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2022 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
INFORMATION ABOUTPROPOSAL ONE: THE MEETINGDECLASSIFICATION PROPOSAL |
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Proposal One: Election of Directors | | |
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Nominees and Continuing Directors |
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Our Amended and Restated Certificate of Incorporation provides that the Board is to be divided into three classes serving for staggered three-year terms. However, the Board has adopted a resolution proposing an amendment to the Amended and Restated Certificate of Incorporation to eliminate the classified Board structure over a three year period, as outlined inThe Declassification Proposal Four. Under our By-Laws, our Board has the authority to fix the number of directors, provided that the Board must have between five and fourteen members.
The first proposal on the agenda for the meeting is the election of five nominees to serve as Class III Directors for three-year terms beginning at the meeting and ending at our 2025 Annual Meeting of Stockholders.
In October 2021, David Steward retired from the Board. In January 2022, Robert Ditmore, John Roberts, and Tommy Thompson retired from the Board. These retirements gave us an opportunity to execute on our commitment to refreshing the Board. In January 2022, five new directors joined the Board.
No director, including any director standing for election, or any associate of a director, is a party adverse to us or any of our subsidiaries in any material proceeding or has any material interest adverse to us or any of our subsidiaries. No director, including any director standing for election, is related by blood, marriage or adoption to any other director or any executive officer.
The Board has nominated Orlando Ayala and James Dallas for re-election to the Board and nominated Kenneth Burdick, Sarah London, and Theodore Samuels for election to the Board. We expect that all nominees will be able to serve if elected. If any of them are not able to serve, proxies may be voted for a substitute nominee or nominees.
The Board believes the election of these five nominees is in our best interests and the best interests of our stockholders and recommends a vote “FOR” the election of the five nominees.
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Class III Directors - Standing for Re-Election or Election for Term Expiring in 2025 |
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Orlando Ayala
Principal Occupation: Retired Chairman and Corporate Vice President of Emerging Businesses for Microsoft Corporation
First Became Director: September 2011
Age: 65
Mr. Ayala served as Chairman and Corporate Vice President of Emerging Businesses for Microsoft Corporation until August of 2016. He joined Microsoft in 1991 as Senior Director of the Latin America region and from 1998 to 2003 was responsible for Global Sales, Marketing and Services as Executive Vice President. For more than 30 years, Mr. Ayala held increasingly senior leadership roles in the technology sector. Mr. Ayala has served as a Director for Ecopetrol since 2019.
Qualifications: Mr. Ayala's range of experience includes, in particular, public company governance, community involvement, technology, service and insurance industry, organizational development and international expertise.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
Kenneth A. Burdick
Principal Occupation: Former Director and Chief Executive Officer of WellCare Health Plans, Inc.
First Became Director: January 2022
Age: 63
Mr. Burdick served as the Executive Vice President of Markets and Products of Centene Corporation from January 23, 2020, until his retirement on February 21, 2021. He served as the Chief Executive Officer of WellCare Health Plans, Inc. from 2015 until January 2020 when the company was acquired by Centene. Mr. Burdick joined WellCare in 2014, serving initially as President, National Health Plans and then as President and Chief Operating Officer. He served as the President and Chief Executive Officer of Blue Cross and Blue Shield of Minnesota from February 2012 to July 2012. From August 2010 to February 2012, he served as Chief Executive Officer of the Medicaid and Behavioral Health businesses of Coventry Health Care, Inc. From October 1995 to May 2009, Mr. Burdick held a variety of positions with UnitedHealth Group, Inc., including Chief Executive Officer of UnitedHealthcare from 2006 to 2008 and Chief Executive Officer of Secured Horizons (Medicare division of UnitedHealthcare) from 2008 to 2009. Mr. Burdick currently serves on the Board of Directors of Orion Acquisition Corporation and First Horizon National Corporation. He also currently serves on the Board of Directors of Big Brothers Big Sisters of America, where he has served since 2017, including as National Board Chair since July 2018.
Qualifications: Mr. Burdick's range of experience includes, in particular, experience as a chief executive officer, public company governance, financial services, organizational development, community involvement, healthcare and insurance industry expertise.
H. James Dallas
Principal Occupation: Former Senior Vice President, Quality and Operations, Medtronic Public Limited Company
First Became Director: January 2020
Age: 63
Mr. Dallas is an independent consultant focusing on change management, information technology strategy, and risk. In 2013, Mr. Dallas retired as Senior Vice President of Quality and Operations at Medtronic Inc., a global medical technology company. Mr. Dallas, who joined Medtronic Inc. in 2006, had previously served as Senior Vice President and Chief Information Officer at Medtronic Inc. Mr. Dallas’s responsibilities included executing cross-business initiatives to maximize the company’s global operating leverage. Mr. Dallas also served as a member of Medtronic Inc.’s executive management team. Mr. Dallas served on the WellCare Board of Directors since 2016 and joined Centene's Board upon the closing of the WellCare acquisition. He also serves as a director of KeyCorp and Grady Memorial Hospital Corporation. He previously served as a director of the Capella Education Company.
Qualifications: Mr. Dallas’ range of experience includes, in particular, public company governance, technology, financial services, community involvement, healthcare and companies with revenues greater than $1 billion.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
Sarah M. London
Principal Occupation: Vice Chairman of Centene Corporation
First Became Director: September 2021
Age: 41
Ms. London joined the Company in September 2020, and prior to her election as Vice Chairman in September 2021, served as the Company’s President, Health Care Enterprises and Executive Vice President, Advanced Technology since March 2021. Prior to that, she served as the Company’s Senior Vice President, Technology and Modernization since September 2020. Prior to joining Centene, she served as both Senior Principal and Partner for Optum Ventures from May 2018 to March 2020 and Chief Product Officer of Optum from March 2016 to May 2018. From March 2014 to March 2016, she served as Vice President, Client Management and Operations for Humedica.
Qualifications: Ms. London's range of experience includes, in particular, technology, community involvement, organizational development, healthcare and insurance industry expertise.
Theodore R. Samuels
Principal Occupation: Former President, Capital Guardian Trust Company
First Became Director: January 2022
Age: 67
Mr. Samuels has over 35 years of experience in the financial industry and brings to our Board extensive business and operational expertise, particularly with respect to economics, capital markets and investment decision making. Mr. Samuels is the former President of Capital Guardian Trust Company and a former global equity portfolio manager at Capital Group, one of the most prominent investment management organizations in the world. While at Capital Group he served on numerous management and investment committees, with an eye towards long-term shareholder value creation. Mr. Samuels currently serves on the boards of Bristol Myers Squibb, where he is Lead Independent Director, and Perrigo Company, plc. He also served on the Board of Stamps.com until October 2021 when the company was acquired.
Qualifications: Mr. Samuels' range of experience includes, in particular, public company governance, community involvement, investment management, value creation, and capital markets.
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Class II Directors - Term Expiring in 2024 | |
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Jessica L. Blume, CPA
Principal Occupation: Retired Vice Chairman of Deloitte LLP
First Became Director: February 2018
Age: 67
Ms. Blume was Vice Chairman of Deloitte LLP from 2012 until her retirement in 2015. She served in various leadership positions during her 26 years at Deloitte including serving on the firm's US Executive Committee and Board of Directors, as the Chair of the Executive Compensation and Evaluation Committee, and a member of the Finance, Governance, Strategic Investment and Risk Committees. Ms. Blume currently serves as a director of Publix Super Markets, Inc.
Qualifications: Ms. Blume's range of experience includes, in particular, management consulting, accounting, technology, international and organizational development expertise.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
Frederick H. Eppinger
Principal Occupation: Director, President and Chief Executive Officer of Stewart Information Services Company
First Became Director: April 2006
Age: 63
Mr. Eppinger has served as Chief Executive Officer since 2019 and as a Director since 2016 of Stewart Information Services Company. He served as Director, President and Chief Executive Officer of The Hanover Insurance Group, Inc. (insurance and financial services industries) from 2003 to 2016. He served as a Senior Partner at McKinsey & Co. from 1985 to 2000. Mr. Eppinger previously served as a director of QBE Insurance Group Limited.
Qualifications: Mr. Eppinger's range of experience includes, in particular, experience as a chief executive officer, community involvement, as well as organizational development and insurance industry expertise.
Leslie V. Norwalk
Principal Occupation: Strategic Counsel, Epstein Becker Green, P.C.
First Became Director: January 2022
Age: 56
Ms. Norwalk has served as Strategic Counsel to Epstein Becker Green, P.C., a law firm specializing in healthcare and life science industries since 2007. She also serves as an advisor to several private equity firms focusing on healthcare policy and regulatory matters. Ms. Norwalk was the Acting Administrator for the Centers for Medicare & Medicare Services (CMS) under the Bush Administration, having served as the Deputy Administrator for the agency, as well as its Chief Operating Officer, Counselor and Policy Advisor. Ms. Norwalk served on the Magellan Health Board of Directors since 2019 and joined Centene's Board following the closing of the Magellan Health acquisition. Ms. Norwalk also serves as a director for Arvinas, Inc., ModivCare Inc., Neurocrine Biosciences, Inc. and NuVasive, Inc. She previously served as a director for Endologix Inc., Press Ganey, and Volcano Corporation. Upon her appointment to Centene's Board of Directors in January 2022, Ms. Norwalk committed to resigning from one of her outside public company board positions prior to our 2022 Annual Meeting of Stockholders in order to meet Centene's corporate governance guidelines requirement that no director may serve on more than three other public company boards. In connection with her appointment, our Board granted a limited waiver to such requirement until the earlier of such resignation and our 2022 Annual Meeting of Stockholders.
Qualifications: Ms. Norwalk's range of experience includes, in particular, political and regulatory relationships as well as healthcare expertise.
William L. Trubeck
Principal Occupation: Retired Executive Vice President and Chief Financial Officer, H&R Block, Inc.
First Became Director: January 2020
Age: 75
Mr. Trubeck served as Interim Executive Vice President and Chief Financial Officer of YRC Worldwide from March 2011 to July 2011. He served as Executive Vice President and Chief Financial Officer of H&R Block, Inc. from 2004 to 2007. Mr. Trubeck also served as Executive Vice President and Chief Financial Officer of Waste Management, Inc. and Senior Vice President and Chief Financial Officer of International Mutlifoods, Inc. Mr. Trubeck served on the WellCare Board of Directors since 2010 and joined Centene's Board of Directors upon the closing of the WellCare acquisition. Mr. Trubeck served as a director of YRC Worldwide, Inc. from 1994 until July 2011, a director of Dynegy, Inc. from April 2003 to June 2011, and a director of Ceridian Corp. from 2006 to 2007.
Qualifications: Mr. Trubeck's range of experience includes, in particular, public company governance, healthcare, companies with revenues greater than $1 billion, financial services and chief financial officer roles.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
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Class I Directors - Term Expiring in 2023 |
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Michael F. Neidorff
Principal Occupation: Chairman and Chief Executive Officer (CEO) of Centene Corporation
First Became Director: May 1996
Age: 79
Mr. Neidorff has served as our Chairman and Chief Executive Officer since September 2021. On February, 23, 2022, our Board of Directors approved a medical leave of absence for Mr. Neidorff from his positions as Chairman, Chief Executive Officer and a director. From April 2019 to September 2021, he served as our Chairman, President and Chief Executive Officer. From November 2017 to April 2019, he served as our Chairman and Chief Executive Officer. From May 2004 to November 2017, Mr. Neidorff served as Chairman, President and Chief Executive Officer. From May 1996 to May 2004, Mr. Neidorff served as President, Chief Executive Officer and as a member of our Board of Directors. Mr. Neidorff previously served as a director of Caleres, Inc.
Qualifications: Mr. Neidorff's range of experience includes, in particular, experience as a chief executive officer, as well as healthcare, investment banking, organizational development expertise and community involvement.
Christopher J. Coughlin
Principal Occupation: Retired Executive Vice President and Chief Financial Officer, Tyco International Ltd.
First Became Director: January 2022
Age: 69
Mr. Coughlin was Senior Advisor to the CEO and Board of Directors of Tyco International from 2010 to his retirement in 2012. He served as Executive Vice President and CFO of Tyco from 2005 to 2010, during which he was instrumental in turning the company around after a management and financial scandal and ultimately separated it into six separate public companies. Prior to joining Tyco, he worked as the Chief Operating Officer of the Interpublic Group of Companies from June 2003 to December 2004 and as Chief Financial Officer from August 2003 to June 2004. Previously, Mr. Coughlin was Executive Vice President and Chief Financial Officer of Pharmacia Corporation from 1998 until its acquisition by Pfizer in 2003. He currently serves as a director of Karuna Therapeutics, Inc. and Prestige Consumer Healthcare, Inc. He previously served as a director of large and complex healthcare companies including Allergan plc, Alexion Pharmaceuticals, Inc., Covidien plc, as well as Hologic Inc., Dun & Bradstreet Corp and Forest Laboratories, LLC. Mr. Coughlin was recently named a 2022 Director of the Year by the New Jersey Chapter of the National Association of Corporate Directors (NACD) for his leadership in public corporate governance. In 2015, Mr. Coughlin was also named the NACD Corporate Director of the Year.
Qualifications: Mr. Coughlin's range of experience includes, in particular, public company governance, healthcare, and chief financial officer roles.
Wayne S. DeVeydt
Principal Occupation: Executive Chairman, Surgery Partners, Inc.
First Became Director: January 2022
Age: 52
Mr. DeVeydt has been an operating partner at Bain Capital since March 2022 and also serves as the Executive Chairman of the Board of Directors of Surgery Partners, Inc., a role he has held since January of 2020. He previously served as Chief Executive Officer and Director of Surgery Partners, Inc. from January 2018 until January 2020. From January 2017 until January 2018, Mr. DeVeydt served as a Senior Advisor to the Global Healthcare division of Bain Capital Private Equity, LP. Mr. DeVeydt previously served as the Executive Vice President and Chief Financial Officer of Anthem, Inc. for nearly a decade, overseeing the financial operations associated with the company’s over $82 billion in annual revenues. During his tenure at Anthem, he also held numerous other leadership roles, including Chief Strategy Officer, Chief Accounting Officer, and Chief of Staff to the Chairman and Chief Executive Officer. Prior to joining Anthem, Mr. DeVeydt
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
was a partner with PricewaterhouseCoopers, where he served the managed care and healthcare sector. Mr. DeVeydt currently serves on the Board of Directors of NiSource, Inc. Mr. DeVeydt previously served on the Board of Directors of Grupo Notre Dame Intermedica and as a director of Myovant Sciences Ltd, a biopharmaceutical company.
