UNITED STATES
SCHEDULE 14A
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TABLE OF CONTENTS
We are furnishing proxy materials, including this proxy statement, in connection with the solicitation of proxies on behalf of the Board of Directors, to be voted at the 20182019 Annual Meeting of Shareholders of Unum Group and at any adjournment or postponement thereof. Our proxy materials are first being mailed and made available electronically to shareholders on or about April 12, 2018.11, 2019.
2019 PROXY STATEMENT
A LETTER FROM OUR BOARD OF DIRECTORS
April 12, 2018
Dear Fellow Shareholder:
Our vision at Unum is to be the leading provider of employee benefits products and services. Today more than 36 million workers and their families rely on us for their financial protection, and the $7.2 billion in benefits we paid in 2018 helped safeguard millions of people during some of the most difficult times of their lives.
We continue to make progress toward our vision through strong financial results, consistent operating performance and steady growth across our core businesses. In addition to investing in our existing business, in 2018 we continued to grow our newly-launched dental and vision product lines and further expanded our geographic reach through our acquisition of Pramerica Žycie TUiR SA, a leading financial protection provider in Poland.
This progress, and the impact of tax reform enacted in the U.S., translated into another profitable year at Unum. We grew adjusted operating earnings per share (EPS) by more than 20% (the thirteenth consecutive year of EPS growth), increased adjusted operating return on equity and continued to generate significant capital in our core businesses. These accomplishments have further positioned the company for long-term success.
In spite of this performance, we are disappointed that Unum's stock price declined significantly in 2018. We continue to seek to address investors' perception surrounding long-term care policies. The leadership team at Unum has successfully and actively managed our long-term care business for over a decade, and after a deep review last year, increased reserves to reflect our updated estimate of future benefit obligations. We are confident in our ongoing proactive approach to this business, and we believe our analysis sets the standard for disclosure in long-term care. The reserve increase had little impact on Unum's capital plans and overall financial strength, and we expect that, over time, investors' recognition of the performance of the core franchise will ultimately drive long-term shareholder value.
As Board members, we believe that good corporate governance is critical to our shareholders and to Unum's long-term success. We take a thorough approach to governance that assesses performance and risk, demands regulatory compliance, and provides oversight of compensation, investment activity and other financial matters. Additionally, we conduct a regular outreach and engagement program that ensures we receive valuable feedback from shareholders on a variety of topics.
More broadly, we - and the entire leadership team at Unum - recognize the obligations we have to all our key stakeholders, including customers, brokers, employers, regulators and shareholders, and we strive to deliver on those commitments. This focus on doing the right thing and making a difference also guides our approach to sustainability and social responsibility. We advocate for greater access to benefits because the need in our society is real. We work to make our local communities better places to live. We reduce the impact we have on our environment because it improves the quality of the world around us.
Operating with integrity and compassion is deeply embedded in our culture. Our We Are Unum principles as well as our Code of Conduct are important guides for how our employees approach their work each day. As a Board, we monitor Unum's culture through feedback from employee engagement surveys, the ethics hotline and other methods to ensure we remain true to our values. We also invest in our people - including striving for inclusion and smart succession planning throughout the organization - because they're the ones who deliver on our promises today and in the years ahead.
2019 PROXY STATEMENT
A LETTER FROM OUR BOARD OF DIRECTORS
All told, 2018 was a good year for Unum. Our focus on enhancing our customer experience, improving our operating effectiveness and expanding our reach into new markets delivered strong financial results and supported the capital needs of our business. As a result, we are confident Unum is well-positioned for the longer-term.
On behalf of the 10,000 employees and entire leadership team at Unum, thank you for your continued support of our company.
2019 PROXY STATEMENT
NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS
NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS
TIME: 10 a.m. Eastern Daylight Time
LOCATION: | Unum Group 2211 Congress Street Portland, ME 04102 |
DIRECTIONS: www.unum.com/directions
Attending
You will be asked to provide photo identification and appropriate proof of ownership to attend the meeting. You can find more information under “About the Annual Meeting” in the proxy statement.
Who can vote
Shareholders of record of the company’s common stock (NYSE: UNM) at the close of business on March 25, 2019, are entitled to vote at the meeting and any adjournments or postponements of the meeting.
Voting Items | ||
Election of Directors | p. | |||||||
☑ | Advisory Vote to Approve Executive Compensation | p. | ||||||
☑ | Ratification of Appointment of Independent Public Accounting Firm | |||||||
p. | ||||||||
We mailed the proxy statement or a Notice of Internet Availability of Proxy Materials on April 11, 2019.
How to vote
Your vote is important. Please vote as soon as possible by one of the methods shown below. Be sure to have your proxy card, voting instruction form or Notice of Internet Availability in hand and follow the instructions provided. Shareholders of record may vote using any one of the following methods.
Proxy Services, c/o Computershare Investor Services,
P.O. Box 43126, Providence, Rhode Island 02940-5138
Deadline: Receipt due by close of business day on May 22, 2019
Telephone
1-800-652-VOTE (8683)
Deadline: 2:00 a.m. Eastern Daylight Time, May 23, 2019
Internet
www.envisionreports.com/UNM
Deadline: 2:00 a.m. Eastern Daylight Time, May 23, 2019
In addition to the voting items listed above, shareholders also will transact any other business that may properly come before the meeting.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 24, 2018:23, 2019: The proxy statement and annual report to shareholders are available at www.envisionreports.com/unm.
J. Paul Jullienne
2019 PROXY STATEMENT 1
A NOTE ABOUT NON-GAAP MEASURES
A NOTE ABOUT NON-GAAP MEASURES
In this proxy statement, we present certain measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP). Non-GAAP financial measures exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP, which are set forth below:
GAAP MEASURES ($ in millions, except per share data)
Year Ended December 31 | |||||||||
2018 | 2017 | 2016 | |||||||
Net Income | $ | 523.4 | $ | 994.2 | $ | 931.4 | |||
Net Income per share* | $ | 2.38 | $ | 4.37 | $ | 3.95 | |||
Total Stockholders' Equity (book value) | $ | 8,621.8 | $ | 9,574.9 | $ | 8,968.0 | |||
Total Stockholders' Equity (book value) per share | $ | 40.19 | $ | 43.02 | $ | 39.02 | |||
Return on Equity | 5.8 | % | 10.7 | % | 10.6 | % |
* Assuming dilution
This proxy statement refers to the following non-GAAP financial measures, which we believe are better performance measures and better indicators of the revenue and profitability and underlying trends in our business:
Realized investment gains or losses and unrealized gains or losses on securities and net gains on hedges depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our company. Book value per common share excluding certain components of AOCI, certain of which tend to fluctuate depending on market conditions and general economic trends, is an important measure. We also exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals. We exclude these items as we believe them to be infrequent or unusual in nature, but this exclusion is not an indication that similar items may not recur and does not replace the comparable GAAP measures in the determination of overall profitability.
For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A to the proxy statement.
This summary is intended to highlight certain key information contained in this proxy statement that we believe will assist your review of the business items to be voted on at the 20182019 Annual Meeting of Shareholders of Unum Group (the "2018"2019 Annual Meeting"). As it is only a summary, we encourage you to review the full proxy statement, andas well as our annual report on Form 10-K for the year ended December 31, 20172018 (the "2017"2018 Form 10-K"), for more complete information about these topics.
Key Corporate Governance and Executive Compensation Items
2018 Say-on-Pay Vote and Shareholder Outreach
Our 2018 shareholder advisory vote to approve executive compensation passed with over 95% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing over 68% of our outstanding shares. Consistent with the prior year, our independent Board Chairman joined several of our meetings with shareholders. Details of 2018 feedback from our shareholders can be found on page 48. |
Corporate Governance and Executive Compensation Practices
Executive Compensation Practices | Board Practices | ||
A pay for performance philosophy | All directors other than the CEO are independent, including the Board Chairman | ||
Annual say-on-pay votes | All Board Committees fully independent | ||
Programs that mitigate undue risk taking in compensation | Commitment to diversity at the Board level and within the enterprise | ||
Independent compensation consultant to the Human Capital Committee | High meeting attendance by directors (average attendance of 98% in 2018) | ||
No golden parachute excise tax gross-ups | Limits on outside board and audit committee service | ||
Minimal perquisites | |||
No NEO employment agreements | Governance Practices | ||
Double-trigger provisions for severance | Annual election of directors | ||
Restrictive covenants in our long-term incentive grant agreements | Majority vote requirement for directors (in uncontested elections) | ||
Clawback provisions | Proxy access bylaws | ||
A balance of short- and long-term incentives | Shareholder right to call special meetings | ||
Robust stock ownership and retention requirements | Annual, proactive shareholder engagement | ||
Relevant peer groups for benchmarking compensation | No supermajority vote requirements | ||
Robust individual performance assessments of executives and directors | Anti-pledging and anti-hedging policies applicable to executives and directors | ||
Annual Board, committee, and individual director evaluations | |||
Regular executive sessions of independent directors |
2019 PROXY STATEMENT 3
PROXY SUMMARY
From a financial and operating standpoint, Unum had a very successful year in 20172018 as we delivered consistent financial and operating performance, and continuedsteady growth across our growth trends,core businesses, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were despite a challenging environment, including the pressure of continued low interest rates, and uncertainty in the U.K. due to Brexit.
Financial Highlights
Below are financial highlights from 2017.
Record earnings | ||
Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For | ||
Return on equity | ||
We continued to put | ||
Book value | ||
Our book value per share at the end of | ||
Strengthening of Reserves | ||
We increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future obligations, which had little impact on our capital plans and overall financial strength. |
(1) | |
4 2019 PROXY STATEMENT
Operating Highlights
Unum delivered on our mission of
supporting our customersinWe saw
We
managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care policies that we service and support, but no longer actively market. In 2009, we closed our individual long-term care business, and in 2012 we closed our group long-term care business. Since that time, we have actively managed these blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Since 2006, we have strengthened reserves $4.9 billion in this block. Through these and other steps, we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.
We continued our commitment to effectively managing our long-term care business in 2018 during our annual comprehensive review of this block. Upon completion of this review in the third quarter of 2018, we increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future benefit obligations. In the process, we believe we set a standard for disclosure in long-term-care. This action had little impact on our capital plans and overall financial strength.
Strategic Positioning
We have recently taken a number of steps to fuel our growth and position us for the future.
In addition, we view these key developments in the external environment as likelyare having a positive impact on our business.
2019 PROXY STATEMENT 5
PROXY SUMMARY
Environmental, Social and Governance
Millions of people count on our benefits as part of a critical financial safety net, and we strive to deliver on those commitments. This focus on doing the right thing guides our approach to sustainability and social responsibility issues. Unum has a long tradition of engaging employees, shareholders, our communities and society at large on advocacy, community outreach, environmental responsibility and good governance.
We recognize the importance of these and other environmental, social and governance (ESG) issues to all our stakeholders. In 2018, we took important steps to enhance our efforts, including creating a fully staffed office of inclusion and diversity and hiring a Vice President, Inclusion and Diversity. This year, we are bringing greater transparency to our inclusion and diversity work, and we will begin a comprehensive review of our overall ESG efforts to ensure we're focusing on the right things and measuring our progress effectively.
While we're proud of our legacy of making a difference, we are committed to bringing additional rigor and process to our ESG efforts as we look to the future. See page 36 for more information about ESG.
Our strong statutory earnings resulthave resulted in solid capital generation, which we have deployed in a number of ways.
Our ability to generate capital remained strong in 2018, allowing us the opportunity to deploy capital in a number of ways. For the year, we invested in our business, strengthened our long-term care reserves and paid out $217.0 million in dividends, including increasing the annual dividend rate by 14% over the prior year. We also repurchased $350.7 million worth of our outstanding shares, bringing our total share repurchases since 2007 to $4.4 billion. In addition, our credit ratings are strong and remain highat our targeted levels as a result of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market.
6 2019 PROXY STATEMENT
PROXY SUMMARY
Unum continuesdelivered strong financial results in our core businesses and record adjusted operating earnings in 2018, continuing a track record of consistent performance that spans more than a decade. However, investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector, overshadowed our performance. This contributed to outperformthe decline in our peersstock value of more than 45% in 2018.
These results are not indicative of the ongoing strong financial and operational performance of our core businesses and the broader S&P 500 in total shareholder return (TSR). Over the last decade, weactive management of our closed LTC block. We believe our consistent results have beenmade Unum an excellent long-term investment - including during one of the worst financial crises in memory with a 10.8% compound annual return to shareholders during the last 10 years.
2019 PROXY STATEMENT 7
PROXY SUMMARY
Our approach to CEO compensation aligns directly with our overall executive compensation philosophy and structure (see page 49). Mr. McKenney's targeted total direct compensation is a combination of base pay plus short- and long-term incentives that are tied directly to performance goals. This structure supports the S&P 500,long-term successes of the company and the interests of our peersshareholders. Mr. McKenney has been and will continue to be subject to robust stock ownership and retention requirements, including a requirement to own six times his base salary in stock. In addition, he must hold 75% of the net shares acquired upon vesting of performance-based restricted stock units (PBRSUs) and performance share units (PSUs) or the exercise of stock options for a period of at least three years. The combination of these two requirements further help to directly align the long-term value of his compensation to shareholders.
For performance goals, the Board, after discussion with Mr. McKenney, annually sets:
In addition to a self-assessment authored by Mr. McKenney, the Human Capital Committee and Board conduct a thorough evaluation of his performance against all objectives as well as a review of a number of professional and leadership characteristics and behaviors (beginning on page 54).
For 2018, as outlined in the S&P LifePerformance Highlights section above, the Human Capital Committee and Health IndexBoard have recognized that Mr. McKenney led the company to deliver strong core operating performance, including more than 20% growth in adjusted operating earnings per share and an adjusted return on equity in excess of 13%, while further strengthening the averagereserves for future benefits in the long-term care block. Strong capital generation and deployment returned value to shareholders of $567.7 million with dividends representing a 14% growth per share year over year. Mr. McKenney led Unum as it undertook a number of initiatives to position the company for long-term success. This included a deep strategic review of our Proxy Peer Group (as definedlong-term care block (see page 5), advancing our talent development strategy and a genuine commitment on inclusion and diversity. While 2018 proved to be a difficult environment for our legacy LTC business, the Board has full confidence in Mr. McKenney's leadership as CEO.
2018 Compensation Decisions
The following CEO Compensation Summary table depicts how the Human Capital Committee views its decisions concerning Mr. McKenney’s compensation for 2018, relative to his 2017 awards. It differs from the Summary Compensation Table (SCT) (see page 77), which is required by the Securities and Exchange Commission, as follows:
8 2019 PROXY STATEMENT
PROXY SUMMARY
The CEO Compensation Summary table is not a substitute for the required Summary Compensation Table found on page 53) during77.
Component | 2017 | 2018 | ||||
Base Salary | $ | 1,000,000 | $ | 1,000,000 | ||
Annual Incentive Payout | 2,415,000 | 1,900,000 | ||||
Approved LTI Grant | 6,600,000 | 6,175,000 | ||||
Annual Compensation | $ | 10,015,000 | $ | 9,075,000 |
Base Salary
No change was made to Mr. McKenney’s base salary in 2018. It has remained the same since March 2016.
Annual Incentive
As previously disclosed, in early 2018, the Committee increased Mr. McKenney’s target annual incentive opportunity from 175% to 200% of his base salary. This decision reflected the continued execution of a multi-year program for Mr. McKenney to adjust his pay to full competitive norms as performance and experience in the job grows. With these adjustments, his targeted total direct compensation is approximately 5% below the median of the proxy peer group.
Mr. McKenney's 2018 annual incentive payout of $1,900,000 was calculated by applying the company performance achievement under the plan formula (100% for 2018; see page 60) and Mr. McKenney’s individual performance factor (95% for 2018; see page 65).
Although stock price is not a direct criteria for assessing the CEO’s performance, the Committee considered its impact on TSR while weighing Mr. McKenney’s individual achievements and overall performance of the company (see page 65). While the stock price did decline in 2018, the Committee believes that active management of our LTC block along with the strong performance of our core businesses will, over time, period. Overdrive investor perceptions and long-term shareholder value. Given this, and its view that the most recent three-company is positioned for long-term success, the Committee awarded Mr. McKenney an individual performance percentage of 95% for his 2018 annual incentive which resulted in an actual award of $1,900,000, a reduction of $515,000 from his 2017 payout.
Long-Term Incentive
As previously disclosed, in early 2018, the Committee increased Mr. McKenney’s long-term incentive target opportunity from $5.5 million to $6.5 million. Again, this decision reflected the continued execution of a multi-year program as outlined above.
The design of our long-term incentive program serves to align the interests of management and shareholders. For 2018, 68% of Mr. McKenney's pay is in the form of long-term equity incentives (delivered through PBRSUs and PSUs), five-the value of which is based on the company’s stock price and, 10-year periods, we exceededfor his PSU achievement, is further modified by relative TSR. Given his performance in 2018 as well as the company’s financial performance and other considerations outlined above, the Committee awarded Mr. McKenney an individual performance
2019 PROXY STATEMENT 9
PROXY SUMMARY
percentage of 95% for his long-term incentive award granted in March 2019 which resulted in an award of $6,175,000, a reduction of $425,000 from the prior year's award.
