Aetna Inc.
2000 Non-Employee Director Compensation Plan. No shares of Common Stock
are available for future awards under this Plan. |
(3) |
Consists of all outstanding
awards under the applicable plans, including SARs, RSUs, PSUs and other
stock-based awards. Amount shown assumes maximum performance for all
outstanding awards. |
(4) |
Amounts in this column do not
take into account outstanding deferred stock units, PSUs or
RSUs. |
(5) |
Consists of 11,019,386 shares
of Common Stock available for future issuance under the 2010 Stock Plan;
201,024 shares of Common Stock available for future issuance under the
2010 Director Plan; and 4,935,552 shares of Common Stock available for
future issuance under the Existing ESPP. Shares available under the 2010
Stock Plan and the 2010 Director Plan may become the subject of future
awards in the form of stock options, SARs, restricted stock, RSUs, PSUs
and other stock-based awards. Only shares of Common Stock are issuable
under the Existing ESPP. As of December 31, 2016, employees had committed
an aggregate of approximately $8.8 million to purchase Common Stock under
the Existing ESPP. Purchases will occur on June 2, 2017 at a purchase
price equal to 95% of the fair market value of the Common Stock on the
purchase date. |
2000 Non-Employee Director
Compensation Plan |
The Aetna Inc. 2000 Non-Employee Director
Plan (the Prior Director Plan) was replaced by the 2010 Director Plan. The
Prior Director Plan was not submitted to shareholders for approval and permitted
Aetnas eligible Directors to receive shares of Common Stock, deferred stock
units, RSUs and other stock-based awards in recognition of their contributions.
The Prior Director Plan expired on April 30, 2010. No shares of Common Stock remain available for future awards under
the Prior Director Plan. At December 31, 2016, the maximum number of shares of
Common Stock that may be issued under the awards outstanding under the Prior
Director Plan was 317,282 shares, subject to adjustment for corporate
transactions, and no shares remained available for future awards.
Table of Contents
COMPENSATION COMMITTEE REPORT
The Board has determined in its business
judgment that all members of the Compensation Committee meet the independence
requirements set forth in the NYSE listing standards and in Aetnas Director
Independence Standards.
The Committee operates pursuant to a Charter that was
last amended and restated by the Board in December 2015 and reviewed by the
Committee in December 2016. The Compensation Committee Charter can be found
at www.aetna.com/about-us/corporate-governance/committees-of-the-board.html.
The Compensation Committee has reviewed
and discussed the Companys Compensation Discussion and Analysis included in
this Proxy Statement with management. Based on this review and discussion, the
Committee has recommended to the Board that the Compensation Discussion and
Analysis be included in this Proxy Statement.
The Committee on Compensation and
Talent Management
Roger N. Farah, Chair
Frank M.
Clark
Betsy Z. Cohen
Jeffrey E. Garten
Edward J. Ludwig
REPORT OF
THE AUDIT COMMITTEE
The Board has determined in its business
judgment that all members of the Audit Committee meet the independence,
financial literacy and expertise requirements for audit committee members set
forth in the NYSE listing standards. Additionally, the Board has determined in
its business judgment that Messrs. Aguirre, Harrington and Newhouse and Mrs.
Hancock, based on his or her background and experience (including that described
in this Proxy Statement), has the requisite attributes of an audit committee
financial expert as defined by the SEC.
The Committee assists the Board in its
oversight of (1) the integrity of the financial statements of the Company, (2)
the qualifications and independence of the Companys independent registered
public accounting firm (the Independent Accountants), (3) the performance of
the Companys internal audit function and the Independent Accountants, and (4)
the compliance by the Company with legal and regulatory requirements. The
Committee is directly responsible for the appointment, compensation, retention
and oversight of the work of the Independent Accountants and any other
accounting firm engaged to perform audit, review or attest services (including
the resolution of any disagreements between management and any auditor regarding
financial reporting). The Independent Accountants and any other such accounting
firm report directly to the Committee.
The Committee operates pursuant to a
Charter that was last amended and restated by the Board in December 2015 and
last reviewed by the Committee in December 2016. The Audit Committee Charter can
be found at www.aetna.com/about-us/corporate-governance/committees-of-the-board.html.
As set forth in the Audit Committee
Charter, Aetnas management is responsible for the preparation, presentation and
integrity of Aetnas financial statements and managements annual assessment of
Aetnas internal control over financial reporting. Aetnas management is
responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
Independent Accountants are responsible for planning and carrying out proper
annual audits and quarterly reviews of Aetnas financial statements. In
conjunction with the Companys annual report, the Independent Accountants
express an opinion as to the conformity of the Companys financial statements
with U.S. generally accepted accounting principles and the effectiveness of the
Companys internal control over financial reporting. The Independent Accountants
also provide review reports regarding the Companys quarterly financial
statements.
In the performance of its oversight
function, the Committee has reviewed and discussed the Companys audited
financial statements for 2016 with management and the Independent Accountants.
The Committee has also discussed with the Independent Accountants the matters
required to be discussed by the Statement on Auditing Standards No. 61, as
amended (AICPA Professional Standards, Vol. 1, AU section 380), as adopted by
the Public Company Accounting Oversight Board (United States) and Rule 3200T
and/or Auditing Standard No. 1301, Communications with Audit Committees, as
adopted by the Public Company Accounting Oversight Board (United States). The
Committee has also received the written disclosures and
Table of
Contents
REPORT OF
THE AUDIT COMMITTEE |
the letter from the Independent
Accountants required by applicable requirements of the Public Company Accounting
Oversight Board regarding the Independent Accountants communications with the
Committee concerning independence, and has discussed with the Independent
Accountants their independence.
Members of the Committee are not employees
of Aetna and, as such, it is not the duty or responsibility of the Committee or
its members to conduct auditing or accounting reviews or procedures. In
performing their oversight responsibility, members of the Committee rely on
information, opinions, reports and statements, including financial statements
and other financial data, prepared or presented by officers or employees of
Aetna, legal counsel, the Independent Accountants or other persons with
professional or expert competence. Accordingly, the Committees oversight does
not provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles and policies, or
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Committees
considerations and discussions referred to above do not assure that the audit
of the Companys financial statements by
the Independent Accountants has been carried out in accordance with the
standards of the Public Company Accounting Oversight Board (United States), that
the Companys financial statements are presented in accordance with U.S.
generally accepted accounting principles, that the Companys internal control
over financial reporting is effective or that the Independent Accountants are in
fact independent.
Based upon the reports, review and
discussions described in this Report, and subject to the limitations on the role
and responsibilities of the Committee, certain of which are referred to above
and in its Charter, the Committee recommended to the Board that the audited
financial statements be included in Aetnas Annual Report on Form 10-K for the
year ended December 31, 2016 filed with the SEC.
The Audit Committee
Richard J. Harrington, Chair
Fernando Aguirre
Ellen M.
Hancock
Joseph P. Newhouse
Olympia J. Snowe
Table of
Contents
II. |
APPROVAL OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM |
PROPOSAL II |
|
Approval of Appointment
of Independent Registered Public Accounting Firm |
The Audit
Committee has appointed KPMG LLP to audit the Companys consolidated
financial statements for 2017. The affirmative vote of a majority of votes
cast is required for the appointment of KPMG as the Companys independent
registered public accounting firm for 2017. |
|
|
✓
|
The Audit Committee and the Board recommend that shareholders
vote FOR this proposal. |
The Audit Committee has appointed KPMG LLP
to audit the Companys consolidated financial statements for 2017. The Audit
Committee and the Board believe that the retention of KPMG LLP as the Companys
independent registered public accounting firm is in the best interests of the
Company and its shareholders. The Audit Committee and the Board recommend that shareholders approve KPMG
LLP as the Companys independent registered public accounting firm (the
Independent Accountants) for 2017. Representatives of the firm are expected to
be available at the Annual Meeting to make a statement if the firm desires and
to respond to appropriate questions.
Nonaudit Services and Other Relationships Between the Company and
the Independent Registered Public Accounting Firm
The Companys practice is not to have the
Independent Accountants provide financial information systems design and
implementation consulting services. Instead, these services are provided by
other accounting or consulting firms. Other types of permissible consulting
services have been provided by the Independent Accountants or other accounting
and consulting firms from time to time. All new services provided by the
Independent Accountants must be approved in advance by the Audit Committee
regardless of the size of the engagement. The Chair of the Audit Committee may
approve any proposed engagements that arise between Committee meetings, provided
that any such decision is presented to the full Committee at its next scheduled
meeting.
In addition, management may not hire as an
employee a person who within the last three years was an employee of the
Independent Accountants and participated in the audit engagement of the
Companys financial statements if the hiring is prohibited by SEC rules or if
the Audit Committee determines that the hiring of such person would impair the
independence of the Independent Accountants.
The independence of the Independent
Accountants is considered annually by the Audit Committee and Board. In order to
assure continuing auditor independence, the Audit Committee periodically
considers whether to rotate the independent registered public accounting firm.
In conjunction with the mandated rotation of the Independent Accountants lead
engagement partner, the Audit Committee is directly involved in the selection of
the Independent Accountants new lead engagement partner.
Table of
Contents
II. APPROVAL
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM |
Fees Incurred for 2016 and 2015 Services Performed by the
Independent Registered Public Accounting Firm
The Audit Committee oversees the fee
negotiations for all services rendered to the Company by the Independent
Accountants. The table below provides details of the fees paid to KPMG LLP by
the Company for services rendered in 2016 and 2015. All such services were
approved in advance by the Audit Committee or the
Chair of the Audit Committee. As shown in the table below, audit and
audit-related fees totaled approximately 96% and 97% of the aggregate fees paid
to KPMG LLP for 2016 and 2015, respectively; and the remaining fees were for tax
and other services.
|
|
2016 |
|
2015 |
Audit Fees(1) |
|
$14,056,850 |
|
$14,313,600 |
Audit-Related
Fees(2) |
|
|
|
|
Servicing Reports/Internal Controls |
|
1,128,800 |
|
1,184,500 |
Employee Benefit Plan Audits |
|
109,000 |
|
157,000 |
Audit/Attest Services Not Required by Statute or
Regulation |
|
150,500 |
|
216,000 |
|
|
$15,445,150 |
|
$15,871,100 |
Tax Fees(3) |
|
442,500 |
|
470,000 |
All Other Fees(4) |
|
132,000 |
|
46,900 |
Total Fees |
|
$16,019,650 |
|
$16,388,000 |
(1) |
Audit Fees include all services performed to comply with generally
accepted auditing standards and services that generally only the
Independent Accountants can provide, such as comfort letters, statutory
audits, attest services, consents and assistance with, and review of,
documents filed with the SEC. For the Company, these fees include the
integrated audit of the Companys consolidated financial statements and
the effectiveness of internal control over financial reporting, quarterly
reviews of the Companys consolidated financial statements, statutory
audits of the Companys subsidiaries required by statute or regulation,
attest services required by applicable law, comfort letters in connection
with debt issuances, consents and assistance with, and review of,
documents filed with the SEC. |
(2) |
Audit-Related Fees are for audit and related attest services that
traditionally are performed by the Independent Accountants, and include
servicing reports, employee benefit plan audits, and audits or agreed-upon
procedures that are not required by applicable law, planning activities
pertaining to business combinations in 2016 only and due diligence
pertaining to business combinations in 2015 only. Servicing reports
represent reviews of the Companys claim administration and certain health
data processing functions that are provided to customers. |
(3) |
Tax Fees include all services performed by professional staff in
the Independent Accountants tax division for tax return and related
compliance services, except for those tax services related to the
integrated audit. |
(4) |
All Other Fees are for advisory services related to realignment of
international subsidiaries and international subsidiary capital regulatory
requirements in 2016 and 2015 and other advisory services for
international legal entities related to regulatory requirements in 2016
only. |
The affirmative vote of a
majority of the votes cast is required for approval of the appointment of KPMG
LLP as the Companys independent registered public accounting firm for 2017. The
Audit Committee and the Board recommend a vote FOR the approval of KPMG LLP as
the Companys independent registered public accounting firm for 2017. If you
complete the enclosed proxy card, unless you direct to the contrary on that
card, the shares represented by that proxy card will be voted FOR approval of
the appointment of KPMG LLP as the Companys independent registered public
accounting firm for 2017.
Table of Contents
III. |
APPROVAL OF THE AMENDMENT OF THE AMENDED AETNA INC.
2010 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO
BE ISSUED UNDER THE PLAN |
PROPOSAL III |
|
Approval of the Amendment
of the Amended Aetna Inc. 2010 Stock Incentive Plan to Increase the Number
of Shares Authorized to Be Issued Under the Plan |
The Board has approved and recommends
that shareholders approve an amendment to the 2010 Stock Plan increasing
the number of shares authorized to be issued under the 2010 Stock Plan
from 27,287,000 to 29,387,000. Approval of this proposal requires a
majority of votes FOR or AGAINST as well as abstentions. |
|
|
✓ |
The Board recommends
a vote FOR this proposal. |
Introduction
Subject to shareholder approval at the
Annual Meeting, on February 17, 2017, the Board, on the recommendation of the
Compensation Committee, unanimously approved an amendment (the Amendment) of
the Amended Aetna Inc. 2010 Stock Incentive Plan (the 2010 Stock Plan), to be
effective as of May 19, 2017, the date of the Annual Meeting. The Amendment
increases the number of shares authorized to be issued under the 2010 Stock Plan
from 27,287,000 to 29,387,000. The Board of Directors recommends and requests
that the shareholders approve the Amendment by approving the following
resolution at the Annual Meeting:
Resolved: That the first sentence of Section
4(a) of the Amended Aetna Inc. 2010 Stock Incentive Plan is hereby amended and
restated to read in its entirely as follows: The maximum number of shares of
Common Stock in respect of which awards may be made under the Plan shall be a
total of 29,387,000 shares of Common Stock.
The principal features of the 2010
Stock Plan are summarized below. Shareholders should read the full text of the
2010 Stock Plan provided in Annex B to this Proxy Statement for a complete
description of its legal terms and conditions.
The summary below is subject in all
respects to the actual terms of the 2010 Stock Plan. Annex B is marked to show
the Amendment proposed to be approved by Aetnas shareholders.
We currently maintain two stock
compensation plans under which future equity awards may be granted: the 2010
Stock Plan and the 2010 Non-Employee Director Compensation Plan (the 2010
Director Plan), which together we refer to as the Current Plans. As of March
17, 2017 there were 8,553,555 shares available for future awards under the
Current Plans. Of that number, 8,352,531 shares were available under the 2010
Stock Plan and 201,024 shares were available under the 2010 Director Plan. The
2010 Director Plan expires on May 21, 2020.
As of March 17, 2017, there were
outstanding under the Current Plans SARs with respect to 7,104,708 shares of
Common Stock, with a weighted average exercise price of 103.81 and a weighted
average remaining term of 8.49 years. None of the outstanding SARs are entitled
to dividends or dividend equivalents. In addition, as of March 17, 2017, there
were 2,453,129 full-value awards outstanding under the Current Plans, as
illustrated in the table below:
Type of Full-Value
Award |
Outstanding
Full-Value Awards |
|
Weighted Average
Fair Value |
Restricted Stock Units |
1,499,054 |
|
$110.52 |
Performance Stock Units |
925,512 |
|
$108.45 |
Market Stock Units |
28,563 |
|
$82.50 |
TOTAL |
2,453,129 |
|
$109.41 |
Table of
Contents
III. |
APPROVAL OF
THE AMENDMENT OF THE AMENDED AETNA INC. 2010 STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE
PLAN |
Upon shareholder approval of the
Amendment, the shares remaining available for future awards under the 2010 Stock
Plan will increase from approximately 8.4 million to approximately 10.5 million.
If the Amendment is not approved by the shareholders, we will continue to grant
awards under the 2010 Stock Plan while it remains in effect and to the extent
shares are available. The table below provides the approximate number of shares
available for future awards under the Current
Plans prior to the Amendment and those that would be available following
approval of the Amendment, each as of the date of the Annual Meeting. The number
of shares requested considers our desire to maintain an average multi-year burn
rate below 3%; maintain a reasonable incremental dilution to shareholders
(1.5%); and limit our long-term share consumption associated with equity
compensation.
|
Shares Remaining Available for Future Equity Awards at
March 17, 2017 |
|
Stock Compensation
Plan |
Prior to Shareholder
Approval |
|
|
Following Shareholder
Approval |
|
2010 Stock Plan |
8,352,531 |
|
|
10,452,531 |
|
2010 Director Plan |
201,024 |
|
|
201,024 |
|
TOTAL |
8,553,555 |
|
|
10,653,555 |
|
COMMON SHARES
OUTSTANDING, AT MARCH 17, 2017 |
331,724,079 |
|
|
331,724,079 |
|
PERCENT OF COMMON SHARES
OUTSTANDING |
2.6 |
% |
|
3.2 |
% |
Introduction
The Board believes that an effective
equity compensation program is a key component of Aetnas compensation
philosophy. Long-term incentive compensation in the form of equity awards is
intended to promote Aetnas long-term success and increase shareholder value by
attracting and retaining high caliber executives and employees who are essential
to our success, and motivating these individuals to achieve Aetnas continued
financial growth and profitability.