Qualifications: Mr. DeVeydt's range of experience includes, in particular, chief executive officer and chief financial officer roles, healthcare, financial services, insurance industry and public accounting expertise.
Richard A. Gephardt
Principal Occupation: Chief Executive Officer and President of Gephardt Group, LLC; Former Majority Leader of the U.S. House of Representatives
First Became Director: December 2006
Age: 81
Mr. Gephardt has served as Chief Executive Officer and President of Gephardt Group, LLC (consulting business) since 2005. Mr. Gephardt served as a Member of the U.S. House of Representatives from 1977 to 2005; he was House Majority Leader from 1989 to 1995 and Minority Leader from 1995 to 2003. He also serves as a director for Spirit Aerosystems Holdings, Inc. Mr. Gephardt previously served as a director for Ford Motor Company, CenturyLink and US Steel Corporation.
Qualifications: Mr. Gephardt's range of experience includes, in particular, political and regulatory relationships as well as investment banking and healthcare expertise.
Lori J. Robinson
Principal Occupation: Retired United States Air Force General
First Became Director: October 2019
Age: 63
General Robinson served in the Air Force until her retirement in July 2018 following a 36-year military career, including Commander of North American Aerospace Defense Command (NORAD) and U.S. Northern Command (NORTHCOM) from 2016 to 2018. General Robinson previously served as Commander, Pacific Air Forces and Air Component Commander for U.S. Pacific Command, from 2014 to 2016, and as Vice Commander, Air Combat Command, from 2013 to 2014. Her international experience includes supporting the U.S. Indo-Pacific Command’s objectives and defending and promoting U.S. interests in the Pacific and Asia. She is a Four Star General and was the first female Combatant Commander for the United States. In 2016, General Robinson was named to Time magazine's list of 100 most influential people. Since 2019, General Robinson has served on the Boards of Directors of Korn Ferry and NACCO Industries, Inc.
Qualifications: General Robinson’s range of experience includes, in particular, organizational development expertise and military service.
On December 14, 2021, we entered into a cooperation agreement (the Cooperation Agreement) with Politan Capital Management LP (Politan) with respect to various matters involving nominees to our Board, voting obligations, and related corporate governance matters. Pursuant to the terms of the Cooperation Agreement, among other things:
•the Board expanded the maximum size of the Board from 13 directors to 14 directors;
•the Board appointed (i) Kenneth Burdick and Theodore Samuels as Class III directors, each for a term expiring at the Company’s 2022 Annual Meeting of Stockholders; (ii) Wayne DeVeydt and Christopher Coughlin as Class I directors, each for a term expiring at the Company’s 2023 annual meeting; and (iii) Leslie Norwalk as Class II director, for a term expiring at the Company’s 2024 annual meeting;
•the Board appointed James Dallas as Lead Independent Director;
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
•Kenneth Burdick has been included in the slate of director nominees recommended by the Board for election at the Company’s 2022 Annual Meeting of Stockholders;
•the Board appointed Wayne DeVeydt to the Board’s Nominating and Governance Committee and Compensation Committee;
•the Board adopted a policy setting a mandatory retirement age for non-management directors of 75 years, with current members of the Board excluded from the policy for the duration of their current terms; and
•Robert Ditmore, John Roberts and Tommy Thompson retired from the Board.
In addition, pursuant to the terms of the Agreement:
•Kenneth Burdick will be permitted to attend meetings of the Board’s Nominating and Governance Committee and Compensation Committee as a nonvoting observer;
•a maximum of 5 Board members will join management's existing Value Creation Plan steering committee;
•each of Michael Neidorff, Orlando Ayala and Richard Gephardt will retire from the Board prior to or at, and will not stand for reelection at, the Company’s 2023 annual meeting;
•the Board will appoint James Dallas or another independent director as independent chair of the Board no later than December 31, 2022; and
•the Board will appoint a new Chief Executive Officer no later than December 31, 2022.
Under the Cooperation Agreement, until 45 days prior to the last date pursuant to which stockholder nominations for director elections are permitted pursuant to the By-Laws with respect to the Company’s 2023 annual meeting (such date the Expiration Date), Politan must vote all shares of the Company’s common stock over which it has voting power at the 2022 Annual Meeting of Stockholders or any special meeting of Company stockholders in accordance with recommendations by the Board, including in favor of each director nominated and recommended by the Board for election at the 2022 Annual Meeting of Stockholders. The Cooperation Agreement provides for director replacement rights until the Expiration Date if any of Kenneth Burdick, Wayne DeVeydt or Leslie Norwalk becomes unable to serve or fulfill his or her duties as a director of the Company.
Further, pursuant to the Cooperation Agreement, Politan is subject to customary standstill restrictions until the Expiration Date, and each of the Company and Politan are subject to customary non-disparagement restrictions.
The Cooperation Agreement terminates automatically immediately following the conclusion of the Company’s 2023 annual meeting. Each party’s obligations under the Cooperation Agreement will terminate earlier if the other party breaches in any material respect any of its obligations under the Cooperation Agreement and any such breach is not cured within 10 days.
The foregoing is a summary of the Cooperation Agreement. The complete Cooperation Agreement is available as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 14, 2021.
The process followed byCompany’s stockholders are being asked to consider and vote on the Nominating and Governance CommitteeDeclassification Proposal, which is a proposal to identify and evaluate director candidates includes requestsadopt an amendment to the Current Charter that immediately declassifies the Board members and others for recommendations, meetings from time to time to evaluate potential candidates and interviewssuch that the terms of selected candidates by membersall of the Nominating and Governance Committee andCompany’s current directors will end at the Board.
In considering whether to recommend any particular candidate for inclusion in the Board's slate of recommended director nominees, the Nominating and Governance Committee will apply the criteria set forth in our Corporate Governance Guidelines. These criteria include the candidate's diversity, age,
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
freshness of perspective, skills and experience in the context of the needs of the Board. In addition, the Nominating and Governance Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. We believe that the backgrounds and qualifications of our Directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.
We believe that it is important that our directors understand the diverse populations that we serve. Indeed, Board membership should reflect diversity in its broadest sense, including persons diverse in background, geography, perspective, gender, and ethnicity and the candidate pool always reflects these attributes. The Board is particularly interested in maintaining a mix that includes the following backgrounds:
•Public company governance
•Healthcare
•Service and insurance industry
•Companies with revenues greater than $1 billion
•Public accounting
•Community involvement
•Military service
•Investment banking
•International
•Financial services
•Technology
•Organizational development
•Political and regulatory relationships
•Experience as a Chief Executive Officer
•Experience as a Chief Financial Officer
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
Our Board reflects a mix of these skills as follows:
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Board Member | | | | | | | | | | | | | | | |
Michael F. Neidorff | ü | ü | ü | ü | | ü | | ü | ü | | | ü | ü | ü | |
Orlando Ayala | ü | | ü | ü | | ü | | | ü | | ü | ü | | | |
Jessica L. Blume | ü | | ü | ü | ü | ü | | | ü | | ü | ü | | | |
Kenneth A. Burdick | ü | ü | ü | ü | | ü | | | ü | ü | | ü | | ü | |
Christopher J. Coughlin | ü | ü | ü | ü | ü | ü | | ü | ü | | | ü | | | ü |
H. James Dallas | ü | ü | ü | ü | | ü | | | ü | ü | ü | ü | | | |
Wayne S. DeVeydt | ü | ü | ü | ü | ü | ü | | | ü | ü | | ü | | ü | ü |
Frederick H. Eppinger | ü | | ü | ü | ü | ü | | | ü | | | ü | | ü | |
Richard A. Gephardt | ü | ü | ü | ü | | ü | | ü | ü | | ü | | ü | | |
Sarah M. London | ü | ü | ü | ü | | ü | | | | | ü | ü | | | |
Leslie V. Norwalk | ü | ü | ü | ü | | ü | | | ü | | | ü | ü | | |
Lori J. Robinson | | | | ü | | ü | ü | | ü | | | ü | | | |
Theodore R. Samuels | ü | ü | ü | ü | | ü | | ü | ü | ü | | ü | | | |
William L. Trubeck | ü | ü | ü | ü | | ü | ü | ü | ü | ü | | ü | ü | | ü |
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Public company governance | Healthcare | Service and insurance industry | High revenue companies | Public accounting | Community involvement | Military service | Investment banking |
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International | Financial services | Technology | Organizational development | Political and regulatory relationships | CEO experience | CFO experience | |
Stockholders may recommend individuals to the Nominating and Governance Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials to Nominating and Governance Committee, c/o Corporate Secretary, Centene Corporation, 7700 Forsyth Boulevard, St. Louis, Missouri 63105. Assuming that appropriate biographical and background material has been provided on a timely basis in accordance with the procedures set forth in our By-Laws, the Nominating and Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process and applying substantially the same criteria as it follows for candidates submitted by others.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
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Director Tenure and Commitment to Refreshment |
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We are proud of our Board, which for years has maintained excellent chemistry and internal working dynamics while having members with differing political affiliations and diverse backgrounds. We believe that the existing members of our Board continue to provide valuable insights and have contributed significantly to the success of our Company. The Board recognizes, however, the importance of planning for the succession of Board leadership and of bringing on new members. We followed through on this commitment to refreshment through the recent addition of five new members to our Board of Directors, which represents 36% refreshment in the last 6 months. In addition, our Board recently adopted a mandatory retirement age for non-management directors of 75 years with current members of the Board excluded from the policy for the duration of their current terms. Our Board has also established a targeted period of seven years as a maximum tenure of a Committee Chairman. Below is a summary of our newest board members.
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Our Board is focused on refreshment and diversity efforts. |
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Recent Board Refreshment | | |
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Kenneth A. Burdick (Appointed January 2022) | | Leslie V. Norwalk (Appointed January 2022) |
•Brings extensive insurance industry expertise as well as familiarity with Centene's operations.
| | •Brings extensive legal, regulatory and political, and healthcare expertise.
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•Former Executive Vice President of Markets and Products for Centene Corporation (2020-2021)
| | •Strategic Counsel, Epstein Becker Green, P.C. and advisor to three private equity firms in healthcare policy and regulatory matters.
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•Former Chief Executive Officer of WellCare Health Plans, Inc. (2015-2020)
| | •Former Director of Magellan Health.
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Christopher J. Coughlin (Appointed January 2022) | | Theodore R. Samuels (Appointed January 2022) |
•Brings extensive financial industry expertise and experience as a Board member at large healthcare companies.
| | •Brings extensive financial, operational and investment management expertise.
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•Former Retired Executive Vice President and Chief Financial Officer, Tyco International Ltd.
| | •Former President, Capital Guardian Trust Company
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•Former Director of large and complex healthcare companies including Allergan, Alexion, Covidien, among others.
| | •Former Director of Stamps.com until their acquisition in October 2021.
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Wayne S. DeVeydt (Appointed January 2022) | | |
•Brings extensive public accounting and financial expertise as well as executive experience in the healthcare and insurance industries.
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•Executive Chairman, Surgery Partners, Inc.
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•Former Chief Executive Officer and Director of Surgery Partners, Inc. (2018-2020)
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
Our Board has affirmatively determined that all directors and director nominees are independent as defined under the rules of the New York Stock Exchange (NYSE), except for Michael Neidorff, Sarah London and Kenneth Burdick due to their current or recent employment by the Company, as applicable. Our Board has also determined that all members of the Audit Committee meet the independence requirements contemplated by Rule 10A-3 under the Exchange Act and all members of the Compensation Committee meet the enhanced independence requirements under the rules of the NYSE. In addition, the Board has previously determined that David Steward, who retired from the Board in October 2021, and Robert Ditmore, John Roberts and Tommy Thompson, who each retired from the Board in January 2022, were independent under the rules of the NYSE.
In the course of the Board's determination regarding the independence of each non-employee director and director nominee, it considered any transactions, relationships and arrangements as required by the rules of the NYSE. The Board considered that Wayne DeVeydt is the executive chairman of Surgery Partners, Inc., with which the Company conducts business. The Board determined that the Company’s relationship with Surgery Partners, Inc. did not impact Mr. DeVeydt’s independence, including because the amounts paid by the Company to Surgery Partners, Inc. were below the thresholds of the NYSE listing standards. In addition, the Board considered that Leslie Norwalk serves on the boards of directors of certain companies with which we conduct business, and determined that her service on these boards does not impact her independence. Accordingly, no director or director nominee, excluding Michael Neidorff, Sarah London and Kenneth Burdick, has a direct or indirect material relationship with us except for their role as a director or stockholder.
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Comprehensive Succession Planning Process |
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Our Board recognizes that one of its most important duties is to ensure continuity in Centene's senior leadership by overseeing the development of executive talent and planning for the efficient succession of the CEO.
In July 2021, our longstanding CEO, Michael Neidorff informally communicated to the Board that he may decide for personal reasons to step down before the end of his contract, after which the Board and Mr. Neidorff established a succession planning initiative to ensure a full continuity plan. Subsequently, in December 2021, Mr. Neidorff, announced his intent to retire during 2022. Leading up to this announcement, the Board took several key steps as part of the leadership succession plan to position the Company for a smooth leadership transition, including:
•Appointing key executives during 2021, including Sarah London as Vice Chairman, Brent Layton as President and Chief Operating Officer, and Drew Asher as Chief Financial Officer;
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
•Creating the Office of the Chairman and CEO to broaden executives' capabilities, and support Centene's continued growth and innovation; and
•Establishing a meaningful search process for evaluating both internal and external candidates with the support of an external search firm, overseen by our Lead Independent Director, James Dallas, as well as the full Nominating and Governance Committee (NGC).
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The Board's Role in Succession Planning |
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As reflected in our Corporate Governance Guidelines, the Board's primary responsibilities include planning for CEO succession and monitoring and advising on succession planning for other executive officers. The Board's goal is to have a long-term and continuous program for effective senior leadership development and succession. The Board also has contingency plans in place for emergencies such as departure, death, or disability of the CEO or other executive officers.
This involves extensive planning and oversight, including:
•The entire Board works with the NGC to nominate and evaluate potential successors to the CEO.
•The CEO regularly evaluates and recommends potential successors, and recommends development plans for such individuals to the NGC.