The total of Mr. McKenney's annual and long-term incentives for 2018 performance were $8,075,000, a reduction of $940,000 from his awards for 2017.
Consistent with the impact to shareholders over the past year, the value of Mr. McKenney’s Unum holdings, including his unvested equity awards, declined significantly in 2018. For example, this impact can be seen in the vesting of Mr. McKenney’s historical PSU awards, which are not only valued at the company’s lower stock price but also modified based on relative TSR (up to +/- 20%). The table below illustrates how the TSR performancemodifier reduced the number of every index group. This strong performance is due primarily to our market-leading positions, prudent underwriting and risk management discipline, and effective capital management.
Executive | Target Share Grant | Operating Performance Factor | Adjusted Shares | TSR Modifier | Earned Shares | Value of Shares as of 2/15/19(1) | |||||
Adjusted Shares | Earned Shares | ||||||||||
CEO | 98,677 | x | 120.3% | = | 118,659 | x | 80% | = | 94,927 | $4,309,683 | $3,447,746 |
10 2019 PROXY STATEMENT
PROXY SUMMARY
Voting Item | Page Reference: | ||||||
FOR each nominee | |||||||
Eleven director nominees are standing for election this year, each for a one-year term expiring at the | ||||
Director Nominee | Director Since | Independent | Current Committees | |
Theodore H. Bunting, Jr. | Regulatory Compliance (Chair) Human Capital | |||
Susan L. Cross | 2019 | Audit Risk and Finance | ||
Susan D. DeVore | 2018 | Audit Risk and Finance | ||
Joseph J. Echevarria | 2016 | Governance Risk and Finance | ||
Cynthia L. Egan | 2014 | Human Capital (Chair) Regulatory Compliance | ||
Kevin T. Kabat, Board Chairman | 2008 | Governance Human Capital | ||
Timothy F. Keaney | 2012 | Risk and Finance (Chair) Audit | ||
Gloria C. Larson | 2004 | Governance (Chair) Regulatory Compliance | ||
Richard P. McKenney,President and CEO | 2015 | — | — | |
Ronald P. | 2015 | Governance Human Capital | ||
Francis J. Shammo | 2015 | Audit Regulatory Compliance | ||
Item 2: Advisory Vote to Approve Executive Compensation | FOR | |||
We are seeking a non-binding advisory vote to approve the compensation of our named executive officers. We describe our compensation programs in the Compensation Discussion and Analysis section of this proxy statement. The Human Capital Committee believes these programs reward performance and align the long-term interests of management and shareholders. Although non-binding, the Human Capital Committee will take into account the outcome of the advisory vote and shareholder feedback when making future | ||||
Item 3: Ratification of Appointment of Independent Registered Public Accounting Firm | FOR | |||
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for | ||||
2019 PROXY STATEMENT 11
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
The Board of Directors is elected by shareholders to oversee management and assure that the long-term interests of shareholders are being served. The Board oversees the CEO and other senior management, who are responsible for carrying out the company's day-to-day operations in a responsible and ethical manner. The Board and its committees meet regularly to review and discuss the company's strategy, business, performance, ethics, and performance,risk culture, as well as important issues that it faces. These discussions take place with management and with appropriate outside advisers who provide independent expertise, perspectives and insights. In addition, the independent members of the Board and its committees hold regular executive sessions to discuss matters free of the presence or influence of management. Board members are also kept apprised of significant developments that arise between meetings.
Board Composition and Refreshment
The Board believes that a critical component of its effectiveness in serving the long-term interests of shareholders is to ensure that its membership remains diverse, possessing a variety of backgrounds, experiences and skill sets from which to draw upon. Fresh views and ideas help the Board to maintain a broad perspective and forward-looking vision capable of anticipating and adapting to the rapid pace of change, just as experience and continuity provide necessary context and stability for important decisions. With that in mind, the Governance Committee periodically reviews the composition of the Board to assure an appropriate balance of experiences, skills, tenure and diversity. This is an ongoing, year-round process.
The Board is committed to effective board succession planning and refreshment, including having honest and difficult conversations with individual directors when necessary. These conversations may arise in connection with the Board evaluation process, succession planning or consideration of the annual slate of Board nominees. As a result of these processes, directors may decide (for personal or professional reasons) or be asked (for reasons related to their ongoing contributions to the Board) not to stand for re-election at the next Annual Meeting. It is expected that these refreshment practices will continue in the future.
Since the beginning of 2015, we have experienced a healthy level of turnover on the Board refreshment, with fivesix new directors joining the Board and sixseven retiring. While some companies have tenure limits on Board service, we believe our balanced approach which places a limit on age but not on tenure delivers the right mix of directors with new ideas and perspectives along with those possessing deep knowledge of the company.
12 2019 PROXY STATEMENT
CORPORATE GOVERNANCE
Board Qualifications
The Board strives to maintain independence of thought and diverse professional experience among its membership. The Board and the Governance Committee look for directors who have qualifications and attributes in key areas relevant to Unum, and that align with both our short- and long-term business strategy.strategies. These qualifications and attributes are evaluated on an annual basis to determine that they continue to serve the best interests of the company. The table below summarizes why thesethe qualifications and attributes that are important to Unum and addresses how the composition of our Board, as a whole, meets these needs.
Qualifications and Attributes | Relevance to Unum | Board Composition(1) |
We operate in a complex financial and regulatory environment with disclosure requirements, detailed business processes and internal controls. | ||
Business Operations | We have significant operations focused on customer service, claims management, sales, marketing and various back-house functions. | |
Capital Management | We allocate capital in various ways to run our operations, grow our core businesses and return value to shareholders. | |
Corporate | As a public company and responsible corporate citizen, we expect effective oversight and transparency, and our stakeholders demand it. | |
Financial Expertise/Literacy | Our business involves complex financial transactions and reporting requirements. | |
Independence | Independent directors have no material relationships with us and are essential in providing unbiased oversight. | |
Industry Experience | Experience in the insurance and financial services industry provides a relevant understanding of our business, strategy, and marketplace dynamics. | ||||
International | With global operations in several countries and prospects for further expansion, international experience helps us understand opportunities and challenges. | ||||
Investment Markets | We manage a large and long-term investment portfolio to uphold our promises to pay the future claims of our policyholders. | ||||
Other Recent Public Board Experience | We value individuals who understand public company reporting responsibilities and have experience with the issues commonly faced by public companies. | ||||
Public Company Executive Experience | Experience leading a large, widely-held organization provides practical insights on need for transparency, accountability, and integrity. | ||||
Regulatory/Risk Management | A complex regulatory and risk environment requires us to develop policies and procedures that effectively manage compliance and risk. | ||||
Technology/Digital Transformation | We rely on technology to manage customer data, deliver products and services to the market, pay claims, and enhance the customer experience. |
(1) | Director nominees only. |
2019 PROXY STATEMENT 13
CORPORATE GOVERNANCE
Board Tenure
Directors with varied tenure contribute to a range of perspectives and ensure we transition knowledge and experience from longer-serving members to those newer to our Board. We have a good mix of new and long-standing directors, with our 11 director nominees averaging 5.4 years of service on our Board as of the 2019 Annual Meeting.
Board Diversity
Our directors represent a range of backgrounds and overall experience. More than half are women or represent a diverse group, which places Unum's Board among the top of our industry in gender and racial/ethnic diversity. In recent years, our Governance Committee has focused on ensuring continued diversity on the Board during refreshment activities by requiring that candidate pools include diverse individuals meeting the recruitment criteria. From the candidate pools, our Governance Committee selects our director candidates based on their qualifications and attributes as addressed below. Our director nominees range from 50 to 69 years of age, with the average age being 60.2 years, as of the 2019 Annual Meeting.
14 2019 PROXY STATEMENT
CORPORATE GOVERNANCE
A healthy and vigorous Board evaluation process is an essential part of good corporate governance. A thorough evaluation process helps us achieve the right balance of perspectives, experiences and skill sets needed for prudent oversight of the company, including execution on corporate strategy, while also considering the best interests of our shareholders. At Unum, this evaluation process includes annual evaluations of the Board, each committee, and individual directors.
The Governance Committee establishes and oversees the evaluation process, which focuses on identifying areas where Board, committee and director performance is most effective, as well as opportunities for further development or improvement. Each year, the Governance Committee reviews the format and effectiveness of the evaluation process in identifying actionable feedback for directors to consider, recommending changes in process as appropriate. Determining whether to engage a third-party facilitator is also part of the review.
This past year, the evaluation process was conducted in two phases. The first phase focused on the evaluation of the effectiveness of each committee and the Board as a whole. Directors completed questionnaires evaluating the full Board and each committee they served on with topics including culture, composition, structure and engagement. The second phase focused on the evaluation of each director’s performance, and was led by the Governance Committee Chair in advance and in anticipation of the director nomination process. This two-phased approach generated robust discussions at all levels of the Board, and resulted in changes that have improved Board efficiency and effectiveness.
2019 PROXY STATEMENT 15
CORPORATE GOVERNANCE
Process for Selecting and Nominating Directors
Director Nominee and Selection
The Governance Committee is responsible for identifying and evaluating director candidates and recommending to the Board a slate of nominees for election at each Annual Meeting. The Committee has engaged a third-party search firm to assist with recruitment efforts. This firm identifies candidates who meet the criteria of our search, provides requested background and other relevant information regarding candidates, and coordinates arrangements for interviews as necessary. Nominees may also be suggested by directors, management, or shareholders. Ms. Cross, who was elected to the Board in February 2019, was recommended to the Governance Committee by a third-party search firm.
Shareholders who wish to recommend director candidates for consideration by the Governance Committee must submit to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402 the same information that would be required to nominate a director candidate as described on page 102 in the section titled "Shareholder proposals and nominations for our 2020 Annual Meeting." The Governance Committee’s policy is to consider candidates recommended by shareholders in the same manner as other candidates.
In addition, our bylaws permit shareholders to nominate directors for inclusion in our proxy materials or directly at an Annual Meeting in accordance with the procedures in our bylaws, as described on page 102 in the section titled "Shareholder proposals and nominations for our 2020 Annual Meeting."
Our corporate governance guidelines specify the following criteria to be used in evaluating the candidacy of a prospective nominee:
The core qualifications and attributes sought in any particular candidate depend on the current and future needs of the Board based on an assessment of the composition of the Board and the mix of qualifications and attributes currently represented. In addition, the Governance Committee considers other specific qualifications that may be desired or required of nominees, including their independence and ability to satisfy specific Audit Committee or Human Capital Committee requirements. As part of the director selection and nomination process, the Governance Committee assesses the effectiveness of its Board membership criteria.
In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s interest in continuing to serve, past attendance at meetings, contributions to the Board and committees on which the director serves, the skills, experience and background that the director brings to the Board relative to the Board’s needs and existing composition, and the results of the most recent Board, committee and individual director evaluations.
16 2019 PROXY STATEMENT
CORPORATE GOVERNANCE
Annual Election of Directors
Directors are elected each year at the Annual Meeting, to hold office until the next Annual Meeting and until their successors are elected, or until their earlier death, resignation, disqualification, or removal from office. Other than requiring retirement from the Board at the next Annual Meeting after a director reaches the age of 72, there are no term limits. However, the Governance Committee evaluates the qualifications and performance of each incumbent director before recommending the nomination of that director for an additional term.
Majority Voting Standard
Our bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected (an "uncontested election"), each nominee must receive a majority of the votes cast with respect to that nominee to be elected as a director (i.e., the number of shares voted "for" a nominee must exceed the number voted "against" that nominee). If an incumbent director is not re-elected under this majority voting standard, the director must submit an irrevocable letter of resignation to the Board, which will become effective upon acceptance by the Board. The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. If the director submitting the resignation is a member of the Governance Committee, that director will not participate in the Governance Committee’s recommendation to the Board. The Board will act on the Governance Committee’s recommendation and publicly disclose its decision and rationale within 90 days from the date of the certification of the election results.
2019 PROXY STATEMENT 17
INFORMATION ABOUT THE BOARD OF DIRECTORS
INFORMATION ABOUT THE BOARD OF DIRECTORS
Below are brief biographies for each of our current directors and descriptions of the directors’ key qualifications, skills, and experiences that contribute to the Board’s effectiveness as a whole.