To achieve this purpose, the 2010 Stock
Plan, initially approved by the Board and our shareholders at the 2010 Annual
Meeting, provides the flexibility to grant stock options, Stock Appreciation
Rights (SARs), restricted stock, Restricted Stock Units (RSUs), Performance
Stock Units (PSUs), Market Stock Units (MSUs), performance shares and other
stock-based awards to eligible employees.
Reasons the Board of Directors Recommends You Vote For This
Proposal
The Amendment will allow Aetna to
continue to grant equity awards, an important incentive tool for creating
shareholder value.
The use of Common Stock as a component of
the Companys compensation program is critical to the future success of the
Company. Equity awards create an employee ownership culture that aligns the
interests of employees with shareholders. Equity compensation also focuses
employees attention on creating long-term value since the awards are subject to
vesting and/or performance conditions. For example:
|
1. |
Aetna has established stock
ownership requirements for senior executives, which are further described
on page 39 in the Compensation Discussion and Analysis section of this
Proxy Statement; and |
|
2. |
A portion of the equity compensation
granted to senior executives in recent years has been awarded in the form
of PSUs and MSUs, which are earned contingent on the Company attaining
specified operating earnings per share, operating earnings and/or revenue
performance levels. |
Equity awards are important as a
recruiting and retention tool.
Aetnas future performance is dependent on
its ability to recruit and retain high caliber employees, and a competitive
compensation program that includes equity awards is essential for attracting and
retaining such employees. The Company would be at a significant competitive
disadvantage if it were not able to use stock-based awards to compensate
employees. Without equity compensation, our recruiting
Table of
Contents
III.
APPROVAL OF THE AMENDMENT OF THE AMENDED AETNA INC. 2010 STOCK INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE
PLAN |
efforts could be more challenging, and,
over time, executives would no longer have stock awards at risk of forfeiture,
which could impact our ability to retain them.
Aetna has demonstrated sound equity
compensation practices.
The Company recognizes that equity
compensation programs dilute shareholder equity and need to be used judiciously.
Our compensation programs are designed to be consistent with competitive market
practice, and we believe that our historical share utilization has been prudent
and mindful of shareholder interests.
The 2010 Stock Plan includes features
designed to protect shareholder interests, including:
|
1. |
Awards under the 2010 Stock Plan are
administered by the Compensation Committee, which consists entirely of
independent directors; |
|
2. |
The 2010 Stock Plan prohibits
granting stock options and SARs with an exercise price below the fair
market value of a share of stock on the date of grant; |
|
3. |
The 2010 Stock Plan prohibits the
repricing of stock options or SARs, including through the exchange of
stock options or SARs for cash or other awards, without shareholder
approval; |
|
4. |
Material amendments to the 2010
Stock Plan, including the Amendment, require shareholder approval;
and |
|
5. |
The 2010 Stock Plan permits the
Company to credit and accrue, but does not permit the Company to pay out,
dividends or dividend equivalents on unvested equity awards until such
awards become vested. |
If the Amendment is not approved, the
Company will be compelled to increase the cash component of employee
compensation.
In order to provide competitive
compensation opportunities to attract and retain employees without equity
compensation, the Company would need to replace the compensation previously
delivered in equity awards with cash awards or other vehicles. These alternative
forms of compensation may not align employee interests with those of
shareholders as efficiently as stock-based awards.
Principal Features of the 2010 Stock
Plan |
The principal features of the 2010 Stock
Plan as proposed to be amended by the Amendment are summarized below. The full
text of the 2010 Stock Plan as proposed to be amended by the Amendment is attached as Annex B to this Proxy Statement, and the
following summary is qualified in its entirety by reference to Annex
B.
The maximum number of shares of our Common
Stock that may be issued pursuant to awards under the 2010 Stock Plan as
proposed to be amended by the Amendment, is 29,387,000, which may include
authorized but unissued shares.
The 2010 Stock Plan permits the Company to
credit and accrue, but does not permit the Company to pay out, dividends or
dividend equivalents on unvested equity awards until such awards become
vested.
Shares that are subject to a stock option,
SAR, restricted stock award, RSU award, PSU award, MSU award or other award
granted under the 2010 Stock Plan which for any reason expire or are terminated,
forfeited, canceled or converted to and paid in cash, are available for delivery
in connection with future awards under the 2010
Stock Plan. In addition, shares surrendered for the payment of the exercise
price of stock options or other awards or withheld for taxes upon exercise or
vesting of an award are again available for issuance under the 2010 Stock Plan.
In addition, when a SAR is exercised and settled in shares or a stock option is
subject to net-exercise, only the net shares issued from the SAR or option are
counted against the 2010 Stock Plan limit.
The 2010 Stock Plan provides that no
participant may be granted stock options or SARs for more than 2,000,000 shares
in any one-year period. In addition, no participant may be granted
performance-based restricted stock awards, PSUs, MSUs, unrestricted stock awards
or RSUs for more than 2,000,000 shares in any one-year period.
The 2010 Stock Plan is administered by the
Compensation Committee, or such other committee as the Board selects consisting
of two or more Directors, each of whom is intended to be a non-employee
director within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended (the Exchange Act), an
outside director under regulations promulgated under Section 162(m) of the
Code, and an independent director under the NYSE rules. The current members of
the Compensation Committee are
Table of
Contents
III. |
APPROVAL OF
THE AMENDMENT OF THE AMENDED AETNA INC. 2010 STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE
PLAN |
Mr. Clark, Mrs. Cohen, Mr. Farah, Mr.
Garten and Mr. Ludwig, each of whom is an independent Director and not an
employee of Aetna.
The Board may reserve to itself any or all
of the authority and responsibility of the Compensation Committee under the 2010
Stock Plan or may act as administrator of the 2010 Stock Plan for any and all
purposes. In addition, the Board or the Compensation Committee may expressly
delegate to another committee of the Board some or all of the Compensation
Committees authority, within specified parameters, to grant awards to eligible
participants who, at the time of grant, are not Executive Officers under Rule
3b-7 of the Exchange Act.
The Compensation Committee has full and
final authority in its discretion to take all actions determined by the
Committee to be necessary in the administration of the 2010 Stock Plan in
accordance with its terms. The Compensation Committee determines the employees
who will be granted awards under the 2010 Stock Plan, the size and types of
awards, the terms and conditions of awards and the form and content of the award
agreements representing awards.
The Compensation Committee is authorized
to establish, administer and waive terms, conditions and performance goals of
outstanding awards and to accelerate the vesting or exercisability of awards, in
each case, subject to limitations contained in the 2010 Stock Plan. The
Compensation Committee interprets the 2010 Stock Plan and award agreements and
has authority to correct any defects, supply any omissions and reconcile any
inconsistencies in the 2010 Stock Plan and/or any award agreements. The
Compensation Committees decisions and actions concerning the 2010 Stock Plan
are final and conclusive.
The 2010 Stock Plan prohibits reducing the
exercise price or grant price of an outstanding stock option or SAR or replacing
or exchanging an outstanding stock option or SAR that has an exercise price or
grant price above the value of our Common Stock with a new option or SAR that
has a lower exercise price or grant price, or with cash or any other type of new
award other than as described under Adjustment for Corporate Transactions on
page 69, without first obtaining shareholder approval.
The 2010 Stock Plan provides that awards
may only be granted to employees of the Company. At March 17, 2017, there were
approximately 48,755 employees who would be eligible to receive awards under the 2010 Stock Plan. In each year from
2011 through 2016, approximately 3,100 of the Companys eligible employees
received equity awards.
Duration and
Modification |
The 2010 Stock Plan will terminate on May
21, 2020, or such earlier date as the Board of Directors may determine.
Notwithstanding the foregoing, the 2010 Stock Plan will remain in effect for
awards outstanding under that Plan until no such awards remain
outstanding.
The Board of Directors may amend, alter,
suspend or terminate the 2010 Stock Plan. However, the Board of Directors is
required to obtain approval of the shareholders, if such approval is required by
any applicable law or rule, of any amendment of the 2010 Stock Plan that would:
(a) increase the maximum number of shares of Common Stock that may be sold or
awarded under the 2010 Stock Plan, or that may be subject to awards granted to a
single participant during a single fiscal year, except in the event of certain
changes in our capital (as described on page 69
under Adjustment for Corporate Transactions); (b) decrease the minimum option
exercise price or SAR grant price required by the 2010 Stock Plan, except in the
event of certain changes in our capital (as described on page 69 under
Adjustment for Corporate Transactions); (c) change the class of persons
eligible to receive awards under the 2010 Stock Plan; (d) change the performance
measures applicable to awards intended to qualify as performance-based
compensation under Section 162(m) of the Code; (e) extend the duration of the
2010 Stock Plan or the exercise period of any stock options or SARs granted
under the 2010 Stock Plan; or (f) otherwise require shareholder approval to
comply with applicable laws or rules. The proposed Amendment requires
shareholder approval.
Incentive Stock and Incentive
Units |
The 2010 Stock Plan provides the
Compensation Committee with the authority to grant a variety of time-based and
performance-based incentive stock and incentive unit awards, including, but not
limited to, restricted stock, RSUs, PSUs, MSUs and performance shares, to
eligible employees.
Restricted stock awards are shares of our
Common Stock that are awarded to a participant subject to the satisfaction of
the terms and conditions established by the Compensation Committee. Until the
applicable restrictions lapse, shares of restricted stock are subject to
forfeiture and may not be sold, assigned, pledged or otherwise disposed of by
the
Table of
Contents
III.
APPROVAL OF THE AMENDMENT OF THE AMENDED AETNA INC. 2010 STOCK INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE
PLAN |
participant who holds those shares. RSUs
are denominated in units of shares of our Common Stock, except that no shares
are actually issued to the participant on the grant date. When a RSU award
vests, the participant is entitled to receive shares of our Common Stock, a cash
payment based on the value of shares of our Common Stock or a combination of
shares and cash. Vesting of restricted stock and RSU awards may be based on
continued employment or service and/or satisfaction of performance goals or
other conditions established by the Compensation Committee. A recipient of
restricted stock will have the rights of a shareholder during the restriction
period, including the right to be credited with any dividends, which shall be
subject to the same restrictions as the underlying share of restricted stock. A
recipient of RSUs will have none of the rights of a shareholder unless and until
shares are actually delivered to the participant. Upon termination of employment
or a period of service, or failure to satisfy other vesting or performance
conditions, a participants unvested shares of restricted stock and unvested
RSUs are forfeited unless the participants award agreement, or the Compensation
Committee, provides otherwise.
Performance units, performance shares,
PSUs and MSUs granted to a participant are amounts credited to a bookkeeping
account established for the participant. A performance unit has an initial value that is established by the
Compensation Committee at the time of grant. A performance share has an initial
value equal to the fair market value of one share of our Common Stock on the
grant date. The fair market value of our Common Stock is generally determined as
the closing price of our Common Stock on the NYSE on the grant date. Whether a
performance unit, performance share, PSU or MSU award will actually result in a
payment to a participant will depend upon the extent to which performance goals
or other conditions established by the Compensation Committee are satisfied.
After a performance unit, performance share, PSU or MSU award has vested, the
participant will be entitled to receive a payout of cash, shares of our Common
Stock or a combination of cash and such shares, as determined by the
Compensation Committee. A participants award agreement describes the terms and
conditions of the award, including the effect of a termination of employment on
the participants performance unit, performance share, PSU or MSU
award.
The number of shares of incentive stock
and/or incentive units granted to a participant will be determined by the
Compensation Committee, but no participant may be granted more than 2,000,000
shares subject to awards in any year.
Incentive stock and/or incentive unit
awards may be conditioned on the achievement of objectively determinable
performance goals based on any combination of one or more of the performance
measures listed below, determined in relation to the Company or our affiliates
or any business unit of either or in comparison to a designated group of other
companies or index (to the extent such awards are intended to qualify as
performance-based for purposes of Section 162(m) of the Code):
●Net income |
●Cash flow |
●Earnings before income
taxes |
●Return on assets |
●Earnings per share |
●Pretax operating income |
●Return on shareholders equity |
●Customer satisfaction |
●Expense management |
●Provider satisfaction |
●Ratio of claims to revenues |
●Employee satisfaction |
●Revenue growth |
●Quality of networks |
●Earnings growth |
●Strategic innovation |
●Profitability of an identifiable business unit or
product |
●Net economic profit (operating earnings minus a charge for
capital) |
●Total shareholder return |
|
The Compensation Committee will determine
whether the performance goals that have been chosen for a particular
performance-based award have been met. The Compensation Committee may, in its
discretion, adjust downwards but not upwards amounts payable or benefits
granted, issued, retained or vested under a performance-based award described
above.
SARs may be granted under the 2010 Stock
Plan alone or in tandem with specific stock options granted under the 2010 Stock
Plan. SARs are awards that, upon their exercise, give a participant the right to
receive from us an amount equal to (1) the number of shares for which the SAR is
exercised, multiplied by (2) the excess of
the fair market value of a share of our Common Stock on the exercise date above
the exercise price of the SAR. The exercise price of a SAR cannot be less than
100% of the fair market value of our Common Stock on the grant date of such SAR.
A SAR
Table of Contents
III. |
APPROVAL OF THE AMENDMENT
OF THE AMENDED AETNA INC. 2010 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE
PLAN |
may be settled in cash, shares or a
combination of cash and shares, as determined by the Compensation Committee.
SARs will become exercisable and expire at the times and on the terms and
conditions established by the Compensation Committee, subject to a maximum term
of 10 years following the grant date. However, a SAR granted in tandem with a
stock option will be exercisable and terminate when the related stock option is
exercisable and terminates. Such a stock option
will no longer be exercisable to the extent that the holder exercises the
related SAR. Likewise, a SAR will not be exercisable to the extent that the
related stock option is exercised. The number of shares covered by each SAR will
be determined by the Compensation Committee, but no participant may be granted
SARs covering more than 2,000,000 shares of our Common Stock in any
year.
A stock option is the right to purchase a
specified number of shares of our Common Stock in the future at a specified
exercise price, subject to the other terms and conditions specified in the award
agreement and the 2010 Stock Plan. Stock options granted under the 2010 Stock
Plan will be either incentive stock options, which may be eligible for special
tax treatment under the Code, or stock options other than incentive stock
options (referred to as nonqualified stock options), as determined by the
Compensation Committee and stated in the award agreement. The number of shares
covered by each stock option award will be determined by the Compensation
Committee, but no participant may be granted stock options for more than
2,000,000 shares of our Common Stock in any year. The exercise price of each
stock option is determined by the Compensation Committee but cannot be less than
100% of the fair market value of our Common Stock on the date of grant. Stock options granted under the 2010 Stock Plan in
substitution or exchange for options or awards of another company involved in a
corporate transaction with us or one of our subsidiaries will have an exercise
price that is intended to preserve the economic value of the award that is
replaced. The exercise price of any stock options granted under the 2010 Stock
Plan may be paid in cash, shares of our Common Stock already owned by the option
holder or any other method that may be approved by the Compensation Committee,
such as a cashless broker-assisted exercise that complies with law.
Stock options will become exercisable and
expire at the times and on the terms and conditions established by the
Compensation Committee, subject to a maximum term of 10 years following the
grant date. Stock options generally terminate 90 days after the holders
employment or service with Aetna or one of our affiliates terminates.
Under the 2010 Stock Plan, the
Compensation Committee may grant to participants other stock-based awards which
are valued in whole or in part by reference to, or otherwise based on, shares of
our Common Stock. The form of any other stock-based awards will be determined by
the Compensation Committee, and may include a grant or sale of unrestricted
shares of Common Stock. The number of shares of our Common Stock related to any
other stock-based award will be determined by the
Compensation Committee. Other stock-based awards may be paid in shares of our
Common Stock or cash, according to the award agreement. The terms and conditions
of the award, including vesting provisions and the effect of a termination of
employment or service on the award, will be established by the Compensation
Committee at the time of grant.
The Compensation Committee may provide for
the crediting of dividends or dividend equivalents with respect to equity
awards, such as RSUs, that have not vested or been issued. However, such
dividends or dividend equivalents will generally
be subject to the same terms and conditions as the underlying award, and will in
no event pay out on unvested awards. Neither SARs nor stock options will be
eligible for dividends or dividend equivalents.
Transferability of
Awards |
Awards under the 2010 Stock Plan generally
may not be sold, assigned or otherwise transferred except by will or the laws of
descent and distribution. The Compensation Committee may permit awards to be
transferred to a member of a participants
immediate family or to a trust or similar vehicle for the benefit of such
immediate family members on such terms and conditions as the Committee shall
determine.