•High-potential executives are regularly challenged with additional responsibilities to expose them to our diverse operations, as we strive to develop well-rounded and experienced senior leaders.
•Potential successors interact frequently with the Board in both formal and informal settings, so directors can get to know and evaluate them.
•The NGC formally reports to the full Board at least annually on succession planning, and the Board discusses succession planning regularly at scheduled meetings, including in executive session, as appropriate.
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Board of Directors Committees |
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Our Board of Directors has established seven committees: Audit, Compensation, Nominating and Governance, Compliance, Environmental and Social Responsibility, Government and Regulatory Affairs and Technology, each of which operates under a charter that has been approved by our Board. Current copies of each committee's charter are posted on our website, https://investors.centene.com. The current composition of these committees is provided in the following table.
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| Board Member | Board of Directors | Audit Committee1 | Compensation Committee2 | Nominating and Governance Committee3 | Compliance Committee | ESHG Committee | Government and Regulatory Affairs Committee | Technology Committee |
| Michael F. Neidorff | Chairman | | | | | | | |
| Orlando Ayala | ü | | | | | ü | | Chairman |
| Jessica L. Blume | ü | ü | ü | Chairman | | | | ü |
| Kenneth A. Burdick | ü | | | | ü | | | ü |
| Christopher J. Coughlin | ü | ü | Chairman | | | | ü | |
| H. James Dallas | Lead Independent Director | | | ü | | Chairman | ü | ü |
| Wayne S. DeVeydt | ü | ü | ü | ü | | | | ü |
| Frederick H. Eppinger | ü | ü | | | Chairman | ü | ü | |
| Richard A. Gephardt | ü | | | | ü | ü | Chairman | |
| Sarah M. London | Vice Chairman | | | | | | | |
| Leslie V. Norwalk | ü | | | | ü | ü | ü | |
| Lori J. Robinson | ü | | | | ü | ü | ü | |
| Theodore R. Samuels | ü | ü | | ü | | ü | | |
| William L. Trubeck | ü | Chairman | ü | ü | ü | | | |
| Meetings held in 2021 | 22 | 8 | 7 | 17 | 4 | 4 | 1 | 3 |
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1 | During 2021, the following individuals served on the Audit Committee: John R. Roberts (Chairman), Jessica L. Blume, Frederick H. Eppinger and Tommy G. Thompson. |
2 | During 2021, the following individuals served on the Compensation Committee: Robert K. Ditmore (Chairman), Orlando Ayala, Jessica L. Blume, Richard A. Gephardt, David L. Steward and William L. Trubeck. |
3 | During 2021, the following individuals served on the Nominating and Governance Committee: Jessica L. Blume, H. James Dallas, Lori J. Robinson, David L. Steward, Tommy G. Thompson and William L. Trubeck |
All of our directors attended 75% or more of the meetings of the Board and any committees thereof on which they served. We encourage our directors to attend the annual meeting of stockholders. All directors then serving as directors attended the 20212023 Annual Meeting of Stockholders which was held virtually.(the 2023 Annual Meeting) and all director nominees will stand for election annually at and after the 2023 Annual Meeting (the Declassification Amendment).
At the Company’s 2022 Annual Meeting of Stockholders (the 2022 Annual Meeting), the Company’s stockholders adopted an amendment to the Current Charter providing for the rolling declassification of the Board over a three-year period. Accordingly, the Current Charter provides that the Board will remain classified, in part, until the Company’s 2025 Annual Meeting, at and after which all directors of the Company will be elected annually.
Our Board of Directors has responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The Board's primary responsibility is to oversee the managementAs part of the Company and,Board’s ongoing review of the Company’s corporate governance practices, the Board has determined that it is in doing so, serve the best interests of the Company and its stockholders. The Board selects, evaluates and provides for the succession of executive officers and, subject to stockholder election, directors. It reviews and approves corporate objectives and strategies, and evaluates significant policies and proposed major commitments of corporate resources. Management keeps the directors informed of its activities through regular written reports and presentations at Board and committee meetings.
The Board currently combines the role of Chairman ofstockholders that the Board with the role of CEO, coupled with a Vice Chairman and a Lead Independent Director position to further strengthen the governance structure. The Board believes this provides an efficient and effective leadership model for the Company at this time. The Board periodically reviews its leadership structure and during 2021, added a Vice Chairman and upon Michael Neidorff's retirement as Chairman of the Board in 2022, James Dallas will become Independent Chairman. To ensure effective independent oversight,be declassified immediately. Accordingly, the Board has adopted a numberand declared advisable the Declassification Amendment. If the Company’s stockholders approve the Declassification Proposal, the Board will be immediately declassified, the terms of governance practices, including:
•a strong, independent, clearly-defined Lead Independent Director role;
•executive sessionsall of the independentCompany’s current directors will end at the 2023 Annual Meeting and all director nominees will stand for election annually at and after the 2023 Annual Meeting.
The foregoing description of the Declassification Proposal should be read in connection with every regular quarterly Board meeting;
•a targeted periodthe proposed Amended and Restated Certificate of seven yearsIncorporation of the Company, which is attached as Annex A to this proxy statement (the “New Charter”). The New Charter is marked to show the maximum tenureproposed modifications of a Committee Chairman;
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the Declassification Amendment.
•annual performance evaluationsThe affirmative vote of a majority of the Chairman and CEO byoutstanding shares of our common stock entitled to vote at the independent directors; and
•regular quarterly meetingsSpecial Meeting is required to approve the Declassification Proposal. If the Company’s stockholders approve the Declassification Proposal at the Special Meeting, we will promptly file the New Charter, including the Declassification Amendment, with the Secretary of each Board committee.
Our Board of Directors has appointed H. James Dallas Lead Independent Director to preside at all executive sessions of “non-management” directors, as defined under the rulesState of the NYSE. The Lead Independent Director's role include leadingState of Delaware, at which point the Board's processes for selecting and evaluatingNew Charter will become effective. If the CEO, presidingCompany’s stockholders do not approve the Declassification Proposal at all meetingsthe Special Meeting, but the Company’s stockholders approve one or both of the Board at whichSpecial Meeting Proposal or the Chairman is not present, including executive sessions of the independent directors.
On February 23, 2022, the Board of Directors approved a medical leave of absence for Mr. Neidorff from his positions as Chairman and Chief Executive Officer. In connection with such leave of absence, our Board appointed James Dallas as Acting Chairman of the Board and determined that day-to-day management ofAction by Written Consent Proposal, the Company will be led on an interim basis by an expanded Officefile the New Charter, without the Declassification Amendment, with the Secretary of State of the Chairman, consistingState of Sarah London, Vice Chairman ofDelaware, at which point the Board; Brent Layton, President and Chief Operating Officer; Drew Asher, Chief Financial Officer; and Shannon Bagley, Chief Administrative Officer. The Office of the ChairmanNew Charter will report to James Dallas in his position as Acting Chairman of the Board.
In connection with the expansion of the Office of the Chairman, the Board determined that Ms. Bagley is an executive officer of the Company. Ms. Bagley, 43, has served as our Executive Vice President, Chief Administrative Officer, since March 2021. From August 2020 to March 2021, she served as Executive Vice President, Human Resources. From July 2016 to August 2020, she served as Senior Vice President, Human Resources and from May 2012 to July 2016 she served as President and CEO of Centene's Missouri health plan. Prior to that, she served in a variety of other roles of increasing responsibility with the Company since 2003.
Our Corporate Governance Guidelines require the Board to conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominating and Governance Committee receives comments from all directors and reports annually to the Board with an assessment of the Board’s performance. This is discussed with the full Board following the end of each fiscal year. The assessment focuses on the Board’s contribution to the Company and specifically focuses on areas in which the Board or management believes that the Board could improve.
The Audit Committee's responsibilities include:
•appointing, retaining, evaluating, terminating, approving the compensation of, and assessing the independence of our independent registered public accounting firm;
•overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of certain reports from the independent registered public accounting firm;
•reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;
•monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
•overseeing our internal audit function;
•discussing our risk management policies;
•assisting in the oversight of risks related to financial reporting, disclosures, investments, business ethics and conduct, and management policies;
•establishing policies regarding hiring employees from our independent registered public accounting firm and procedures for the receipt and retention of accounting-related complaints and concerns;
•meeting independently with our internal audit staff, independent registered public accounting firm and management; and
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•preparing the Audit Committee report required by Securities and Exchange Commission (SEC) rules.become effective.
The Board has determined that William L. Trubeck, Jessica L. Blume, Christopher J. Coughlin, Wayne S. DeVeydt, Frederick H. Eppinger and Theodore R. Samuels are “audit committee financial experts” as defined in Item 407(d)(5) of Regulation S-K and that each member ofrecommends a vote “FOR” the Audit Committee is "financially literate" under the applicable NYSE rules.
The Compensation Committee oversees our activities in the area of compensation and benefits (generally with regard to all employees and specifically with regard to our Named Executive Officers, or NEOs, identified in the Summary Compensation Table, as well as other officers) and reviews and makes recommendations concerning compensation-related matters to be submitted to the Board and/or stockholders for approval. The Board has determined that each of the members of the Compensation Committee is “independent,” as defined under the rules of the NYSE. The Compensation Committee's responsibilities include:
•annually reviewing and approving corporate goals and objectives relevant to our CEO's compensation;
•reviewing and making recommendations to the Board with respect to our CEO's compensation;
•reviewing and approving with respect to the compensation of our other executive officers;
•overseeing an evaluation of our senior executives;
•overseeing and administering our equity incentive plans;
•reviewing and making recommendations to the Board with respect to director compensation;
•reviewing and discussing with management the compensation, discussion and analysis section of the proxy statement;
•assisting in the oversight of risks associated with our compensation plans and policies;
•reviewing the results of any advisory stockholder vote on executive compensation and considering whether to make or recommend adjustments to the Company's executive compensation as a result of such vote; and
•retaining and terminating any compensation consultant to be used to assist the Compensation Committee in the evaluation of executive compensation.
Members of management assist the Compensation Committee in its responsibilities by providing recommendations for the Compensation Committee's approval concerning the design of our compensation program for our executive officers other than our CEO, including our NEOs, as well as recommended award levels. The design of our compensation program for our CEO is recommended by the Compensation Committee and approved by the Board without any approval of the Chairman, who is the Company's CEO.
The Compensation Committee considered information and data regarding executive compensation supplied by management and by Exequity, LLP, compensation consultants that were engaged directly by the Compensation Committee to provide advice with respect to base salaries, bonus targets and long-term incentives. The consultants analyzed the compensation levels of the NEOs of the industry peer group developed by Exequity, LLP for the most recently completed fiscal year. As discussed under the Compensation Discussion and Analysis (CD&A), the Compensation Committee considered this information, along with a variety of other factors, in reviewing executive compensation in 2021.
The Compensation Committee has reviewed the independence of Exequity, LLP in light of SEC rules and NYSE listing standards, including the following factors: (1) other services provided to us by the consulting firm; (2) fees paid by us as a percentage of consulting firm's total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business orDeclassification Proposal.
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personal relationships between the compensation consultant and a member of the Compensation Committee; (5) any company stock owned by the compensation consultant; and (6) any business or personal relationships between our executive officers and the senior advisor. The Compensation Committee discussed these considerations and concluded that the compensation consultant's work for the committee does not raise any conflict of interest.
The Compensation Committee delegates to management the authority to grant certain stock options and restricted stock units under the 2012 Stock Incentive Plan. Except as noted below, our CEO is authorized to grant awards (other than to himself) of less than 60,000 shares to any newly hired employee or up to 24,000 shares to any one person during a calendar year, and is required to report any such grants to the Compensation Committee at the following Compensation Committee meeting. The delegation of authority may be terminated by the Compensation Committee at any time and for any reason. All internal promotions and equity grants to any “Executive Officer” (as defined by Rule 3b-7 under the Exchange Act) require Compensation Committee approval.
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Nominating and Governance Committee | | |
The Nominating and Governance Committee's responsibilities include:
•identifying individuals qualified to become members of the Board;
•recommending to the Board the persons to be nominated for election as directors and to each of the Board's committees;
•reviewing and making recommendations to the Board with respect to management succession planning;
•assisting in the oversight of Board processes and corporate governance-related risks;
•reviewing and recommending to the Board corporate governance guidelines; and
•overseeing an annual evaluation of the Board's performance.
The Government and Regulatory Affairs Committee’s primary responsibility is to assist the Board in identifying, evaluating and monitoring legislative, political and regulatory trends and addressing public policy issues and concerns that affect or could affect the Company. The Government and Regulatory Affairs Committee’s responsibilities include, among others:
•making recommendations to the Board regarding the amendment and/or adoption of new policies, procedures and/or practices by the Company regarding legislative, political and regulatory trends and other public policy issues and concerns affecting the Company;
•reviewing and reporting on the Company’s position on key public policy issues under consideration in federal and state legislative, regulatory and judicial forums;
•reviewing, reporting and making recommendations with respect to the Company's relationships with public interest groups, legislatures and governmental agencies as they relate to issues of public policy and its efforts to affect identified public issues through analysis, lobbying efforts, political contributions and other political advocacy efforts;
•periodically reviewing the political activities and expenditures of the Company and its political action committees;
•reviewing the Company's Political Activity Report prior to its public disclosure;
•overseeing the Company's Political Contributions Policy; and
•assisting in overseeing political and regulatory risks.
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The Technology Committee’s primary responsibility is to assist the Board in reviewing the Company’s information technology (IT) programs and strategy, including significantly streamlining our technology footprint to create a digitized and seamless member experience. The Technology Committee’s responsibilities include, among others:
•reviewing the status of the existing IT programs;
•reviewing significant technology opportunities and monitoring the progress of special initiatives;
•making recommendations to the Board with respect to IT and cybersecurity related projects and investments that require Board approval; and
•in conjunction with the Audit Committee, assisting in the oversight of risks associated with our systems and technology, including risks related to cybersecurity, privacy, critical infrastructure and disaster recovery, as well as identifying the potential likelihood, frequency and severity of cyberattacks and breaches.