Director since 2013 Age at Annual Meeting 60 Independent Director Committees Regulatory Compliance (chair) Human Capital | Theodore H. Bunting, Jr. | |
Mr. Bunting retired as the Group President, Utility Operations of Entergy Corporation, an integrated energy company, and previously served as Senior Vice President and Chief Accounting Officer for Entergy. He has extensive financial, accounting and operational experience as a senior executive with a public company in a regulated industry. Mr. Bunting is a director at another publicly traded company and is also a certified public accountant. | ||
Career Experience | Qualifications | |
Entergy Corporation Group President, Utility Operations (2012-2017) Senior Vice President and Chief Accounting Officer (2007-2012) Numerous executive roles with Entergy, which he joined in 1983 | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management | |
Public Company Board Experience NiSource Inc., since 2018 Imation Corp. (2012-2014) |
Director since 2019 Age at Annual Meeting 59 Independent Director Committees Audit Risk and Finance | Susan L. Cross | |
Ms. Cross is the former Executive Vice President and Global Chief Actuary of XL Group Ltd (now AXA XL), a global insurance and reinsurance company. She previously held various chief actuarial positions for operational segments of XL. She brings over three decades of financial, actuarial, insurance and risk experience as a senior executive with an international company in a regulated industry. Ms. Cross also qualifies as an audit committee financial expert under SEC regulations. | ||
Career Experience | Qualifications | |
XL Group Ltd Executive Vice President and Global Chief Actuary (2008-2018) Senior Vice President and Chief Actuary, XL Group (2006-2008) XL Reinsurance (2000-2006) XL America (1999-2000) Significant consulting experience with Willis Towers Watson in the U.S. and Bermuda | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy Industry Experience International Public Company Executive Experience Regulatory/Risk Management |
18 2019 PROXY STATEMENT
INFORMATION ABOUT THE BOARD OF DIRECTORS
Director since 2018 Age at Annual Meeting 60 Independent Director Committee Audit Risk and Finance | Susan D. DeVore | ||||
Ms. DeVore has served as the President and Chief Executive Officer of Premier, Inc., a leading health care improvement company, since its initial public offering in 2013, and before that served in the same capacity for its predecessor company, Premier Healthcare Solutions, Inc. She also previously served as the Chief Operating Officer for a number of affiliated Premier entities. Prior to joining Premier, Ms. DeVore had two decades of finance, strategy and healthcare consulting experience. She also qualifies as an audit committee financial expert under SEC regulations. | |||||
Career Experience | Qualifications | ||||
Premier, Inc. President and CEO (since 2013) Premier Healthcare Solutions, Inc. President and CEO (2009-2013) COO (2006-2009) Significant consulting experience with Ernst & Young LLP, including service as a Partner, Executive Committee member and Senior Healthcare Industry Management Practice Leader | Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology/Digital Transformation | ||||
Public Company Board Experience | |||||
Premier, Inc., since 2013 |
Director since 2016 Age at Annual Meeting 62 Independent Director Committees Governance Risk and Finance | Joseph J. Echevarria | |
Mr. Echevarria retired as the Chief Executive Officer of Deloitte LLP, a global provider of professional services, prior to which he served in increasingly senior leadership positions with Deloitte. He brings to the Board significant experience in finance, accounting, global operations, executive management and corporate governance. Mr. Echevarria has experience as a director at other publicly traded companies and is also a certified public accountant. | ||
Career Experience | Qualifications | |
Deloitte LLP CEO (2011-2014) Various executive positions during his 36 years with the company My Brother's Keeper Alliance Chair Emeritus President's Export Council Private sector member | Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Regulatory/Risk Management | |
Public Company Board Experience | ||
Xerox, since 2007 Bank of New York Mellon Corporation, since 2015 (Lead Independent Director since 2016) Pfizer, since 2015 |
2019 PROXY STATEMENT 19
INFORMATION ABOUT THE BOARD OF DIRECTORS
Director since 2014 Age at Annual Meeting 63 Independent Director Committees Human Capital (chair) Regulatory Compliance | Cynthia L. Egan | |
Ms. Egan retired as the President of T. Rowe Price Retirement Plan Services, Inc., a subsidiary of the global investment management firm T. Rowe Price Group, Inc. Prior to her work at T. Rowe Price, she held various executive positions at Fidelity Investments. She has significant operational experience in delivering complex financial products and services on a large scale, as well as experience in using technology to lead businesses through growth and operational transitions. Ms. Egan is and has been a director at other publicly traded companies. | ||
Career Experience | Public Company Board Experience | |
U.S. Department of the Treasury Senior Advisor on the development of a Treasury-sponsored retirement savings program (2014-2015) T. Rowe Price Retirement Plan Services, Inc. President (2007-2012) Fidelity Investments Various leadership and executive positions, including President of the Fidelity Charitable Gift Fund (1989-2007) | BlackRock Fixed Income Funds, since 2016 The Hanover Insurance Group, Inc., since 2015 Envestnet, Inc. (2013-2016) Qualifications Business Operations Corporate Governance/ESG Financial Expertise/Literacy Industry Experience Investment Markets Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology/Digital Transformation |
Director since 2008 Age at Annual Meeting 62 Independent Director Chairman of the Board of Directors Committees Governance Human Capital | Kevin T. Kabat | ||||
Mr. Kabat is the Chairman of Unum’s Board of Directors, and the retired Chief Executive Officer and Vice Chairman of Fifth Third Bancorp, a diversified financial services company. He also served in numerous executive positions with Fifth Third. He has executive leadership experience, extensive financial, operating and strategic planning expertise and understands the importance of risk management and the challenges of managing a business in a highly regulated industry. Mr. Kabat also has experience serving on boards of publicly traded companies. | |||||
Career Experience | Qualifications | ||||
Fifth Third Bancorp CEO (2007-2015) President (2006-2012) Other executive roles, including with predecessor companies Public Company Board Experience E*TRADE Financial Corporation, since 2016 NiSource Inc., since 2015 (Vice Chairman since 2018) Fifth Third Bancorp (2007-2016, including Executive Chairman from 2008-2010 and Executive Vice Chairman from 2012-2016) | Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management |
20 2019 PROXY STATEMENT
Director since 2012 Age at Annual Meeting 57 Independent Director Committees Risk and Finance (chair) Audit | Timothy F. Keaney | ||||
Mr. Keaney retired as the Vice Chairman of the Bank of New York Mellon Corporation (BNY Mellon), a global investments company, prior to which he held various executive positions within the organization. He possesses significant operational, investment and financial experience with a public company in a highly regulated industry, including lengthy periods of executive leadership service in the U.K. Mr. Keaney is considered an | |||||
Career Experience | Qualifications | ||||
The Bank of New York Mellon Corporation Vice Chairman (2010-2014) CEO, Investment Services (2013-2014) CEO and co-CEO, Asset Servicing (2007-2012) Other executive roles | Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
Director since 2004 Age at Annual Meeting 69 Independent Director Committees Governance (chair) Regulatory Compliance | Gloria C. Larson | ||||
Ms. Larson | |||||
Career Experience | Public Company Board Experience | ||||
Harvard University Graduate School of Education President in Residence (since 2018) Bentley University President (2007-2018) Foley Hoag LLP Law firm partner and Co-Chair of Governmental Practices Group Other leadership positions with the Commonwealth of Massachusetts (Secretary of Economic Affairs) and the Federal Trade Commission (Deputy Director of Consumer Protection) | Boston Private Financial Holdings, Inc., since 2015 Qualifications Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Other Public Company Board Experience Regulatory/Risk Management |
2019 PROXY STATEMENT 21
INFORMATION ABOUT THE BOARD OF DIRECTORS
Director since 2015 Age at Annual Meeting 50 Director President and CEO | Richard P. McKenney | ||||
Mr. McKenney is the President and Chief Executive Officer of Unum, previously having served as Executive Vice President and Chief Financial Officer. He has significant executive management, financial and insurance industry experience through his prior service as CFO of Unum and other public insurance companies, and through his current service as CEO. He has an intimate knowledge of all aspects of our business and industry, including operational, risk management and public policy, and close working relationships with senior management. Mr. McKenney also has experience serving on boards of publicly traded companies. | |||||
Career Experience | Qualifications | ||||
Unum President and CEO (since 2015) Chief Financial Officer (2009-2015) Sun Life Financial, Inc. Executive Vice President and Chief Financial Officer Public Company Board Experience U.S. Bancorp, since 2017 | Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management |
Director since 2015 Age at Annual Meeting 62 Independent Director Committees Governance Human Capital | Ronald P. O'Hanley | ||||
Mr. O’Hanley is the President and Chief | |||||
Career Experience | Public Company Board Experience | ||||
State Street Corporation President and CEO (since 2019) President and COO (2017-2018) Vice Chairman (during 2017) President and CEO, State Street Global Advisors (2015-2017) Fidelity Investments President of Asset Management and Corporate Services, and member of Executive Committee (2010-2014) Other senior leadership positions with The Bank of New York Mellon Corporation and McKinsey & Company, Inc. | State Street Corporation, since 2019 Qualifications Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
22 2019 PROXY STATEMENT
Director since 2015 Age at Annual Meeting 58 Independent Director Committees Audit Regulatory Compliance | Francis J. Shammo | ||||
Mr. Shammo retired as the Executive Vice President and Chief Financial Officer of Verizon Communications, Inc., a leading communications provider, prior to which he held increasingly senior leadership positions within the organization. He has significant executive management, financial, operational and risk management experience in the technology-heavy telecommunications industry, and has led business units with responsibility for sales, marketing and customer service for customers worldwide. He is also a certified public accountant and qualifies as an audit committee financial expert under SEC regulations. | |||||
Career Experience | Qualifications | ||||
Stonepeak Infrastructure Partners Consultant (since 2019) Verizon Communications, Inc. EVP and CFO (2010-2016) President and CEO, Verizon Telecom and Business (2010) President – Wireline (2009-2010) Other executive positions with Verizon and its predecessor, which he joined in 1989 Public Company Board Experience Avis Budget Group, since 2018 | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology/Digital Transformation |
Director since 2007 (also 2004-2005) Age at Annual Meeting 72 Independent Director Committees Audit (chair) Risk and Finance | E. Michael Caulfield | ||||
Mr. Caulfield retired as the President of | |||||
Career Experience | Qualifications | ||||
Mercer Human Resource Consulting President (2005-2006) Chief Operating Officer (2005) Prudential Insurance Executive Vice President, Financial Management CEO of President of Prudential Preferred Financial Services and Prudential Property and Casualty Company | Accounting/Auditing Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
2019 PROXY STATEMENT 23
INFORMATION ABOUT THE BOARD OF DIRECTORS
This table provides a summary view of the qualifications and attributes of each director nominee.
*Tenure and age calculated as of the 20182019 Annual MeetingMeeting.
24 2019 PROXY STATEMENT
INFORMATION ABOUT THE BOARD OF DIRECTORS
Our corporate governance guidelines provide that a substantial majority of the Board will be independent. For a director to be considered independent, the Board must determine that the director has no material relationship with our company, and the director must meet the requirements for independence under the listing standards of the New York Stock Exchange (NYSE). The Board has also determined that certain categories of relationships are not considered to be material relationships that would impair a director’s independence. These independence standards are listed in our corporate governance guidelines.
The Governance Committee reviews information about the directors’ relationships and affiliations that might affect their independence and makes recommendations to the Board as to the independence of the directors. In making independence determinations, the Board considers all relevant facts and circumstances. In this regard, the Board considered that each of the non-employee directors (other than Mr. Keaney), or one of their immediate family members, is or was during the last three fiscal years a director, trustee, advisor, or executive or served in a similar position at another business that had dealings with our company during those years. In each case, these have been ordinary course dealings (business where the other business obtains insurance policies from us or we receive interest on debt security investments or make payments for trustee, depository and commercial banking business relationships) involving amounts less than 1% of both our and the other business’ total consolidated revenues for such fiscal year or in which the director's only interest arose only from his or her position as a director of the other business. In addition, each of Mses. DeVore and Larson, or one their immediate family members, is or was during the last three fiscal years, a director, executive, or employee of a charitable organization or university that received contributions from us (other than non-discretionary matching contributions) of less than $120,000 in any one fiscal year.
Based on a review of the findings and recommendations of the Governance Committee and applying the standards described above, the Board has determined that each of Messrs. Bunting, Caulfield, Echevarria, Kabat, Keaney, O’Hanley and Shammo and Mses. Cross, DeVore, Egan, Godwin and Larson is (as well as Mr. MuhlMs. Godwin who retired in 2017,2018, was during hisher tenure) an independent director.
Mr. McKenney, our President and CEO, is not an independent director.
The Human Capital Committee (the "Committee") reviews our non-employee director compensation annually and makes recommendations to the Board as appropriate.
Benchmarking
With the assistance of its independent third-party compensation consultant, Pay Governance LLC, the Committee reviews peer group data to understand market practices for director compensation.
Our non-employee director compensation is compared to that of companies in two peer groups: (1) the Proxy Peer Group described beginning on page 5352 of this proxy statement; and (2) a general industry peer group, which consisted of 140139 companies for the review completed in December 2017.2018. The Committee believes the companies in the general industry peer group provide appropriate comparisons given that their market capitalizations and revenues are well aligned with those of the company (data below as of December 2016)2017):
2019 PROXY STATEMENT 25
INFORMATION ABOUT THE BOARD OF DIRECTORS
The use of two peer groups provides an indication of director pay levels both within the insurance industry as well as the broader market. The Committee uses the approximate median of these peer groups as a reference point for setting director compensation.
Based on its annual analysis of non-employee director compensation, at the December 2017 Committee meeting. GivenCommittee’s consultant recommended an increase in order to bring compensation levels more in line with the competitive positioning of the Board's annual cash retainer and equity grant relative to peers, no increase was recommended. However, the consultant advised that the committee chair retainers were below the Proxy Peer Groupmarket median. After discussion, the Committee approved increases to chair retainers to be effective indeferred consideration of any potential action until May 2018, as outlined in the table below.
Elements of Non-Employee Director Compensation in 2017
Non-employee directors receive cash retainers and equity awards as outlined in the following table:
NON-EMPLOYEE DIRECTOR COMPENSATION
2018 Pay | |||
All Directors: | |||
Annual cash retainer | $ 110,000 | ||
Annual restricted stock unit award | 150,000 | ||
Committee Chairs: | |||
Additional annual cash retainer - Audit Committee | 25,000 | ||
Additional annual cash retainer - Human Capital Committee | 20,000 | ||
Additional annual cash retainer - Risk and Finance Committee | 20,000 | ||
Additional annual cash retainer - Governance Committee | 15,000 | ||
Additional annual cash retainer - Regulatory Compliance Committee | 15,000 | ||
Board Chairman: | |||
Additional annual cash retainer (paid in quarterly installments) | 200,000 |
NON-EMPLOYEE DIRECTOR COMPENSATION | ||||
2018 Pay | 2017 Pay | |||
All Directors: | ||||
Annual cash retainer | $110,000 | $110,000 | ||
Annual restricted stock unit award | 150,000 | 150,000 | ||
Committee Chairs: | ||||
Additional annual cash retainer - Audit Committee | 25,000 | 22,500 | ||
Additional annual cash retainer - Human Capital Committee | 20,000 | 17,500 | ||
Additional annual cash retainer - Risk and Finance Committee | 20,000 | 10,000 | ||
Additional annual cash retainer - Governance Committee | 15,000 | 10,000 | ||
Additional annual cash retainer - Regulatory Compliance Committee | 15,000 | 10,000 | ||
Board Chairman: | ||||
Additional annual cash retainer (paid in quarterly installments) | 200,000 | 200,000 |
For new Board members, these amounts are prorated for partial-year service based on the date of election to the Board. Amounts may be deferred at the election of each director for payment in company common stock at a future date. Directors deferring cash compensation receive a number of deferred share rights equal to the number of whole shares of common stock that could be purchased for the deferred amount, based on the closing price of a share of common stock on the date the cash compensation would otherwise be payable.
Directors’ expenses of attending Board and committee meetings, or other meetings relating to company business, are paid by the company. Directors are eligible to participate in our employee matching gifts program. Under this program, we match up to $10,000 each year for eligible gifts to non-profit organizations.
Mr. McKenney is employed by the company and receives no additional compensation for his Board service.
26 2019 PROXY STATEMENT
INFORMATION ABOUT THE BOARD OF DIRECTORS
2018 Compensation
Our Board compensation year starts at the Annual Meeting each year and runs to the next Annual Meeting. The annual Board and committee chair cash retainers and restricted stock unit award are paid/granted annually in advance. The additional cash retainer for the Board Chairman is paid quarterly in advance. The following table provides details of the compensation of each person who served as a non-employee director during 2017.2018. Ms. DeVoreCross did not join the Board until February 20182019 and therefore did not receive any compensation during 2017.2018. Mr. Kabat was elected as the Chairman of the Board in May following the 2017 Annual Meeting. In addition, Mr. Kabat served as the chair of the Human Capital Committee until August 2017 andBunting was elected as the chair of the GovernanceRegulatory Compliance Committee in September 2017. Therefore, his compensation reflects the prorated cash retainer for service as Board Chairman as well as the prorated cash retainers for service as chair of the Human Capital Committee and the Governance Committee. Ms. Egan was elected as the chair for the Human Capital Committee in August 2017 and her compensation reflects a prorated committee chair retainer.
NON-EMPLOYEE DIRECTOR COMPENSATION
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | ||||||||
Theodore H. Bunting, Jr. | $ 125,000 | $ | 150,000 | — | $ | 275,000 | ||||||
E. Michael Caulfield | 135,000 | 150,000 | 10,000 | 295,000 | ||||||||
Susan D. DeVore | 137,425 | 150,000 | — | 287,425 | ||||||||
Joseph J. Echevarria | 109,993 | 150,000 | — | 259,993 | ||||||||
Cynthia L. Egan | 130,000 | 150,000 | 10,000 | 290,000 | ||||||||
Pamela H. Godwin | — | — | 5,000 | 5,000 | ||||||||
Kevin T. Kabat | 310,000 | 150,000 | — | 460,000 | ||||||||
Timothy F. Keaney | 129,989 | 150,000 | — | 279,989 | ||||||||
Gloria C. Larson | 125,000 | 150,000 | 10,000 | 285,000 | ||||||||
Ronald P. O'Hanley | 109,993 | 150,000 | 10,000 | 269,993 | ||||||||
Francis J. Shammo | 110,000 | 150,000 | — | 260,000 |
NON-EMPLOYEE DIRECTOR COMPENSATION | ||||||||
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | ||||
Theodore H. Bunting, Jr. | $110,000 | $150,002 | — | $260,002 | ||||
E. Michael Caulfield | 132,500 | 150,002 | 10,000 | 292,502 | ||||
Joseph J. Echevarria | 109,959 | 150,002 | — | 259,961 | ||||
Cynthia L. Egan | 123,354 | 150,002 | 10,000 | 283,356 | ||||
Pamela H. Godwin | 120,000 | 150,002 | — | 270,002 | ||||
Kevin T. Kabat | 260,647 | 150,002 | — | 410,649 | ||||
Timothy F. Keaney | 120,000 | 150,002 | — | 270,002 | ||||
Gloria C. Larson | 119,992 | 150,002 | 10,000 | 279,994 | ||||
Edward J. Muhl | — | — | 5,000 | 5,000 | ||||
Ronald P. O'Hanley | 109,959 | 150,002 | 10,000 | 269,961 | ||||
Francis J. Shammo | 110,000 | 150,002 | — | 260,002 | ||||
Thomas R. Watjen | 80,000 | — | 5,000 | 85,000 |
(1) | Amounts represent retainers, including for service as Board Chairman and committee chairs, which were paid in |
(2) | On May |
We account for stock-based payments under the requirements of Accounting Standards Codification Topic 718 Compensation Stock Compensation (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our Form 10-K for the year ending December 31, 2017.
The following table provides details of the unvested RSUs, including dividend equivalent units, held by each non-employee director as of December 31, 2017.
Director Name | Number of Restricted Stock Units Held at Fiscal Year End | Director Name | Number of Restricted Stock Units Held at Fiscal Year End |
Theodore H. Bunting, Jr. | 3,948 | Kevin T. Kabat | 3,948 |
E. Michael Caulfield | 3,948 | Timothy F. Keaney | 3,948 |
Susan D. DeVore | 4,693 | Gloria C. Larson | 3,948 |
Joseph J. Echevarria | 3,948 | Ronald P. O'Hanley | 3,948 |
Cynthia L. Egan | 3,948 | Francis J. Shammo | 3,948 |
Director Name | Number of Unvested Restricted Stock Units at Fiscal Year End | Director Name | Number of Unvested Restricted Stock Units at Fiscal Year End | |
Theodore H. Bunting, Jr. | 3,334 | Kevin T. Kabat | 3,334 | |
E. Michael Caulfield | 3,334 | Timothy F. Keaney | 3,334 | |
Joseph J. Echevarria | 3,334 | Gloria C. Larson | 3,334 | |
Cynthia L. Egan | 3,334 | Ronald P. O'Hanley | 3,334 | |
Pamela H. Godwin | 3,334 | Francis J. Shammo | 3,334 |
(3) | With the exception of |
2019 PROXY STATEMENT 27
INFORMATION ABOUT THE BOARD OF DIRECTORS
Director Stock Ownership and Retention Requirements
Each non-employee director is required to own Unum equity securities with an aggregate value of five times the director’s annual cash retainer (for a total current retention requirement of $550,000). New directors have five years from the date of their election to meet the ownership requirement.
In addition, each non-employee director is required to retain 60% of Unum equity securities received as a result of director compensationthe shares underlying their annual restricted stock unit award for at least one year from the time they vest, and to retain at least the amount of equity securities necessary to meet his or her ownership requirement until retirement from the Board.
The Committee annually reviews each director’s stock ownership level. If a director does not reach his or her ownership requirement within the time period provided, the Committee will determine whether action is appropriate. As of December 31, 2017, all2018, eight of the ten non-employee directors serving on the Board at that time had met the ownership requirement. The two directors who had not met the ownership requirement at year-end 2018 joined the Board within the past five years and are expected to meet the ownership requirement within the applicable time period provided.