Table of Contents
III. APPROVAL OF THE AMENDMENT OF THE AMENDED AETNA INC.
2010 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED
TO BE ISSUED UNDER THE PLAN |
Adjustment for
Corporate Transactions |
In the event of any corporate event or
transaction, such as an extraordinary stock dividend, stock split,
recapitalization, reorganization, merger, combination, consolidation or
spin-off, in order to prevent dilution or enlargement of participants rights
under the 2010 Stock Plan, the Compensation Committee will substitute or adjust
the number, class and kind of securities that can
be delivered under the 2010 Stock Plan and outstanding awards, the 2010 Stock
Plans limits on the number of shares that can be subject to awards granted to a
single participant during a single fiscal year, and the price, as applicable, of
securities subject to awards outstanding under the 2010 Stock Plan.
Tax
Withholding Obligations |
The 2010 Stock Plan authorizes the Company
to withhold all applicable taxes from any award or payment under the 2010 Stock
Plan and to take other actions necessary or appropriate to satisfy those tax
obligations.
Certain United
States Federal Income Tax
Consequences |
The following is a brief summary of
certain significant United States federal income tax consequences under the
Code, as in effect on the date of this summary, applicable to us and
participants in connection with awards under the 2010 Stock Plan. This summary
assumes that all awards will be exempt from, or comply with, the rules under
Section 409A of the Code regarding nonqualified deferred compensation. If an
award constitutes nonqualified deferred compensation and fails to comply with
Section 409A of the Code, the award will be subject to immediate taxation and
tax penalties in the year the award vests. This summary is not intended to be
exhaustive, and, among other things, does not describe state, local or
non-United States tax consequences, or the effect of gift, estate or inheritance
taxes. References to we, us, our and the Company in this summary of tax
consequences mean Aetna Inc., or any subsidiary or affiliate of Aetna Inc. that
employs or receives the services of a recipient of an award under the 2010 Stock
Plan, as the case may be.
A recipient of shares of restricted stock
will not recognize any taxable income upon the award of shares, if any of
restricted stock which are not transferable or are subject to a substantial risk
of forfeiture. Generally, dividends and dividend equivalents, if any, accrued
prior to vesting and paid with respect to restricted stock upon the lapse of
restrictions applicable to that stock will be taxable as compensation income to
the recipient. Generally, the recipient will recognize taxable ordinary income
when the shares become transferable and are no longer subject to a substantial
risk of forfeiture, in an amount equal to the fair market value of those shares
at the time such restrictions lapse. However, a recipient may elect to recognize
taxable ordinary income upon the award date of restricted stock based on the
fair market value of the shares of our Common Stock subject to the award on the
date of the award. If a recipient makes such an election, any dividends paid
with respect to that restricted stock will not be treated as compensation
income, but rather as dividend income, and the recipient will not recognize
additional taxable income when the restrictions applicable to his or her restricted stock award lapse. In addition, if
the election is made, the recipient will not be allowed a deduction for amounts
subsequently required to be returned to the Company.
The granting of incentive stock and/or
incentive unit awards subject to performance conditions, including PSUs, MSUs,
performance shares and other stock-based awards, generally should not result in
the recognition of taxable income by the recipient or a tax deduction by us. The
payment or settlement of a PSU, MSU, performance share or other stock-based
award should generally result in immediate recognition of taxable ordinary
income by the recipient equal to the amount of any cash received or the
then-current fair market value of the shares of our Common Stock received, and a
corresponding tax deduction by the Company. Section 162(m)(6) of the Code limits our tax deduction to the first
$500,000 of earned compensation regardless of whether or not that compensation
is performance-based. If the shares covered by the award are not transferable
and subject to a substantial risk of forfeiture, the tax consequences to the
recipient and the Company will be similar to the tax consequences of restricted
stock awards previously described. If the award consists of unrestricted shares
of our Common Stock, the recipient of those shares will immediately recognize as
taxable ordinary income the fair market value of those shares on the date of the
award, and we will be entitled to a corresponding tax deduction, subject to the
limitations of Section 162(m)(6) of the Code.
The granting of RSUs does not result in
taxable income to the recipient of a RSU or a tax deduction for the Company. The
amount of cash received or the then-current fair market value of our Common
Stock received upon vesting of the RSU is taxable to the recipient as ordinary
income and deductible by the Company in the year of receipt of the cash or
Common Stock, subject to the limitations of Section 162(m)(6) of the
Code.
Table of Contents
III. |
APPROVAL OF THE AMENDMENT
OF THE AMENDED AETNA INC. 2010 STOCK INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE
PLAN |
The grant of SARs does not, in itself,
result in taxable income to the recipient of a SAR or a tax deduction for the
Company. Upon exercise of a SAR, the amount of any cash and/or the fair market
value of any Common Stock received as of the exercise date are taxable to the
recipient as ordinary income and deductible by the Company, subject to the
limitations of Section 162(m)(6) of the Code.
The grant of stock options does not, in
itself, result in taxable income to the recipient of the stock option or a tax
deduction for the Company. However, our transfer of Common Stock to a stock
option holder upon exercise of the option may or may not give rise to taxable
income to the option holder and a tax deduction for us depending upon whether
such option is a nonqualified stock option or an incentive stock option and
subject to the limitations of Section 162(m)(6) of the Code.
The exercise of a nonqualified stock
option by an option holder generally results in immediate recognition of taxable
ordinary income by the option holder and a corresponding tax deduction for the
Company in the amount by which the fair market value of the shares of our Common
Stock purchased, on the date of such exercise, exceeds the aggregate exercise
price paid, subject to the limitations of Section 162(m)(6) of the Code. Any
appreciation or depreciation in the fair market value of those shares after the
exercise date will generally result in a capital gain or loss to the holder at
the time the participant disposes of the shares (long term capital gain if the
holding period of such shares of Common Stock is more than one year) and has no
impact on the Company.
The exercise of an incentive stock option
by the option holder is exempt from income tax, although not from the
alternative minimum tax, and does not result in a tax deduction for the Company
if the holder has been an employee at all times beginning with the option grant
date and ending three months before the date the holder exercises the option (or
twelve months in the case of termination of employment due to disability). If
the option holder has not been so employed during that time, the option holder will be taxed as if nonqualified stock options
were granted. If the option holder disposes of the shares purchased more than
two years after the option was granted and more than one year after the option
was exercised, then the option holder will recognize any gain or loss upon
disposition of those shares as capital gain or loss. However, if the option
holder disposes of the shares prior to satisfying these holding periods (known
as a disqualifying disposition), the option holder will be obligated to report
as taxable ordinary income for the year in which that disposition occurs the
excess, with certain adjustments, of the fair market value of the shares
disposed of, on the date the incentive stock option was exercised, over the
exercise price paid for those shares. The Company would be entitled to a tax
deduction equal to that amount of ordinary income reported by the option holder,
subject to the limitations of Section 162(m)(6) of the Code. Any additional gain
realized by the option holder on the disqualifying disposition would be capital
gain. If the total amount realized in a disqualifying disposition is less than
the exercise price of the incentive stock option, the difference would be a
capital loss for the option holder.
Under certain circumstances, accelerated
vesting, exercise or payment of awards under the 2010 Stock Plan in connection
with a change of control may be deemed an excess parachute payment for
purposes of the golden parachute payment provisions of Section 280G of the Code.
To the extent it is so considered, the recipient holding the award would be
subject to an excise tax equal to 20% of the amount of the excess parachute
payment, and we would be denied a tax deduction for the excess parachute
payment.
Equity compensation awards to be granted in the future to the Companys
current and future eligible employees under the 2010 Stock Plan cannot be
determined at this time, as actual awards will be based on the discretion of the
Compensation Committee. For an understanding of the equity compensation awards
made in the past under the 2010 Stock Plan and the 2000 Stock Plan, see the 2016
Grants of Plan-Based Awards table and the Outstanding Equity Awards at 2016
Fiscal Year-End table beginning on page 44.
Approval of the
Amendment requires a majority of the votes cast on the Amendment (which for this
proposal includes votes cast FOR or AGAINST the proposal as well as
abstentions) to be FOR the Amendment. The Board recommends a vote FOR the
approval of the Amendment. If you complete the enclosed proxy card, unless you
direct to the contrary on that card, the shares represented by that proxy card
will be voted FOR approval of the Amendment.
Table of Contents
IV. |
APPROVAL OF THE COMPANYS EXECUTIVE COMPENSATION ON A NON-BINDING
ADVISORY BASIS |
PROPOSAL IV |
|
Approval of the Companys
Executive Compensation on a Non-Binding Advisory Basis |
We are
providing you with the opportunity to vote on a non-binding advisory basis
on the fiscal 2016 compensation of our NEOs. The affirmative vote of a
majority of the votes cast is required for this proposal to be considered
approved. |
|
|
✓ |
The Board recommends a vote FOR for this
proposal. |
In accordance with Section 14A of the
Exchange Act (15 U.S.C. 78n-l) (Section 14A), Aetna is providing shareholders
with the opportunity to cast a non-binding advisory vote on the fiscal 2016
compensation of our NEOs (sometimes referred to as say-on-pay). This vote is
not intended to address any specific item of compensation, but rather the
overall compensation for our NEOs and our compensation philosophy, policies and
practices as disclosed in the Compensation Discussion and Analysis and
Executive Compensation sections of this Proxy Statement. Accordingly, you may
vote on the following resolution at the Annual Meeting:
Resolved, that the shareholders of Aetna
Inc. (Aetna) hereby approve, on an advisory basis, the compensation paid to
Aetnas Named Executive Officers, as disclosed in Aetnas Proxy Statement for
the 2017 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K,
including the Compensation Discussion and Analysis, the compensation tables and
the narrative discussion.
As described in detail under Compensation
Discussion and Analysis and Executive Compensation, our compensation programs
are designed to motivate our executives to manage
and grow a successful company. If fully earned based on the achievement of
performance goals, equity compensation in the form of PSUs that are subject to
performance-based vesting and SARs, the value of which is determined by our
stock price performance, are the largest component of executive compensation. We
believe that our compensation program, with its balance of short-term incentives
(including cash bonus awards) and long-term incentives (including SARs and PSUs)
and share ownership guidelines, rewards sustained performance that is aligned
with long-term shareholder interests. Shareholders are encouraged to read the
Compensation Discussion and Analysis and Executive Compensation sections of
this Proxy Statement, the accompanying compensation tables, and the related
narrative disclosure.
This advisory vote is non-binding. The
Compensation Committee, which is comprised solely of independent Directors, and
the Board value the opinions of all of our shareholders and expect to take into
account the outcome of this vote when considering future executive compensation
decisions for our NEOs.
The affirmative vote
of a majority of the votes cast is required for the non-binding advisory vote on
executive compensation to be considered approved. The Board recommends a vote
FOR the approval, on an advisory basis, of the proposed resolution on the
compensation of Aetnas Named Executive Officers. If you complete the enclosed
proxy card, unless you direct to the contrary on that card, the shares
represented by that proxy card will be voted FOR approval, on an advisory basis,
of such compensation.
Table of Contents
V. |
NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF THE VOTE ON EXECUTIVE
COMPENSATION |
PROPOSAL V |
|
Non-Binding Advisory Vote on the Frequency of the
Vote on Executive Compensation |
We also are asking
shareholders to cast a non-binding advisory vote on how frequently
say-on-pay votes should be held in the future. The choice that receives
the majority of votes cast will be considered approved. |
|
|
The Board does not have a voting
recommendation with respect to proposal V. |
In accordance with Section 14A, Aetna is
providing shareholders with the opportunity to cast a non-binding advisory vote
to determine how often to present to shareholders the advisory vote to approve
the compensation of Aetnas named executive officers (sometimes referred to as
the say-on-pay vote). Section 14A requires us to include this vote in our
proxy statement at least once every six years. In this Proposal, the Board is
asking shareholders to cast a non-binding advisory vote on how frequently
say-on-pay votes should be held in the future. Shareholders may select among
four choices: (1) a vote every year; (2) a vote every two years; (3) a vote
every three years; or (4) to abstain from casting a vote. This advisory vote is
not binding on the Board. The Board acknowledges that there are a number of
points of view regarding the relative benefits of annual and less frequent
say-on-pay votes.
Accordingly, you may vote on the following
resolution at the Annual Meeting:
Resolved, that the shareholders of Aetna
Inc. (Aetna) determine, on an advisory basis,
that Aetnas shareholders should have an advisory vote on the compensation of
Aetnas Named Executive Officers set forth in Aetnas proxy
statement:
Choice 1 EVERY YEAR;
Choice 2 EVERY TWO years;
Choice 3 EVERY THREE years; or
Choice 4 ABSTAIN from voting.
The choice among the four choices included
in the resolution that receives the majority of the votes cast will be
considered approved. Even if no choice receives the required majority vote
approval, the Board will take into account all voting results.
The Board does not
have a recommendation with respect to this proposal. If you sign and date your
proxy card with no further instructions with respect to this proposal, the
shares represented by that proxy card will NOT BE VOTED on this proposal.
Shareholders may choose among the four choices included in the resolution set
forth above.
Table of Contents
VI.
SHAREHOLDER PROPOSALS
PROPOSAL VI(A) |
|
Shareholder
Proposal - Annual Report on Direct and Indirect
Lobbying |
|
Mercy Investment Services, Inc.,
2039 North Geyer Road, St. Louis, MO 63131-3332, Oblate International
Pastoral Investment Trust, 391 Michigan Avenue, NE, Washington, DC 20017,
and The Comptroller of the State of New York, Thomas P. DiNapoli, as the
trustee of the New York State Common Retirement Fund, 59 Maiden Lane-30th
Floor, New York, NY 10038 (each an owner of Common Stock valued in excess
of $2,000), have advised Aetna that they plan to present the following
proposal at the Annual Meeting. The proposal is included in this Proxy
Statement pursuant to the rules of the SEC. |
Whereas, we believe full disclosure of Aetnas direct and indirect lobbying
activities and expenditures is required to assess whether Aetnas lobbying is
consistent with its expressed goals and in the best interests of
shareholders.
Resolved, the shareholders of Aetna request the preparation of a report, updated
annually, disclosing:
1. Company policy and procedures governing
lobbying, both direct and indirect, and grassroots lobbying
communications.
2. Payments by Aetna used for (a) direct
or indirect lobbying or (b) grassroots lobbying communications, in each case
including the amount of the payment and the recipient.
3. Aetnas membership in and payments to
any tax-exempt organization that writes and endorses model
legislation.
4. Description of the decision making
process and oversight by management and the Board for making payments described
in section 2 and 3 above.
For purposes of this proposal, a
grassroots lobbying communication is a communication directed to the general
public that (a) refers to specific legislation or regulation, (b) reflects a
view on the legislation or regulation and (c) encourages the recipient of the
communication to take action with respect to the legislation or regulation.
Indirect lobbying is lobbying engaged in by a trade association or other
organization of which Aetna is a member.
Both direct and indirect lobbying and
grassroots lobbying communications include efforts at the local, state and
federal levels.
The report shall be presented to the Audit
Committee or other relevant oversight committees and posted on Aetnas
website.
Supporting Statement
We encourage transparency in the use of
corporate funds to influence legislation and regulation. Aetna spent
approximately $5.63 million in 2014 and 2015 on federal lobbying. Aetna reports
spending $10.93 million in 2014 and 2015 on state lobbying, yet provides no
information by state. Aetnas lobbying on a merger with Humana has attracted
media scrutiny (Aetna, Cigna Boost Spending on Lobbyists, Connecticut Mirror, January
11, 2016).
Aetna belongs to the Chamber of Commerce,
which has spent over $1.2 billion on lobbying since 1998. Aetna discloses its
trade association dues and amounts of its dues used for lobbying on its website,
but this fails to capture all payments, despite a 2007 shareholder agreement to
do so (Why Mandate Disclosure? Because Corporations Lie on Voluntary Political
Transparency, The Nation, March 29, 2013). This loophole allows Aetna to make
additional payments beyond dues that can be used for lobbying, yet not be
disclosed to shareholders. Aetna has previously made undisclosed trade
association payments beyond dues that were used for lobbying (Oops! Aetna
Discloses Political Donations, CNN, June 15, 2012). We are concerned
that this disclosure loophole presents reputational risks.
We also question if Aetnas membership in
the Chamber is consistent with Aetnas values and presents reputational risks on
the issues of improving health. For example, Aetna supports smoking cessation,
yet the Chamber has worked to block global antismoking laws (U.S. Chamber
Fights Smoking Laws While Hospitals and Insurers Sit on Its Board, New York Times,
July 1, 2015).
The affirmative vote
of a majority of the votes cast is required for approval of the foregoing
proposal.
Table of Contents
VI. SHAREHOLDER
PROPOSALS |
THE BOARD OF DIRECTORS
WILL OPPOSE THIS PROPOSAL IF IT IS INTRODUCED AT THE 2017 ANNUAL MEETING AND
RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
The Company is an active participant in
the political process at all levels of government and seeks to promote political
interests that are aligned with the business interests of the Company, its
shareholders and its members. We agree that transparency and accountability with
respect to political expenditures are important. That is why the Company
publishes annually its Political Contributions and Related Activity Report. Our
2015 report is available on our website at http://www.aetna.com/about-aetna-insurance/document-library/pac/2015-aetna-pac-annual-report.pdf. The 2016 report will become available after it has been
reviewed by the Audit Committee.