The Compliance Committee’s primary responsibility is to provide overall compliance oversight of the Company. The Compliance Committee’s responsibilities include, among others:
•reviewing the Compliance Program structure;
•remaining informed of Compliance Program outcomes, including audit results and governmental enforcement activities;
•receiving quarterly reports from the Senior Vice President of Internal Audit, Compliance and Risk Management of the Company, and other members of management in executive session;
•reviewing the results of performance audits and monitoring of Medicare operations, as well as effectiveness assessments of the Medicare Compliance Program;
•approving and amending as necessary the annual Compliance Program and audit and monitoring schedule;
•providing specific guidance and directives to Management for the remediation and implementation of Compliance Program initiatives and updates;
•assisting in the oversight of overall compliance risks; and
•receiving and considering the reports required to be made by the compliance function regarding critical compliance policies and practices.
The Environmental and Social Responsibility Committee was formed in July of 2020 to assist the Board in the development of the Company's strategic plan related to issues of environmental and social importance. The Environmental and Social Responsibility Committee's responsibilities include, among others:
•making recommendations to the Board regarding the Company's position on key public policy issues related to environmental and social responsibility, diversity and inclusion, social determinants of health, healthcare reform, correctional healthcare and criminal justice reform, as well as related risks and opportunities; and
•making recommendations to the Board regarding the Company's strategy to further develop transparent, industry-leading principles related to the correctional healthcare operations conducted by Centurion, LLC and its affiliated entities (Centurion).
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Compensation Committee Interlocks and Insider Participation |
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During 2021, Orlando Ayala, Jessica L. Blume, Robert K. Ditmore (served as Chair), David L. Steward and Richard A. Gephardt served as members of the Compensation Committee. Our current Compensation Committee is comprised of Christopher J. Coughlin (Chair), Jessica L. Blume, Wayne S. DeVeydt, and William L. Trubeck. In addition, Kenneth A. Burdick serves as a non-voting observer of the Compensation Committee. During 2021, and as of the date of this filing, none of our executive officers served as a director or member of the Compensation Committee, or committee serving an equivalent function of any other entity
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that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee. No member of the Compensation Committee had a relationship that must be described under SEC rules relating to disclosure of related person transactions. None of the current members of our Compensation Committee have ever been an officer or employee of Centene or any of our subsidiaries.
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Communicating with Independent Directors |
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The Board will give appropriate attention to written communications that are submitted by stockholders and other interested parties and will respond as appropriate. The Chairman of the Nominating and Governance Committee, with the assistance of our CEO, is primarily responsible for monitoring communications from stockholders and other interested parties and for providing copies or summaries to the other directors as he or she considers appropriate. Under procedures approved by a majority of the independent directors, communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments considered to be important for the directors to know.
Stockholders and interested parties who wish to send communications on any topic to the Board should address such communications to Board of Directors c/o Corporate Secretary, Centene Corporation, 7700 Forsyth Boulevard, St. Louis, Missouri 63105. Any stockholder or interested party who wishes to communicate directly with our Lead Independent Director, or with our non-employee directors as a group, should also follow the foregoing method.
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The following table summarizes the compensation of our non-employee directors for the fiscal year ended December 31, 2021:
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| Name | Fees Earned or
Paid in Cash
($) | Stock Awards ($) 1 | Option Awards ($) 1 | All Other Compensation ($) 2 | Total
($) |
| Orlando Ayala | $ | 135,000 | | $ | 217,800 | | $ | — | | $ | — | | $ | 352,800 | |
| Jessica L. Blume | 121,998 | | 217,800 | | — | | 27,257 | | 367,055 | |
| H. James Dallas | 36,155 | | 342,800 | | — | | 26,703 | | 405,658 | |
| Robert K. Ditmore | 20,000 | | 386,667 | | — | | 80,882 | | 487,549 | |
| Frederick H. Eppinger | 20,000 | | 342,800 | | — | | 27,257 | | 390,057 | |
| Richard A. Gephardt | 135,000 | | 217,800 | | — | | 74,123 | | 426,923 | |
| John R. Roberts | 50,000 | | 342,800 | | — | | 27,257 | | 420,057 | |
| Lori J. Robinson | 120,000 | | 217,800 | | — | | — | | 337,800 | |
| David L. Steward | 12,283 | | 322,800 | | — | | — | | 335,083 | |
| Tommy G. Thompson | 20,000 | | 355,789 | | — | | 27,257 | | 403,046 | |
| William Trubeck | 20,000 | | 342,800 | | — | | 43,093 | | 405,893 | |
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1 | The amounts reported as Stock Awards and Option Awards reflect the grant date fair value of grants made during the current year under the 2012 Stock Incentive Plan and Non-Employee Directors Deferred Stock Compensation Plan in accordance with ASC 718. There can be no assurance that the grant date fair value of Stock Awards or Option Awards will ever be realized. |
2 | All other compensation includes group excess liability insurance policy premiums paid by the Company for Ms. Blume, Mr. Dallas, Mr. Ditmore, Mr. Eppinger, Mr. Gephardt, Mr. Roberts, Mr. Thompson, and Mr. Trubeck. In addition, all other compensation includes personal use of the Company provided aircraft for Mr. Ditmore $53,625, Mr. Gephardt $48,866, and Mr. Trubeck $16,390. Lastly, all other compensation includes the Company match of charitable contributions of $25,000 made or pledged during 2021 under the Company's Board of Directors Charitable Matching Gift Program for Ms. Blume, Mr. Dallas, Mr. Ditmore, Mr. Eppinger, Mr. Gephardt, Mr. Roberts, Mr. Thompson, and Mr. Trubeck. |
During 2021, non-employee directors received a quarterly retainer fee of $31,250, if the director elected to receive 100% of the fee in Company stock and defer settlement of the fee until retirement or termination of the Board under the Company's Non-Employee Directors Deferred Stock Compensation Plan. Directors not making this election received a quarterly cash retainer fee of $25,000. In addition, the Chairman of the Audit Committee received a quarterly fee of $7,500, the Chairman of the Compensation Committee received a quarterly fee of $5,000, and the Chairman of the Nominating and Governance Committee, Government and Regulatory Affairs Committee, Technology Committee, and Environmental, Social, Health and Governance Committee each received a quarterly fee of $3,750. The Company also pays a quarterly fee of $6,250 to the Lead Independent Director of the Board. All fees are eligible for deferral under the Non-Employee Directors Deferred Stock Compensation Plan. Expense recognized in conjunction with the deferred stock election is included in the “Stock Awards” column in the Director Compensation Table above.
During 2021, the Board received additional variable compensation dependent on the number of meetings held annually. Once the number of full Board of Director meetings held exceeded six, non-employee directors received $2,000 per meeting, not to exceed $20,000. The variable compensation is included within Fees Earned or Paid in Cash in the table above.
As part of non-employee director compensation and to recognize each member's stock holding requirement of 7.5 times the annual cash retainer, each director receives an annual stock grant. For 2021, the grant was valued at $200,000 based on the first quarter average stock price prior to the grant and resulted in a grant of 3,300 restricted shares of our common stock in April 2021. The restricted shares vest on the 2022 Annual Meeting of Stockholders, subject to meeting Board of Director meeting attendance conditions. In addition, each new non-employee director is granted an option under our 2012 Stock Incentive Plan to purchase 10,000 shares of our common stock, vesting in three equal annual installments commencing on the first anniversary of the grant date.
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Information related to compensation for recent director retirements and new director appointments is outlined below:
•Mr. Steward received pro-rated fees for his service in 2021 prior to his retirement on October 6, 2021. In addition, he will vest in his outstanding 3,300 restricted shares of our common stock at the 2022 Annual Meeting.
•In connection with the new directors who joined the Board in January 2022; in February 2022, each new director was granted 10,000 options which vest ratably over three years, and a pro-rated award of 1,100 restricted shares that will vest on the 2022 Annual Meeting of Stockholders, subject to meeting Board of Director meeting attendance conditions.
In February 2022, the Compensation Committee made the following key changes to the Director compensation program:
•The annual retainer for the Lead Independent Director was increased to $200,000, consisting of a $50,000 cash retainer and $150,000 in deferred shares of the Company's stock;
•the annual retainer of the Nominating and Governance Committee Chair was increased to $20,000; and
•the variable compensation for meetings in excess of six per year was eliminated.
The following table shows the number of shares covered by exercisable and unexercisable options and unvested restricted stock held by our non-employee directors on December 31, 2021.
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| Name | Option Awards | Stock Awards |
| Number of Securities Underlying Unexercised Options (Exercisable) | Number of Securities Underlying Unexercised Options (Unexercisable) | Number of Shares or Units of Stock That Have Not Vested |
| Orlando Ayala | — | | — | | 3,300 | |
| Jessica L. Blume | 20,000 | | — | | 3,300 | |
| H. James Dallas | 3,333 | | 6,667 | | 3,300 | |
| Robert K. Ditmore | — | | — | | 3,300 | |
| Frederick H. Eppinger | — | | — | | 3,300 | |
| Richard A. Gephardt | — | | — | | 3,300 | |
| John R. Roberts | — | | — | | 3,300 | |
| Lori J. Robinson | 6,666 | | 3,334 | | 3,300 | |
David Steward1 | — | | — | | 3,300 | |
| Tommy G. Thompson | — | | — | | 3,300 | |
| William Trubeck | 3,333 | | 6,667 | | 3,300 | |
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1 | Mr. Steward was not an active board member as of December 31, 2021, however his 2021 annual grant will vest at the 2022 annual meeting and remains outstanding. |
The Board of Directors has approved the Board of Directors Charitable Matching Gift Program. Under the program, the Company will match a Board member's qualifying charitable donations of up to $25,000 per calendar year. Charitable donations must be made to a qualified tax exempt U.S. organization under the Internal Revenue Code Section 501(c)(3) and within the Company's charitable contribution guidelines. The Company also provides a group excess liability insurance policy at no cost to the directors.
Directors are reimbursed for all reasonable expenses incurred in connection with their service. Directors who are also our employees receive no additional compensation for serving on our Board of Directors.
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Corporate Governance and Risk Management |
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We believe that sound corporate governance is important to ensure that we are managed for the long-term benefit of our stockholders. We also recognize the connection between sound corporate governance and our ability to create and sustain value for our stockholders. Our Ethics and Compliance Program provides methods by which we further enhance operations, safeguard against fraud and abuse and help ensure that our values are reflected in everything we do. We have also reviewed and believe we are in compliance with the provisions of the Sarbanes-Oxley Act of 2002, the applicable SEC rules, and the listing standards of the NYSE. Our Board of Directors has adopted Corporate Governance Guidelines addressing, among other things, director qualifications and responsibilities, duties of key Board Committees, director compensation and management succession. A current copy of the Corporate Governance Guidelines is posted on our website, https://investors.centene.com/governance/governance-documents.
Our Board of Directors has adopted a Business Ethics and Code of Conduct Policy (the Policy) which is applicable to all directors, officers and employees of the Company, including the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. While no policy can replace the thoughtful behavior of an ethical director, officer or employee, we believe the Policy will, among other things, focus our Board and management on areas of ethical risk, provide guidance for recognizing and responding to ethical issues, provide mechanisms to report unethical conduct and generally help foster a culture of honesty and accountability. Any amendment to, or waiver of, the Policy involving a director or executive officer may only be made by the Board or a committee of the Board. A current copy of the Policy is posted on our website, https://investors.centene.com/governance/governance-documents. Any future amendments to the Policy will be promptly disclosed on our website.
Our policy concerning pre-approval of related party transactions is part of our Conflicts of Interest policy that is incorporated into the provisions of the Policy. As part of the Policy, our directors, officers and employees are responsible for disclosing any transaction or relationship that reasonably could be expected to give rise to a conflict of interest to the Ethics and Compliance department of the Company or the Board of Directors, in the case of an executive officer or director, which shall be responsible for determining whether such transaction or relationship constitutes a conflict of interest.
The Board of Directors oversees execution of the Company’s enterprise risk management framework with assistance provided by Board Committees. This oversight is enabled by quarterly risk reporting from executive management that is designed to provide visibility into the identification, assessment, monitoring and management of critical risks, from key areas such as strategy, operations, finance (including investment risk), compliance, and information security. The Board and its Committees also consider compensation risk, as well as exposures from regulatory changes and the environment, including climate change and its impact on our business model. In addition, the Board and its Committees are informed of emerging risks and opportunities which could impact the Company’s risk profile. Furthermore, this information is combined with other data to evaluate the Company’s performance in relation to tolerance levels established in Centene’s risk appetite framework on a quarterly basis. Management is responsible for executing day-to-day risk activities, and ensuring that enterprise risk management is integrated with strategic decision-making and financial budgeting processes.
As noted above, the Board uses its Committees to assist in its risk oversight function:
•Our Audit Committee assists in the oversight of risks related to financial reporting, disclosures, investments, business ethics and conduct, and management policies. The Company's Senior Vice President of Internal Audit, Compliance & Risk Management, who reports to the Audit Committee and Centene's Vice Chairman of the Board of Directors, assists the Company in identifying and evaluating risk management controls and methodologies to address risks and provides reports to the Audit Committee quarterly. The Audit Committee also meets privately with representatives from the Company's independent registered public accounting firm and the Company's Senior Vice President of Internal Audit, Compliance & Risk Management.
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•Our Compensation Committee assists in the oversight of risks associated with our compensation plans and policies. Please see the discussion in the Compensation Discussion & Analysis under the heading “Risk Disclosure” for a discussion of elements intended to mitigate excessive risk taking by our employees.
•Our Nominating and Governance Committee assists in the oversight of Board processes and corporate governance-related risk.
•Our Government and Regulatory Affairs Committee assists in the oversight of political and regulatory risks.
•Our Technology Committee assists in the oversight of risks associated with our systems and technology, including risks related to cybersecurity, as well as business continuity and disaster recovery.
•Our Compliance Committee assists in the oversight of overall compliance risks.
•Our Environmental and Social Responsibility Committee oversees and advances our Environmental, Social, Health and Governance (ESHG) initiatives throughout the organization, including diversity and inclusion, social determinants of health, healthcare reform, correctional healthcare and criminal justice reform.
Our Board of Directors and its Committees are supported by our Management Oversight Committee, which formally oversees our enterprise and security risk management functions. The Management Oversight Committee is a cross-functional governance group comprised of certain members of our executive leadership team. The duties of the Management Oversight Committee include:
•Oversight of the processes used to identify, assess, respond, and report on risk and compliance issues;
•Determine Centene’s risk appetite and risk tolerance levels. All changes are reviewed by the Board;
•Review of performance measures against established risk tolerances and recommend corrective action where appropriate;
•Review of findings from internal audit activities for accuracy and clarity;
•Provide direction for resource allocation to address internal audit findings and/or gaps identified through enterprise and security risk management and Corporate Compliance activities; and
•Validate assignment of risk owners associated with identified exposures and monitor plans to address documented findings/gaps.