28 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
BOARD AND COMMITTEE GOVERNANCE
The Board of Directors has adopted corporate governance guidelines on a number of significant matters, including director selection and independence, director responsibilities, Board leadership, and management succession. The corporate governance guidelines are available on our investor relations website under the "Corporate Governance" heading at
www.investors.unum.com. The Governance Committee regularly reviews developments in corporate governance and recommends updates to the corporate governance guidelines and other documents as necessary or appropriate in response to regulatory requirements and evolving practices.Kevin T. Kabat serves as non-executive Chairman of the Board and Richard P. McKenney serves as President and CEO of the Company. Following a deliberate and transparent succession process, members of the Board elected Mr. Kabat to this position effective upon the retirement of its former Chairman at the 2017 Annual Meeting.
The Board believes the current leadership structure provides significant independent oversight of management, as Mr. McKenney (our CEO and an employee of the company) is the only member of the Board
Our bylaws and corporate governance guidelines allow the offices of Chairman and CEO to be filled by the same or different individuals. This allows the Board flexibility to select the appropriate leadership for our company based on a number of factors, including the specific needs of the business and what best serves the company
2019 PROXY STATEMENT 29
BOARD AND COMMITTEE GOVERNANCE
and shareholders at a given time. The independent directors of the Board will continue to review the Board’s leadership structure periodically and may modify this structure from time to time as they determine appropriate and in the best interests of the company and shareholders.
The Board of Directors met sixseven times during 2017.2018. Depending upon committee assignments, a director generally would have had 1716 to 22 meetings to attend in 2017.2018. Average director attendance at Board and committee meetings was 98%, and each incumbent director attended at least 89% of the total number of meetings of the Board and committees on which he or she served during the period of the director’s service in 2017.
Directors are expected to attend Annual Meetings. All current directors serving on the Board at the time of the 20172018 Annual Meeting attended that meeting.
The Board of Directors has five standing committees: Audit, Risk and Finance, Governance, Human Capital, and Regulatory Compliance. Each committee has a charter that is available on our investor relations website under the "Corporate Governance" heading at
www.investors.unum.com. In addition to the duties contained in their respective charters, each committee may be assigned additional tasks by the Board, and each is charged with reporting its activities to the Board.BOARD MEMBERS AND COMMITTEES
Name | Term Expires | Audit | Risk & Finance | Governance | Human Capital | Regulatory Compliance |
Theodore H. Bunting, Jr.(1) | 2019 | • | Chair | |||
E. Michael Caulfield(2) | 2019 | Chair | • | |||
Susan L. Cross(3) | 2019 | • | • | |||
Susan D. DeVore | 2019 | • | • | |||
Joseph J. Echevarria | 2019 | • | • | |||
Cynthia L. Egan | 2019 | Chair | • | |||
Kevin T. Kabat | 2019 | • | • | |||
Timothy F. Keaney | 2019 | • | Chair | |||
Gloria C. Larson | 2019 | Chair | • | |||
Richard P. McKenney | 2019 | |||||
Ronald P. O'Hanley(4) | 2019 | • | • | |||
Francis J. Shammo | 2019 | • | • | |||
2018 Committee Meetings | 9 | 5 | 5 | 6 | 4 |
Name | Term Expires | Audit | Risk & Finance | Governance | Human Capital | Regulatory Compliance |
Theodore H. Bunting, Jr. | 2018 | ● | ● | |||
E. Michael Caulfield | 2018 | Chair | ● | |||
Susan D. DeVore(1) | 2018 | ● | ||||
Joseph J. Echevarria(2) | 2018 | ● | ● | |||
Cynthia L. Egan(3) | 2018 | Chair | ● | |||
Pamela H. Godwin(4)(5) | 2018 | ● | ● | |||
Kevin T. Kabat(6) | 2018 | Chair | ● | |||
Timothy F. Keaney | 2018 | ● | Chair | |||
Gloria C. Larson | 2018 | ● | Chair | |||
Richard P. McKenney | 2018 | |||||
Ronald P. O'Hanley | 2018 | ● | ● | |||
Francis J. Shammo | 2018 | ● | ● | |||
2017 Committee Meetings | 10 | 6 | 6 | 7 | 5 |
(1) |
Mr. |
As noted on page |
(3) | Ms. Cross joined the Board effective February 25, 2019. |
(4) | Mr. |
30 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
COMMITTEE RESPONSIBILITIES
Audit Committee(1) |
• | |
Governance Committee(2) |
Human Capital Committee(3) |
2019 PROXY STATEMENT 31
BOARD AND COMMITTEE GOVERNANCE
Regulatory Compliance Committee(4) |
Risk and Finance Committee(5) |
(1) | All members of the Audit Committee meet the independence requirements of the SEC and the NYSE and our corporate governance guidelines. All five members of the Audit Committee are "audit committee financial experts" under SEC regulations, and are "financially literate" as required by the NYSE. |
(2) | All members of the Governance Committee meet the independence requirements of the NYSE and our corporate governance guidelines. |
(3) | All members of the Human Capital Committee meet the independence requirements of the NYSE for directors and compensation committee members and our corporate governance guidelines and are "non-employee directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and "outside directors" for purposes of Section 162(m) of the Internal Revenue Code. |
(4) | All members of the Regulatory Compliance Committee meet the independence requirements of our corporate governance guidelines. |
(5) | All members of the Risk and Finance Committee meet the independence requirements of our corporate governance guidelines. |
32 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
While we recognize that Board members benefit from service on the boards of other companies and such service is encouraged, the Board believes it is critical that directors be able to dedicate sufficient time to their service on our Board. To that end, no director may serve on more than three public company boards in addition to our Board, or on more than two audit committees of public companies in addition to our Audit Committee.
The Board has an active role, as a whole and also at the committee level, in overseeing management of the company’s risks. The Board is responsible for managing strategic risk, and it regularly reviews information regarding our capital, liquidity and operations, as well as the risks associated with each. The Risk and Finance Committee is responsible for oversight of the company’s enterprise risk management program and receives a report on these activities at least quarterly. The Risk and Finance Committee is also responsible for overseeing risks associated with investments and related financial matters, including those pertaining to our Closed Block segment, and any other risks not specifically allocated to another committee for oversight. The Audit Committee is responsible for oversight of financial risk and continues to fulfill its NYSE-mandated responsibility to discuss guidelines and policies with respect to the process by which the company undertakes risk assessment and risk management. The Audit Committee and Risk and Finance Committee also meet jointly as
Each year, the company’s chief risk officer, in consultation with the Human Capital Committee, undertakes a risk assessment of our compensation programs and practices. This year’s process included the following steps:
Based on this assessment, the following conclusions were reached by the chief risk officer and presented to the Human Capital Committee:
2019 PROXY STATEMENT 33
BOARD AND COMMITTEE GOVERNANCE
Accordingly, our chief risk officer and the Human Capital Committee do not believe the company’s compensation programs create risks that are reasonably likely to have a material adverse effect on the company, and that the programs fall within the range of the company's risk appetite.
Our bylaws do not allow any person to serve as a director beyond the date of the annual meeting of shareholders immediately following his or her 72nd72nd birthday.
During 2017,2018, Ms. Egan and Messrs. Bunting, Kabat, Muhl, and O'Hanley each served as a member of our Human Capital Committee. None of the members has served as an officer of the company, and during 20172018 none of the members was an employee of the company. None of our executive officers served as a member of a board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Human Capital Committee.
The Board has adopted a written policy concerning related party transactions. This policy covers any transaction in which the company was or is to be a participant and the amount involved exceeds $120,000, and in which any related party had or will have a direct or indirect material interest. A "related party" means any of our directors, director nominees, executive officers, persons known to us to beneficially own more than 5% of our outstanding common stock, and any of their respective immediate family members, and any entity in which any of these persons has an interest as an employee, principal or 10% or greater beneficial owner or other material financial interest.
Prior to entering into a transaction that may be viewed as a related party transaction, the related party must notify our general counsel of the facts and circumstances of the transaction. If the general counsel determines that the proposed transaction is a related party transaction, it is submitted to the disinterested members of the Audit Committee for consideration at the next Committee meeting (or to the chair of the Committee if it is not practical to wait until the next meeting and the chair is not a related party to the transaction). The Committee considers all relevant facts and circumstances, including the benefits to the company, if the related party is an independent director or nominee, the potential effect of entering into the transaction on the director’s or nominee’s independence, any improper conflict of interest that may exist, the availability of other sources for the products and services, the terms of the transaction, and the terms available from or to unrelated third parties generally.
34 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
The transaction may be approved if it is determined in good faith not to be inconsistent with the best interests of the company and shareholders. Certain types of transactions are deemed to be pre-approved by the Audit Committee, including executive officer and director compensation arrangements approved by the Board of Directors or the Human Capital Committee, indemnification payments and any transaction between the company and any entity in which a related party has a relationship solely as a director, less than 10% equity holder, or employee (other than an executive officer), or all of these relationships.
Transactions with Related Persons
The company employs a sister-in-law of Michael Q. Simonds, Executive Vice President, President and Chief Executive Officer of Unum US. Charlene Glidden serves as Vice President, Business Planning and Technology Strategy for Colonial LifeDigital Transformation and does not report within the Unum US organization. Her compensation for 20172018 was approximately $461,736,$460,621, and she participated in compensation and benefit arrangements generally applicable to similarly-situated employees.
The Board has adopted a Code of Conduct establishing certain business practices and ethics applicable to all of our directors, officers and employees. Our Code guides employees on how to abide by the company's principles and access the resources available to address any ethical issues that arise. We provide online and toll-free access to report ethical issues confidentially, conduct annual training and offer self-service access to a variety of educational materials related to issues covered in our Code. The Board has also implemented a separate Code of Ethics applicable to our CEO and certain of our senior financial officers.
We expect all employees and officers of Unum to abide by the principles and policies set forth in our codes. Both of these codes, together with any information on certain amendments or any waivers applicable to certain of our executive officers, are available on our investor relations website under the "Corporate Governance" heading at
www.investors.unum.com.2019 PROXY STATEMENT 35
OTHER GOVERNANCE MATTERS
OTHER GOVERNANCE MATTERS
In line with our commitment to open communication and transparency, we have a robust shareholder engagement process that occurs throughout the year.
In the late summer and early fall, we begin our shareholder engagement efforts by contacting each of our top 50 investors, which in 68% of our outstanding shares. The focus of these meetings is to discuss our business strategy and our governance and compensation practices, as well as to learn about any other topics that are important to our shareholders. Chairman joined management for several of the shareholder meetings. In the late fall, we also met with on our shareholder engagement efforts and gain further insight into These communications promote greater engagement with our shareholders on various corporate governance issues and provide an open forum to share perspectives on our policies and practices. | ||||
During the winter, we review with our Governance and Human Capital Committees, and with the full Board, the feedback we received during these shareholder meetings and use it to enhance proxy disclosures and make any recommended governance and compensation changes prior to the next Annual Meeting. Following our Annual Meeting in the spring, we review our shareholder voting results, consider compensation and governance trends and current best practices, and conduct follow-up meetings with investors to address any issues.
For additional information on feedback we received from our shareholders during our outreach efforts, refer to page 49.
Millions of people count on our benefits as part of a critical financial safety net, and we strive to deliver on those commitments and make a difference. This focus on doing the right thing guides our approach to sustainability and social responsibility issues. Unum has a long been integratedtradition of engaging employees, shareholders, our communities and society at large on advocacy, community outreach, environmental responsibility and good governance. Here are a few ways we aspire to integrate corporate responsibility into our business. With millions
Being Good Stewards of people dependingthe Environment
We’re committed to helping protect the valuable resources that we all depend on to support quality of life for everyone. We do that by striving to effectively manage our impact on the coverageenvironment. Our facilities account for our biggest environmental impacts, and we provide, Unum understandshave made significant strides in several areas to measure our
36 2019 PROXY STATEMENT
OTHER GOVERNANCE MATTERS
impact and improve efficiencies to reduce our carbon footprint. Employee ‘green teams’ also promote environmentally smart ways of living and working. By better managing our impacts today, we are investing in a better future.
Social Outreach and Engagement
Engaging with employees, community partners and in the importancepublic discourse are key ways we work to create better places to live and work.
Our Culture and Human Capital Management
The wellbeing of helping others. That philosophy permeates everythingour employees is one of our top priorities and starts with a dynamic and welcoming workplace that embraces diversity, fosters collaboration and encourages employees to bring their best ideas to work every day.
In 2018, we do - from advocatingcontinued a multi-year modernization of our main home offices. This investment is transforming our workspaces to spark greater collaboration, innovation and flexibility, and introduce upgraded food service and fitness amenities for employees. We believe the introduction of a more contemporary workplace will support the recruitment of top talent and the delivery of best-in-class customer service.
Work-life balance is a core value of ours, and we provide access to benefits and investingresources employees need to enhance their health and wellbeing. We offer comprehensive health plans, annual screenings, on-site fitness and health resource centers at our primary facilities and programs that educate employees and help them manage chronic health issues as well as generous retirement benefits.
Our company has a strong focus on training and professional development. All employees participate in an annual curriculum of training on our Code of Conduct (which covers a variety of topics including ethics, harassment, regulatory compliance and our business practices) privacy, and information security. We also provide employees and managers a variety of training and development programs tailored to their specific roles and support the professional development of our employees through our tuition assistance program.
We’re proud to have been recognized as a great place to work by several independent organizations and we will continue to make investments in our people and our culture to create a world-class workplace.
Inclusion and Diversity
We are committing greater resources to foster a workplace that welcomes diverse backgrounds and perspectives, and reflects our customers and our communities. Our commitment starts at the top, and we’re pleased to have been recognized as being a leader in gender diversity at the Board level. We set inclusion and diversity performance goals for the CEO and senior leadership team. Last year, we also established an Office of Inclusion & Diversity and hired a Vice President, Inclusion and Diversity and support staff. A variety of
2019 PROXY STATEMENT 37
OTHER GOVERNANCE MATTERS
programming and training opportunities are available for all employees to learn about issues such as unconscious bias and inclusion in the wellbeing of our people, to improving our local communities and minimizing the impactworkplace.
This year, we have oncommitted to creating and sharing a strategic inclusion and diversity plan and key goals.
Positively Impacting Our Communities
We’re dedicated to building stronger communities in the places where we live and work. Through financial gifts and employee volunteering, we partner with community organizations to improve educational opportunities, promote health and wellness, and support the arts. We encourage employee engagement in community outreach by providing time off for volunteer activities and matching employee giving to qualified organizations. We partner with dozens of local charities every year and provide significant support in the U.S. to public education, health and wellness, and arts and culture. For more information about our environment. Here are just a few of the ways that we aspire to integrate social responsibility intocommunity outreach, visit our business.
Advocating for Financial Protection Benefits
We participate in public policy discussions on a variety of issues related to our business and industry. One of our primary areas of focus is advocating for greater access to financial protection benefits for workers and their families in the U.S. and U.K. This is an issue that continues to grow in significance as governmental revenue and funding for public safety net initiatives has declined.
Our engagement in these issues includes:
Through engagement with legislators and other public officials at the state and federal level, we educate policymakers on the importance of making financial protection benefits widely available and easy to enroll in.
38 2019 PROXY STATEMENT
REPORT OF THE AUDIT COMMITTEE
Good Governance
We are committed to maintaining a sound governance framework rooted in a culture of integrity and responsiveness to the long-term interests of our shareholders. Shareholder perspectives are valued by the Board and management as they consider the current governance landscape and shape our practices to keep pace with, if not stay ahead of, best practices. We list many of our governance practices on page 3.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (in this report, the "Committee") is appointed by the Board of Directors and operates under a written charter adopted by the Board, a copy of which is available on the company’s investor relations website under the heading "Corporate Governance" at www.investors.unum.com. The Committee is comprised solely of independent directors who meet the independence requirements of the SEC and the NYSE. All members of the Committee are "financially literate" as required by the NYSE, and the Board has determined that all five current members are "audit committee financial experts" under SEC regulations. In August 2017, committee member Joseph J. Echevarria rotated from the Committee to the Risk and Finance Committee. Additionally, in February 2018, Susan D. DeVore became a member of the Committee upon her election to the Board.
The primary purpose of the Committee is to assist the Board in its oversight of the:
The Committee is also responsible for discussing guidelines and policies with respect to the process by which the company undertakes risk assessment and management, and communicates with the Risk and Finance Committee as necessary for this purpose. The Committee receives regular enterprise risk management (ERM) reports, including results of the Own Risk and Solvency Assessment (ORSA). In 2017,2018, the Committee Chair and another member of the Committee reviewed and provided input in the development of the ORSA Summary Report. This report provides strong evidence of the strengths of the company’s ERM framework, measurement approaches, key assumptions utilized in assessing our risks, and prospective solvency assessments under both normal and stressed conditions.
The Committee met 10nine times during 2017.2018. The Committee regularly held executive sessions and met separately with its independent auditor, Ernst & Young, and with the internal auditors without management present.