The Company complies fully with all state
and federal laws concerning the disclosure of its political and lobbying
activity. In addition, it makes available additional information beyond that
required by current laws and regulations. The Company was ranked in the top tier
of the 2016 Center for Political Accountability CPA-Zicklin Index for Corporate
Political Accountability and Disclosure (Zicklin Index), ahead of many of its
managed healthcare competitors. The Zicklin Index, which places companies into
one of 5 tiers based on political contributions disclosure practices, is
intended to provide a comprehensive portrait of the disclosure practices of
companies listed in the S&P 500 index.
With respect to oversight, the Companys
Audit Committee reviews the Companys Political Contributions and Related
Activity Report prior to publication. In addition, management regularly
discusses public policy issues and political activities with our full Board.
Given the importance of public policy to the health care industry and our
business, our Board will continue to exercise oversight with respect to public
policy matters.
We believe that the information currently
available to shareholders is easily accessible and understandable and, coupled
with the oversight of the Companys political activities by the Board, is in the
best interest of the Company. As a result, we do not believe additional
disclosure is warranted at this time.
A shareholder proposal seeking political
contribution disclosure similar (but not identical) to the Proposal was
presented to shareholders at our 2016, 2015, 2014 and 2012 annual shareholder
meetings. At those meetings 74.5%, 70.99%, 72.84% and 89.98% of the votes cast
at the respective meetings were voted against the proposal, reflecting our
shareholders agreement that our current disclosure practices meet or exceed
their expectations.
For these reasons, the Board opposes this
proposal and recommends a vote AGAINST the proposal.
If you complete the
enclosed proxy card, unless you direct to the contrary on that card, the shares
represented by that proxy card will be voted AGAINST the foregoing
proposal.
PROPOSAL VI(B) |
|
Shareholder Proposal - Annual Report on Gender Pay
Gap |
|
The Comptroller of the City of New
York, Scott M. Stringer, custodian and a trustee of the New York City
Employees Retirement System, the New York City Fire Department Pension
Fund, The New York City Teachers Retirement System, and the New York City
Police Pension Fund, and custodian of the New York City Board of Education
Retirement System (the Systems), 1 Centre Street, New York, NY
10007-2341 (owner of Common Stock valued in excess of $2,000), has advised
Aetna that he plans to present the following proposal at the Annual
Meeting. The proposal is included in this Proxy Statement pursuant to the
rules of the SEC. |
RESOLVED: Shareholders request that Aetna, Inc. report annually to the board and
shareholders, identifying whether there exists a gender pay gap among the
companys employees, and if so, the measures being taken (policies, programs,
goals etc.) to eliminate any such pay disparities and to facilitate an
environment that promotes opportunities for equal advancement for women. The
gender pay gap is defined as the difference between male and female earnings
expressed as a percentage of male earnings according to the Organization for
Economic Cooperation and Development. The report should be prepared by December
2017 at reasonable cost and omit proprietary information.
Supporting Statement
Women earn about 78 cents for every dollar
earned by their male peers. Differences in age, education, years of experience
etc. may explain some of this difference. However, a study by Glassdoor
(Demystifying the Gender Pay
Gap) of over 500,000 self-reported salary
data points on its website shows that even after adjusting for these factors,
there is an unexplained, statistically significant pay gap of 5.4% (the adjusted
gender pay gap) between men and women in the US.
Table of Contents
VI. SHAREHOLDER
PROPOSALS |
The study also revealed that the
healthcare and insurance industries both have an adjusted gender pay gap of 7.2%
- the largest of 25 industries studied. This means that women earn about 93
cents for every dollar earned by men working
in the same job title, same company, and with similar background and
experience, (https://research-content.glassdoor.com/app/uploads/sites/2/2016/03/Glassdoor-Gender-Pay-Gap-Study.pdf).
This gap is 33% higher than the average
adjusted gender pay gap for the US.
The gender pay gap is real -
salesforce.com commissioned an analysis of its salaries and spent $3 million
correcting for statistically significant gender-based salary differences for 6%
of its workforce.
Many studies conclude that diversity
matters to company performance. Gender and ethnically diverse companies are
likely to outperform by 15% and 35% respectively (http://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters). This raises concerns about whether companies are positioned to attract
the best talent, if similar work is not being equally compensated.
The gender pay gap is attracting
attention. The Paycheck Fairness Act, which seeks to strengthen existing equal
pay regulations, is pending in Congress; the President has taken executive
actions, and 57 companies have signed the White House Equal Pay Pledge.
Companies that file EE0-1 data on the breakdown of their workforce by
race/ethnicity and gender across ten job categories, will soon have to submit
compensation data across 12 pay bands. Massachusetts and NYC are taking actions
to ban employers from asking applicants about previous pay.
Despite progress, pay inequity and
advancement opportunities remain concerns for the healthcare industry in which
the Company operates. Women comprise 78% of the healthcare workforce but remain
underrepresented at the leadership level. At Fortune 500 healthcare companies,
women represent only about 20% of executive leadership and 63% of these
companies have less than 25% women on their boards (https://rockhealth.com/the-state-of-healthcare-gender-diversity-2016/).
The affirmative vote of a majority of the
votes cast is required for approval of the foregoing proposal.
THE BOARD OF DIRECTORS
WILL OPPOSE THIS PROPOSAL IF IT IS INTRODUCED AT THE 2017 ANNUAL MEETING AND
RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
Aetna believes a strong focus on diversity
and inclusion (D&I) provides the Company with an important competitive
advantage. Diversity in our workforce is essential to gaining insights into the
members we serve and finding new and better ways to allow our members to live
more healthy days. Gender equality is a primary focus within our overall D&I
strategy, and we are committed to diversity and equal employment opportunities
in all areas of our business, including hiring and compensation.
Accountability for D&I at Aetna starts
at the top. Our Chairman and CEO is the executive sponsor of womens advancement
at the Company. Fifty percent of our Board members are women or come from a
diverse background (four of 12 of our Directors are women). In 2015, we
appointed Karen S. Lynch as the first woman President in our Companys nearly
165-year history.
Aetnas compensation programs are designed
to prevent gender pay differences by setting pay targets by job class. Pay
targets are set using market pay data collected from industry surveys. Pay
equity reviews are conducted periodically to help
us understand whether our compensation structure is appropriate. Pay decisions
are based on individual performance and, at the senior executive level, pay
decisions are reviewed and approved by the Compensation Committee. Further, as a
Federal Contractor, the Company is subject to periodic audits by the Office of
Federal Contract Compliance Programs (OFCCP) which, among others items,
reviews compliance with laws and regulations prohibiting
discrimination.
Aetnas 2016 Corporate Social
Responsibility (CSR) Report www.aetna.com/about-aetna-insurance/document-library/corporate-responsibility.pdf
includes detailed information about our workforce
demographics and provides information on our comprehensive D&I efforts. In
addition, the Company files EEO-1 reports annually that provide information
about our workforce demographics.
Some of the items highlighted in the 2016
CSR Report include:
● |
75% of our workforce are
women; |
● |
Our turnover rate for women has
decreased by 2.5% over the past two years and is below the Company average
for all employees; |
● |
33% of our U.S. executives are
women, an increase of 8% over the past 4
years; |
Table of Contents
VI.
SHAREHOLDER PROPOSALS |
● |
Our Womens Leadership Alliance, launched in
2012, was established to accelerate the advancement of women in senior
manager and executive positions and create a culture for talent and
development; and |
● |
In 2016, the Company was included in the
Diversity Inc. list of Top 50 Companies for Diversity and was named a Top
50 Company for Executive Women by the National Association for Female
Executives. |
We report annually to the Board of
Directors regarding our D&I strategy and related programs and have included
diversity metrics into our incentive compensation programs to drive execution
and accountability.
Aetna remains committed to ongoing efforts
to promote diversity, inclusion and equality. We do not believe the additional
reporting required by this proposal would enhance our existing efforts to foster
a fair, equal and inclusive workforce.
For these reasons, the Board opposes this
proposal and recommends a vote AGAINST the proposal.
If you complete the enclosed proxy card,
unless you direct to the contrary on that card, the shares represented by that
proxy card will be voted AGAINST the foregoing proposal.
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Why Am I Receiving This Proxy
Statement? |
The Board is providing these proxy
materials to you in connection with the solicitation by the Board of proxies to
be voted at Aetnas Annual Meeting of Shareholders that will take place at 9:30
a.m. Central time on May 19, 2017, and any adjournments or postponements of the
Meeting. You are invited to attend the Annual
Meeting and are requested to vote on the
proposals described in this Proxy Statement. A notice of the Internet
availability of proxy materials or the proxy materials and an enclosed proxy
card are being mailed to shareholders beginning on or about April 7,
2017.
Why Did I Receive in the Mail a Notice of the Internet
Availability of Proxy Materials? |
You received in the mail either a notice
of the Internet availability of proxy materials or a printed Proxy Statement and
2016 Annual Report on Form 10-K because you owned Aetna common shares at the
close of business on March 17, 2017, the RECORD DATE, and that entitles you to
vote at the Annual Meeting. The Board is soliciting your proxy to vote at the
Annual Meeting or at any later meeting if the Annual Meeting is adjourned or
postponed for any reason. Your proxy will authorize specified people (proxies)
to vote on your behalf at the Annual Meeting. By use of a proxy, you can vote
whether or not you attend the meeting.
This Proxy Statement describes the matters
on which Aetna would like you to vote, provides information on those matters,
and provides information about Aetna that we must disclose when we solicit your
proxy.
Pursuant to rules adopted by the SEC, we
have elected to provide access to our proxy materials over the Internet to many
shareholders. We believe that Internet delivery of our proxy materials allows us
to provide our shareholders with the information
they need, while lowering the costs of delivery and reducing the environmental
impact of our Annual Meeting. Accordingly, we are sending a Notice of Internet
Availability of Proxy Materials, which we refer to as the Notice, to many of
our shareholders (including beneficial owners) as of the Record Date. Our
shareholders who receive the Notice will have the ability to access the proxy
materials on a website referred to in the Notice or request to receive a printed
set of the proxy materials. The Notice contains instructions on how to access
the proxy materials over the Internet or to request a printed copy. In addition,
shareholders may request to receive proxy materials in printed form by mail or
electronically by e-mail on an ongoing basis by calling Broadridge Financial
Solutions, Inc. (Broadridge) at 1-800-579-1639. Please note that you may not
vote using the Notice. The Notice identifies the items to be voted on at the
Annual Meeting and describes how to vote, but you cannot vote by marking the
Notice and returning it.
Are the Proxy Materials Available
Online? |
Yes. As described in more detail in
response to the prior question, most shareholders will receive the Proxy
Statement online. If you received a paper copy, you can also view these
documents on the Internet at www.proxyvote.com.
What Information Is Contained in These
Materials? |
This Proxy Statement provides you with
information about Aetnas governance structure, our Director nominating process,
the proposals to be voted on at the Annual Meeting, the voting process, the compensation of our Directors and our named
executive officers, and certain other required information.
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING |
What Proposals Will Be Voted on at the Annual
Meeting? |
There are seven items scheduled to be
voted on at the Annual Meeting:
● |
Election of the 12 nominees named in this Proxy
Statement as Directors of Aetna for the coming year. |
● |
Approval of the appointment of KPMG LLP as the
Companys independent registered public accounting firm for the year
2017. |
● |
Approval of the proposed amendment of the
Amended Aetna Inc. 2010 Stock Incentive Plan. |
● |
Approval of the Companys executive
compensation on a non-binding advisory basis. |
● |
A non-binding advisory vote on the Frequency of
the Vote on Executive Compensation. |
● |
Consideration of a shareholder proposal
relating to direct and indirect lobbying disclosure. |
● |
Consideration of a shareholder proposal
relating to an annual report identifying whether there exists a gender pay
gap among the Companys employees. |
What Are Aetnas Voting
Recommendations? |
The Board recommends that you vote your
shares as follows:
● |
FOR each of Aetnas nominees to the Board;
|
● |
FOR the approval of the appointment of KPMG LLP
as the Companys independent registered public accounting firm for the
year 2017; |
● |
FOR the approval of the proposed amendment of
the Amended Aetna Inc. 2010 Stock Incentive Plan; |
● |
FOR the approval of the Companys executive
compensation on a non-binding advisory basis; and |
● |
AGAINST each of the
shareholder proposals. |
The Board does not have a recommendation
with respect to the frequency of the vote on executive compensation.
Which of My Shares Can I
Vote? |
You may vote all Common Stock that you
owned as of the close of business on March 17, 2017, the RECORD DATE. These
shares include those (1) held directly in your name as the SHAREHOLDER OF
RECORD, including shares purchased through
Aetnas Computershare Investment Plan, and (2) held for you as the BENEFICIAL
OWNER through a stockbroker, bank or other holder of record.
What Is the Difference Between Holding Shares as a
Shareholder of Record and as a Beneficial
Owner? |
Many Aetna shareholders hold their shares
through a stockbroker, bank or other holder of record rather than directly in
their own names. As summarized below, there are some distinctions between shares
held of record and those owned beneficially:
● |
SHAREHOLDER OF RECORD If your shares are
registered directly in your name with Aetnas transfer agent,
Computershare Trust Company, N.A. (the Transfer Agent), you are
considered the shareholder of record with respect to those shares, and
Aetna is sending these proxy materials or the Notice directly to you. As
the shareholder of record, you have the right to grant your voting proxy
to the persons appointed by Aetna, to vote in person at the Annual Meeting
or to grant your voting proxy to your representative. Aetna has enclosed a
proxy card for you to use. Any shares held for you under Aetnas
Computershare Investment Plan are included on the enclosed proxy
card. |
● |
BENEFICIAL OWNER If
your shares are held in a stock brokerage account or by a bank or other
holder of record, you are considered the beneficial owner of shares held
in street name, and these proxy materials or the Notice are being
forwarded to you by your broker or other nominee who is considered the
shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker
or other nominee on how to vote your shares, and you also are invited to
attend the Annual Meeting. However, since you are not the shareholder of
record, you may not vote these shares in person at the Annual Meeting
unless you bring with you to the Annual Meeting a proxy, executed in your
favor, from the shareholder of record. Your broker or other nominee also
is obligated to provide you with a voting instruction card for you to use
to direct them as to how to vote your shares.
|
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING |
How Can I Vote My Shares Before the Annual
Meeting? |
Whether you hold shares directly as the
shareholder of record or beneficially in street name, you may vote before the
Annual Meeting by granting a proxy to each of Ellen M. Hancock, Richard J.
Harrington and Edward J. Ludwig or, for shares you beneficially own, by
submitting voting instructions to your broker or other nominee. Shareholders
have a choice of voting by using the Internet, by calling a toll-free telephone
number within the United States or Puerto Rico, or by completing a proxy or
voting instruction card and mailing it in the
postage-paid envelope provided. Please refer to the summary instructions below
and carefully follow the instructions included on your Notice, your proxy card
or, for shares you beneficially own, the voting instruction card provided by
your broker or other nominee. Please note that you may not vote using the
Notice. The Notice identifies the items to be voted on at the Annual Meeting and
describes how to vote, but you cannot vote by marking the Notice and returning
it.
|
|
VIA THE
INTERNET* Go to www.proxyvote.com
and
follow the instructions |
|
|
|
BY MAIL** Mark, sign, date and
return your proxy card, or, for shares held in street name, the voting
instruction card provided by your broker or other nominee and mail it back
to your broker or other nominee in accordance with their
instructions |
|
|
|
|
|
|
|
|
|
BY
TELEPHONE* Call toll-free on a touchtone telephone
1-800-690-6903 inside the United States or Puerto Rico and follow the
instructions |
|
|
|
IN PERSON Attend the Annual
Meeting in Chicago, IL |
* |
You will need to have your
proxy card (or the Notice or the e-mail message you receive with
instructions on how to vote) in hand when you access the website or
call. |
|
The Internet and telephone
voting procedures are designed to authenticate shareholders and to allow
shareholders to confirm that their instructions have been properly
recorded. In order to provide shareholders of record with additional time
to vote their shares while still permitting an orderly tabulation of
votes, Internet and telephone voting for these shareholders will be
available until 11:59 p.m. Eastern time on May 18, 2017. |
** |
If you provide specific
voting instructions, your shares will be voted as you instruct. If you
sign and date your proxy or voting instruction card but do not provide
instructions, your shares will be voted as described under What If I
Return My Proxy Card or Voting Instruction Card But Do Not Provide Voting
Instructions? on page 80. |
How Can I Vote the Shares I Hold Through the 401(k)
Plan? |
We maintain the 401(k) Plan for our
employees. Participants in the 401(k) Plan who receive this Proxy Statement in
their capacity as participants in the 401(k) Plan will receive voting
instruction cards instead of proxy cards. The voting instruction card directs
the trustee of the 401(k) Plan to vote the shares shown on the card as indicated
on the card. Shares held through the 401(k) Plan may be voted by using the
Internet, by calling a toll-free telephone number or by marking, signing and
dating the voting instruction card and mailing it to the trustee of the 401(k)
Plan in accordance with the trustees
instructions. Internet and telephone voting of shares held through the 401(k)
Plan will be available until 11:59 p.m. Eastern time on May 16, 2017. Shares
held through the 401(k) Plan for which no instructions are received will be
voted by the trustee of the 401(k) Plan in the same percentage as the shares
held through the 401(k) Plan for which the trustee receives voting instructions.