Proxy access allows stockholders who meet minimum stock ownership and holding period requirements, and who comply with specified procedural and disclosure requirements, the opportunity to include their director nominees in the Company’s proxy materials. We believe proxy access gives our long-term stockholders a valuable right and enables them to have an important voice in director elections. The following is a summary outlining key details of requirements related to our proxy access By-Law:
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Ownership Threshold | at least 3% of the Company's outstanding common stock |
Group Ownership | a group of 20 or less holders |
Ownership Period | at least 3½ years of continuous ownership |
Number of Nominees | the greater of two individuals or 20% of the Board (not to exceed one-half of the number of directors up for election at the annual meeting) |
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
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The Company's Approach to Integrating Technology and Healthcare |
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Over the next 10 years, we envision the practice of healthcare to change meaningfully. Technology will play a central role in healthcare, including the diagnosis, management and treatment of disease. Drugs and therapies will be developed and designed specifically for each person given their unique genome, proteome and metabolism, and care will be provided virtually and in an increasingly noninvasive manner. In this new world, Centene will be a trusted convener and partner in health, and a leader in the discovery and use of novel approaches to bring about individual well-being throughout life.
We continue to digitize the administration of healthcare and accelerate innovation and modernization across the enterprise. We can leverage AI capabilities, human-centered design and data science to transform our advanced technology efforts and enrich Centene applications and services. We have the opportunity to lead the digital transformation of healthcare and to create a seamless experience for our members and providers, closing the gap between health and care.
We intend for the Centene member experience to be unique for each beneficiary. Benefits will be precisely tailored to achieve the desired well-being. Our goal will be a lack of administrative friction, with operational and payment activities largely automated in the background. We believe that deeper innovation at Centene is a catalyst in the creation of a healthcare learning and discovery platform.
It is through these innovative solutions that we plan to bring about a unique personalized digital healthcare experience for each member, to deliver better health outcomes.
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2022 NOTICE OF SPECIAL MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
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Environmental, Social, Health and Governance and Corporate Sustainability |
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Continued focus on environmental, social, and governance (ESG) matters remains foundational to supporting our strategy, long-term sustainability and value creation. A central theme to Centene's purpose, mission, pillars, and beliefs is the opportunity to shape a better world of healthcare. When discussing corporate sustainability, 'health' is included as a separate pillar of reporting on Environmental, Social, Health and Governance (ESHG) topics. This highlights our specific focus and importance placed on health topics as part of our overall sustainability strategy.
Sound corporate governance, a strong culture of compliance and unwavering ethics are foundational to our ESHG strategy. Governance and accountability for corporate sustainability begins at the top of the organization. Our Environmental and Social Responsibility Committee (ESRC) of the Board of Directors oversees the strategic plan for environmental and social matters, including our ESHG Strategic Framework. Over the past several years, we have significantly improved our ESHG governance and reporting, and will consider enhancing in the coming years. We leverage external reporting frameworks to facilitate disclosure of relevant data and align with best practices for reporting. Additionally, we engage our employees in enterprise-wide sustainability and social activities and communicate key information via our intranet website. We include a Corporate Sustainability section on our external corporate website and an ESG link on our investor-focused website to improve access to and awareness of our ESHG initiatives and key reports and disclosures. We support worldwide efforts as expressed through commitments with the UN Global Compact, Women’s Empowerment Principles (WEPs), and Ethical Principles in Health Care (EPiHC). Each provides us opportunities to contribute towards a more just and sustainable healthcare landscape. Updated and new ESHG and sustainability information is periodically posted to our external website. Further, we disclose important ESHG information throughout the year, including:
•Our ESHG Report to the Community details the key partnerships, initiatives, and programs that exemplify our commitment to the health of our planet, our people, and our enterprise over the preceding year. To view or download a copy of the report, visit www.centene.com/who-we-are/corporate-facts-reports.html.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
•The C-index Diversity, Equity & Inclusion report describes how we sustain and advance conscious inclusion of talent, community engagement, supplier diversity, and stakeholder collaboration. Our Employer Information Report (EEO-1) is included as an appendix to the report. See www.centene.com/who-we-are/corporate-facts-reports.html.
•Our Political Activity report sets forth details about political contributions, lobbying efforts, and membership in industry trade associations. Visit https://investors.centene.com/esg.
•The Task Force on Climate-related Financial Disclosures (TCFD) report includes discussions about our governance structure, strategy, risks and opportunities, and metrics and target-setting related to managing climate change. See https://www.centene.com/why-were-different/corporate-sustainability/protecting-planet/environmental-sustainability.html.
•We disclose a SASB Index to provide stakeholders with disclosures aligned with the Sustainability Accounting Standards Board (SASB) Managed Care standard. Sustainability Accounting Standards were also included for workforce turnover and engagement. The index is available at https://www.centene.com/who-we-are/corporate-facts-reports.html.
•We report our environmental efforts to CDP, our Commitment on Progress towards the United Nations Global Compact principles and publish our Environmental Guiding Principles. See https://www.centene.com/why-were-different/corporate-sustainability.html.
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Data Privacy and Security |
As a healthcare organization with operations across the world, we are committed to earning the trust of our members, employees, and business partners by responsibly managing and protecting their confidential information. Our information security and privacy programs are built to support that goal. Our Enterprise Data Privacy Program describes the measures we take to protect information and how individuals may exercise their data privacy rights under applicable regulations.
Federal, state, and international regulations, in addition to contract obligations, create a highly regulated environment in which our business operates. To effectively manage, we maintain comprehensive information security and privacy programs that allow for full compliance with these regulations. These programs are assessed annually in compliance with the HIPAA Privacy and Security Rules, HITECH Act, and the EU GDPR. Our information security program is aligned to and certified against ISO 27001.
We provide annual information security and privacy training and specialized role-based training to our employees and communicate security awareness items in multiple formats including awareness of the importance of timely notification of potential security and privacy issues. We also conduct a “Compliance and Security Awareness” week to build and support our culture of compliance and reduce risk across the enterprise.
HIPAA privacy breaches, as required by law, are reported by Centene to the U.S. Department of Health and Human Services (HHS), Office for Civil Rights (OCR). Our reports can be obtained through the OCR Portal at: https://ocrportal.hhs.gov/ocr/breach.
In addition to the information security and privacy programs described above, we annually purchase a security and privacy risk insurance policy that could offset some of the costs associated with an information security breach. Please refer to our ESHG Report to the Community for further information regarding data privacy and security.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
Amid an evolving healthcare landscape, we are committed to supporting policies that promote healthcare access and reduce the cost of receiving care. Leveraging our many years of experience in government-sponsored healthcare, we can deliver cost effective services to both our members and government sponsors. We also offer a variety of health care coverage options to meet the different needs of our members and those seeking affordable care.
Optimizing Site of Service: Through managed care of government-sponsored programs, we drive greater affordability for the health system by helping our members access high-quality care in lower-cost settings. We provide a comprehensive set of education and outreach programs to inform, assist and incentivize members to access high-quality, appropriate healthcare services in an efficient manner. For example, our Emergency Department Diversion program is designed to collaboratively work with hospitals and ambulance services to reduce avoidable emergency department visits through patient education and alternative urgent care settings. We also make available, as an alternative to high-cost settings, the use of telehealth visits either through our network of qualified providers or contracted national vendors to provide expanded capacity.
Value-Based Care: Value-based models of care are a foundation to the interactions we have with our network providers. We have a strong belief that we can provide a higher level of care by working in partnership with our providers. Key to that partnership is the various value-based programs and models we have implemented across our product offerings. From a value-based risk contracting standpoint, over 27% of our membership in our Medicaid business has an upside/downside risk agreement as of January 1, 2022. Providers share in a percentage of savings by improving the overall quality and cost of the care involved. Within Medicare, as of January 1, 2022, over 37% of our business is in upside/downside risk agreements. The programs put the emphasis on physicians to make the best decision for the member and place them in charge of that individual member's care.
From its inception, Centene has understood the importance of social determinants of health (SDoH) on access to care. As the largest healthcare insurer of underserved and underinsured populations in the United States, Centene sees our members often disproportionately impacted by SDoH barriers that lead to negative health outcomes.
By cultivating multi-year partnerships, locally and nationally with community, provider, and civic and government partners, we work to solve cross-sector problems our customers and members face, sustainably and at scale. Key principles of this work include:
•Highly local system engagement – we partner across community, member, and provider stakeholders to drive system-level supports.
•Data driven – we use evidence-based approaches and both qualitative and quantitative insights to identify, address, and improve outcomes.
•Population health – we create tailored, whole-health interventions to meet needs unique to each population.
•Health equity – we view all interventions and outcomes through an equity lens, acknowledging disparities and working toward equity across factors such as race, geography, and socioeconomic status.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
Our efforts are focused on meeting local needs in tailored ways. We believe that every individual, family, and community is unique, and our local approach enables us to provide accessible, high-quality, culturally sensitive services to our members.
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Healthcare Quality and Member Well-Being |
Centene's steadfast commitment to the environment, the health and social well-being of our communities, and our culture of sound and ethical corporate governance extends far beyond individual programs or initiatives. The health of our members is paramount to fulfilling our purpose. Through the delivery of high-quality health services to at-risk populations, our responsibilities to members, stakeholders, and our planet serve as a living expression of our purpose – transforming the health of communities, one person at a time.
•51 Centene subsidiaries hold one or more National Committee for Quality Assurance accreditations
•7 Centene specialty companies are accredited by URAC
•Ribera Salud has accumulated 81 recognitions in the IQVIA Hospital Awards Top 20, including 6 in 2021
*above metrics as of December 31, 2021
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Diversity, Equity & Inclusion |
The core pillars of Centene’s Diversity, Equity & Inclusion (DEI) strategy guide our efforts and hold us accountable for measurable progress. Data and analytics are key, and we continuously adapt how we measure and review our data to find opportunities for improvement. In partnership with our five Employee Inclusion Groups (ABILITY, CENVET, cPRIDE, I.N.S.P.I.R.E. MOSAIC), our Executive DEI Council, leaders, and employees across Centene, we are committed to advancing the implementation of DEI principles into all aspects of our business. The Company is committed to a workforce that represents diversity, equity, and inclusion as shown below:
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Information as of December 31, 2021. People data excludes international companies and/or U.S. non-integrated companies. Our total headcount (including international and U.S. non-integrated companies) is approximately 74,300, and our Full-Time Equivalent (FTE) count is approximately 72,500. |
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
Our DEI Office organizes monthly virtual engagement opportunities, whereby employees can join programs such as panels of external speakers or experts and internal Centene leaders to present viewpoints and continue to enhance the cultural competency of our workforce. In 2021, the DEI Office and Employee Inclusion Groups hosted a combined total of over 250 programs with over 20,000 employees attending across all programs.
•Centene’s HR Compliance team, in partnership with the DEI Office and Centene University, delivers Inclusive and Responsible Workplace Learning to ensure employees have been exposed to best practices and policies to sustain an equitable workplace.
•Employee Inclusion Groups encompass multicultural, veterans and military, LGBTQ+, and networks for women and people with disabilities.
•As of December 31, 2021, the diversity of our 207 regulated health plan external governing board directors was as follows:
•65% Caucasian
•36% Female
•19% African American
•8% Veteran
•6% Hispanic
•6% Asian/Indian
•1% Disability
•1% Native American
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Employee Health and Well-Being and Centene's Purpose |
Our commitment to transform the health of our communities includes empowering our employees to pursue their personal and career development, engage in healthy lifestyles, and actively contribute to their families and communities. As a reflection of this, our Serving the Communities pillar includes topics such as Employee Health and Well-Being, Employee Partnership and Development, and Community Engagement. It is through these topics that we frame strategic discussions and efforts around employee wellness, including lifestyle improvements achieved through on-campus facility designs and benefits that support healthy living, financial health, work-life balance, professional growth, and connecting with our communities. For more information regarding our employee health and other benefits, please visit our prospective employee site here: https://jobs.centene.com/us/en/benefits.
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Environmental Sustainability |
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Environmental Initiatives |
As part of our commitment to being good stewards of the environment, we are working to understand, quantify, and reduce our impact on climate change. We understand that climate change poses risk and presents opportunities for our business to address such impacts in several ways. We recently undertook several actions to raise understanding about climate change and potential risks to our business, including:
•Issuing an inaugural report aligned with the recommendations of the TCFD with plans to continue to do so annually.
•Evaluating potential enterprise risks associated with climate change.
•Disclosing our baseline scope 1 and scope 2 greenhouse gas (GHG) emissions, which we assessed in 2021 for calendar years 2019 and 2020.
We are currently focused on calculating our scope 3 GHG emissions, and in conjunction with our Value Creation Plan, we are assessing energy usage and reduction opportunities and determining decarbonization goals.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS | |
Global Headquarters - St. Louis, Missouri:
•The newest tower within our corporate headquarters space is LEED Gold certified.
•36,000 sq. ft. of vegetated roof with over 3,000 sq. ft. of native plantings, reducing the heat island effect and decreasing energy consumption and water use.
West Coast Headquarters - Natomas, California:
•Electric vehicle charging stations on site for employee use.
•Low flush and flow fixtures reduce indoor water use by 41% compared to standard fixtures.
•Energy efficient lighting and HVAC systems reduce energy consumption by 17% compared to standard systems.
East Coast Headquarters - Charlotte, North Carolina:
•Our new Charlotte campus, currently under construction, will be built according to the WELL building standard, emphasizing indoor air and water quality, natural light, and physical activity.
Scientific studies have shown a causal relationship between environmental factors and negative health effects. The health of our environment is inextricably linked to human health. Understanding the impacts of environmental factors is critical to ensuring we do all we can to support healthier lives for our members and our communities.
In fulfilling our commitment to deliver high-quality health services to at-risk populations, we recognize that some of our members and their families are particularly vulnerable to experiencing the most harmful impacts of environmental risks, including climate change. Our corporate, local health plan, and business unit leadership is engaged in closely monitoring environmental and climate-related risks and their potential impact on our members. To further advance our work around climate-related risks, the Climate Change Task Force was formed and meets as needed to identify climate-related issues, outline climate change scenarios, assess transition/physical factors, and determine mitigation actions.