In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management and the independent auditor matters relating to the company’s accounting and financial reporting processes, including the internal control over financial reporting; reviewed and discussed with management and the independent auditor the company’s annual and quarterly financial statements and related disclosures in reports filed with the SEC; pre-approved all audit services and permitted non-audit services to be performed by the company’s independent auditor; reviewed and discussed with management the responsibilities and performance of the internal audit function; discussed with management policies relating to risk assessment and risk management,
2019 PROXY STATEMENT 39
REPORT OF THE AUDIT COMMITTEE
as well as specific financial risks; and obtained and reviewed reports concerning the company’s policies and procedures for ensuring compliance with legal and regulatory requirements.
Management is primarily responsible for the preparation, presentation and integrity of the company’s financial statements and for the reporting process, including the establishment and effectiveness of the company’s internal control over financial reporting. The company’s independent auditor is responsible for performing an
The Committee reviewed and discussed with management the company’s audited financial statements for the year ended December 31, 2017,2018, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and assumptions which could impact the amounts reported in the company’s financial statements, and the clarity of disclosures in the financial statements. The Committee reviewed and discussed with the independent auditor the overall scope and results of the independent audit and its judgments of the quality and acceptability of the company’s accounting principles. The Committee also engaged in discussions with management and the independent auditor, among other matters, concerning management’s assessment of reserve adequacy across all major business lines, which is presented to the Committee each year. The Committee discussed with the independent auditor the matters required to be discussed by applicable standards of the PCAOB. The Committee engaged in an exercise with its independent auditor using the 2018 audit as an opportunity to better understand new standards requiring discussion of critical audit matters (CAMs) in future auditor reports and the potential impacts on the company’s and auditor’s processes and reporting. The Committee also received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence. TheIn addition, the Committee also discussed with the independent auditor matters relating to its independence, including consideration of whether the independent auditor’s provision of non-audit services to the company is compatible with the auditor’s independence. In order to assure continuing auditor independence, the Committee periodically considers whether there should be a regular rotation of the independent auditor.
The company’s internal audit function, under the direction of the chief auditor, reports directly to the Committee, which is responsible for the oversight of the work performed by the internal auditors. The internal auditors are responsible for, among other matters, conducting internal audits designed to evaluate the company’s system of internal controls. The Committee reviewed and discussed with the company’s internal auditors, and received regular status reports from them concerning, the overall scope and plans for their audits. The Committee met with the internal auditors, with and without management present, to discuss their audit observations and findings, and management’s responses, and their evaluation of the effectiveness of the company’s internal control over financial reporting.
The Committee evaluates the performance of its independent auditor, including the senior audit engagement team, each year and considers whether to retain the current independent auditor or consider other audit firms. In doing so, the Committee took into consideration a number of factors, including the professional qualifications of the firm and the lead audit partner, the quality and candor of the firm’s communications with the Committee and the company, and evidence supporting the firm’s independence, objectivity, and professional skepticism. The Committee also reviewed the 2016 PCAOB inspection report of Ernst & Young which was publishedAdditionally, in 2017 and discussed its findings with the independent auditor. In conjunction with the mandated rotation of the independent auditor’s lead engagement partner, the Committee and its chair are directly involved in the selection of the independent auditor’s lead engagement partner, including the current partner who assumed this role in 2014 after meeting with2014. As the current lead engagement partner has completed five years of service to the company in 2018, a subgroup of the Committee during which hismet with a candidate proposed to assume this role in 2019, as well as discussed the candidate's qualifications were discussed.with management.
40 2019 PROXY STATEMENT
REPORT OF THE AUDIT COMMITTEE
Based on this evaluation, the Committee has determined that the continued retention of Ernst & Young to serve as the company’s independent auditor is in the best interests of the company and its shareholders. Accordingly, the Committee appointed Ernst & Young as the company’s independent auditor for 2017.2018. Ernst & Young has served as the company’s independent auditor since the merger of Unum and Provident in 1999, and before that served at various times as the independent auditor for the company and certain predecessor companies. Although the Committee has sole authority to appoint the independent auditor, the Committee
Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the company’s audited financial statements for the year ended December 31, 20172018 be included in the company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
2018 Audit Committee
E. Michael Caulfield, Chair
(1) | |
2019 PROXY STATEMENT 41
COMPENSATION DISCUSSION AND ANALYSIS
In this section, we provide an overview of our compensation philosophy and processes, and explain how the Human Capital Committee of our Board (referenced throughout this section as the "Committee") arrived at its compensation decisions for the below named executive officers (NEOs) for 2017.
Our Business
We are a leading provider of financial protection benefits in the United States and United Kingdom. Following our acquisition of Pramerica Žycie TUiR SA (which we have subsequently renamed Unum Žycie TUiR SA and refer to as Unum Poland) in the fourth quarter of 2018, we now provide financial protection benefits in Poland, which expands our European presence. Our products include disability, life, accident, critical illness, dental and vision insurance. These products, primarily offered through the workplace, help protect millions of working people and their families from the financial hardships that can occur in the event of illness, injury, or loss of life.
Our business operations are divided into three primary segments – Unum US, Unum UK,International (formerly solely Unum UK), and Colonial Life – andas well as a Closed Block of business that includes products, such as long-term care insurance, that we service and support but no longer actively market.
2018 Performance
From a financial and operating standpoint, Unum had a very successful year in 20172018 as we delivered consistent financial and operating performance, and continuedsteady growth across our growth trends,core businesses, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were despite a challenging environment, including the pressure of continued low interest rates, and uncertainty in the U.K. due to Brexit.
42 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Financial Highlights
(1Record earnings | ||
Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For | ||
Return on equity | ||
We continued to put | ||
Book value | ||
Our book value per share at the end of | ||
Strengthening of reserves | ||
We increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future obligations, which had little impact on our capital plans and overall financial strength. |
Operating Highlights
Unum delivered on our mission of
supporting our customersinWe saw
We
managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.(1) | |
2019 PROXY STATEMENT 43
The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care policies that we service and support, but no longer actively market. In 2009, we closed our individual long-term care business, and in 2012 we closed our group long-term care business. Since that time, we have actively managed these blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Since 2006, we have strengthened reserves $4.9 billion in this block. Through these and other steps, we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.
We continued our commitment to effectively managing our long-term care business in 2018 during our annual comprehensive review of this block. Upon completion of this review in the third quarter of 2018, we increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future benefit obligations. In the process, we believe we set a standard for disclosure in long-term-care. This action had little impact on our capital plans and overall financial strength.
Strategic Positioning
We have recently taken a number of steps to fuel our growth and position us for the future.
In addition, we view these key developments in the external environment as likelyare having a positive impact on our business.
44 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Capital Generation for Shareholders
Our strong statutory earnings resultshave resulted in solid capital generation, which we have deployed in a number of ways.
Our ability to generate capital remained strong in 2018, allowing us the opportunity to deploy capital in a number of ways. For the year, we invested in our business, strengthened our long-term care reserves and paid out $217.0 million in dividends, including increasing the annual dividend rate by 14% over the prior year. We also repurchased $350.7 million worth of our outstanding shares, bringing our total share repurchases since 2007 to $4.4 billion. In addition, our credit ratings are strong and remain highat our targeted levels as a result of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market.
2019 PROXY STATEMENT 45
COMPENSATION DISCUSSION AND ANALYSIS
Business Highlights
The following are 20172018 performance highlights within our primary business segments and other key areas of the company:
Unum US | ||
Our Unum US segment, representing |
Unum International | ||
Our Unum |
Colonial Life | ||
Our Colonial Life segment, representing |
Closed Block
Our Closed Block segment, representing 13.1%12.0% of our consolidated premium income in 2017,2018, delivered stable performance, with a decreasean increase in adjusted operating income of 4.3%1.3%. We continue to see consistent results, from this block of business largely as a result of our continuedactive oversight of this block of business and ongoing investments in management resources and capabilities.
Investments
Our investment results remained solid, generally exceedingin line with our plan benchmarks. Although we recorded lower net investment incomeThe portfolio was well-managed through market volatility in 2017, our asset quality remains strong2018 and our portfolio providescontinues to provide a consistent source of income for our business. Our asset quality remains strong.
46 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Total Shareholder Return
Unum delivered strong financial results in our core businesses and record adjusted operating earnings in 2018, continuing a track record of consistent performance that spans more than a decade. However, investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector, overshadowed our performance. This contributed to the decline in our stock value of more than 45% in 2018.
These results are not indicative of the company's long-term incentive program as outlined on page 61. Unum continues to outperformongoing strong financial and operational performance of our peerscore businesses and the broader S&P 500 in total shareholder return. Over the last decade, weactive management of our closed LTC block. We believe our consistent results have beenmade Unum an excellent long-term investment - including during one of the worst financial crises in memory with a 10.8% compound annual return to shareholders during the last 10 years.
2019 PROXY STATEMENT 47
COMPENSATION DISCUSSION AND ANALYSIS
Our |
Six investors, representing more than 36%15% of our outstanding shares, accepted our invitation for engagement and we met with each of them. Another sixeight investors, representing approximately 8%13% of our outstanding shares, responded that a meeting was not necessary.
During the meetings, shareholders provided feedback on a variety of topics thoughtopics; however, we did not receive any suggestions for changes to our compensation programs. Overall, the shareholders we spoke with generally had favorable comments about our practices and programs, including:
Given the uncertainty of the long-term care industry during 2018, management during 2015had anticipated an increased focus on our long-term care business. However, only one shareholder commented on our long-term care business and 2016.
Following consideration of the results of our 2018 say-on-pay vote and feedback we received through these meetings, we did not make any changes to our executive compensation program but weprograms. However, our discussions identified opportunities for further enhancements to our proxy statement disclosuresdisclosure and discussed other governance topics as described under the Proxy Summary on page 10.
• | The addition of the CEO Compensation Summary beginning on page 8; |
• | Added footnotes to the "Elements of Pay" table, on page 49, indicating where the underlying incentive plan metrics can be found. |
In addition to our meetings with shareholders, we also met with two largeone proxy advisory firmsfirm to provide an update on our shareholder engagement efforts and gain further insight into their views regarding our compensation and governance practices and disclosures.
Overall, shareholders told us they appreciated the opportunity to engage in these discussions and the company’s willingness to consider their input with respect to both executive compensation and governance practices.
48 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Our executive compensation philosophy is to reward performance that helps us achieve our corporate objectives, increase shareholder returns, attract and retain talented individuals, and promote a culture of ownership and accountability in the company. We do this by:
There are five primary elements of pay in our executive compensation program, which are summarized in the following table.
SHORT-TERM | LONG-TERM | ||||
BASE PAY | ANNUAL INCENTIVE | PERFORMANCE- BASED RSUs | PSUs | RETIREMENT & WORKPLACE BENEFITS |
Primary Purpose | Reflects the market for similar positions as well as individual skills, abilities & performance | Rewards short-term performance(1) | Rewards long-term performance, aligns interest with stockholders & promotes a culture of ownership and accountability(1) | Addresses health, welfare & retirement needs | ||
Performance Period | Ongoing | 1 year | 1 year (vests over 3 years)(2) | 3 years prospective | N/A | |
Form | <--------------- Cash ---------------> | <--------------- Equity ---------------> | N/A | |||
Payment/Grant Date | Ongoing | <----- In March based on prior year performance -----> | Ongoing |
(1) | For details on performance measures see “Annual and Long-Term Incentive Programs” beginning on page 55. |
(2) | A performance threshold goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are paid. |
2019 PROXY STATEMENT 49
COMPENSATION DISCUSSION AND ANALYSIS
Those pay elements that are "at risk," or contingent upon individual or corporate performance, are noted in the charts below. Our NEOs, as the most senior officers of the company, have a majority of their targeted total direct compensation (i.e., fixed salary and variable annual and long-term incentive awards) at risk. This design creates an incentive for achievement of performance goals (short- and long-term) and aligns the interests of our executives with those of our shareholders. For 2017, 88%2018, 89% of Mr. McKenney’s targeted total direct compensation was at risk. For the remaining NEOs, an average of 71%72% of their aggregate targeted total direct compensation was at risk.
The Committee, CEO, and compensation consultant each have important roles in our compensation program. The Committee, with input from the CEO, and compensation consultant, has the final authority to:
The CEO provides to the Committee:
The CEO does not participate in any decisions related to his own compensation.
Pay Governance LLC, as independent compensation consultant to the Committee, provides objective, expert analyses, independent advice, and comparative data across peer companies on executive and director
50 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
compensation. Pay Governance reports directly to the Committee, which is responsible for the appointment, compensation, retention, and oversight of the work performed by the consultant. A senior representative of the compensation consultant generally attends Committee meetings, participates in executive sessions of the Committee without management present, and communicates directly with Committee members outside of meetings. Management interacts with the compensation consultant only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval.
The Committee has adopted a policy requiring that its compensation consultant be independent. During 2017,2018, the Committee completed its annual assessment of the independence of Pay Governance, taking into account the following factors:
Pay Governance has attested to its independence and does not provide any services to the company other than those related to director and executive compensation consulting. Fees paid to Pay Governance for such services provided in 20172018 totaled $195,191.
Based on its assessment, the Committee concluded that Pay Governance is independent under the Committee’s policy and that Pay Governance's work has not raised any conflict of interest.
In 2018, as a matter of good corporate governance, the Committee commissioned an executive compensation consultant benchmarking analysis. After considering the results of a Request for Information (RFI), the Committee determined to maintain its relationship with Pay Governance.
The company’s finance, human resources, and legal staff, including the chief financial officer,Chief Financial Officer, support the Committee in its work.work, interacting with the compensation consultant only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval. Employees from these departments discuss various executive compensation topics with the Committee and Pay Governance, including how compensation plans fit in with other programs and business objectives. Although these staff members may make recommendations, the final decision on all executive compensation matters rests solely with the Committee.
The Committee compares the compensation of our NEOs to the median pay of executives in similar positions at peer companies. By generally targeting each pay element to the approximate median of the applicable comparator group (as described below), we ensure that the balance among the elements is competitive, while at the same time allowing company and individual performance to determine a majority of the compensation received by our NEOs. Overall, these benchmarking comparisons are used as points of reference and are secondary to the primary factors considered by the Committee when making compensation decisions. The primary factors are: company performance; individual performance; the executive’s level of responsibility and
2019 PROXY STATEMENT 51
COMPENSATION DISCUSSION AND ANALYSIS
tenure; internal equity considerations; the creation of shareholder value; our executive compensation philosophy; and the results of the most recent shareholder say-on-pay vote and feedback received from engagement with shareholders.
In addition to benchmarking executive compensation, the Committee uses a subset of the Proxy Peer Group (which we refer to as the "PSU Peer Group") for purposes of measuring relative TSR for our PSU awards (see page 6160 for details on these awards). This subset is selected because they are considered to be direct business competitors of Unum.
The Committee evaluates the composition of the Proxy Peer Group every year. Peer companies are determined based on five primary criteria (life and health GICS code; reasonable range of: assets, revenues, and market capitalization; and competition with Unum for talent and/or market share). In the past, the Committee has discussed insurance brokers and property and casualty insurers as potential peers. However, the Committee decided not to include these companies due to the differences in business models, performance cycles and executive talent markets. Based on the most recent peer review in August 2017,2018, on average, the companies in the Proxy Peer Group met three of the five criteria. Overall, Unum is at 29% of the median asset level and approximately 90%82% of the revenue median (as of the 12 months ended March 31, 2017)2018). Additionally, 8 of the 11 peers (73%) selected Unum as a peer for compensation benchmarking purposes in their 20172018 proxy statements.
Although no changes were made to either our PSU Peer Group or Proxy Peer Group from 2017 to 2018, during its annual Proxy Peer Group analysis in August 2017,2018, the Committee with its consultant, Pay Governance, considered other insurance and financial services companies and determined that no companies should be removed and no additional companies were appropriate for inclusion into remove Genworth from the Proxy Peer Group atfor 2019. Genworth was removed due to the time.pending acquisition by China Oceanwide. Furthermore, the Committee considered other insurance and financial services companies and determined that Brighthouse Financial, a company that the Committee believes closely aligns as a life insurance and asset management business, will be added to the 2019 Proxy Peer Group.
Annual sensitivity tests are performed to understand the impact of both larger and smaller peers on median CEO compensation levels. For the tests conducted in 2018, excluding the two smallest and two largest peers for testing purposes had no impact on CEO targeted total direct compensation. An additional sensitivity test was conducted using a common statistical approach known as regression analysis. Regression analysis considers the correlation between two factors (e.g., compensation and revenue size) and is commonly used to adjust compensation data to remove the effects of company size. A regression analysis that considered the correlation between revenue and compensation yielded a corresponding targeted total direct compensation that was 6% less than the median. Based on these tests, the Committee determined that the 2019 Proxy Peer Group is appropriate.
52 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
The following table lists the companies in the Diversified Insurance Study (DIS)(“DIS”), PSU Peer Group and Proxy Peer Group.