You may not vote the shares you hold through the 401(k) Plan at the Annual
Meeting.
How Can I Vote the Shares I Acquired Through an Aetna
Employee Stock Purchase Plan? |
You hold the Common Stock you acquired
through any of Aetnas employee stock purchase plans as the beneficial owner of
shares held in street name. You can vote these shares as described above under
How Can I Vote My Shares Before the Annual Meeting?
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING |
Yes. For shares you hold directly in your
name, you may change your vote by (1) signing another proxy card with a later
date and delivering it to us before the date of the Annual Meeting, (2)
submitting revised votes over the Internet or by telephone before 11:59 p.m.
Eastern time on May 18, 2017, or (3) attending the Annual Meeting in person and
voting your shares at the Annual Meeting. The last-dated proxy card or Internet
or telephone vote will be the only one that counts. Attendance at the Annual
Meeting will not cause your previously granted proxy or Internet or telephone
vote to be revoked unless you specifically
so request. You may revoke your proxy by providing written notice to Aetnas
Corporate Secretary at 151 Farmington Avenue, RW61, Hartford, CT 06156. For
shares you hold beneficially, you may change your vote by submitting new voting
instructions to your broker or other nominee in accordance with the instructions
you receive from your broker or other nominee and in a manner that allows your
broker or other nominee sufficient time to process your new instructions and
vote your shares.
Can I Vote at the Annual
Meeting? |
You may vote your shares at the Annual
Meeting if you attend in person. You may vote the shares you hold directly in
your name by completing a ballot at the Annual Meeting. You may only vote the
shares you hold in street name at the Annual
Meeting if you bring with you to the Annual Meeting a proxy, executed in your
favor, from the shareholder of record. You may not vote the shares you hold
through the 401(k) Plan at the Annual Meeting.
How Can I Vote on Each
Proposal? |
In the election of Directors, you may vote
FOR or AGAINST or ABSTAIN with respect to each of the Director nominees. For all
other proposals, except the non-binding advisory vote on the frequency of a vote
on executive compensation, you may vote FOR or AGAINST or ABSTAIN. For the
non-binding advisory vote on the frequency of a vote on executive compensation, you may vote to have a vote on executive
compensation every 1, 2 or 3 years, or you may ABSTAIN. For a discussion of the
votes needed to approve each proposal, see What Is the Voting Requirement to
Approve Each of the Proposals, and How Will Votes Be Counted? on page
82.
What If I Return My Proxy Card or Voting Instruction Card
But Do Not Provide Voting
Instructions? |
If you sign and date your proxy card with
no further instructions, your shares will be voted:
● |
FOR the election as Directors of each of the
nominees named on pages 14 through 21 of this Proxy Statement; |
● |
FOR the approval of the appointment of KPMG LLP
as the Companys independent registered public accounting firm for the
year 2017; |
● |
FOR the approval of the proposed amendment of
the Amended Aetna Inc. 2010 Stock Incentive Plan; |
● |
FOR the approval of the Companys executive
compensation on a non-binding advisory basis; |
● |
The shares represented by that proxy card will
NOT BE VOTED on the frequency of the vote on executive compensation on a
non-binding advisory basis; and |
● |
AGAINST each of the shareholder proposals. |
If you sign and date your broker voting instruction card with
no further instructions, your shares will be voted as described
on your broker voting instruction card.
If you sign and date 401(k) Plan voting instruction card with
no further instructions, all shares you hold through the 401(k)
Plan will be voted by the trustee of the 401(k) Plan in the
same percentage as the shares held through the 401(k) Plan
for which the trustee receives voting instructions.
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING |
What If I Dont Return My Proxy Card or Voting Instruction
Card and Dont Vote By Internet or
Phone? |
If you do not return your proxy card and
do not vote by Internet or phone, shares that you hold directly in your name
(i.e., shares for which you are the shareholder of record) will not be voted at
the Annual Meeting. If you do not return your voting instruction card and do not
vote by Internet or phone, shares that you beneficially own that are held in the
name of a brokerage firm or other nominee may be voted in certain circumstances
even if you do not provide the brokerage firm with voting instructions. Under
NYSE rules, brokerage firms have the authority to vote shares for which their
customers do not provide voting instructions on certain routine matters. The
approval of the appointment of KPMG LLP as the Companys independent registered
public accounting firm for the year 2017 is considered a routine matter for
which brokerage firms may vote uninstructed shares. The election of Directors; the approval of the proposed amendment to the
Amended Aetna Inc. 2010 Stock Incentive Plan to increase the number of shares
authorized to be issued under the Plan; the approval of the Companys executive
compensation on a non-binding advisory basis; the non-binding advisory vote on
the frequency of the vote on executive compensation; and each of the shareholder
proposals to be voted on at the Annual Meeting are not considered routine under
the applicable rules, and therefore brokerage firms may not vote uninstructed
shares on any of those proposals. Any uninstructed shares you hold through the
401(k) Plan will be voted by the trustee of the 401(k) Plan in the same
percentage as the shares held through the 401(k) Plan for which the trustee
receives voting instructions.
What Does It Mean If I Receive More Than One Set of Proxy
Materials? |
It means your shares are registered
differently or are in more than one account. Please provide voting instructions
for all of the Notices and proxy and voting instruction cards you
receive.
What Should I Do If I Want to Attend the Annual
Meeting? |
The Annual Meeting will be held at the
Waldorf Astoria Chicago, in Chicago, IL. Directions to the Waldorf Astoria
Chicago, in Chicago, IL, are on page C-1. The Annual Meeting is open to all
shareholders as of the RECORD DATE (the close of business on March 17, 2017) or
their authorized representatives. Anyone who
attends the Annual Meeting must have an admission ticket. Follow the
instructions below under How Can I Obtain an Admission Ticket For the Annual
Meeting? to obtain an admission ticket.
How Can I Obtain an Admission Ticket For the Annual
Meeting? |
In accordance with Aetnas security
procedures, anyone wishing to attend the Annual Meeting must have an admission
ticket issued in his or her name and present your ticket and valid government
issued photo identification to be admitted to the Annual Meeting. Admission is
limited to:
● |
Shareholders at the close of business on March
17, 2017; |
● |
One authorized proxy holder of a shareholder of
record at the close of business on March 17, 2017; or |
● |
One authorized representative of a shareholder
of record who has been designated in writing to present a shareholder
proposal. |
You must provide evidence of your
ownership of shares with your ticket request and follow the requirements for
obtaining an admission ticket specified in the ADMISSION AND TICKET
REQUEST PROCEDURE on page 87. Aetnas Corporate Secretary must receive your request for an
admission ticket on or before May 12, 2017.
No weapons, cameras, audio or video
recording equipment, electronic devices, large bags, briefcases or packages will
be permitted in the Annual Meeting. Please
note that, for security reasons, all bags may be searched, and all persons who
attend the Annual Meeting may be required to pass through a metal detector. We
will be unable to admit anyone to the Annual Meeting who does not comply with
these security procedures. No one will be admitted to the Annual Meeting once
the meeting has commenced.
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING |
Can I Listen to the Annual Meeting If I Dont Attend in
Person? |
Yes. You can listen to the live audio
webcast of the Annual Meeting by going to Aetnas Internet website at
www.aetna.com/investor and then clicking on the link to the webcast.
Where Can I Find the Voting Results of the Annual
Meeting? |
We will publish the voting results of the
Annual Meeting in a Current Report on Form 8-K within four business days after
the Annual Meeting, and you will be able to find this report on Aetnas Internet
website at www.aetna.com/investor.
What Class of Shares Is Entitled to Be
Voted? |
Each share of Common Stock outstanding as
of the RECORD DATE (the close of business on March 17, 2017) is entitled to one
vote at the Annual Meeting. At the close of business on March 17, 2017,
331,724,079 shares of Common Stock were outstanding.
How Many Shares Must Be Present to Hold the Annual
Meeting? |
A majority of the shares of Common Stock
outstanding as of the RECORD DATE (the close of business on March 17, 2017) must
be present in person or by proxy for us to hold the Annual Meeting and transact
business. This is referred to as a quorum. Shares subject to broker nonvotes are
counted as present for the purpose of determining the presence of a quorum if
the broker votes the shares on a routine matter, such as the appointment of the
Companys independent registered public
accounting firm. Generally, broker nonvotes occur when shares held by a broker
for a beneficial owner are not voted with respect to a particular proposal
because the proposal is not a routine matter, and the broker has not received
voting instructions from the beneficial owner of the shares. If you abstain from
voting on one or more proposals, your shares will be counted as present for
purposes of determining the presence of a quorum even if you abstain on all
proposals.
What Is the Voting Requirement to Approve Each of the
Proposals, and How Will Votes Be
Counted? |
Under Pennsylvania corporation law and
Aetnas Articles of Incorporation and By-Laws, the approval of any corporate
action taken at the Annual Meeting is based on votes cast. For the proposals
that will be considered at the Annual Meeting, other than the proposed amendment
of the Amended Aetna Inc. 2010 Stock Incentive Plan to increase the number of
shares authorized to be issued under the Plan (the Plan Proposal) and the
non-binding advisory vote on the frequency of the vote on executive
compensation, shareholder approval occurs if the votes cast for the proposal
exceed the votes cast against the proposal. Votes cast on these proposals
means votes for or against a particular proposal, whether by proxy or in
person. Abstentions and broker nonvotes are not considered votes cast on these
proposals and therefore have no effect on the outcome. In uncontested elections,
Directors are elected by a majority of votes cast. As described in more detail
on page 2 under Director Elections Majority Voting Standard, in uncontested
elections, Aetnas Corporate Governance Guidelines require any incumbent
Director nominee who receives more against votes than for votes to promptly
submit his or her resignation for consideration by the Nominating Committee and
the Board.
The vote necessary to approve the Plan
Proposal, including the impact of abstentions and broker nonvotes, is subject to
additional NYSE rules. For the Plan Proposal, under NYSE rules, shareholder
approval occurs if a majority of votes cast are for the Plan Proposal. Under
NYSE rules, votes cast on the Plan Proposal consist of votes for or
against the Plan Proposal as well as abstentions. As a result, abstentions
have the effect of a vote against the Plan Proposal. Broker nonvotes are not
considered votes cast and therefore have no effect on the number of votes cast
on the Plan Proposal.
For the non-binding advisory vote on the frequency of the
vote on executive compensation, the choice that receives the majority of the
votes cast will be considered approved. Abstentions and broker nonvotes are not
considered votes cast on this proposal and therefore have no effect on the
outcome. Even if no choice receives the required majority vote approval, the
Board will take into account all voting results.
If you are a beneficial owner
and do not provide the shareholder of record with voting instructions, your
shares may constitute broker nonvotes, as described under How Many Shares Must
Be Present to Hold the Annual Meeting? above.
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING |
Who Will Bear the Cost of Soliciting Votes For the Annual
Meeting? |
Aetna will pay the entire cost of
preparing, assembling, printing, mailing and distributing these proxy materials
and the Notice, except that you will pay for Internet access if you choose to
access these proxy materials over the Internet. In addition to the mailing of
these proxy materials, the solicitation of proxies or votes may be made in
person, by telephone or by electronic communication by our Directors, officers
and employees, none of whom will receive any additional compensation for such
solicitation activities. We also have hired
Georgeson LLC to assist us in the solicitation of votes for a fee of $22,000
plus reasonable out-of-pocket expenses for these services, which vary from year
to year. We also will reimburse brokerage houses and other custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy
and solicitation materials to beneficial owners of Common Stock and obtaining
their voting instructions.
Does Aetna Allow Shareholders to Choose to View Annual
Reports to Shareholders and Proxy Statements Via the
Internet? |
Yes. Aetna allows shareholders of record
to choose to view future annual reports to shareholders and proxy statements via
the Internet instead of receiving paper copies of these documents in the mail.
The 2017 Aetna Inc. Notice of Annual Meeting and Proxy Statement and Aetnas
2016 Annual Report on Form 10-K are available on the Internet at
www.proxyvote.com. Under Pennsylvania law, Aetna may provide shareholders who
give Aetna their e-mail addresses with electronic notice of its shareholder
meetings as described below.
If you are a shareholder of record, you
can choose to view annual reports to shareholders and proxy statements via the
Internet and save Aetna the cost of producing and mailing these documents in the
future by following the instructions under How Do I Elect to View Annual
Reports to Shareholders and Proxy Statements Via the Internet? below. If you
hold your shares through a stockbroker, bank or other holder of record, check the information provided by that entity for
instructions on how to elect to view future notices of shareholder meetings,
proxy statements and annual reports via the Internet.
If you are a shareholder of record and
choose to receive future notices of shareholder meetings by e-mail and view
future annual reports and proxy statements over the Internet, you must supply an
e-mail address, and you will receive your notice of the meeting by e-mail when
those materials are posted. The notice you receive will include instructions and
contain the Internet address for those materials.
Many shareholders who hold their shares
through a stockbroker, bank or other holder of record and elect electronic
access will receive an e-mail containing the Internet address to access Aetnas
notices of shareholder meetings, proxy statements and annual reports when those
materials are posted.
How Do I Elect to View Annual Reports to Shareholders and
Proxy Statements Via the Internet? |
If you are a shareholder of record and are
interested in receiving future notices of shareholder meetings by e-mail and
viewing future annual reports and proxy statements on the Internet instead of
receiving paper copies of these documents, you may elect this option when voting
via the Internet by going to www.proxyvote.com and
following the instructions. You will need to have your proxy card (or the Notice
or the e-mail message you receive with instructions on how to vote) in hand when
you access the website.
What If I Get More Than One Copy of Aetnas Annual
Report? |
Aetnas 2016 Annual Report on Form 10-K is
being mailed to shareholders in advance of, or together with, this Proxy
Statement. If you hold Aetna shares in your own name and received more than one
copy of the Aetnas 2016 Annual Report on Form 10-K at your address and wish to
reduce the number of reports you receive and save Aetna the cost of producing
and mailing these reports, you should contact Aetnas Transfer Agent at
1-800-446-2617 to discontinue the mailing of
reports on the accounts you select. At least one account at your address must
continue to receive an annual report, unless you elect to view future annual
reports over the Internet. The mailing of dividend checks, dividend reinvestment
statements, proxy materials and special notices will not be affected by your
election to discontinue duplicate mailings of annual reports. Registered
shareholders may resume the mailing of an annual report to an account by
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING |
calling Aetnas Transfer Agent at
1-800-446-2617. If you own shares through a stockbroker, bank or other holder of
record and received more than one Aetna 2016 Annual Report on Form 10-K, please
contact the holder of record to eliminate duplicate mailings.
Householding occurs when a single copy
of our annual report and proxy statement is sent to any household at which two
or more shareholders reside if they appear to be members of the same family.
This procedure reduces our printing and mailing
costs and fees. Shareholders who participate in householding will continue to
receive separate proxy cards, and householding will not affect the mailing of
account statements or special notices in any way. In 2016, we began householding
for registered shareholders. If you are a registered shareholder, please check
the appropriate box on your proxy card or select the householding option when
you vote by Internet or phone if you would like to participate in our
householding program. A number of brokerage firms have instituted householding
for shares held in street name.
What If a Director Nominee Is Unwilling or Unable to
Serve? |
If for any reason one or more of Aetnas
nominees is not available to be a candidate for Director, the persons named as
proxy holders on your proxy card may vote your shares for such other candidate or candidates as may be nominated by the
Board, or the Board may reduce the number of Directors to be elected.
What Happens If Additional Proposals Are Presented at the
Meeting? |
Other than the election of Directors and
the other proposals described in this Proxy Statement, Aetna has not received
proper notice of, and is not aware of, any matters to be presented for a vote at
the Annual Meeting. If you grant a proxy using your proxy card, the persons
named as proxies on your proxy card, or any of them, will have discretion
to, and intend to, vote your shares according to
their best judgment on any and all additional proposals or other matters
properly presented for a vote at the Annual Meeting, including, among other
things, consideration of a motion to adjourn the Annual Meeting to another time
or place.
Can I Propose Actions for Consideration at Next Years
Annual Meeting of Shareholders or Nominate Individuals to Serve as
Directors? |
Yes. You can submit proposals for
consideration at future annual meetings, including Director nominations.