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Evaluation of Enterprise Risks Associated with Climate Change |
Centene’s Enterprise Risk Management function coordinates and applies an integrated approach whereby risks are identified and assessed across Centene and its business units. The ERM and ESHG functions are managed by teams that share people and other resources. The ESHG function coordinates and facilitates all ESHG internal and external reporting and works closely with ERM to incorporate climate-related risks within the Corporate risk register for monitoring. For more information regarding our assessment of climate risks and opportunities, please see our TCFD report.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS |
We have received various recent awards and recognitions reflecting our commitment to ESHG efforts:
•FORTUNE World's Most Admired Companies – 2022
•Human Rights Campaign Corporate Equality Index Best Places to Work for LGBTQ Equity – 2022
•DiversityInc. Top 50 Companies for Diversity – 2021
•DiversityInc. Top Company for LBGT Employees – 2021
•DiversityInc. Top Company for Executive Diversity Councils – 2021
•Disability Equality Index Best Places to Work for Disability Inclusion – 2021
•Certified Great Place to Work, October 2021 – October 2022
•National Organization on Disability, 2021 Leading Disability Employer
•U.S. Veterans Magazine Top Veteran Friendly Company – 2021
•Military Times Magazine, Best for Vets – 2021
•Chamber of Commerce of Valencia (Spain) – Digital Transformation Award 2021, Ribera Salud
As introduced in June 2021, the Value Creation Plan is designed to drive margin expansion by leveraging our scale and generating sustainable, profitable growth. In order to execute the Value Creation Plan, we created the Value Creation Office, which includes members of executive leadership. The three major pillars of the Value Creation Plan are: SG&A expense savings, gross margin expansion and strategic capital management. The first pillar, SG&A expense savings, includes initiatives targeting improving productivity, driving efficiencies and reducing costs throughout the organization, including real estate optimization. The second pillar, gross margin expansion, will be achieved through initiatives including bid discipline, clinical initiatives, quality improvement and pharmacy cost management. The third pillar, strategic capital management, focuses on value-creating capital deployment activities such as share repurchases, portfolio optimization and debt and investment management.
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2022 NOTICE OF MEETINGSTOCKHOLDERS AND PROXY STATEMENT |
PROPOSAL TWO: ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATIONTHE SPECIAL MEETING PROPOSAL |
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Proposal Two: Advisory Resolution to Approve Executive CompensationThe Special Meeting Proposal |
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At our 2021 Annual Meeting of Stockholders, ourThe Company’s stockholders approved the Company's executive compensation. Pursuantare being asked to Section 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act), we are again holding an advisoryconsider and vote on the Company's executive compensation, as described in this Proxy Statement (commonly referredSpecial Meeting Proposal, which is a proposal to as "say-on-pay"). In accordance withadopt an amendment to the results ofCurrent Charter to eliminate the vote we conducted at the 2017 Annualprohibition on stockholders calling special meetings (the Special Meeting on the frequency of say-on-pay votes, we present a say-on-pay vote every year.
We encourage stockholders to review the Compensation Discussion and Analysis included in this Proxy Statement. Our executive compensation program has been designed to implement the Company's compensation philosophy of paying for performance by making decisions based on promoting the Company's corporate mission statement and creating long-term stockholder value. As discussed in Section 3 of CD&A, the following principles guide the Company's compensation philosophy:
•Pay for Performance;
•Create Long-Term Stockholder Value;
•Foster a Culture of Risk Management and Compliance; and
•Attract and Retain Top Executive Talent.
This philosophy is evidenced by the following:
•We provide a significant part of executive compensation in the form of at-risk annual incentive and long-term incentive compensation.
•Our annual incentive and long-term incentive opportunities are substantially based on corporate financial measures closely correlated with achieving long-term stockholder value, such as earnings per share, revenue growth targets, pre-tax operating margins, adjusted net earnings margin, and total stockholder return. Annual incentive opportunities are also based on meeting individual goals around compliance, quality and operational excellence. We have withheld or reduced payments under our incentive programs when financial, quality or compliance measures have not been fully achieved.
•We provide a mix of short-term, long-term, cash and non-cash compensation that we believe allows us to strike a balance between offering competitive executive compensation packages, motivating our executives without fostering excessive risk-taking and linking Executive Officer compensation with the creation of long-term stockholder value.Amendment).
The Board of Directors strongly endorses the Company's executive compensation program and recommends thatCurrent Charter prohibits stockholders vote in favor of the following resolution:
RESOLVED, that the stockholders approve the compensation of those NEOs listed in the Summary Compensation Table of this proxy statement, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis and the tabular and narrative disclosure included herein under “Information about Executive Compensation.”
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL TWO: ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION |
Because the vote is advisory, it will not be binding upon the Board of Directors or the Compensation Committee and neither the Board of Directors nor the Compensation Committee will be required to take any action as a result of the outcome of the vote on this proposal. The Compensation Committee strongly considers the views of the Company's stockholders when making compensation decisions. Additionally, the Compensation Committee monitors the results of the annual advisory “say-on-pay” proposal and incorporates such results as one of many factors considered in connection with the discharge of its responsibilities.
The Board recommends a vote “FOR” the approval of the compensation of the NEOs.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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Proposal Three: Ratification of Appointment of Independent Registered Public Accounting Firm |
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KPMG LLP audited our financial statements for the fiscal year ended December 31, 2021. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent external audit firm retained to audit our financial statements. The Audit Committee has appointed KPMG LLP to serve as our independent registered public accounting firm for the current fiscal year, and we are asking stockholders to ratify this appointment. KPMG LLP has been retained as our external auditor continuously since 2005. Stockholder ratification of this selection is not required by our By-Laws or other applicable legal requirements. Our Board of Directors is, however, submitting the selection of KPMG LLP to stockholders for ratification as a matter of good corporate practice. In the event that stockholders fail to ratify the selection, the Audit Committee will consider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes that a change would be in the best interests of the Company and our stockholders.
We expect that representatives of KPMG LLP will be present at our Annual Meeting of Stockholders to answer appropriate questions. They will have the opportunity to make a statement if they desire to do so.
The affirmative vote of the holders of a majority of the votes cast at the meeting is being sought to ratify the selection of KPMG LLP as our independent registered public accounting firm for the current fiscal year. The Audit Committee believes the continued retention of KPMG LLP to serve as our independent registered public accounting firm is in the best interests of the Company and our stockholders.
The following table discloses the aggregate fees for services related to 2021 and 2020 by KPMG LLP, our independent registered public accounting firm ($ in thousands):
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| 2021 | 2020 |
| Audit Fees | $15,512 | $16,915 |
| Audit-Related Fees | 1,535 | 1,581 |
| Tax Fees | 298 | 615 |
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Audit-related fees in 2021 and 2020 consist primarily of fees for operational control reviews. The Audit Committee is responsible for the audit fee negotiations associated with our retention of KPMG LLP. Tax fees included in the table above relate to tax planning associated with the expansion of our corporate headquarters and international tax matters.
When assessing services rendered by our auditor and evaluating the quality of their work, the Audit Committee considers a variety of factors, including: independence, insight provided to the Audit Committee, ability to meet deadlines and respond to issues, management feedback, and relative costs of services.
In order to ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent audit firm. The Audit Committee ensures that the mandated rotation of KPMG LLP’s personnel occurs routinely and is directly involved in the selection of KPMG LLP’s lead engagement partner.
The Audit Committee has adopted policies and procedures relating to the approval of all audit, audit-related, tax and other services that are to be performed by our independent registered public accounting firm. This policy generally provides that the Company will not engage its independent registered public accounting firm to render audit, audit-related, tax or other services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to the Company by its independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.
The Audit Committee has also delegated to the Chairman of the Audit Committee the authority to approve audit, audit-related, tax or other services to be provided to the Company by its independent registered public accounting firm. Any approval of services by the Chairman of the Audit Committee pursuant to this delegated authority is reported at the next meeting of the Audit Committee. All audit, audit-related and tax fees for 2021 and 2020 were pre-approved by the Audit Committee or the Audit Committee Chairman, and no fees were paid under the de minimis exception to the Audit Committee pre-approval requirements.
The Board recommends that stockholders vote “FOR” the ratification of the selection of KPMG LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2022.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL FOUR: APPROVAL OF AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION |
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Proposal Four: Approval of an Amendment to the Company's Amended and Restated Certificate of Incorporation to Declassify the Board of Directors |
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The Board has approved, and unanimously recommends that the Company's stockholders approve, an amendment to the Company’s Amended and Restated Certificate of Incorporation providing for the elimination of the classified Board structure over a three year period (the Amendment). The full text of the Amendment is set forth in Appendix B to this Proxy Statement.
Background
Our current classified Board structure has been in place since we became a public company in 2002. The Company is committed to reviewing and adopting corporate governance practices that are in the interests of both the Company and our stockholders and has evaluated the Company’s classified Board structure on numerous occasions to ensure that it is consistent with the best interests of the Company and its stockholders. After reviewing our governance practices and the views of our stockholders, including consideration of the vote on a stockholder proposal on the issue at the Company’s 2021 Annual Meeting, the Board has decided to adopt the Amendment to provide for the annual election of directors.
Proposed Amended and Restated Certificate of Incorporation
The Company’s current Amended and Restated Certificate of Incorporation divides the Board into three classes that are elected for staggered, three-year terms. If the Amendment is adopted by the stockholders, then, beginning with the class of directors standing for election at the Company’s 2023 Annual Meeting, directors would be elected for a term expiring at the next Annual Meeting and when his or her successor is elected and qualified, or upon his or her earlier death, resignation, retirement, disqualification or removal from office.
The approval of the Amendment by the stockholders would not shorten the terms for any previously elected directors. This means that, even if the Amendment is approved by the stockholders, directors who were or will be elected prior to the 2023 Annual Meeting would continue to hold office until the end of the terms for which they were elected and until their successors are elected and qualified. Accordingly, directors elected at the 2021 Annual Meeting would continue to have a term that expires at the 2024 Annual Meeting and directors elected atcalling special meetings. At the 2022 Annual Meeting, would continueCompany stockholders approved a nonbinding stockholder proposal “to amend the appropriate company governing documents to havegive the owners of a term that expires atcombined 10% of our outstanding common stock the 2025 Annual Meeting. If the Amendment is approved by the stockholders, all directors will be elected on an annual basis beginning at the 2025 Annual Meeting.
This general description of the proposed changes to the Amended and Restated Certificate of Incorporation is qualified in its entirety by reference to the Amendment set forth in Appendix B to this Proxy Statement.
If the Amendment is approved by our stockholders, then the Amendment will become effective upon its filing with the Delaware Secretary of State. The Board has also unanimously approved certain conforming changes to the Company’s Amended and Restated By-Laws, and the Company's Corporate Governance Guidelines (the Governance Guidelines), contingent upon stockholder approval of the Amendment. If the Amendment is not approved by the stockholders, then the Amended and Restated Certificate of Incorporation and the Amended and Restated By-Laws will remain unchanged and the Board will remain classified.
Vote Required. The affirmative vote of at least a majority of the voting power of the shares entitled to vote is required to approve the Amendment.
The Board unanimously recommends a vote “FOR” the Amendment to declassify the Board of Directors.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL FIVE: BOARD PROPOSAL REGARDING STOCKHOLDER SPECIAL MEETING |
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Proposal Five: Board Proposal Regarding the Stockholder Right to Call for a Special Stockholder Meeting |
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Overview
Stockholders of the Company do not presently have the right to require the Company to call a special meeting of stockholders. This proposal (the Board’s Special Meeting Proposal) is the product of the Board’s ongoing review of our corporate governance principles and its consideration of the stockholder special meeting proposal discussed further in Proposal 6 (the Stockholder Special Meeting Proposal). After due consideration and a balancing of the interests discussed below, the Board has determined that stockholders should be provided the opportunity to consider this alternative proposal regarding the right to call a specialshareholder meeting.
Specifically, the Board now asks that you vote to approve its proposal to allow stockholders who own at least 25% of the Company’s outstanding shares of common stock, and satisfy certain other procedures and requirements to be determined by the Board in the future, to require the Company to call a special meeting of stockholders.
The Board’s Special Meeting Proposal”
The Board recognizes that some stockholders feel the right of stockholders to call a special meeting is an important corporate governance practice. Through this proposal,As part of the Board’s ongoing review of the Company’s corporate governance practices, the Board intends to strike an appropriate balance between enhancingconsidered this stockholder rightsfeedback, including through the approval of the stockholder proposal at the 2022 Annual Meeting, and protecting long-termhas determined that it is in the best interests of the Company and ourits stockholders by minimizingthat the risk of abuse byCurrent Charter’s prohibition on stockholders pursuingcalling special interests.meetings be removed. Accordingly, the Board has adopted and declared advisable the Special Meeting Amendment.
The Board believes that special meetings should be extraordinary events, held only if a significant number of stockholders agree that a special meeting is necessary to discuss critical, time-sensitive issues. In consideration of this proposal,the Special Meeting Amendment, the Board considered the disruption that special meetings cause and the substantial costs they entail. Specifically, ourthe Board, members, management and employees mustwould be required to devote a significant amount of time and attention to preparing for a special meeting, which distractswould distract them from their primary focus of managing our business for the long-term benefit of our stockholders. In addition, with each special meeting, we must incur significant expenses in order to prepare the disclosures required for such meeting, print and distribute materials, solicit proxies and tabulate votes. Moreover,Therefore, the Board believes that, although a 25% threshold serves the best interestssignificant number of the stockholders as a whole by avoiding the potential for abuse ofshould have the right byto call a small minority ofspecial meeting, it is important that such right is exercised in accordance with terms and conditions that balance the stockholders for self-interested actions.foregoing considerations and establish an orderly and consistent process that provides fairness and transparency.