BENCHMARKING EXECUTIVE COMPENSATION
Proxy Peer Group Indicators | |||||||||
Company | Survey Partici- pant | PSU Peer Group(2) | 2018 Proxy Peer Group(3) | Life & Health GICS | 0.4x to 2.5x Unum Revenues | 0.4x to 2.5x Unum Assets | 0.5x to 5.0x Unum Market Capitalization | List Unum as a Peer | |
Aflac | • | • | • | • | • | • | • | • | |
Allstate | • | ||||||||
AXA Group | • | ||||||||
Cigna | • | ||||||||
CNO Financial Group | • | • | • | • | • | • | |||
Genworth Financial | • | • | • | • | • | • | |||
Guardian Life | • | ||||||||
Hartford Financial Services Group | • | • | • | • | • | • | |||
John Hancock | • | ||||||||
Lincoln National Corporation | • | • | • | • | • | • | • | ||
Massachusetts Mutual | • | ||||||||
MetLife | • | • | • | • | |||||
Nationwide | • | ||||||||
New York Life | • | ||||||||
Northwestern Mutual | • | ||||||||
OneAmerica Financial | • | ||||||||
Pacific Life | • | ||||||||
Principal Financial Group | • | • | • | • | • | • | |||
Prudential Financial | • | • | • | • | • | ||||
Reinsurance Group of America | • | • | • | • | • | ||||
Securian Financial | • | ||||||||
Sun Life Financial | • | ||||||||
Thrivent Financial | • | ||||||||
Torchmark Corporation | • | • | • | • | • | • | • | ||
Transamerica | • | ||||||||
USAA | • | ||||||||
Voya Financial | • | • | • | • | • | • |
(1) | For compensation decisions made in early |
(2) | This peer group will be used for the relative TSR comparison under the 2018 PSU grant. These companies are our direct competitors, are generally followed by the same |
The Proxy Peer Group includes both property and casualty insurers and life and health insurers, with Unum’s assets equal to 29% of the peer median as of December 31, |
2019 PROXY STATEMENT 53
COMPENSATION DISCUSSION AND ANALYSIS
Components of Executive Compensation
Base Salary, Annual and Long-Term Incentives
Salaries for our NEOs are established based on their position, skills, experience, responsibilities, and performance. Competitiveness of salary levels is assessed annually relative to the approximate median of salaries in the marketplace using the sources noted beginning on page 51 for similar executive positions. Adjustments may be considered for factors such as changes in responsibilities, individual performance, and/or changes in the competitive marketplace.
Annual and long-term incentive targets are set based on consideration of each NEO’s current target, the approximate median of the appropriate comparator group, and each individual’s target relative to other NEOs given their respective levels of responsibility. For purposes of determining the amount of annual incentive and long-term incentive awards for our NEOs, the Committee establishes a target amount as a percentage of each executive’s salary, except that the long-term incentive target is set as an absolute dollar amount for the CEO. In establishing each target for 2018 awards, the Committee considered market data from the appropriate peer group as well as each individual’s target relative to other NEOs, given their respective levels of responsibility.
At its February 2019 meeting, after consideration of company and individual performance during 2018, each executive’s responsibilities, tenure and market data, the Committee made decisions with respect to our NEOs’ base salaries and annual and long-term incentive targets for 2019 as outlined in each NEOs "Performance Assessment and Highlights" summary beginning on page 64. The Committee believes the 2019 compensation decisions position all of our NEOs’ targeted total direct compensation within an appropriate range of the market median given each executive’s performance and time in his or her current position.
Individual performance is evaluated by the Committee against the NEO's goals and metrics, specific to his or her respective business area. These goals and metrics are set at the beginning of the year and include the following performance categories:
Evaluation Criteria
In evaluating how effectively each NEOthe NEOs met their goals, the Committee considered:
54 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
✓ | |||||
Ability to balance complex and competing factors | ✓ | ||||
Balance of putting the company first with appropriate self-care and resilience | |||||
✓ | Commitment to the enterprise and their business unit | ✓ | Leadership | ||
✓ | Statesmanship | ✓ | Building and sustaining a high-functioning organization and team | ||
✓ | |||||
Strategic planning, succession planning and leadership development | ✓ | Demonstrated performance | |||
✓ | Board relations | ✓ | Humility and ego maturity |
Based on the NEOs' individual performance goals and Board assessment in combination with the CEO's assessment of those reporting to him, the Committee awarded each NEO an individual performance percentage which is used to adjust the earned annual incentive and long-term incentive awards between 0% and 125%. These percentages were used to calculate the final payout of 20172018 annual incentives and long-term incentive awards granted in 2018,2019, as described laterunder “Performance Assessment and Highlights.”
Annual and Long-Term Incentive Programs
Each year, the Committee sets targets for several performance measures that are used to calculate annual and long-term incentive awards. Performance measures and their respective targets are established for the company. Weightings are assigned to each performance measure based on its relative importance to the company.
The performance targets are aligned with the company’s primary business objectives:
The performance goals in this section.our incentive plans are a direct output of our business plans which are approved by the Board each year.
Goal Rigor
The business plans and the associated metrics carefully balance the current performance of the business and the risk appetite of the enterprise with an appropriate amount of stretch designed to drive consistent growth and improvement. In addition, the Committee considered external economic factors including: (1) the overall economic growth rate, (2) employment and wage growth, which impacts our overall premium levels, and (3) the interest rate and investment environment which can have a significant impact on our overall profit margins.
2019 PROXY STATEMENT 55
COMPENSATION DISCUSSION AND ANALYSIS
We set challenging business plans and performance measures to ensure that their achievement will drive long-term value for shareholders. In setting the business plans and performance metrics, a number of sensitivity tests are run to determine the possible upside and downside scenarios to the plan. These scenarios are reviewed to be certain we have the appropriate degree of rigor in the plan.
Once the performance measures are established, the incentive payout targets are set to appropriately align pay with performance.
Generally, the performance range for each annual incentive performance measure is set based on what is appropriate for the variability of the metric. The actual ranges for each performance metric are shown in the table on page 59. The payout range for each metric is from 0-150%.
To align our metrics with shareholders, over both a near-term and an extended timeframe, the Committee determined to use ROE under both our annual and long-term incentive plans. The Committee believes that using this metric in incentive plans that pay out over both one-year and three-year periods encourages executives to focus on both short- and long-term results. The Committee also believes that any risk of overemphasizing ROE in the annual and long-term incentive plans is avoided by assigning it only a 15% weighting for the annual incentive plan and by weighting it equally with another performance measure in the long-term incentive plan (in recent years, average after-tax adjusted operating earnings per share) with further adjustment based on relative TSR for PSUs awarded under our long-term incentive plan.
Our incentive plans are subject to an annual risk assessment by our chief risk officer, which is discussed with the Committee as described on page 33.
Each performance metric has been selected because the Committee believes it is an appropriate driver of long-term shareholder value:
Incentive Metric | 2018 Weightings | Purpose | |
After-Tax Adjusted Operating Income | 35% | ⇨ | Measures profitability achievement |
Consolidated Adjusted Operating Return on Equity | 15% | ⇨ | Measures effectiveness of balancing profitability and capital management priorities |
Earned Premium | 15% | ⇨ | Measures growth and competitiveness of the business |
Sales | 15% | ||
Customer Experience | 10% | ⇨ | Measures effective and efficient customer service |
Operating Expense Ratio | 10% |
Our annual incentive awards reward performance based on the achievement of both company and individual performance, which the Committee believes aligns compensation with the objectives of shareholders. The Annual Incentive Plan, under which 2018 annual incentive awards were granted, includes:
56 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
The decision-making process to determine 2018 annual incentive awards was as follows:
If the 2018 Performance Threshold was met, then: |
($) | × | (%) | × | (%) | = | ($) |
2018 Annual Incentive Target for NEOs | 2018 Company Performance(1) | 2018 Individual Performance(2) | 2018 Annual Incentive Award | |||
If threshold was not met, then award not paid |
(1) | The Committee exercises discretion as to the final percentage considering all performance factors, including, but not limited to, the quality of financial results. For details on adjustments for 2018, see page 58. |
(2) | Individual performance may range from 0% to 125%. Individual performance adjustments for 2018 are described beginning on page 65. |
Once it was determined that the performance threshold had been met for 2018, specific awards for our NEOs were arrived at by:
• | Calculating company performance percentages by comparing actual results to the performance targets described beginning on page 55 (the Committee may also take into account other factors, including economic considerations as well as non-financial goals); |
• | Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 54; and |
Incentive Funding Performance Requirement
The funding of awards under our Annual Incentive Plan is conditioned on the company achieving a specified level of performance. We apply an incentive funding performance requirement because we believe employees and officers should receive incentive awards only after our shareholders and creditors are paid.
The Annual Incentive Plan specifies a performance requirement of $250 million of statutory after-tax operating earnings to fund the plan. For 2018, the Committee established the same performance requirement to fund grants under the long-term incentive plan. Funds used to attain the performance requirement are derived from statutory after-tax operating earnings and other sources of cash flow available from the company’s insurance and non-insurance subsidiaries.
The company successfully achieved the performance requirement for funding the 2018 annual incentive awards and the long-term incentive grants made in March 2019.
While the "qualified performance-based compensation" exception under Section 162(m) was eliminated in 2017, the Committee has reaffirmed our pay-for-performance alignment and determined that our annual and long-term incentive plans will continue to be predicated upon the company achieving a specified level of
2019 PROXY STATEMENT 57
COMPENSATION DISCUSSION AND ANALYSIS
performance. Therefore, in 2019, we will continue to use the performance requirement of $250 million of statutory after-tax operating earnings to fund our annual and long-term incentive plans.
Items Excluded When Determining Company Performance
When establishing the performance measures and weightings for 2018, the Committee determined that the effect of certain items not included in the 2018 financial plan would be excluded from the calculation of the company’s performance, for purposes of both the annual and long-term incentive plans, should they occur. The Committee believes it is appropriate to exclude the items below because they: (1) are unusual or infrequent in nature, (2) do not directly reflect company or management performance, or (3) could serve as a disincentive to capital management or other decisions which are in the best interest of the company and shareholders. These criteria are the same ones that we used in 2018 and the Committee has also approved them for use in 2019. The items are:
58 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Annual Incentive Results
2018 ANNUAL INCENTIVE TARGETS AND RESULTS ($s in millions)
Threshold(1) | Target(1) | Maximum(1) | Component Weight | Result | |||||||||||
Unum Group (actual results in blue) | |||||||||||||||
After-tax adjusted operating income(2) | 35% | Above target | |||||||||||||
Consolidated adjusted operating return on equity(3) | 15% | Above target | |||||||||||||
Earned premium(4) | 15% | Above target | |||||||||||||
Sales | 15% | Below target | |||||||||||||
Customer experience(5) | 10% | Below target | |||||||||||||
Operating expense ratio(6) | 10% | Above target |
(1) | For each performance measure, there is no payout at or below the threshold. For each performance measure, the payout would be 150% for performance at or above the maximum. For performance between defined levels, the payout is interpolated. |
(2) | After-tax adjusted operating income is defined as net income adjusted to exclude after-tax net realized investment gains or losses and certain other items specified in the reconciliation of non-GAAP financial measures attached hereto as Appendix A. |
(3) | Consolidated adjusted operating return on equity is calculated by dividing after-tax adjusted operating income by the average of the beginning- and end-of-year stockholders’ equity adjusted to exclude the net unrealized gain or loss on securities and the net gain on hedges. |
(4) | Earned premium is calculated for our core operations (Unum US, Unum International, and Colonial Life). |
(5) | Customer Experience is based on the quality of our customers' experiences and includes measures which focus on areas that impact customer loyalty and satisfaction. |
(6) | The operating expense ratio is equal to operating expenses as a percentage of earned premium (or total company expense over total company earned premium) inclusive of the Closed Block and Corporate segments. |
Applying the criteria and standards approved by the Committee when it established the 2018 annual incentive targets, as discussed on page 58, the Committee adjusted the Annual Incentive Plan performance calculations for the impact of the following four items on our 2018 financial plan results that were not included in the 2018 financial plan from which the targets were initially derived:
2019 PROXY STATEMENT 59
COMPENSATION DISCUSSION AND ANALYSIS
Each year, the Committee also undertakes an overall assessment of the results while also maintaining the discretion to make final adjustments. Any adjustments are based on a review of the actual achievement for each performance measure compared to the annual incentive targets listed on page 59, as well as a qualitative assessment of results. For 2018, the Committee made minor adjustments to the overall performance based on qualitative considerations that slightly reduced the aggregate annual incentive payout (by less than 1%). The resulting Annual Incentive Plan achievement level for 2018 was 100% as shown below.
2018 Annual Incentive Plan Achievement Level | |
100% Unum Group |
The table below sets forth the target incentive and the actual annual incentive awards approved by the Committee to our NEOs for 2018 performance. For a discussion of 2019 annual incentive award targets for each NEO, see the "Performance Assessment and Highlights" summary beginning on page 64.
Depending on their role in the company, the annual incentive awards for our NEOs are tied in various ways to the performance of Unum Group and its business units. The annual incentive awards of all NEOs are based on Unum Group performance though the individual goals for Mr. Simonds and Mr. Arnold include financial goals related to their respective business units. The following table outlines the annual incentives awarded for 2018 performance.
ANNUAL INCENTIVE PAID IN 2019 | (for 2018 performance) |
Executive | 2018 Incentive Target (%) | Eligible Earnings ($) | Company Performance (%) | Individual Performance (%) | 2018 Annual Incentive Paid ($) | ||||
Mr. McKenney | 200% | X | 1,000,000 | X | 100% | X | 95% | = | 1,900,000 |
Mr. McGarry | 110% | X | 630,000 | X | 100% | X | 100% | = | 693,000 |
Mr. Simonds | 100% | X | 627,418 | X | 100% | X | 100% | = | 627,418 |
Mr. Arnold | 90% | X | 497,144 | X | 100% | X | 100% | = | 447,429 |
Ms. Iglesias | 90% | X | 521,315 | X | 100% | X | 100% | = | 469,184 |
Our long-term incentive plan aligns the long-term interests of management and shareholders by tying a substantial portion of executive compensation directly to the company’s stock price. All long-term incentive awards in 2018 were granted under the Stock Incentive Plan of 2017. Our long-term incentive award mix is based on a review of peer practices as well as what the Committee believes most appropriately retains and rewards our NEOs and ensures that a significant portion of each executive’s compensation is tied to the increase of our stock price over the long-term. The mix of awards for each NEO was 50% performance-based restricted stock units (PBRSUs) and 50% performance share units (PSUs). As with the Annual Incentive Plan, grants of PBRSUs and PSUs have been conditioned on the company first achieving a corporate performance threshold, as described on page 57.
All of our NEOs received a long-term incentive grant in March 2018 in the form of PBRSUs and PSUs. All grants were awarded based on the achievement of an after-tax statutory earnings threshold for 2017, as modified by individual achievement factors for 2017. PBRSUs vest ratably over three years while PSUs vest at the end of the
60 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
3-year performance period dependent upon actual performance, modified (up to +/- 20%) by relative TSR. The decision-making process to determine long-term incentive awards granted in March 2018 was as follows:
If the 2017 Performance Threshold was met, then: |
($) | × | (%) | = | ($) |
2017 Long-term Incentive Target for NEOs | 2017 Individual Performance(1) | 2018 Long-term Incentive Award | ||
If threshold was not met, then award not granted under plan |
(1) | Individual performance may range from 0% to 125%. Individual performance adjustments for 2017 are described on pages 56 through 58 of our 2018 proxy statement. |
As outlined in the diagram, once it was determined that the performance threshold had been met, the total value of the long-term incentive awards for our NEOs were determined by:
• | Applying the individual long-term incentive targets, which were set in early 2017 by considering the market data from the appropriate comparator group (as described beginning on page 51) as well as each individual��s target relative to other NEOs, given their respective levels of responsibility, to each individual’s base salary, except that, the long-term incentive target is set as a dollar amount for Mr. McKenney; |
• | Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 54 (for a discussion of the individual NEO performance assessments for 2017 that determined the individual performance percentage for these 2018 grants, other than for Mr. Arnold, see page 56 of our 2018 Proxy Statement). For Mr. Arnold, the Committee applied an individual performance percentage of 110% based on his leadership of Colonial Life's 2017 performance, including sales growth of almost 8%, the continued expansion of sales territories as well as an increase in new representatives. Additionally, the Committee recognized his contributions as part of the senior leadership team; and |
Once the long-term incentive award value was determined, it was awarded as described below:
No stock is issued under PBRSUs at the time of grant. Instead, company stock is issued only when the grant is settled. During the performance period, dividend equivalents accrue and vest only when and to the extent that the underlying PBRSUs vest. In addition, there are no shareholder voting rights unless and until the award is settled in shares.