● |
SHAREHOLDER PROPOSALS: In
order for a shareholder proposal to be considered for inclusion in Aetnas
proxy statement for the 2018 Annual Meeting, the written proposal must be
RECEIVED by Aetnas Corporate Secretary no later than the close of
business Eastern time on December 8, 2017. Such proposals must be sent to:
Corporate Secretary, Aetna Inc., 151 Farmington Avenue, RW61, Hartford, CT
06156. Such proposals also will need to
comply with the SECs rules and regulations, namely Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, regarding the inclusion of
shareholder proposals in Aetna-sponsored proxy materials.
In order for a shareholder proposal
to be raised from the floor during the 2018 Annual Meeting instead of
being submitted for inclusion in Aetnas proxy statement, the
shareholders written notice must be RECEIVED by Aetnas Corporate
Secretary at least 90 calendar days before the date of the 2018 Annual
Meeting and must contain the information required by Aetnas By-Laws.
Please note that the 90-day advance notice
requirement relates only to matters a shareholder wishes to bring before
the 2018 Annual Meeting from the floor. It does not apply to proposals a
shareholder wishes to have included in Aetnas proxy statement; that
procedure is explained in the immediately preceding
paragraph. |
● |
NOMINATION OF DIRECTOR
CANDIDATES: You may propose Director
candidates for consideration by the Nominating Committee. In addition,
Aetnas By-Laws permit shareholders to nominate Directors for
consideration at a meeting of shareholders at which one or more Directors
are to be elected. In order to nominate a Director candidate at the 2018
Annual Meeting, the shareholders written notice must be RECEIVED by
Aetnas Corporate Secretary at least 90 calendar days before the date of
the 2018 Annual Meeting and must contain the information required by
Aetnas By-Laws. (Please see Consideration of Director Nominees-Director
Qualifications on page 11 for a description of qualifications that the
Board believes are required for Board nominees.)
|
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE PROXY
MATERIALS AND THE ANNUAL MEETING |
● |
COPY OF BY-LAW
PROVISIONS: You may contact the
Corporate Secretary at Aetnas headquarters, 151 Farmington Avenue, RW61,
Hartford, CT 06156, for a copy of the relevant provisions of Aetnas
By-Laws regarding the requirements for making shareholder proposals and nominating Director candidates. You also
can visit Aetnas website at www.aetna.com/governance to
review and download a copy of Aetnas
By-Laws. |
Can Shareholders Ask
Questions at the Annual Meeting? |
Yes. You can ask questions regarding each
of the items to be voted on when those items are discussed at the Annual
Meeting. Shareholders also will have an opportunity to ask questions of general
interest at the end of the Annual Meeting.
Who Counts the Votes Cast
at the Annual Meeting? |
Votes are counted by employees of
Broadridge Financial Solutions, Inc. and certified by the judge of election for
the Annual Meeting who is an employee of Governance Consulting Services, LLC, an
independent consultant of Broadridge Financial Solutions, Inc. The judge will
determine the number of shares outstanding and the voting power of each share, determine the shares represented at the Annual
Meeting, determine the existence of a quorum, determine the validity of proxies
and ballots, count all votes and determine the results of the actions taken at
the Annual Meeting.
Yes. The vote of each shareholder is held
in confidence from Aetnas Directors, officers and employees except (a) as
necessary to meet applicable legal requirements (including stock exchange
listing requirements) and to assert or defend claims for or against Aetna and/or
one or more of its consolidated subsidiaries, (b) as necessary to assist in
resolving any dispute about the authenticity or
accuracy of a proxy card, consent, ballot, authorization or vote, (c) if there
is a contested proxy solicitation, (d) if a shareholder makes a written comment
on a proxy card or other means of voting or otherwise communicates to
management, or (e) as necessary to obtain a quorum.
Table of Contents
ADDITIONAL
INFORMATION
Contact Information
If you have questions or need more
information about the Annual Meeting, write to:
Office of the Corporate
Secretary
Aetna Inc.
151 Farmington Avenue, RW61
Hartford, CT 06156
or
email us at shareholderrelations@aetna.com.
For information about your record
holdings or Computershare Investment Plan account, call Computershare Trust
Company, N.A. at 1-800-446-2617 or access your account via the Internet at
www.computershare.com/investor. We also invite you to visit
Aetnas website at www.aetna.com. Website addresses, hyperlinks
and QR codes are included for reference only. The information contained on
websites referred to and/or linked to in this Proxy Statement (other than
Aetnas website to the extent specifically referred to herein as required by the
SECs rules) is not part of this proxy solicitation and is not incorporated by
reference into this Proxy Statement or any other proxy materials. References to
competitors and other companies throughout this Proxy Statement are for
illustrative or comparison purposes only and do not indicate that these
companies are Aetnas only competitors or are Aetnas closest
competitors.
Aetnas 2016 Annual Report on Form 10-K
includes the Report of Independent Registered Public Accounting Firm, which
includes an opinion on the Companys consolidated financial statements as of
December 31, 2016 and 2015 and for each of the three years in the three-year
period ending December 31, 2016, as well as an opinion on the effectiveness of
the Companys internal control over financial reporting as of December 31, 2016.
Aetnas Annual Report on Form 10-K also contains Managements Discussion and
Analysis of Financial Condition and Results of Operations together with the Consolidated Financial Statements and
related Notes as of December 31, 2016 and 2015 and for each of the three years
in the three-year period ending December 31, 2016. Other information provided in
Aetnas Annual Report on Form 10-K includes Managements Report on Internal
Control Over Financial Reporting, Selected Financial Data for the most recent
five years, Quarterly Financial Data for 2016 and 2015 and a Corporate
Performance Graph.
Shareholders may obtain a copy of
Aetnas 2016 Annual Report on Form 10-K filed with the SEC, including the
financial statements and the financial statement schedules, without charge by
calling 1-800-237-4273, by visiting Aetnas website
at www.aetna.com or by mailing a written request to Judith H. Jones, Aetnas
Corporate Secretary, at 151 Farmington Avenue, RW61, Hartford, CT
06156.
By order of the Board of
Directors,
Judith H. Jones
Vice President and Corporate Secretary
April 7, 2017
Table of Contents
ADMISSION
AND TICKET REQUEST PROCEDURE
Admission
Admission is limited to shareholders of
record at the close of business on March 17, 2017, or one individual designated
as a shareholders authorized proxy holder or one representative designated in
writing to present a shareholder proposal. In each case, the individual must
have an admission ticket and valid government issued photo identification (e.g.,
a drivers license or a passport) to be admitted to the Annual
Meeting.
Ticket
Request Deadline
Ticket requests must include all
information specified in the applicable table below and be submitted in writing
and received by Aetna on or before May 12, 2017. No requests will be processed
after that date.
To Submit
a Request
Submit ticket requests by mail to Office
of the Corporate Secretary, 151 Farmington Avenue, RW61, Hartford, CT 06156 or
by facsimile to 860-293-1361. Ticket requests will not be accepted by telephone
or e-mail.
Authorized
Proxy Representative
A shareholder may appoint one
representative to attend the Annual Meeting and/or vote on his/her behalf. The
admission ticket must be requested by the shareholder but will be issued in the
name of the authorized representative. Individuals holding admission tickets
that are not issued in their name will not be admitted to the Annual Meeting.
The shareholder information specified below and a written proxy authorization
must accompany the ticket request.
Proponent
of a Shareholder Proposal
For each shareholder proposal included in
this Proxy Statement, the shareholder sponsor should notify the Company in
writing of the individual authorized to present the proposal on behalf of the
shareholder at the Annual Meeting. One admission ticket will be issued for the
designated representative if the advance registration instructions on this page
and page 81 are followed. Shareholder sponsors and their designated
representatives must have an admission ticket and present valid government
issued photo identification to be admitted to the Annual Meeting.
Registered
Shareholders For ownership verification provide: |
Beneficial
Holders For ownership verification provide one of the
following: |
401(k) Holders For
ownership verification provide: |
Option A
●Name(s) of shareholder(s); ●Address; ●Phone number; and
●Shareholder account number or social security number
Option B
●A copy of your proxy card or notice showing shareholder name and address
Also include:
●Name of authorized proxy representative, if applicable ●Address to which ticket should be mailed |
●A copy of your March 2017 brokerage account statement showing Aetna share ownership as of the record date (3/17/17); or ●A letter from your broker, bank or other nominee verifying your record date (3/17/17) ownership; or ●A copy of your brokerage account voting instruction card showing shareholder name and address
Also include:
●Name of authorized proxy representative, if applicable ●Address to which ticket should be mailed and phone number |
●Name; ●Address; and ●Phone number
Also
include:
●Address to which ticket should be mailed |
Table of Contents
ANNEX
A
Reconciliation of
Certain Amounts to the Most Directly Comparable GAAP Measure
Net income (loss) refers to net
income (loss) attributable to Aetna reported in Aetnas Consolidated Statements
of Income in accordance with U.S. generally accepted accounting principles
(GAAP). Unless otherwise indicated, all references in this Proxy Statement to
net income (loss) and net income per share exclude amounts attributable to
non-controlling interests.
Non-GAAP financial measures such as
operating earnings, operating earnings per share, adjusted selling, general and
administrative expenses, adjusted operating expenses, adjusted SG&A ratio,
adjusted operating expense ratio, operating revenue, and pretax operating margin
exclude from the relevant GAAP metrics, as applicable:
● |
Amortization of other acquired
intangible assets; |
● |
Net realized capital gains or
losses; and |
● |
Other items, if any, that
neither relate to the ordinary course of Aetnas business nor reflect
Aetnas underlying business performance. |
Although the excluded items may
recur, management believes that non-GAAP financial measures Aetna discloses,
including those described above, provide a more useful comparison of Aetnas underlying business performance
from period to period. Net realized capital gains and losses arise from various
types of transactions, primarily in the course of managing a portfolio of assets
that support the payment of liabilities. However, these transactions do not
directly relate to the underwriting or servicing of products for customers and
are not directly related to the core performance of Aetnas business operations.
Other acquired intangible assets relate to Aetnas acquisition activities and
are amortized over their useful lives. However, this amortization does not
directly relate to the underwriting or servicing of products for customers and
is not directly related to the core performance of Aetnas business operations.
Operating earnings is the measure reported to the Chief Executive Officer for
purposes of assessing financial performance and making operating decisions, such
as the allocation of resources among Aetnas business segments. The non-GAAP
financial measures Aetna discloses, including those described in this Annex A,
should not be considered a substitute for, or superior to, financial measures
determined or calculated in accordance with GAAP.
Table of Contents
The following is a reconciliation of net
income to operating earnings and a calculation of net income and operating
earnings per share for the years ended December 31, 2016 through
2012:
(Millions, except per
common share data) |
|
|
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
2012 |
|
Reconciliation of net income attributable to Aetna to
operating earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Aetna (GAAP measure) |
|
(A) |
|
$2,271 |
|
$2,390 |
|
$2,041 |
|
$1,914 |
|
$1,658 |
|
Transaction and
integration-related costs |
|
|
|
517 |
|
258 |
|
201 |
|
333 |
|
33 |
|
Restructuring
costs |
|
|
|
404 |
|
15 |
|
|
|
|
|
37 |
|
Litigation-related
proceeds |
|
|
|
|
|
(110 |
) |
|
|
|
|
|
|
Loss on early
extinguishment of long-term debt |
|
|
|
|
|
|
|
181 |
|
|
|
85 |
|
Pension settlement
charge |
|
|
|
|
|
|
|
112 |
|
|
|
|
|
Release of
litigation-related reserve |
|
|
|
|
|
|
|
(103 |
) |
|
|
|
|
Charge for changes
in life insurance claim payment practices |
|
|
|
|
|
|
|
|
|
55 |
|
|
|
Reduction of reserve
for anticipated future losses on discontinued products |
|
|
|
(128 |
) |
|
|
|
|
(86 |
) |
|
|
Reversal of
allowance and gain on sale of reinsurance recoverable |
|
|
|
|
|
|
|
|
|
(49 |
) |
|
|
Litigation-related
settlement |
|
|
|
|
|
|
|
|
|
|
|
120 |
|
Amortization of
other acquired intangible assets |
|
|
|
247 |
|
255 |
|
243 |
|
215 |
|
142 |
|
Net realized capital
(gains) losses |
|
|
|
(86 |
) |
65 |
|
(80 |
) |
9 |
|
(109 |
) |
Income tax
benefit |
|
|
|
(308 |
) |
(156 |
) |
(190 |
) |
(150 |
) |
(104 |
) |
Operating Earnings |
|
(B) |
|
$2,917 |
|
$2,717 |
|
$2,405 |
|
$2,241 |
|
$1,862 |
|
Weighted-average
common shares - diluted |
|
(C) |
|
354.3 |
|
352.6 |
|
359.1 |
|
359.2 |
|
345.0 |
|
Net income
attributable to Aetna per share (GAAP measure) |
|
(A)/(C) |
|
$6.41 |
|
$6.78 |
|
$5.68 |
|
$5.33 |
|
$4.81 |
|
Operating earnings
per share |
|
(B)/(C) |
|
$8.23 |
|
$7.71 |
|
$6.70 |
|
$6.24 |
|
$5.40 |
|
In order to provide useful information
regarding Aetnas profitability on a basis comparable to others in the industry,
without regard to financing decisions, income taxes or amortization of other
acquired intangible assets (each of which may vary for reasons not directly
related to the performance of the underlying business), Aetnas pretax operating
margin is based on operating earnings excluding interest expense and income
taxes. Management also uses pretax operating margin to assess Aetnas
performance, including performance versus competitors. The pretax operating
margin is calculated by dividing operating earnings before income taxes
(excluding interest expense) by operating revenue.
Aetnas adjusted operating expenses
exclude net realized capital gains and losses and other items, if any, that are
excluded from operating revenue or adjusted operating expenses, as noted above.
The adjusted operating expense ratio is calculated by dividing adjusted
operating expenses by operating revenue.
Operating revenue excludes net realized
capital gains and losses, litigation-related proceeds and interest income on the
proceeds of the transaction-related June 2016 debt.
Table of Contents
The following are reconciliations of the
most directly comparable GAAP measure to certain non-GAAP measures and
calculations of certain GAAP ratios and non-GAAP ratios for the years ended
December 31, 2016 and December 31, 2015 that are used in this Proxy
Statement:
(Millions) |
|
|
2016 |
|
2015 |
|
Reconciliation of income before income taxes to operating
earnings before income taxes, excluding interest expense: |
|
|
|
|
|
|
Income before income taxes (GAAP measure) |
|
|
$3,991 |
|
$4,236 |
|
Interest
expense |
|
|
317 |
|
319 |
|
Transaction and
integration-related costs |
|
|
517 |
|
258 |
|
Restructuring
costs |
|
|
404 |
|
15 |
|
Reduction of reserve
for anticipated future losses on discontinued products |
|
|
(128 |
) |
|
|
Litigation-related
proceeds |
|
|
|
|
(110 |
) |
Amortization of
other acquired intangible assets |
|
|
247 |
|
255 |
|
Net realized capital
(gains) losses |
|
|
(86 |
) |
65 |
|
Operating earnings before income taxes, excluding
interest expense |
(D) |
|
$5,262 |
|
$5,038 |
|
Reconciliation of net income to operating earnings excluding
interest expense, net of tax: |
|
|
|
|
|
|
Net income (GAAP measure) |
(E) |
|
$2,271 |
|
$2,390 |
|
Interest
expense |
|
|
317 |
|
319 |
|
Transaction and
integration-related costs |
|
|
517 |
|
258 |
|
Restructuring
costs |
|
|
404 |
|
15 |
|
Reduction of reserve
for anticipated future losses on discontinued products |
|
|
(128 |
) |
|
|
Litigation-related
proceeds |
|
|
|
|
(110 |
) |
Amortization of
other acquired intangible assets |
|
|
247 |
|
255 |
|
Net realized capital
(gains) losses |
|
|
(86 |
) |
65 |
|
Income tax
benefit |
|
|
(419 |
) |
(268 |
) |
Operating earnings excluding interest expense, net of
tax |
|
|
$3,123 |
|
$2,924 |
|
Reconciliation of total revenue to operating
revenue: |
|
|
|
|
|
|
Total revenue (GAAP measure) |
(F) |
|
$63,155 |
|
$60,337 |
|
Interest income on
proceeds of transaction related debt |
|
|
(23 |
) |
|
|
Litigation-related
proceeds |
|
|
|
|
(110 |
) |
Net realized capital
(gains) losses |
|
|
(86 |
) |
65 |
|
Operating revenue (excludes net realized capital (gains)
losses and other items) |
(G) |
|
63,046 |
|
60,292 |
|
Reconciliation of total operating expenses
to adjusted operating expenses: |
|
|
|
|
|
|
Total operating expenses (GAAP measure) |
(H) |
|
$12,085 |
|
$11,644 |
|
Transaction and
integration-related costs |
|
|
(253 |
) |
(208 |
) |
Restructuring
costs |
|
|
(404 |
) |
(15 |
) |
Adjusted operating expenses |
(I) |
|
$11,428 |
|
$11,421 |
|
Net Income and Operating Margins: |
|
|
|
|
|
|
After-tax net income
margin (GAAP measure) |
(E)/(F) |
|
3.6% |
|
4.0% |
|
Pretax operating
margin |
(D)/(G) |
|
8.3% |
|
8.4% |
|
Operating Expense Ratios: |
|
|
|
|
|
|
Total company
expense ratio (GAAP measure) |
(H)/(F) |
|
19.1% |
|
19.3% |
|
Adjusted operating
expense ratio |
(I)/(G) |
|
18.1% |
|
18.9% |
|
Table of Contents
Under the Annual Bonus Plan (ABP), bonus
pool funding is determined by the Committee on Compensation and Talent
Management in part using non-GAAP metrics to measure actual performance. The
following is a reconciliation of the actual performance metrics used in
determining the bonus pool funding in 2016 to the most directly comparable GAAP
measure (other than those metrics already defined above) for the year ended
December 31, 2016:
(Millions) |
|
|
|
2016 |
|
Reconciliation of total revenue to operating
revenue: |
|
|
|
|
|
Total revenue (GAAP measure) |
|
(J) |
|
$63,155 |
|
Interest Income on
proceeds of transaction related debt |
|
|
|
(23 |
) |
Net realized capital
(gains) losses |
|
|
|
(86 |
) |
Operating revenue (excludes net realized capital (gains)
losses and other items) |
|
(K) |
|
$63,046 |
|
Reconciliation of total operating expenses
to adjusted selling, general and administrative expenses |
|
|
|
|
|
Total operating expenses (GAAP measure) |
|
(L) |
|
$12,085 |
|
Transaction and
integration-related costs |
|
|
|
(253 |
) |
Restructuring
costs |
|
|
|
(404 |
) |
Incentive
compensation expense |
|
|
|
(352 |
) |
Adjusted selling, general and administrative
expenses |
|
(M) |
|
$11,076 |
|
Operating Expense Ratios: |
|
|
|
|
|
Total company
expense ratio (GAAP measure) |
|
(L)/(J) |
|
19.1% |
|
Adjusted selling,
general and administrative expense ratio |
|
(M)/(K) |
|
17.6% |
|
Table of Contents
ANNEX
B
Amended Aetna Inc. 2010 Stock Incentive Plan As Amended May
19, 2017
The purposes of this Plan are to promote
the interests of the Company and its shareholders and align the interests of
shareholders and Participants by:
(i). motivating Participants through Awards
tied to total return to shareholders (i.e., stock price appreciation and
dividends);
(ii). attracting and retaining high
performing individuals as Participants;
(iii). enabling Participants to acquire
additional equity interests in the Company; and
(iv). providing compensation
opportunities dependent upon the Companys performance relative to its
competitors and changes in its own performance over time.