Recommendation OnlyFor these reasons, the Board, concurrently with its adoption of the Special Meeting Amendment, approved an amendment to the Company’s Amended and Restated By-Laws (the Current By-Laws) that would provide a stockholder, or a group of stockholders, holding at least 10% of the outstanding shares of our common stock to call a special meeting, subject to certain terms and conditions (the Special Meeting By-Laws Amendment). Such terms and conditions include, but are not limited to, the following:
Centene
•To ensure adequate underlying support before committing Company resources, the By-Laws will require that stockholders should be aware that this proposal is simplyseeking to call a special meeting must own, individually or in the aggregate, at least 10% of our outstanding shares of common stock to request that the Board take the actions stated in the proposal. Approval of this proposal may not result in the requested action being taken by the Centene Board and, therefore, its approval would not in fact createset a stockholder rightrecord date to call for a special meeting. To create suchThis 10% ownership threshold is the same ownership threshold proposed in our Action by Written Consent Proposal, which the Board believes is appropriate so that a right, the Company’slimited group of stockholders must approvecannot use written consent to push forward an actual amendmentaction that lacks sufficient support to the Amended and Restated Certificatemerit calling a special meeting. The Board believes that this 10% threshold, which is consistent with market practice, permits stockholders to call a special meeting that has achieved a critical mass of Incorporation.support.
If•Any special meeting request must set forth information regarding the Board’s Special Meeting Proposalbusiness proposed to be conducted at the special meeting and information regarding the requesting stockholder(s) that is approved,similar to the information currently required by our By-laws in order for a stockholder to nominate directors or propose business at our annual meetings.
•The Board expectswill not be required to include a proposal requesting stockholder approval for the amendment of the Amended and Restated Certificate of Incorporation to implement the Board’s Special Meeting Proposal in the proxy statement for the 2023 Annual Meeting. The stockholder right to call forhold a special meeting in the expected proposal may be subject to other conditions, to be determined by the Board.if:
Approval of◦The business requested to be conducted at the Board’s Special Meeting Proposal (this proposal)special meeting is not conditioned on approvala proper subject for stockholder action under applicable law or disapprovalthat involves a violation of the Stockholder Special Meeting Proposal (Proposal 6). Although the Board’s Special Meeting Proposal and the Stockholder Special Meeting Proposal concern the same subject matter, theapplicable law;
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2022 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
PROPOSAL FIVE: BOARD PROPOSAL REGARDING STOCKHOLDERTWO: THE SPECIAL MEETING PROPOSAL |
terms of each proposal differ. The Board encourages you to read carefully◦Notice for the descriptions of each proposal, and the Board’s statement in oppositionrequested special meeting is received within 90 days prior to the Stockholderanniversary of the Company’s last annual meeting of stockholders; or
◦A substantially similar item of business was covered at a stockholder meeting that was held within 120 days prior the special meeting request.
•The business conducted at any special meeting requested by stockholders will be limited to the purposes stated in the notice of the special meeting.
The effectiveness of the Special Meeting Proposal. The BoardBy-Laws Amendment is recommending a vote FORcontingent on the Board’sapproval of the Special Meeting Proposal, and AGAINSTif stockholders do not approve the Stockholder Special Meeting Proposal.Proposal, the Special Meeting By-Laws Amendment will not become effective.
ForThe foregoing description of the reasons described above, as well as below in our Board of Directors' Statement in Opposition to Proposal 6, the Board believes that the Board’s Special Meeting Proposal is more aligned with market practice and more appropriately balances the rights of stockholdersshould be read in connection with the long-term interestsproposed New Charter, which is attached as Annex A to this proxy statement. The New Charter is marked to show the proposed modifications of the Company andSpecial Meeting Amendment.
The affirmative vote of a majority of the outstanding shares of our stockholders. Incommon stock entitled to vote at the event bothSpecial Meeting is required to approve the Board’sSpecial Meeting Proposal. If the Company’s stockholders approve the Special Meeting Proposal andat the StockholderSpecial Meeting, we will promptly file the New Charter, including the Special Meeting Amendment, with the Secretary of State of the State of Delaware, at which point the New Charter will become effective. If the Company’s stockholders do not approve the Special Meeting Proposal are approved,at the Board will takeSpecial Meeting, but the voting results into consideration and will continue to engage withCompany’s stockholders as partapprove one or both of the Board’s considerationDeclassification Proposal or the Action by Written Consent Proposal, the Company will file the New Charter, without the Special Meeting Amendment, with the Secretary of an amendment toState of the Amended and Restated CertificateState of Incorporation to implement a special meeting right to be submitted to stockholdersDelaware, at which point the Company’s 2023 annual meeting.New Charter will become effective.
The Board recommends that stockholdersa vote “FOR” the Board’s proposal regarding the stockholder right to call for a special stockholder meeting.Special Meeting Proposal.
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2022 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
PROPOSAL SIX: STOCKHOLDERTHREE: THE ACTION BY WRITTEN CONSENT PROPOSAL TO ALLOW FOR THE SHAREHOLDER RIGHT TO CALL FOR A SPECIAL SHAREHOLDER MEETING |
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Proposal Six: StockholderThree: The Action by Written Consent Proposal for the Shareholder Right to Call for a Special Shareholder Meeting |
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In September 2021,The Company’s stockholders are being asked to consider and vote on the Company received correspondenceAction by Written Consent Proposal, to adopt an amendment to the Current Charter to grant stockholders the right to act by written consent, subject to certain terms and conditions (the Action by Written Consent Amendment).
The Current Charter prohibits stockholders from a stockholder, John Chevedden, beneficial owner of Centene common stock, regarding a proposal onacting by written consent.
The Board recognizes that some stockholders feel the right of astockholders to act by written consent is an important corporate governance practice. As part of the Board’s ongoing review of the Company’s corporate governance practices, the Board considered this stockholder feedback and has determined that it is in the best interests of the Company and its stockholders that the Current Charter be amended to call for a special shareholder meeting as described below.permit stockholders to act by written consent. However, the Board also believes that reasonable safeguards should be included to enhance transparency and prevent the disenfranchisement of minority stockholders and the inefficient use of corporate resources.
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278, beneficial owner ofFor these reasons, the Board adopted and declared advisable the Action by Written Consent Amendment, which would permit Company stockholders to act by written consent in accordance with certain terms and conditions that balance the foregoing considerations and establish an orderly and consistent process that provides fairness, transparency and a deliberative process. Such terms and conditions include, but are not limited to, the following:
•To ensure adequate underlying support before committing Company resources to the consent solicitation process, the Charter will require that stockholders seeking to act by written consent must own, individually or in the aggregate, at least $2,000 in market value,10% of Centeneour outstanding shares of common stock asto request that the Board set a record date to determine the stockholders entitled to act by written consent. This 10% ownership threshold is the same ownership threshold proposed in our Special Meeting Proposal, which the Board believes is appropriate so that a limited group of January 4, 2021stockholders cannot use written consent to push forward an action that lacks sufficient support to merit calling a special meeting. The Board believes that this 10% threshold, which is consistent with market practice, permits stockholders to initiate action around a matter that has achieved a critical mass of support.
•To ensure that all stockholders have a voice, stockholders that seek to act by written consent must solicit written consents from all stockholders entitled to vote on the matter, giving each stockholder the right to consider and act on the proposal, similar to what would be done at a stockholder meeting. This protection eliminates the possibility that a small group of stockholders could act without a democratic process for determining the requisite period, intendsmerits of any proposed action.
•To ensure transparency, stockholders that seek to act by written consent must provide the Company with similar information that would be required to propose such action at a stockholder meeting.
•To provide the followingBoard with sufficient time to evaluate and respond to a valid stockholder request for a record date, the Board must act and fix a record date by the later of (i) ten (10) days after delivery of such request and (ii) five (5) days after delivery by the stockholders of any information requested by the Company to determine the validity of such request. The record date must be no more than ten days after the date on which the resolution atfixing the annual meeting.
record date is adopted.
•To provide stockholders with sufficient time to consider the proposal, as well as to provide the Board the opportunity to present its views regarding the proposed action, no executed consents may be delivered until sixty (60) days after the delivery of a valid request to set a record date.
•To protect against duplicative matters or other abuses, the Charter will provide that the written consent process is not available in a limited number of circumstances, including:
•The business requested to be conducted through written consent is not a proper subject for stockholder action under applicable law;
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| | | | | NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
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Stockholder Statement Regarding Proposal for the Shareholder Right to Call for a Special Shareholder Meeting |
| | | | PROPOSAL THREE: THE ACTION BY WRITTEN CONSENT PROPOSAL |
Proposal 6 - Shareholder Right•The record date request is received within ninety (90) days prior to Call for a Special Shareholder Meeting
Shareholders ask our Board to take the steps necessary to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting.
Oneanniversary of the main purposesCompany’s last annual meeting of this proposal is to give shareholders the right to formally participate in calling for a special shareholder meeting regardless of their length of stock ownership to the fullest extent possible.
stockholders;
This proposal is more important to Centene shareholders because we do not have a right to act by written consent. Many companies provide for shareholder to have both the right to call a special shareholder meeting and a right to act by written consent — we have neither.
It is also important to have a shareholder right to call a special meeting to bring new ideas to management because Centene is free to not have an independent Board Chairman far into the future. An independent Board Chairman is an important means to bring new ideas to management and this is lacking at Centene.
It is also important to have a shareholder right to call a special meeting to be able to elect a new director. Mr. David Steward, who was on the management pay committee, received up to 60-times the negative votes of other Centene directors in 2021. Management pay was rejected by 37% of shares in 2021 when a 5% rejection is the norm.
Special meetings allow shareholders to vote on important matters, such as electing new directors with special expertise or independence that may be lacking in our current or future directors as was the case with the 3 new Exxon directors supported by the Engine No. 1 hedge fund in 2021.
Our management is best served by providing the means for 10% of shareholders, who have special expertise, to bring emerging opportunities or solutions to problems to the attention of management and all shareholders.
A reasonable shareholder right to call for a special shareholder meeting can make shareholder engagement meaningful. If management is insincere in its shareholder engagement, a right for shareholders to call for a special meeting can make management think twice about its insincerity.
It is important to remember that management can abruptly discontinue shareholder engagement if it fails to give mostly cheerleading support to management. A reasonable shareholder right to call for a special shareholder meeting will help curb such a management tendency.
Please vote yes:•A substantially similar item of business was covered at a stockholder meeting that was held within 120 days prior to the record date request;
Shareholder Right
•A substantially similar item will be covered at a stockholder meeting to Callbe held within forty (40) days after the Company’s receipt of the request for a Special Shareholder Meeting – Proposal 6
Centene Corporation 41record date; or
•If the record date request was made in a manner that violates applicable law.
•To promote management’s focus on the Company’s business, the Charter will provide that a consent will not be effective unless it is delivered to the Company within sixty (60) days of the earliest-dated consent delivered to the Company, but in no event later than 120 days after the record date.
The foregoing description of the Action by Written Consent Proposal should be read in connection with the proposed New Charter, which is attached as Annex A to this proxy statement. The New Charter is marked to show the proposed modifications of the Action by Written Consent Amendment.
The affirmative vote of a majority of the outstanding shares of our common stock entitled to vote at the Special Meeting is required to approve the Action by Written Consent Proposal. If the Company’s stockholders approve the Action by Written Consent Proposal at the Special Meeting, we will promptly file the New Charter, including the Action by Written Consent Amendment, with the Secretary of State of the State of Delaware, at which point the New Charter will become effective. If the Company’s stockholders do not approve the Action by Written Consent Proposal at the Special Meeting, but the Company’s stockholders approve one or both of the Declassification Proposal or the Special Meeting Proposal, the Company will file the New Charter, without the Action by Written Consent Amendment, with the Secretary of State of the State of Delaware, at which point the New Charter will become effective.
The Board recommends a vote “FOR” the Action by Written Consent Proposal.
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2022 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
PROPOSAL SIX: STOCKHOLDERFOUR: THE ADJOURNMENT PROPOSAL TO ALLOW FOR THE SHAREHOLDER RIGHT TO CALL FOR A SPECIAL SHAREHOLDER MEETING |
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Board of Directors' Statement in Opposition to Proposal SixFour: The Adjournment Proposal |
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The Company’s stockholders are being asked to consider and vote on the Adjournment Proposal, which is a proposal that will give the Board has carefully considered this proposal and has concluded that its adoption is notauthority to adjourn the Special Meeting from time to time, if necessary or appropriate, to solicit additional proxies in the best interestsevent there are not sufficient votes to approve any of the Company's stockholders. Accordingly,Declassification Proposal, the Board unanimously recommendsSpecial Meeting Proposal or the Action by Written Consent Proposal at the time of the Special Meeting or any adjournment or postponement thereof (the Adjournment Proposal). If the Adjournment Proposal is approved, the Special Meeting could be adjourned to a vote AGAINST this proposal forlater date. The Company could adjourn the reasons outlined below.Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from Company stockholders who have previously voted.
As previously discussed, we are recommending that our stockholders approve Proposal 5, which requests that we implement a right forIf the Special Meeting is adjourned, Company stockholders who hold,have already submitted their proxies will be able to revoke them at any time prior to their use. If you sign and return a proxy and do not indicate how you wish to vote on any proposal, or if you indicate that you wish to vote in favor of the aggregate, at least 25%Declassification Proposal, the Special Meeting Proposal or the Action by Written Consent Proposal but do not indicate a choice on the Adjournment Proposal, your shares will be voted in favor of the Adjournment Proposal. If you indicate, however, that you wish to vote against each of the Declassification Proposal, the Special Meeting Proposal or the Action by Written Consent Proposal, your shares of our common stock and satisfy certain other procedures and requirements, to request a special meeting of stockholders. We feel that a 25% ownership threshold strikes the appropriate balance between enhancing stockholder rights and protecting long-term interestswill only be voted in favor of the Company and our stockholders and is consistent with market practice. As of January 19, 2022, approximately 53%Adjournment Proposal if you indicate that you wish to vote in favor of the companies included in the S&P 500 that provide a special meeting right have an ownership threshold of 25% or greater, while approximately 19% of the same companies have adopted a 10% ownership threshold.Adjournment Proposal.
The Board recognizes that some stockholders feelWhether or not a quorum is present, approval of the rightAdjournment Proposal requires the affirmative vote of stockholders to call a special meeting is an important corporate governance practice. However, a low threshold for qualifying ownership, like the one proposed, fails to serve the best interests of Centene’s stockholders as a whole and could cause the Company to incur substantial costs and distraction. The Board does not believe it is appropriate to enable stockholders of only 10% of our common stock, regardless of how long they have held their shares, to have an unlimited ability to call special meetings for any purpose and at any time. Specifically, the Board believes that the 10% level of required ownership called for in this proposal is unduly low and would likely result in disruption and the expense of a special meeting of stockholders to consider matters that have not garnered significant enough interest from other stockholders or that are not viewed by the Board as being in the best interest of all the stockholders. A failure to receive at least 25% support among stockholders to convene a special meeting is a strong indicator that the issue is unduly narrow and not deemed critical by a majority of our stockholders.