2019 PROXY STATEMENT 61
COMPENSATION DISCUSSION AND ANALYSIS
LONG-TERM INCENTIVE GRANTED IN 2018 | (for 2017 Performance) |
Executive | 2017 Long-Term Incentive Target | Individual Performance | 2018 Long-Term Incentive Grant(2) | ||
Mr. McKenney(1) | $5,500,000 | X | 120% | = | $6,600,000 |
Mr. McGarry | 1,102,500 | X | 105% | = | $1,157,625 |
Mr. Simonds | 984,000 | X | 115% | = | $1,131,600 |
Mr. Arnold | 582,000 | X | 110% | = | $640,200 |
Ms. Iglesias | 631,250 | X | 110% | = | $694,375 |
(1) | Mr. McKenney’s target was set as a dollar amount, rather than as a percentage of salary as for the other NEOs. |
(2) | The amount shown is the award approved by the Committee for each NEO. This amount is then converted to the respective number of PBRSUs and PSUs based on the closing stock price on the date of grant. The amount included in the Summary Compensation Table on page 77 was calculated using the closing stock price for PBRSUs and the Monte Carlo valuation methodology for PSUs. |
Executive | Performance-Based Restricted Stock Units Granted (Mar. 2018) | Performance Share Units Granted (Mar. 2018) | ||||
Mr. McKenney | 66,924 | 66,924 | ||||
Mr. McGarry | 11,738 | 11,738 | ||||
Mr. Simonds | 11,474 | 11,474 | ||||
Mr. Arnold | 6,492 | 6,492 | ||||
Ms. Iglesias | 7,041 | 7,041 |
The PSUs will vest based on the achievement of three-year, prospective (2018-2020) average adjusted operating earnings per share and average adjusted operating return on equity goals, and the achievement will be modified (up to +/-20%) based on our TSR relative to eight members of our "PSU Peer Group." Assuming performance above the threshold, PSUs can be paid out at 40% to 180% of target. The eight companies in the PSU Peer Group (Aflac, Hartford Financial Services, Lincoln Financial, MetLife, Principal Financial, Prudential Financial, Torchmark and Voya Financial) were selected because they are considered to be direct business competitors of Unum (see discussion beginning on page 52 for the differences between our Proxy Peer Group and PSU Peer Group). We believe it is appropriate to modify these awards based on relative TSR performance, since Unum’s individual TSR performance directly affects the value of the equity awards. The table below outlines the three-year performance targets established by the Committee for the PSU grants made in March 2018. PSUs are notional units that will track the value of our share price over the three-year performance period, and will vest and be settled through the issuance of shares based upon the achievement of the predetermined performance metrics. Dividend equivalents accrue during the three-year performance period and will vest only when and to the extent that the underlying PSUs vest.
62 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
TARGETS FOR PERFORMANCE SHARE UNITS (PSUs) GRANTED IN 2018
Corporate Performance Factors | Driver of Shareholder Value | Component Weighting | Threshold | Target | Maximum | ||||||||||
Unum Group | |||||||||||||||
Average 3-year Consolidated Adjusted Operating Return on Equity (2018-2020) | Capital Management Effectiveness | 50% | |||||||||||||
Average 3-year After-Tax Adjusted Operating EPS (2018-2020) | Profitability | 50% | |||||||||||||
Relative Total Shareholder Return | Modifier Percentile | -20% @ 35th | 0 @ 50th | +20% @ 75th |
Vesting of 2016 Performance Share Units (PSUs)
The long-term incentive mix for our NEOs' 2016 awards included 50% in the form of PSUs, which vested based on performance over a three-year performance period that ended on December 31, 2018.
The table below provides an overview of the three-year goals for the 2016 PSU grant as well as their actual achievement levels.
2016 PERFORMANCE SHARE UNIT (PSU) AWARDS
Corporate Performance Factors | Component Weighting | Threshold | Target | Maximum | Result | ||||||||||
Unum Group | |||||||||||||||
Average 3-year Adjusted Operating Return on Equity (2016-2018) | 50% | 12.00% | |||||||||||||
Average 3-year After-Tax Adjusted Operating EPS (2016-2018) | 50% | $4.46 | |||||||||||||
Relative Total Shareholder Return | Modifier Percentile | -20% @ 35th | 0 @ 50th | +20% @ 75th | @ 0th |
Based on the above performance, and after taking into account the factors described below, in February 2019, the Committee certified the results for this grant and approved a payout. The business goals were achieved at 120.3%, with relative TSR at the lowest percentile which resulted in a 20% decrease for a final payout of 96.2%.
As discussed under “Items Excluded When Determining Company Performance,” beginning on page 58, when setting the performance measures and weightings for the 2016 PSU grant, the Committee determined that certain items not included in the financial plan for fiscal years 2016 to 2018 would be excluded from the calculation of the company’s performance.
Applying the criteria and standards approved by the Committee, targets were adjusted for the impact of the following items:
2019 PROXY STATEMENT 63
COMPENSATION DISCUSSION AND ANALYSIS
The NEOs’ achievement levels, for purposes of the 20172018 annual incentive awards paid and long-term incentive awards paid/granted in March 2018,2019, were determined in part based on the individual performance goal areas listed in the "Individual Performance Evaluations" beginning on page 55.
64 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
RICHARD P. McKENNEY, President and Chief Executive Officer | |||
ANNUAL COMPENSATION(1) | In assessing Mr. McKenney's performance for 2018, the Committee noted that he: • Led the company to a strong level of financial performance in 2018, including a more than 20% growth in adjusted operating earnings per share and return on equity in excess of 13%, continuing a consistent pattern of outstanding operating results; | ||
2018 | |||
Base Salary | $1,000,000 | ||
AI | $1,900,000 | ||
LTI | $6,175,000 | ||
2017 | |||
Base Salary | $1,000,000 | ||
AI | $2,415,000 | • Took actions and delivered statutory results to ensure the company maintains a very strong balance sheet and robust capital position. Capital generation and deployment met or exceeded expectations as the company returned value to shareholders through the repurchase of approximately $350 million in shares and a dividend increase of 14% per share year over year. The strong capital position also allowed the company to invest in the business and pursue acquisitions and expansion, while providing continued flexibility to respond to future challenges and opportunities; • Undertook a number of strategic initiatives designed to position the company for ongoing, long-term success. This included embarking on a digital transformation journey, reinvesting in the customer experience, launching new products, growing the distribution network, and expanding the company's footprint through the acquisition of a Poland-based financial protection provider; • Reaffirmed the company’s commitment to sustainability and social responsibility through the establishment of an Office of Inclusion & Diversity, the focus on an environmental, social and governance (ESG) platform, and continued investments in the company’s workforce through benefits such as expanded paid parental leave; and • Led the company’s continued efforts to actively and responsibly manage its closed block of long-term care policies by completing a strategic review of this business that resulted in the strengthening of reserves by approximately $590 million after-tax and set the standard for disclosure in long-term care. Although stock price is not a direct criteria for assessing the CEO’s performance, the Committee considered its impact on TSR while weighing the above individual achievements and overall performance of the company. The decline in stock value in 2018 was affected by investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector. Despite this, the Committee believes the company is well-positioned for long-term success through the actions of Mr. McKenney. Given this, the Committee awarded Mr. McKenney an individual performance percentage of 95% for his 2018 annual incentive award and 95% as the individual performance modifier for his long-term incentive award granted in March 2019. | |
LTI | $6,600,000 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $1,000,000 | ||
AI Target | 200% | ||
LTI Target | $6,500,000 | ||
2018 | |||
Base Salary | $1,000,000 | ||
AI Target | 200% | ||
LTI Target | $6,500,000 | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards the year granted. The above is not a replacement for the Summary Compensation Table. |
2019 PROXY STATEMENT 65
COMPENSATION DISCUSSION AND ANALYSIS
JOHN F. McGARRY, Executive Vice President and Chief Financial Officer | |||
ANNUAL COMPENSATION(1) | In assessing Mr. McGarry's performance for 2018, the Committee noted that he: • Provided effective leadership as CFO through a complex capital environment, allowing the company to achieve strong operational results and grow key financial metrics while managing challenges in the Closed Block that drove market uncertainty; | ||
2018 | |||
Base Salary | $630,000 | ||
AI | $693,000 | ||
LTI | $1,260,000 | ||
2017 | |||
Base Salary | $623,077 | • Ensured the company maintained a strong capital position with flexibility to invest in growth through geographic expansion, fund technology and product investments, set aside additional reserves for our Closed Block and return capital to shareholders through dividend increases and share repurchases; • Accelerated our annual strategic review in the long-term care portion of our Closed Block segment, leading to a strengthening of reserves and revised assumptions that place the block on a path of greater sustainability; • Significantly contributed in key ways to our strategic assessment and actions, drawing not only on his financial expertise but also his deep experience throughout Unum; and • Continued driving change management and talent development in the Finance team, particularly our leadership pipeline and inclusion and diversity. Given these accomplishments, the Committee applied individual performance percentages of 100% for Mr. McGarry’s 2018 annual incentive award and 100% for his long-term incentive award granted in March 2019. | |
AI | $822,462 | ||
LTI | $1,157,625 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $630,000 | ||
AI Target | 110% | ||
LTI Target | 200% | ||
2018 | |||
Base Salary | $630,000 | ||
AI Target | 110% | ||
LTI Target | 200% | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
66 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
MICHAEL Q. SIMONDS, President and Chief Executive Officer, Unum US | |||
ANNUAL COMPENSATION(1) | In assessing Mr. Simonds' performance for 2018, the Committee noted that he: • Led Unum US to strong financial results, including record adjusted operating income of $1.0 billion, exceeding expectations; | ||
2018 | |||
Base Salary | $627,418 | ||
AI | $627,418 | ||
LTI | $1,213,472 | ||
2017 | • Delivered strong premium growth of 5.4% despite a more competitive market environment, while maintaining risk and pricing discipline, and resulting in margins and ROE levels at the top of our industry; • Continued to drive operational improvements in Unum US that resulted in greater efficiencies and an enhanced experience for our customers • Managed the development of key strategic initiatives for Unum US and the broader enterprise to expand our product and service portfolio, leverage technology to drive growth and customer experience, and quickly redeploy resources to take advantage of new opportunities; and • Has effectively built a culture of change within Unum US led by a strong leadership team that has mentored key talent and fostered inclusion and diversity in the organization. Given these accomplishments, the Committee applied individual performance percentages of 100% for Mr. Simonds’ 2018 annual incentive award and 110% for his long-term incentive award granted in March 2019. | ||
Base Salary | $611,538 | ||
AI | $792,554 | ||
LTI | $1,131,600 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $630,375 | ||
AI Target | 100% | ||
LTI Target | 175% | ||
2018 | |||
Base Salary | $630,375 | ||
AI Target | 100% | ||
LTI Target | 175% | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
2019 PROXY STATEMENT 67
COMPENSATION DISCUSSION AND ANALYSIS
TIMOTHY G. ARNOLD, President and Chief Executive Officer, Colonial Life | |||
ANNUAL COMPENSATION(1) | In assessing Mr. Arnold’s performance for 2018, the Committee noted that he: • Delivered another year of strong financial and operational results at Colonial Life, with growth in sales, premium and adjusted operating income; | ||
2018 | |||
Base Salary | $497,144 | ||
AI | $447,429 | ||
LTI | $656,296 | ||
• Guided an exceptional launch of our new Colonial Life dental product, with sales far exceeding expectations; • Accelerated work to automate and modernize our processes and interactions with customers, leveraging technology in areas such as claims submission, engagement with independent agents and enrollment; • Led efforts to leverage Colonial Life’s expertise in key areas, including enrollment and benefits education, to help drive growth in other areas of the company; and • Continued to strengthen a strong and talented culture at Colonial Life committed to inclusion and diversity, professional growth and leadership development. Given these accomplishments, the Committee applied individual performance percentages of 100% for Mr. Arnold’s 2018 annual incentive award and 105% for his long-term incentive award granted in March 2019. | |||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $500,035 | ||
AI Target | 90% | ||
LTI Target | 125% | ||
2018 | |||
Base Salary | $500,035 | ||
AI Target | 90% | ||
LTI Target | 125% | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
68 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
LISA G. IGLESIAS, Executive Vice President and General Counsel | |||
ANNUAL COMPENSATION(1) | In assessing Ms. Iglesias' performance for 2018, the Committee noted that she: • Demonstrated effective leadership as General Counsel for our legal, audit, government affairs, ethics, compliance and supply management teams during a year of substantial change and business support needs; | ||
2018 | |||
Base Salary | $521,315 | ||
AI | $469,184 | ||
LTI | $751,036 | ||
2017 | |||
Base Salary | $502,692 | • Increased accountability of key Board and Committee activities, improving communication from senior management and enhancing key processes; • Has been a valued and vocal leader in our $100 million, multiyear strategy to create a more collaborative and engaging workplace, and continued her leadership of key inclusion and diversity initiatives; • Continued her work to further strengthen our culture of ethical conduct, compliance and transparency; and • Focused on talent and leadership development in key areas, particularly in our supply management team. Given these accomplishments, the Committee applied individual performance percentages of 100% for Ms. Iglesias' 2018 annual incentive award and 110% for her long-term incentive award granted in March 2019. | |
AI | $452,423 | ||
LTI | $694,375 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $550,000 | ||
AI Target | 95% | ||
LTI Target | 135% | ||
2018 | |||
Base Salary | $525,200 | ||
AI Target | 90% | ||
LTI Target | 130% |
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
2019 PROXY STATEMENT 69
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Policies and Practices
Equity Grant Practices
Equity grants awarded under the long-term incentive program are approved at the February meeting of the Committee, which typically occurs two to three weeks after the company’s annual earnings are released to the public. The March 1, 2018 grant was approved at the February 2018 meeting of the Committee. The closing stock price on the grant date is used to determine the number of units awarded.
Stock Ownership and Retention Requirements
Ensuring that senior officers have a significant ownership stake in the company aligns the long-term interests of management and shareholders and promotes a culture of ownership and accountability. The following table reflects the stock ownership and retention requirements across Unum Group for senior level officers beyond those described in the proxy.
STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR SENIOR OFFICERS |
Ownership as Percent of Salary | Retention Requirements | ||||
Required | Retention Percent | Holding Period | |||
Chief Executive Officer | 6x | 75% | 3 years | ||
Executive Vice President | 3x | 60% | 1 year | ||
Senior Vice President | 1x | 50% | 1 year |
We require these senior officers, including each NEO, to:
The following table presents the stock ownership and retention requirements for each NEO. Messrs. McKenney, McGarry, and Simonds exceeded the requirements as of December 31, 2018. Ms. Iglesias, who joined the organization in January 2015, and Mr. Arnold, who became an Executive Vice President in January 2015, are expected to meet the ownership requirements within the applicable time period provided.
70 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR NEOs | (as of December 31, 2018) |
Ownership as Percent of Salary | Retention Requirements | ||||||
Executive | Common Stock(1) | Restricted Stock Units(2) | Total Current Ownership | Owned | Required | Retention Percent(3) | Holding Period(4) |
Mr. McKenney | $8,178,070 | $4,113,200 | $12,291,270 | 12.3x | 6x | 75% | 3 years |
Mr. McGarry | 1,749,755 | 729,476 | 2,479,231 | 3.9x | 3x | 60% | 1 year |
Mr. Simonds | 1,438,269 | 729,388 | 2,167,657 | 3.4x | 3x | 60% | 1 year |
Mr. Arnold | 458,122 | 374,507 | 832,629 | 1.7x | 3x | 60% | 1 year |
Ms. Iglesias | 745,136 | 459,004 | 1,204,140 | 2.3x | 3x | 60% | 1 year |
(1) | Amount includes shares held in certificate form, brokerage accounts, and 401(k) Plan accounts. Shares were valued using a closing stock price of $29.38 on December 31, 2018. |
(2) | Shares/units were valued using a closing stock price of $29.38 on December 31, 2018. Performance-based restricted stock units (PBRSUs) vest over three years (see the Vesting Schedule for Unvested Restricted Stock Units table on page 82). |
(3) | Retention percentage is the net percentage of shares to be held after the payment of taxes and the costs of exercise and commissions. Retention requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs and PSUs. |
(4) | After this holding period, the officer would then be able to sell the shares as long as his or her ownership requirement is met or would be reached in the time period allotted. |
Hedging, Pledging and Insider Trading Policies
We have a policy that no director or executive officer, which includes our NEOs, may purchase or sell options, puts, calls, straddles, equity swaps or other derivatives that are directly linked to our stock.
In addition, our insider trading policy prohibits directors, executive officers (including NEOs) and employees from buying or selling our stock while in possession of material nonpublic information about the company and from conveying any such information to others. Under this policy, additional trading restrictions apply to the NEOs and other “corporate insiders,” who are generally permitted to buy or sell our stock only during predetermined window periods following earnings announcements, and only after they have pre-cleared the transactions with our general counsel or designee. Also under this policy, no corporate insider may make “short sales” of our stock, and no director or executive officer may pledge our stock as security for a loan.
Recoupment Policy
If the company makes a material restatement of its financial results, then the Board will, to the extent permitted by applicable law, seek recoupment of performance-based compensation paid to certain senior officers if it determines that:
The amount of performance-based compensation to be recouped will be determined by the Board after taking into account the relevant facts and circumstances. Performance-based compensation includes annual cash incentive awards, bonuses and all forms of equity compensation. The company’s right to recoup compensation is in addition to other remedies that may be available under applicable law.
2019 PROXY STATEMENT 71
COMPENSATION DISCUSSION AND ANALYSIS
Tax and Accounting Considerations
Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a public corporation for compensation over $1 million paid in any fiscal year to certain “covered employees,” which includes our named executive officers. However, in the case of tax years commencing before 2018, the statute exempted qualifying performance-based compensation from the deduction limit if certain requirements were met. Section 162(m) was amended in December 2017 by the Tax Cuts and Jobs Act to eliminate the exemption for performance-based compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017) and to expand the group of current and former executive officers who are covered by the deduction limit under Section 162(m).