AFFILIATE shall mean any corporation or other entity (other than the Company or one
of its Subsidiaries) in which the Company directly or indirectly owns at least
twenty percent (20%) of the combined voting power of all classes of stock of
such entity or at least twenty percent (20%) of the ownership interests in such
entity.
AWARD shall mean a grant or award under the Plan, as evidenced in a written
document delivered to a Participant as provided in Section 12(b).
BOARD shall mean the Board of Directors of the Company.
CAUSE shall mean (i) the willful failure by the Participant to perform
substantially the Participants duties as an employee of the Company (other than
due to physical or mental illness) after reasonable notice to the Participant,
(ii) the Participants engagement in serious misconduct that is injurious to the
Company, any Subsidiary or any Affiliate, (iii) the Participants conviction of,
or entrance of a plea of nolo contendere to, a crime that constitutes a felony,
(iv) the breach by the Participant of any written covenant or agreement not to
compete with the Company, any Subsidiary or any Affiliate or (v) the breach by
the Participant of his or her duty of loyalty to the Company which shall
include, without limitation, (A) any disclosure by the Participant of any
confidential information pertaining to the Company, any Subsidiary or any
Affiliate, (B) any harmful interference by the Participant in the business or
operations of the Company, any Subsidiary or any Affiliate, (C) any attempt by
the Participant directly or indirectly to induce any employee, insurance agent,
insurance broker or broker-dealer of the Company,
any Subsidiary or any Affiliate to be employed or perform services elsewhere,
(D) any attempt by the Participant directly or indirectly to solicit the trade
of any customer or supplier, or prospective customer or supplier, of the Company
or (E) any breach or violation of the Companys Code of Conduct.
CODE shall mean the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
COMMITTEE shall mean a committee of the Board as may be designated by the Board to
administer the Plan, which shall consist of at least three directors of the
Company chosen by the Board each of whom has satisfied such criteria for
independence as the Board may establish and such additional regulatory or
listing requirements as the Board may determine to be applicable or
appropriate.
COMMON STOCK shall mean the common shares, $.01 par value, of the
Company.
COMPANY shall mean Aetna Inc., a Pennsylvania corporation.
ELIGIBLE EMPLOYEE shall mean each employee of the Company, its Subsidiaries or
its Affiliates, but shall not include directors who are not employees of such
entities. Any individual the Company designates as, or otherwise determines to
be, an independent contractor shall not be considered an Eligible Employee, and
such designation or determination shall govern regardless of whether such
individual is ultimately determined to be an employee pursuant to the Code or
any other applicable law.
Table of Contents
EMPLOYMENT shall mean, for purposes of determining whether a termination of
employment has occurred under the Plan, continuous and regular salaried
employment with the Company, a Subsidiary or an Affiliate, which shall include
(unless the Committee shall otherwise determine) any period of paid time off,
any approved leave of absence or any salary continuation or severance pay period
and, at the discretion of the Committee, may include service with any former
Subsidiary or Affiliate of the Company. For this purpose, regular salaried
employment means scheduled employment of at least 20 hours per week.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended
from time to time.
EXECUTIVE OFFICER shall mean those persons who are officers of the Company
within the meaning of Rule 16a-1(f) of the Exchange Act.
FAIR MARKET VALUE shall mean on any date, with respect to a share of Common
Stock, the closing price of a share of Common Stock as reported by the
Consolidated Tape of New York Stock Exchange Listed Shares on such date, or, if
no shares were traded on such Exchange on such date, on the next date on which
the Common Stock is traded on such Exchange.
FUNDAMENTAL CORPORATE
EVENT shall mean any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, offering to
purchase Common Stock at a price substantially below fair market value, or other
similar event.
INCENTIVE STOCK shall mean an Award of Common Stock granted under Section 7
which may become vested and nonforfeitable upon the passage of time and/or the
attainment, in whole or in part, of performance objectives determined by the
Committee.
INCENTIVE STOCK
OPTION shall mean an option which is
intended to meet the requirements of Section 422 of the Code.
INCENTIVE UNIT shall mean an Award of a contractual right granted under
Section 7 to receive Common Stock (or, at the discretion of the Committee, cash
based on the Fair Market Value of the Common
Stock) which may become vested and nonforfeitable upon either the passage of
time and/or the attainment, in whole or in part, of performance objectives
determined by the Committee.
NONSTATUTORY STOCK
OPTION shall mean an Option which is not
intended to be an Incentive Stock Option.
OPTION shall mean the right granted under Section 5 to purchase the number of
shares of Common Stock specified by the Committee, at a price and for the term
fixed by the Committee in accordance with the Plan and subject to any other
limitations and restrictions as this Plan and the Committee shall impose, and
shall include both Incentive Stock Options and Nonstatutory Stock Options.
OTHER STOCK-BASED
AWARD shall mean any right granted under
Section 8.
PARTICIPANT shall mean an Eligible Employee who is selected by the
Committee to receive an Award under the Plan and any recipient of a Substitute
Award.
PLAN shall mean the Aetna Inc. 2010 Stock Incentive Plan, described herein,
and as may be amended from time to time.
RESTRICTED PERIOD shall mean the period during which a grant of Incentive Stock
or Incentive Units is subject to forfeiture.
SECTION 409A shall mean Section 409A of the Code and the regulations
issued thereunder, as may be amended from time to time.
STOCK APPRECIATION
RIGHT or SAR shall mean a right granted under
Section 6.
SUBSIDIARY shall mean any entity of which the Company possesses directly or
indirectly fifty percent (50%) or more of the total combined voting power of all
classes of stock of such entity.
SUBSTITUTE AWARD shall mean an Award granted in assumption of, or in
substitution for, an outstanding award previously granted by a company acquired
by the Company or with which the Company combines.
SECTION 3.
ADMINISTRATION. |
The Plan shall be administered by the
Committee. The Committee shall have the responsibility of construing and
interpreting the Plan and of establishing and amending such rules and
regulations as it deems necessary or desirable for the proper administration of
the Plan. Any decision or action taken or to be taken by the Committee, arising
out of or in connection with the construction, administration, interpretation
and effect of the Plan and of its rules and regulations, shall, to the maximum
extent permitted by applicable law, be within its
absolute discretion (except as otherwise specifically provided herein) and shall
be conclusive and binding upon all Participants and any person claiming under or
through any Participant.
Subject to the terms of the Plan and
applicable law, and in addition to other express powers and authorizations
conferred on the Committee by the Plan, the Committee election of the holder
thereof or of the Committee;
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(vii) interpret and administer the Plan
and any instrument or agreement relating to, or Award made under, the Plan;
(viii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan (including authorizing another committee of the Board to designate
Participants or make Awards under the Plan within limits prescribed by the
Committee).
Except with respect to any action or
adjustment taken in connection with a Fundamental Corporate Event, any amendment
or action that would, directly or indirectly, reduce the exercise price of any
outstanding option or SAR previously granted under the Plan, including through
an exchange or cancellation of awards for cash or other awards, shall be subject
to the approval of the Companys shareholders.
SECTION 4. SHARES AVAILABLE FOR
AWARDS. |
(a) Shares Available for Issuance. The
maximum number of shares of Common Stock in respect of which Awards may be made
under the Plan shall be a total of 27,287,000 29,387,000
shares of Common Stock. Shares of Common Stock may be made available from the
authorized but unissued shares of the Company or from shares held in the
Companys treasury and not reserved for some other purpose. In the event that
any Award is paid solely in cash, no shares shall be deducted from the number of
shares available for issuance by reason of such Award. Shares of Common Stock
subject to Awards that are forfeited, terminated, canceled or settled, in whole
or in part, without the delivery of Common Stock under the Plan will again be
available for Awards under the Plan, as will shares of Common Stock tendered
(either actually or by attestation) to the Company in satisfaction or partial
satisfaction of the exercise price of any Award under the Plan, and shares
withheld by the Company to pay applicable withholding in accordance with Section
12.
(b) Adjustment for Corporate Transactions.
In the event that the Committee shall determine that any Fundamental Corporate
Event affects the Common Stock such that an adjustment is required to preserve,
or to prevent enlargement of, the benefits or potential benefits made available
under this Plan, then the Committee shall, in such manner as the Committee may
deem equitable, adjust any or all of (i) the number and kind of shares which
thereafter may be awarded or optioned and sold or made the subject of Awards
under the Plan, (ii) the number and kinds of shares subject to outstanding
Awards and (iii) the grant, exercise or conversion price with respect to any of
the foregoing. Additionally, the Committee may make provisions for a cash
payment to a Participant or a person who has an outstanding Award; provided,
however, that to the extent such an Award constitutes deferred compensation
within the meaning of Section 409A, no such provision for a cash payment shall
change the timing of payment of such Award unless such change is permitted under
Section 409A. However, the number of shares subject to any Award shall always be
a whole number.
SECTION 5. STOCK
OPTIONS. |
(a) Grant. Subject to the provisions of
the Plan, the Committee shall have the authority to grant Options to an Eligible
Employee and to determine (i) the number of shares to be covered by each Option,
(ii) subject to Section 5(b), the exercise price of the Option and (iii) the
conditions and limitations applicable to the exercise of the Option.
Notwithstanding the foregoing, in no event shall the Committee grant any
Participant Options (i) for more than 2,000,000 shares of Common Stock in
respect of any year in which the Plan is in effect, as such number may be
adjusted pursuant to Section 4(b) or (ii) with a term of exceeding 10 years. In
the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to and comply with Section 422 of the Code and the regulations
thereunder.
(b) Exercise Price. Except in the case of
a Substitute Award, the exercise price of an Option shall not be less than 100%
of the Fair Market Value on the date of grant.
(c) Exercise. Each Option shall be
exercised at such times and subject to such terms and conditions as the
Committee may specify at the time of the applicable Award or thereafter. No
shares shall be delivered pursuant to any exercise of an Option unless
arrangements satisfactory to the Committee have been made to assure full payment
of the exercise price therefor. Without limiting the generality of the
foregoing, payment of the exercise price may be made in cash or its equivalent
or, if and to the extent permitted by the Committee, by exchanging shares of
Common Stock owned by the optionee (which are not the subject of any pledge or
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other security interest or which, in the
case of Incentive Stock, are fully vested) either actually or by attestation, or
by a combination of the foregoing, provided that the combined value of all cash
and cash equivalents and the Fair Market Value of any such Common Stock so
tendered to the Company, valued as of the date of such tender, is at least equal
to such exercise price.
(d) Incentive Stock Option Annual Limit.
The aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an Eligible Employee during any
calendar year (counting Incentive Stock Options under this Plan and under any other stock option plan of the Company or a
subsidiary) shall not exceed $100,000. If an Option intended to be an Incentive
Stock Option is granted to an Eligible Employee and the Option may not be
treated in whole or in part as an Incentive Stock Option pursuant to the
$100,000 limitation, the Option shall be treated as an Incentive Stock Option to
the extent it may be so treated under the limitation and as a Nonstatutory Stock
Option as to the remainder. For purposes of determining whether an Incentive
Stock Option would cause the limitation to be exceeded, Incentive Stock Options
shall be taken into account in the order granted. The annual limit set forth
above shall not apply to Nonstatutory Stock Options.
SECTION 6. STOCK APPRECIATION
RIGHTS. |
(a) Grant of Stock Appreciation Rights.
The Committee shall have the authority to grant Stock Appreciation Rights in
tandem with an Option, in addition to an Option, or freestanding and unrelated
to an Option. Notwithstanding the foregoing, in no event shall the Committee
grant any Participant Stock Appreciation Rights (i) for more than 2,000,000
shares of Common Stock in respect of any year in which the Plan is in effect, as
such number may be adjusted pursuant to Section 4(b), and (ii) with a term
exceeding 10 years (or the term of the underlying Incentive Stock Option in the
case of a Stock Appreciation Right granted in tandem with an Incentive Stock
Option). Stock Appreciation Rights granted in tandem with an Option may be
granted either at the same time as the Option or at a later time.
(b) Exercise Price. The exercise price of
a Stock Appreciation Right shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date the Stock Appreciation Right was granted;
provided that if a Stock Appreciation Right is granted retroactively in
tandem with or in substitution for an Option, the
exercise price may be the exercise price of the Option to which it is related.
(c) Exercise of Stock Appreciation Rights.
A Stock Appreciation Right shall entitle the
Participant to receive from the Company an amount equal to the excess of the
Fair Market Value of a share of Common Stock on the date of exercise of the
Stock Appreciation Right over the base price thereof. The Committee shall
determine the time or times at which or the event or events (including, without
limitation, a change of control) upon which a Stock Appreciation Right may be
exercised in whole or in part, the method of exercise and whether such Stock
Appreciation Right shall be settled in cash, shares of Common Stock or a
combination of cash and shares of Common Stock; provided, however, that unless
otherwise specified by the Committee at or after grant, a Stock Appreciation
Right granted in tandem with an Option shall be exercisable at the same time or
times as the related Option is exercisable.
SECTION 7. INCENTIVE
AWARDS. |
(a) Incentive Stock and Incentive Units.
Subject to the provisions of the Plan, the Committee shall have the authority to
grant time vesting and/or performance vesting Incentive Stock or Incentive Units
to any Eligible Employee and to determine (i) the number of shares of Incentive
Stock and/or the number of Incentive Units to be granted to each Participant and
(ii) the other terms and conditions of such Awards; provided that, to the extent
necessary to comply with applicable law, Incentive Stock shall only be awarded
to an Eligible Employee who has been employed for such minimum period of time as
shall be determined by the Committee. The Restricted Period related to Incentive
Stock or Incentive Units shall lapse upon the passage of time and/or the
determination by the Committee that the
performance objectives established by the Committee have been attained, in whole
or in part. The maximum number of shares of Common Stock that may be subject to
any performance-based Awards of Incentive Stock and/or Incentive Units (whether
payable in cash or shares) granted to an Executive Officer with respect to any
year in which the Plan is in effect shall not exceed 2,000,000 shares, as such
number may be adjusted pursuant to Section 4(b). If the award is intended to
qualify under Section 162(m) of the Code, the performance objectives with
respect to an Award made to an Executive Officer shall be related to at least
one of the following criteria, which may be determined solely by reference to
the performance of
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the Company, a Subsidiary or an Affiliate
(or any business unit thereof) or based on comparative performance relative to
other companies: (i) net income; (ii) earnings before income taxes; (iii)
earnings per share; (iv) return on shareholders equity; (v) expense management;
(vi) profitability of an identifiable business unit or product; (vii) ratio of
claims to revenues; (viii) revenue growth; (ix)
earnings growth; (x) total shareholder return; (xi) cash flow; (xii) return on
assets; (xiii) pretax operating income; (xiv) net economic profit (operating
earnings minus a charge for capital); (xv) customer satisfaction; (xvi) provider
satisfaction; (xvii) employee satisfaction; (xviii) quality of networks; (xix)
strategic innovation or (xx) any combination of the foregoing.
SECTION 8. OTHER STOCK-BASED
AWARDS. |
The Committee shall have authority to
grant to eligible Employees an Other Stock-Based Award, which shall consist of
any right which is (i) not an Award described in Sections 5 through 7 above and
(ii) an Award of Common Stock or an Award denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, Common
Stock (including, without limitation, securities convertible into Common Stock),
as deemed by the Committee to be consistent with
the purposes of the Plan; provided that any such rights must comply, to the
extent deemed desirable by the Committee, with Rule 16b-3 under the Exchange Act
and applicable law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of any such
Other Stock-Based Award.
SECTION 9. DIVIDENDS AND DIVIDEND
EQUIVALENTS. |
The Committee may provide that any Award
shall include dividends or dividend equivalents, payable in cash, Common Stock,
securities or other property on a current or deferred basis, including payment
contingencies provided, however, in no event shall any such dividend or dividend
equivalent become payable prior to the date on
which an award is vested in accordance with its terms. The preceding sentence to
the contrary notwithstanding, no dividends or dividend equivalents will be
payable on options or stock appreciation rights.
SECTION 10. STOCK IN LIEU OF
CASH. |
The Committee may grant Awards in lieu of
all or a portion of compensation or an Award otherwise payable in cash to an
Executive Officer pursuant to any bonus or incentive compensation plan of the
Company.
The Committee shall have the discretion to
determine whether, to what extent, and under what circumstances cash, shares of
Common Stock, other securities, other Awards, other property, and other amounts
payable with respect to an Award shall be deferred either automatically or at
the election of the Participant or of the Committee. The timing of any elective
deferral shall comply with Section 409A. At the time of any automatic or
elective deferral, the time and form of payment
shall be established consistent with the requirements of Section 409A. If the
time or form of payment is not so established, the form of payment shall be a
lump sum and the time of payment shall be the date the Participant experiences a
separation from service within the meaning of Section 409A. Gains from the
exercise of Options and Stock Appreciation Rights shall not be eligible for
automatic or elective deferral.
SECTION 12. GENERAL
PROVISIONS. |
(a) Withholding. The Company shall have
the right to deduct from all amounts paid to a Participant in cash (whether
under this Plan or otherwise) any taxes required by law to be withheld in
respect of Awards under this Plan. In the case of any Award satisfied in the
form of Common Stock, no shares shall be issued
unless and until arrangements satisfactory to the Company shall have been made
to satisfy any withholding tax obligations applicable with respect to such
Award.
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(b) Award Agreement. Each Award hereunder
shall be evidenced in writing. The written agreement shall be delivered to the
Participant and shall incorporate the terms of the Plan by reference and specify
the terms and conditions thereof and any rules applicable thereto.
(c) Nontransferability. Unless the
Committee shall permit (on such terms and conditions as it shall establish) an
Award to be transferred to a member of the Participants immediate family or to
a trust or similar vehicle for the benefit of such immediate family members
(collectively, the Permitted Transferees), no Award shall be assignable or
transferable except by will or the laws of descent and distribution, and except
to the extent required by law, no right or interest of any Participant shall be
subject to any lien, obligation or liability of the Participant. All rights with
respect to Awards granted to a Participant under the Plan shall be exercisable
during the Participants lifetime only by such Participant or, if applicable,
the Permitted Transferees or the Participants legal representative.
(d) No
Right to Employment. The grant of an Award
shall not be construed as giving a Participant the right to be retained in the
employ of the Company, any Subsidiary or any Affiliate. Further, the Company and
each Subsidiary and Affiliate expressly reserves the right at any time to
dismiss a Participant free from any liability, or any claim under the Plan,
except as provided herein or in any Award Agreement.
(e) No
Rights to Awards, No Shareholder Rights. No
Participant or Eligible Employee shall have any claim to be granted any Award
under the Plan, and there is no obligation of uniformity of treatment of
Participants and Eligible Employees. Subject to the provisions of the Plan and
the applicable Award, no person shall have any rights as a shareholder with
respect to any shares of Common Stock to be issued under the Plan prior to the
issuance thereof.
(f) Applicable Law. The validity,
construction, interpretation, administration and effect of the Plan and of its
rules and regulations, and rights relating to the Plan, shall be determined
solely in accordance with the laws of the State of Connecticut.
(g) Effective Date. The Plan shall be
effective upon approval by the Companys shareholders.
(h) Amendment or Termination of Plan. The
Board or the Committee may terminate or suspend the Plan at any time, but the
termination or suspension will not adversely affect any vested Awards then
outstanding under the Plan. No Award may be granted under the Plan after May 21,
2020 or such earlier date as the Plan is terminated by action of the Board or
the Committee. The Plan may be amended or terminated at any time by the Board,
except that no amendment may be made without shareholder approval if the Committee determines that such approval is necessary to
comply with any tax or regulatory requirement, including any approval
requirement which is a prerequisite for exemptive relief from Section 16 of the
Exchange Act, for which or with which the Committee determines that it is
desirable to qualify or comply; and, the Committee may amend the term of any
Award or Option granted, retroactively or prospectively, but no amendment may
adversely affect any vested Award or Option without the holders consent.
(i) Compliance with Legal and Exchange Requirements. The Plan, the granting and exercising of Awards thereunder
and the other obligations of the Company under the Plan, shall be subject to all
applicable federal and state laws, rules, and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the granting and exercising of Awards, the issuance or
delivery of Common Stock under any Award or any other action permitted under the
Plan to permit the Company, with reasonable diligence, to complete such stock
exchange listing or registration or qualification of such Common Stock or other
required action under any federal or state law, rule, or regulation and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Common Stock in compliance with applicable laws, rules, and
regulations. The Company shall not be obligated by virtue of any provision of
the Plan to recognize the exercise of any Award or to otherwise sell or issue
Common Stock in violation of any such laws, rules, or regulations; and any
postponement of the exercise or settlement of any Award under this provision
shall not extend the term of such Awards, and neither the Company nor its
directors or officers shall have any obligations or liability to the Participant
with respect to any Award (or stock issuable thereunder) that shall lapse
because of such postponement.
(j) Severability of Provisions. If any
provision of this Plan shall be held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions hereof, and this Plan
shall be construed and enforced as if such provision had not been included.
(k) Incapacity. Any benefit payable to or
for the benefit of a minor, an incompetent person or other person incapable of
providing a receipt therefore shall be deemed paid when paid to such persons
guardian or to the party providing or reasonably appearing to provide for the
care of such person, and such payment shall fully discharge any liability or
obligation of the Committee, the Board, the Company and all other parties with
respect thereto.
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(l) Headings and Captions. The headings
and captions herein are provided for reference and convenience only, shall not
be considered part of this Plan, and shall not be employed in the construction
of this Plan.
(m) Compliance with Section
409A. All
Awards granted under the Plan are intended to be either exempt from the
requirements of Section 409A or, if not exempt, to satisfy the requirements of
Section 409A. The provisions of the Plan and any Awards granted under the Plan
shall be construed in a manner consistent with such intent. In addition,
notwithstanding any other provision of this Plan or an Award agreement to the
contrary, the Company will not pay or accelerate the payment of any amount that
constitutes deferred compensation within the meaning of Section 409A, in
violation of Section 409A. To the extent any amount of deferred compensation
as defined in Section 409A would otherwise vest and become payable upon a Change
in Control or upon a disability, as set forth herein or in an Award Agreement,
any such Award may vest but payment shall not be accelerated unless the Change
in Control or the disability also satisfies the definition of change in
control or disability as set forth in Section 409A.
Any amount that constitutes deferred
compensation within the meaning of Section 409A and is payable under the Plan
solely by reason of a Participants termination of employment shall be payable
only if the Participant has experienced a separation from service within the
meaning of Section 409A, provided that if the Participant is a specified
employee within the meaning of Section 409A at the time of such separation from
service, as determined by the Company in accordance with Section 409A, no
payments shall be made before the six-month anniversary of the Participants
separation from service, at which time all payments that would otherwise have
been made during such six-month period shall be paid to the Participant in a
lump sum.
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ANNEX
C
Directions
to Waldorf Astoria Chicago, in Chicago, IL.
11 E Walton Street
Chicago, Illinois
60611
Directions From Chicago OHare
International Airport
Travel I-90 East to 90 East. Continue on
90 East until the Ohio Street exit 50-B.
Turn left onto State
Street.
Drive north 7 blocks and turn right
onto Delaware Place.
Travel 1 block and turn left onto Rush
Street.
Drive 1 block and turn left on Walton
Street.
Distance from OHare to
hotel: 18 miles
Travel time: 40 minutes
Directions From Chicago Midway
International Airport
Turn left onto Cicero
Avenue.
Travel 1.5 miles to I-55 North towards
90/94 West to the Ohio Street exit 50-B.
Turn left onto State
Street.
Drive north 7 blocks and turn right
onto Delaware Place.
Travel 1 block and turn left onto Rush
Street.
Drive 1 block and turn left on Walton
Street.
Distance from Midway to
hotel: 12 miles
Travel time: 25 minutes
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The
Aetna Way is an expression of why we exist,
what we are trying to achieve and
what we believe in.
Everything we do at Aetna starts with our values
a clear,
strongly held set of core beliefs that reflect who we
are and what you can
expect from us.
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|
151 Farmington
Avenue |
Hartford, Connecticut
06156 |
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Visit our Investor Relations
website https://www.aetna.com/about-us/investor-information.html |
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Read our
2016 Corporate Social Responsibility
Report www.aetna.com/about-aetna-insurance/document-library/corporate-responsibility.pdf |
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The Aetna Story: Building a Healthier
You
Founded in 1853 in Hartford,
Connecticut, Aetna is one of the nations leading diversified health care
benefits companies. We help people achieve health and financial security
by offering a broad range of traditional, voluntary and consumer-directed
health insurance products and related services, including medical,
pharmacy, dental, behavioral health, group life and disability plans,
medical management capabilities, Medicaid health care management services,
Medicare Advantage and Medicare Supplement plans, workers compensation
administrative services and health information technology products and
services.
We currently serve an estimated 46.7
million people with information and resources to help them, in
consultation with their health care professionals, make better informed
decisions about their health care. Our customers include employer groups,
individuals, college students, part-time and hourly workers, health plans,
health care providers, governmental units, government-sponsored plans,
labor groups and expatriates.
Our people, our ability to innovate
as a company, and our focus across the organization are helping us move
closer to our goal of building a healthier world, community by
community. |
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AETNA
INC.
151 FARMINGTON AVENUE,
RW61
HARTFORD, CT 06156-3215
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to
transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time on May 18, 2017. Have your proxy card in hand when
you access the website and follow the instructions to obtain your records and to
create an electronic voting instruction form.
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costs incurred by Aetna in mailing proxy materials, you can consent to receiving
all future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate that
you agree to receive or access proxy materials electronically in future
years.
VOTE BY PHONE -
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If you are calling from the
United States or Puerto Rico, use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern Time on May 18, 2017. Have your
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VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
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E23163-P88280-Z69546 |
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KEEP THIS PORTION FOR YOUR
RECORDS |
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED. |
AETNA INC. |
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The Board of Directors
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1a. |
Fernando Aguirre |
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1b. |
Mark T. Bertolini |
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1c. |
Frank M. Clark |
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1d. |
Betsy Z. Cohen |
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1e. |
Molly J. Coye, M.D. |
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1f. |
Roger N. Farah |
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1g. |
Jeffrey E. Garten |
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1h. |
Ellen M. Hancock |
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1i. |
Richard J.
Harrington |
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1j. |
Edward J.
Ludwig |
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1k. |
Joseph P.
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1l. |
Olympia J.
Snowe |
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The Board of Directors
recommends a vote FOR proposals 2, 3 and 4. |
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2. |
Company Proposal - Approval of the
Appointment of the Independent Registered Public Accounting
Firm |
|
☐ |
☐ |
☐ |
|
|
|
|
|
|
3. |
Company Proposal - Approval
of Amendment to Amended Aetna Inc. 2010 Stock Incentive Plan to Increase
Number of Shares Authorized to be Issued |
|
☐ |
☐ |
☐ |
|
|
|
|
|
|
4. |
Company
Proposal - Approval of the Company's Executive Compensation on a
Non-Binding Advisory Basis |
|
☐ |
☐ |
☐ |
|
|
|
|
|
The Board of Directors does
not have a voting recommendation with respect to proposal
5. |
1
Year |
2 Years |
3 Years |
Abstain |
|
|
|
|
|
|
5. |
Company Proposal - Non-Binding Advisory
Vote on the Frequency of the Vote on Executive
Compensation |
☐ |
☐ |
☐ |
☐ |
|
|
|
|
|
|
The Board of Directors
recommends a vote AGAINST proposals 6A and 6B. |
|
For |
Against |
Abstain |
|
|
|
|
|
|
6A. |
Shareholder Proposal - Annual Report on
Direct and Indirect Lobbying |
|
☐ |
☐ |
☐ |
|
|
|
|
|
|
6B. |
Shareholder Proposal -
Annual Report on Gender Pay Gap |
|
☐ |
☐ |
☐ |
|
|
|
|
|
|
NOTE: The proxies may vote in their discretion on any and all
other matters that may properly come before the meeting or any adjournment
or postponement thereof. |
|
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|
|
|
|
|
|
|
|
HOUSEHOLDING CONSENT Please indicate if you
consent to receive a single copy of future notices of shareholder meetings, proxy statements and annual reports to
shareholders for your household (Please note that each registered
shareholder in your household will need to consent to this
option.) |
|
Yes |
No |
|
|
☐ |
☐ |
|
|
NOTE: Please sign exactly as your name appears hereon. Joint
owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such.
If a corporation or other form of entity, please sign in the full name of
the entity, by a duly authorized officer. The signer hereby revokes all
proxies heretofore given by the signer to vote at the 2017 Annual Meeting
of Shareholders of Aetna Inc. and any adjournment or postponement
thereof. |
|
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|
|
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|
Signature [PLEASE SIGN WITHIN BOX] |
Date |
|
Signature (Joint Owners) |
Date |
|
|
|
|
Table of Contents
2017 ANNUAL MEETING OF
SHAREHOLDERS
OF
AETNA
INC.
FRIDAY, MAY 19, 2017, 9:30 AM CENTRAL
TIME
WALDORF ASTORIA
CHICAGO
11 E WALTON STREET
CHICAGO,
IL 60611
Your vote is important to us. You may
vote your proxy by Internet, telephone or mail. Please vote your proxy at your
earliest convenience even if you plan to attend the Annual Meeting. Voting
instructions appear on the reverse side of this card. Your vote is held in
confidence by the Company's outside tabulator, Broadridge Financial Solutions,
Inc.
NOTE: If you plan to attend the
Annual Meeting, you must follow the admission and ticket request procedure in the 2017 Proxy Statement. Aetna's Corporate
Secretary must receive your written request for an admission ticket on or before May 12, 2017. You must present your
admission ticket along with a government-issued photo identification
(e.g., a driver's license or a passport) in order to be admitted to the Annual Meeting.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE 2017 ANNUAL MEETING:
The Aetna Inc. 2017 Notice of Annual Meeting and Proxy
Statement and the Aetna Inc. 2016 Annual Report on Form 10-K are available at
www.proxyvote.com.
2017 Annual Meeting of
Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF
AETNA'S BOARD OF DIRECTORS.
The undersigned hereby appoints Ellen
M. Hancock, Richard J. Harrington, and Edward J. Ludwig, and each of them, the
proxies of the undersigned, with full power of substitution, to vote the shares
of the undersigned at the 2017 Annual Meeting of Shareholders of Aetna Inc. to
be held on May 19, 2017 and at any adjournment or postponement thereof, and
directs said proxies to vote as specified herein on the items specified in this
proxy, and in their discretion on any and all other matters that may properly
come before the meeting or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR EACH NOMINEE LISTED IN ITEM 1, FOR ITEMS 2, 3 AND
4, AGAINST ITEMS 6A AND 6B, AND THIS PROXY WILL NOT BE VOTED ON ITEM
5.
If you vote by telephone or the
Internet, please DO NOT mail back this Proxy Card.
THANK YOU FOR VOTING
(Items to be voted appear on reverse
side of this Proxy Card.)
This regulatory filing also includes additional resources:
aet_courtesy-pdf.pdf
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