Historically, our annual incentive payout and long-term incentive grants were intended to be deductible under Section 162(m). The Committee did, however, reserve the right to, in its sole discretion, pay compensation that was not deductible under Section 162(m) if it determined that paying such compensation was needed in order to attract, retain or provide incentives to our NEOs, or was otherwise desirable. Given complexities in the tax rules, it is also possible that compensation intended to qualify for the “qualified performance-based compensation” exception did not so qualify.
In light of the repeal of the performance-based compensation exception to Section 162(m), the Committee expects compensation granted or paid in 2018 and future tax years will not be fully deductible for income tax purposes. While, the Committee believes that shareholder interests are best served if it retains discretion and flexibility in awarding compensation, even though some compensation awards may result in non-deductible compensation expenses, the Committee intends to maintain strong pay-for-performance alignment of executive compensation arrangements notwithstanding loss of deductibility due to the repeal of the exemption for performance-based compensation.
ASC Topic 718
We account for stock-based payments under the requirements of ASC Topic 718. A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our 2018 Form 10-K. Each year, the company provides a report to the Committee of the expense for stock-based payments. Additionally, in the event the Committee is considering new equity-based compensation programs or changes to existing programs, the accounting implications of the program or change are presented and discussed as part of the decision process.
Perquisites and Other Personal Benefits
We provide a limited number of perquisites to our employees, including all NEOs, which are described below:
72 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
component in favor of a component ensuring that, to be certain the Company has a strong brand with a variety of constituents. In particular,extent permitted under FAA regulations, the company has beenrecovers the value of the flight determined under the Standard Industry Fare Level valuation formula. Mr. McKenney did not use this benefit during 2018.
• | A tax gross-up is provided to employees who incur income on company-sponsored events where attendance is expected, including a limited number of events we host each year to recognize the contributions of various employees. These functions serve specific business purposes, and in some cases the attendance of a NEO and his or her spouse or guest is expected. If so, we attribute income to the NEO for these costs when required under Internal Revenue Service regulations. For more information, see the All Other Compensation table on page 78. |
Retirement and Workplace Benefits
We provide a leading voicebenefits package for our industryemployees, including all NEOs, and their dependents, portions of which are paid for, in building partnerships with policymakers and groupswhole or in part, by the employee.
Among the retirement benefits we offer are:
The Unum Group 401(k) Retirement Plan. On January 1, 2014, Unum replaced its defined benefit pension plans, which were frozen to further accruals as of December 31, 2013, with an enhanced defined contribution retirement offering. This includes: (1) a non-contributory tax-qualified defined contribution plan for all regular U.S. employees who meet eligibility requirements and are generally scheduled to work at least 1,000 hours per year, which is offered within our existing tax-qualified 401(k) retirement plan (401(k) Plan), and (2) a separate, non-qualified defined contribution plan (Non-Qualified Plan) for employees whose benefits under the goal of protectingtax-qualified plan are limited by the financial security of more workersInternal Revenue Code (the “Code”). New hires are automatically enrolled in the 401(k) and Non-Qualified Plan at a 5% deferral rate 45 days after hire but are able to make adjustments to their families;deferral rate. Base pay and annual incentives are included in covered earnings for these defined contribution plans, but long-term incentive awards are not. Unum provides the following contributions:
The transition contributions are being namedprovided to eligible employees to more closely align with the benefits which were accrued under the frozen defined benefit plans. This benefit is provided to those employees who, due to their age and years of service, would not have the same opportunity to adjust to the position. He has focusednew defined contribution plan as other employees. Transition contributions will be made to active eligible employees until December 31, 2020.
The other workplace benefits we offer include: life, health, dental, vision, voluntary products and disability insurance; dependent and healthcare reimbursement accounts; health savings accounts; tuition reimbursement; an employee stock purchase plan; paid time off; holidays; and a matching gifts program for charitable contributions.
In April 2018, we purchased corporate owned life insurance (COLI) on all officers who gave their approval. In the event of a covered officer’s death while still employed, we will provide a death benefit to the officer’s beneficiary in the amount of $200,000. In the event of a covered officer’s death while no longer employed, we will provide a death benefit to the officer’s beneficiary in the amount of $50,000. Each of the NEOs is covered under the policy. Mr. McGarry is also covered under a similar COLI policy purchased in April 2000 that will provide a death benefit to the officer’s beneficiary in the amount of $200,000 in the event of his death while still employed.
2019 PROXY STATEMENT 73
COMPENSATION DISCUSSION AND ANALYSIS
The Unum Group Pension Plan (the Qualified Plan) and the Unum Group Supplemental Pension Plan (the Excess Plan) were frozen on December 31, 2013. Benefits earned under these plans have been determined based on service and eligible earnings through December 31, 2013. NEOs hired prior to this date and who met the participation requirements at the freeze date participated in both the Unum Group Pension and Supplemental Pension Plans. Benefits earned before the freeze will be paid to executives under the terms of the plans as the employees terminate employment or retire.
FROZEN DEFINED BENEFIT PLANS
Unum Group Pension Plan (Qualified Plan) |
Provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Code. The Qualified Plan was designed to provide tax-qualified pension benefits for most employees. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Qualified Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. |
Unum Group Supplemental Pension Plan (Excess Plan) |
Provides unfunded, non-qualified benefits for compensation that exceeds the Code limits applicable to the Qualified Plan. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Excess Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. |
Plan Descriptions
Following are details of how each of the frozen plan benefits are calculated. These formulas incorporate base pay received in each plan year during which the employee accrued credited service through December 31, 2013, and payments received from the regular Annual Incentive Plan and any field or sales compensation plans through that date. Not included are other bonuses, long-term incentive awards, commissions, prizes, awards, or allowances for incidentals.
Qualified Plan
In calculating the basic pension benefits in our Qualified Plan, three criteria are used:
FROZEN QUALIFIED PLAN CRITERIA
Credited service |
Measures of the time individuals are employed at the company. One year of credited service is granted for each plan year in which 1,000 hours of employment are completed. No additional credited service will accrue to any participant after December 31, 2013. |
Highest average earnings |
The average of the highest 5 years of compensation (whether or not consecutive) during the earlier of the last 10 years of employment or as of the date the plan was frozen on December 31, 2013. |
Social Security covered compensation |
The average of the taxable wage bases in effect for each calendar year during the 35-year period ending when the plan was frozen on December 31, 2013. |
74 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
The basic benefit is provided as an annual single life annuity and is calculated as follows:
(1) | Can range from 3%, if the sum of an employee’s age and years of credited service is less than 30, to 8%, if the sum equals or exceeds 95. |
(2) | Equal to 9.0 for retirement at age 65 and increased by 0.2 for each whole year retirement occurs prior to age 65. |
All frozen pension benefits are indexed on the developmentfirst day of his leadership team while maintaining employee engagement at levels exceeding industry leading benchmarks. In 2017, he accelerated programs and actions to further diversityeach plan year (January 1st) following December 31, 2013 using the National Average Wage rate of increase published by the Social Security Administration in the organizationpreceding year (minimum of 2.75% and buildmaximum of 5%). As of January 2017, the retirement benefits will be indexed using the Internal Revenue Service regulations.
Benefits provided under the frozen Qualified Plan are based on pensionable earnings through December 31, 2013 up to the 2013 compensation limit of $255,000 under the Internal Revenue Code. In addition, benefits may not exceed $225,000 (payable as a culturesingle life annuity beginning at any age from 62 through Social Security Normal Retirement Age) under the Internal Revenue Code.
Excess Plan
As described above in the Frozen Defined Benefit Plans table, the Excess Plan disregards the annual benefit limit under Section 415 of inclusion.the Code. The Excess Plan takes into account pension benefits outside of the current Qualified Plan and is calculated as follows:
Retirement Age
Participants in the pension plans outlined above are eligible to retire as early as age 55. Under the Qualified Plan, participants may retire early at age 55 with 5 years of vesting service. Under the Excess Plan, generally participants can retire at the latter of age 60 or termination. However, if a participant begins receiving a benefit prior to the normal retirement age of 65, the normal retirement benefit will be reduced based on the applicable early reduction factors defined in the plan. The benefit formula for the Qualified and Excess plans are shown above. Mr. McGarry and Mr. Arnold are the only NEOs currently eligible for early retirement under the Qualified Plan. Mr. McGarry is the only NEO currently eligible for early retirement under the Excess Plan.
2019 PROXY STATEMENT 75
COMPENSATION DISCUSSION AND ANALYSIS
REPORT OF THE HUMAN CAPITAL COMMITTEE
The Human Capital Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the company’s overall performance achievement of 120%,Annual Report on Form 10-K for the Committee awarded Mr. McKenney an individual performance percentage of 115% for his 2017 annual incentive award and 120% as the individual performance modifier for his long-term incentive award granted in Marchfiscal year ended December 31, 2018.
2018 Human Capital Committee:
Cynthia L. Egan, Chair
Theodore H. Bunting, Jr.
Kevin T. Kabat
Ronald P. O’Hanley
76 2019 PROXY STATEMENT
COMPENSATION TABLES
COMPENSATION TABLES
2018 Summary Compensation Table
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value & Non-qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | TOTAL ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard P. McKenney | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer, and a Director | 2018 | 1,000,000 | — | 6,564,575 | (2) | — | 1,900,000 | (3) | — | (4) | 432,286 | (5) | 9,896,861 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 1,000,000 | — | 5,720,021 | — | 2,415,000 | 119,000 | 429,925 | 9,683,946 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 994,231 | — | 5,176,835 | — | 2,100,937 | 84,000 | 315,316 | 8,671,319 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John F. McGarry | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | — | 1,151,381 |
2017 623,077 — 1,040,004 822,462 322,000 231,242 3,038,785 2016 588,461 — 912,245 — 744,404 273,000 196,724 2,714,834 Michael Q. Simonds Executive Vice President, President and Chief Executive Officer, Unum US 627,418 — 1,125,485 (2) — 627,418 (3) — (4) 146,822 (5) 2,527,143 2017 1,040,004 — 792,554 248,000 132,521 2,824,617 2016 594,231 — 953,678 — 676,532 168,000 127,479 2,519,920 Timothy G. Arnold Executive Vice President, President and Chief —
Lisa G. Iglesias Executive Vice President and General Counsel 521,315 — 690,652 (2) — 469,184 (3) — (4) 104,501 (5) 1,785,652 2017 502,692 — 643,520 — 452,423 — 105,505 1,704,140 2016 492,692 — 639,854 — 424,946 — 91,033 1,648,525 |
(1) | "Stock Awards" consists of performance |
(2) | These awards were comprised of 50% PSUs and 50% PBRSUs granted on |
2019 PROXY STATEMENT 77
COMPENSATION TABLES
(3) | Amounts reflect the annual incentive awards
|
(4) | The amounts of the
the discount rate and mortality rate. The
|
(5) | "All Other Compensation" amounts are set forth in the
|
Mr. McKenney | Mr. McGarry | Mr. Simonds | Mr. Arnold | Ms. Iglesias | |
Employee and Spouse/Guest Attendance at Company Business Functions(a) | 41,752 | — | 5,494 | 44,074 | — |
Total Perquisites | 41,752 | — | 5,494 | 44,074 | — |
Matching Gifts Program(b) | 10,000 | 100 | — | 10,000 | 10,000 |
Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | 169,789 | 72,017 | 70,392 | 48,817 | 48,182 |
Company Contributions to the Qualified and Non-Qualified Defined Contribution Retirement Plan(d) | 152,810 | 163,190 | 63,353 | 109,830 | 43,364 |
Non-Resident State Taxes(e) | 40,604 | 2,536 | 3,129 | 386 | 2,886 |
Tax Reimbursement Payments(f) | 17,331 | 97 | 4,454 | 32,858 | 69 |
Foreign Assignment(g) | — | 1,500 | — | — | — |
Total All Other Compensation | $432,286 | $239,440 | $146,822 | $245,965 | $104,501 |
Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compen- sation | Change in Pension Value & Non-qualified Deferred Compensation Earnings | All Other Compen- sation | TOTAL | ||||||||||||||||||
Name and Principal Position(1) | Year | ($) | ($) | ($)(2) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||
Richard P. McKenney | |||||||||||||||||||||||||
President and Chief Executive Officer, and a Director | 2017 | 1,000,000 | — | 5,720,021 | (3 | ) | — | 2,415,000 | (4 | ) | 119,000 | (5 | ) | 429,925 | (6 | ) | 9,683,946 | ||||||||
2016 | 994,231 | — | 5,176,835 | — | 2,100,937 | 84,000 | 315,316 | 8,671,319 | |||||||||||||||||
2015 | 905,000 | — | 3,051,050 | — | 1,527,033 | — | 247,931 | 5,731,014 | |||||||||||||||||
John F. McGarry | |||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2017 | 623,077 | — | 1,040,004 | (3 | ) | — | 822,462 | (4 | ) | 322,000 | (5 | ) | 231,242 | (6 | ) | 3,038,785 | ||||||||
2016 | 588,461 | — | 912,245 | — | 744,404 | 273,000 | 196,724 | 2,714,834 | |||||||||||||||||
2015 | 517,860 | — | 629,287 | — | 509,513 | — | 221,024 | 1,877,684 | |||||||||||||||||
Michael Q. Simonds | |||||||||||||||||||||||||
Executive Vice President, President and Chief Executive Officer, Unum US | 2017 | 611,538 | — | 1,040,004 | (3 | ) | — | 792,554 | (4 | ) | 248,000 | (5 | ) | 132,521 | (6 | ) | 2,824,617 | ||||||||
2016 | 594,231 | — | 953,678 | — | 676,532 | 168,000 | 127,479 | 2,519,920 | |||||||||||||||||
2015 | 566,346 | — | 961,052 | — | 564,888 | — | 113,967 | 2,206,253 | |||||||||||||||||
Breege A. Farrell | |||||||||||||||||||||||||
Executive Vice President and Chief Investment Officer | 2017 | 458,385 | — | 494,697 | (3 | ) | — | 651,822 | (4 | ) | 47,000 | (5 | ) | 112,834 | (6 | ) | 1,764,738 | ||||||||
2016 | 451,500 | — | 448,816 | — | 598,689 | 38,000 | 99,493 | 1,636,498 | |||||||||||||||||
2015 | 444,618 | — | 443,024 | — | 557,551 | — | 109,762 | 1,554,955 | |||||||||||||||||
Lisa G. Iglesias | |||||||||||||||||||||||||
Executive Vice President and General Counsel | 2017 | 502,692 | — | 643,520 | (3 | ) | — | 452,423 | (4 | ) | — | (5 | ) | 105,505 | (6 | ) | 1,704,140 | ||||||||
2016 | 492,692 | — | 639,854 | — | 424,946 | — | 91,033 | 1,648,525 | |||||||||||||||||
2015 | 470,077 | — | 1,149,997 | — | 381,291 | — | 40,410 | 2,041,775 |
2017 ALL OTHER COMPENSATION | |||||||||||||||
Mr. McKenney | Mr. McGarry | Mr. Simonds | Ms. Farrell | Ms. Iglesias | |||||||||||
Employee and Spouse/Guest Attendance at Company Business Functions(a) | 52,009 | — | 4,178 | — | 4,597 | ||||||||||
Total Perquisites | $52,009 | $— | $4,178 | $— | $4,597 | ||||||||||
Matching Gifts Program(b) | 10,000 | 3,200 | 200 | 10,000 | 10,000 | ||||||||||
Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | 155,047 | 68,374 | 64,404 | 52,854 | 46,382 | ||||||||||
Non-Resident State Taxes(d) | 43,677 | 1,420 | 1,515 | 2,355 | 2,385 | ||||||||||
Company Contributions to the Qualified and Non-Qualified Defined Contribution Retirement Plan(e) | 139,542 | 154,811 | 57,963 | 47,568 | 41,744 | ||||||||||
Tax Reimbursement Payments(f) | 29,650 | 114 | 4,261 | 57 | 397 | ||||||||||
Foreign Assignment(g) | — | 3,323 | — | — | — | ||||||||||
Total All Other Compensation | $429,925 | $231,242 | $132,521 | $112,834 | $105,505 |
(a) | Spouses or guests sometimes accompany the NEO at company business functions. When their attendance is expected, a tax gross up payment is provided. Where applicable, these payments have been included under "Tax Reimbursement Payments." Additionally, when these trips included travel on the corporate aircraft, the incremental cost was calculated to determine amounts to be reported. For purposes of compensation disclosure, the use of company aircraft is valued using an incremental cost that takes into account fuel costs, landing fees, parking, weather monitoring and maintenance fees per hour of flight. Crew travel expenses are included based on the actual amount incurred for a particular trip. Fixed costs that do not change based on usage, such as pilot salaries and depreciation of the aircraft, are excluded. Amounts represent the imputed income each NEO incurred for such attendance plus the incremental cost of the aircraft when the aircraft was used. |
(b) | Amounts represent those provided through our Matching Gifts Program, available to all full-time employees and non-employee directors. During 2018, the company matched eligible gifts from a minimum of $50 to an aggregate maximum gift of $10,000 per employee/non-employee
78 2019 PROXY STATEMENT COMPENSATION TABLES
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