Moreover, allowing a small minority of our stockholdersthe votes cast and entitled to call a special meeting could result invote thereon at the Company expending a large amount of time and money preparing for such special meeting, even if a large majority of our stockholders is opposed to holding it. As previously discussed, convening a special meeting of stockholders imposes significant costs, both administrative and operational, and the Board feels that a 25% threshold reflects a balanced approach to enhancing stockholders rights, while minimizing the risk of wasting time and resources or abuse by stockholders pursuing special interests.
Finally, the Company’s existing corporate governance policies and practices demonstrate and promote our accountability to stockholders. Centene’s corporate governance policies and practices are continuously evolving, provide transparency, and provide numerous avenues for stockholders to voice their opinions. The Company’s key substantive stockholder rights and governance practices include:
•Active Stockholder Engagement: The Board is committed to maintaining a consistent engagement with stockholders to solicit feedback and inform Board-level discussion, as evidenced by our current stockholder engagement process.
•Majority-Independent Board: All but three of the Company’s 14 directors are independent, and the Audit, Compensation, and Nominating and Governance Committees are comprised exclusively of independent directors.
•Lead Independent Director: The Company has a strong, independent, clearly-defined Lead Independent Director role and the Lead Independent Director presides over executive sessions of the independent directors in connection with every Board meeting.
•Director Refreshment: Of our 11 independent directors, seven have been appointed to the Board in the last three years, including four that were appointed in the last year. Each of these directors brings significant leadership experience and a diversity of backgrounds, skills and experiences to the Board.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
PROPOSAL SIX: STOCKHOLDER PROPOSAL TO ALLOW FOR THE SHAREHOLDER RIGHT TO CALL FOR A SPECIAL SHAREHOLDER MEETING |
•Majority Voting Standard: In uncontested elections, the Company has a majority voting standard.
•Proxy Access: Our proxy access right allows stockholders, or a group of up to 20 stockholders, holding 3% or more of our common stock for 3½ or more years to include director nominations in our proxy statement.
•No Supermajority Voting Provisions: Our Certificate of Incorporation and By-Laws do not contain provisions requiring more than a simple or absolute majority shareholder vote on any issue.
•Rigorous Stock Ownership Requirements: We maintain rigorous stock ownership requirements for our directors, executives and other members of senior management.
•No Stockholder Rights Plan: We do not maintain a stockholder rights plan.
Additionally, the Company is reinforcing its commitment to strong and effective corporate governance and responsiveness to stockholders by amending the Certificate of Incorporation to implement the annual election of directors after a transition period as described in Proposal 4 and recommending stockholders approve the Company’s alternative proposal regarding the right to call for a special meeting at a 25% threshold as described in Proposal 5.
Centene stockholders should be aware that this stockholder proposal is simply a request that the Board take the actions stated in the proposal. Approval of this proposal may not result in the requested action being taken by the Centene Board and, therefore, its approval would not in fact create a stockholder right to call for a special meeting. To create such a right, the Company’s stockholders must approve an actual amendment to the Certificate of Incorporation.
Approval of this proposal is not conditioned on approval or disapproval of the Board’s Special Meeting Proposal (Proposal 5).Meeting.
The Board recommends that stockholdersa vote “AGAINST”“FOR” the stockholder proposal regarding special meetings of stockholders.Adjournment Proposal.
Centene Corporation 43
Centene Corporation 9
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2022 NOTICE OF SPECIAL MEETING AND PROXY STATEMENT |
AUDIT COMMITTEE REPORT |
The Audit Committee operates under a written charter adopted by the Company’s Board of Directors. The charter outlines the Audit Committee’s duties and responsibilities. The Audit Committee reviews the charter annually and works with the Board of Directors to amend the charter, as necessary, based on the Audit Committee’s evolving responsibilities. The Audit Committee charter is available on the Company’s website at investors.centene.com/corporate-governance.
The Audit Committee of the Company’s Board of Directors consists of six non-employee directors who are independent under the rules of the NYSE, the rules of the SEC and the Company's Standards for Director Independence. All of the Audit Committee members are considered Audit Committee Financial Experts as defined by the SEC and all are financially literate under the applicable NYSE rules. The Audit Committee assists the Board of Directors in its oversight of the integrity of the Company's financial statements, the Company's compliance with legal and regulatory requirements, the qualifications and independence of the Company's independent auditor, and the performance of the Company's internal audit function and independent registered public accountant. Specifically, the Audit Committee has responsibility for providing independent, objective oversight of the accounting and financial reporting process of the Company. These responsibilities include:
•appointing, evaluating, and retaining the independent registered public accounting firm, which reports directly to the Audit Committee;
•reviewing and discussing with the auditing firm, and recommending that the Board include, the audited financial statements in the Company's Annual Report on Form 10-K;
•reviewing the Company's other financial disclosures; and
•assisting the Board in its oversight of the Company's internal control over financial reporting, disclosure controls and procedures, code of business ethics and conduct and the performance of the Company's internal audit function.
Management is responsible for the preparation of the Company's financial statements and the overall reporting process, for maintaining adequate internal control over financial reporting and, with the assistance of the Company's internal auditors, for assessing the effectiveness of the Company's internal control over financial reporting. The Company's independent registered public accounting firm is responsible for performing an independent audit of the Company's financial statements in accordance with the standards of the Public Company Accounting Oversight Board (the PCAOB), expressing an opinion as to the conformity of the financial statements with generally accepted accounting principles in the United States of America, and auditing management's assessment of the effectiveness of internal control over financial reporting. KPMG LLP has served as the Company's independent registered public accounting firm since 2005.
Management represented to the Audit Committee that the financial statements were prepared in accordance with generally accepted accounting principles and that there were no material weaknesses in its internal control over financial reporting. The Audit Committee met and held discussions with management and KPMG LLP to review and discuss the financial statements and the Company's internal control over financial reporting. The Audit Committee has also discussed with KPMG LLP the firm’s judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters as are required to be discussed by the applicable requirements of the PCAOB and the SEC. KPMG LLP also provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant's communications with the Audit Committee concerning independence. The Audit Committee has discussed with KPMG LLP their independence with respect to the Company, including a review of audit and non-audit fees and services and concluded that KPMG LLP is independent.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
| | AUDIT COMMITTEE REPORT |
In fulfilling its oversight responsibilities for reviewing the services performed by KPMG LLP, the Audit Committee has the sole authority to select, evaluate and replace the outside auditors. The Audit Committee discusses the overall scope of the annual audit, the proposed audit fee, and annually evaluates the qualifications, performance and independence of KPMG LLP as independent registered public accountants and the performance of its lead audit partner. The Audit Committee meets regularly with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their respective examinations, the evaluation of the Company's internal control over financial reporting and the overall quality of the Company's accounting.
Based upon the review and discussions with the Company’s management and KPMG LLP referred to above, and its review of the representations and information provided by management and KPMG LLP, the Audit Committee recommended to the Board that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, for filing with the Securities and Exchange Commission. The Audit Committee also reappointed KPMG LLP to serve as the Company’s independent registered public accounting firm for 2022.
AUDIT COMMITTEE
William L. Trubeck, Chair
Jessica L. Blume
Christopher J. Coughlin
Wayne S. DeVeydt
Frederick H. Eppinger
Theodore R. Samuels
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
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Information About Executive Compensation | | |
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Compensation Committee Report |
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The Compensation Committee, comprised solely of independent directors, has reviewed and discussed the “Compensation Discussion and Analysis” with the Company's management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this proxy statement on Schedule 14A and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
COMPENSATION COMMITTEE
Christopher J. Coughlin, Chair
Jessica L. Blume
Wayne S. DeVeydt
William L. Trubeck
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
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Compensation Discussion and Analysis | | |
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This CD&A describes the principles, objectives, and compensation policies and arrangements of our executive compensation program which is generally applicable to each of our senior officers. This CD&A focuses primarily on our Chairman & CEO and the other executive officers included in the Summary Compensation Table, whom we collectively refer to in this proxy as our Named Executive Officers (NEOs). For 2021, our NEOs were:
•Michael F. Neidorff, Chairman and Chief Executive Officer
•Andrew L. Asher, Executive Vice President, Chief Financial Officer
•Christopher A. Koster, Executive Vice President, Secretary and General Counsel
•Brent D. Layton, President and Chief Operating Officer
•Sarah M. London, Vice Chairman
•Jeffrey A. Schwaneke, Former Executive Vice President, Chief Financial Officer
•Jesse N. Hunter, Former Executive Vice President, Mergers and Acquisitions & Chief Strategy Officer
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
The contents of this CD&A are organized as follows:
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| | |
| l | Results of the April 2021 “Say-on-Pay” Vote |
l | Stockholder Outreach and Engagement Efforts |
| l | Overview of Compensation Best Practices |
| l | Competitive Pay Philosophy |
| | – Healthcare Industry Peer Group |
| | – General Industry Group |
| l | Benchmarking Methodology |
| l | Alignment of Pay and Performance |
l | 2021 NEO Compensation Overview |
| l | Pay Mix |
| l | Target Pay Review |
| l | Base Salaries |
| l | Annual Cash Incentive Plan |
| l | Annual Cash Incentive Performance |
| l | Long-Term Incentive Awards |
| l | 2019-2021 Performance-Based Restricted Stock Unit Award Results |
| l | 2019-2021 Cash Long-Term Incentive Plan Award Results |
| l | Competitive Compensation in Connection with Succession Planning |
| l | 2022 Annual Cash Incentive |
| | – Must Meet Adjusted EPS Objective (Funding of Bonus) |
| | – Allocation of Bonus Payout for 2022 |
| l | 2022-2024 Long-Term Incentives |
| l | Comments about Performance Targets |
| l | Other Benefits |
| l | Stock Ownership Guidelines |
l | Hedging and Pledging Policies |
l | Risk Disclosure |
| l | Employment Contracts, Termination of Employment Arrangements, Change in Control Arrangements, and Retirement Provisions |
| | – CEO Employment Agreement |
| | – Offer Letter Agreement - Andrew L. Asher |
| | – Severance and Change in Control Agreements |
| | – Separation Agreements |
| | – Retirement Provisions |
| l | Deductibility of Executive Compensation |
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
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SECTION 1 - Executive Summary |
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We are a leading multi-national healthcare enterprise that is committed to helping people live healthier lives. We take a local approach - with local brands and local teams - to provide fully integrated, high-quality, and cost-effective services to government sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. We also provide education and outreach programs to inform and assist members in accessing quality, appropriate healthcare services.
During 2021 and early 2022, the Company and Board of Directors took key steps in the leadership succession planning, including initiating a formal process of CEO selection in December 2021; made new key executive appointments; took significant refreshment actions on our Board of Directors and Board Committees as we welcomed five new, non-management Board members; and made key governance changes, including the implementation of a mandatory retirement age for our Board members and a commitment to an independent chairman by the end of 2022. In addition, we have included management proposals in this proxy statement regarding Board declassification and the right of stockholders to call a special stockholder meeting.
In addition to these important changes around leadership and governance, we announced the establishment of our Value Creation Plan focused on increased stockholder value through actions including cost reduction initiatives, gross margin expansion through bid discipline and cost management, and portfolio optimization and strategic capital allocation. We took action on the plan in the fourth quarter through our divestiture of USMM and a $200 million share repurchase. During 2021, our stock price increased 37%.
In January 2022, we acquired all of the issued and outstanding shares of Magellan Health for $95.00 per share in cash for approximately $2.6 billion. The Magellan Health acquisition enables us to provide whole-health, integrated healthcare solutions to deliver better health outcomes at lower costs for complex, high-cost populations.
The Company delivered solid financial performance in 2021 as outlined below.
•Total revenues of $126.0 billion, an increase of 13% over 2020.
•Diluted EPS of $2.28, a decrease of 27% over 2020 due to acquisition related costs and our legal settlement reserve related to services provided by our pharmacy benefits manager subsidiary.
•Adjusted Diluted EPS of $5.15, an increase of 3% over 2020.
•Operating cash flows of $4.2 billion.
•Stock price appreciation of 37%.
Overall, our three-year Compound Annual Growth Rates (CAGR) have been:
•Total revenues of 28%;
•Diluted EPS of 0% and Adjusted Diluted EPS of 13%;
•Net earnings attributable to Centene Corporation of 14%;
•Adjusted EBITDA of 31%;
•Cash flow from operations of 50%; and
•Stock price of 13%.
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
Refer to Appendix A for reconciliations of non-GAAP measures included throughout this proxy statement.
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SECTION 2 - Stockholder Engagement |
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Results of the April 2021 “Say-on-Pay” Vote |
The Compensation Committee monitors the results of the annual advisory “say-on-pay” proposal and considers such results as one of many factors in connection with the discharge of its responsibilities. Although our 2021 say-on-pay vote was approved by our stockholders with approximately 63% of stockholders voting in support, it was below what the Board and management consider satisfactory.
We actively seek input from stockholders on compensation and governance matters and are always open to new ideas. As discussed below, during 2021, we extended meeting invitations to 40 stockholders (representing approximately 73% of our outstanding shares) and ultimately management met with 17 stockholders (representing approximately 54% of our outstanding shares). Stockholders expressed a wide variety of views about executive compensation as well as other recommendations.
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Stockholder Outreach and Engagement Efforts | | |
Regular outreach and engagement with our stockholders is a fundamental part of our Company’s success. Over the past several years, we have significantly expanded our governance-focused engagement program to better understand the issues that are important to our stockholders and incorporate feedback into the Board’s decision-making process. Members of our management team and Board regularly meet with stockholders to gather their perspectives on key topics including our performance and strategy, corporate governance, management succession planning, executive compensation, human capital management and corporate responsibility.
Beyond our governance-focused engagement, our investor relations team and members of our senior management team regularly communicate with investors in connection with quarterly earnings calls, investor and industry conferences, analyst meetings and individual discussions with stockholders.
As described in the diagram below, we report stockholder feedback regularly to our Board, which in turn uses this feedback to evaluate any changes to the Company’s practices year-round.
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Our Year-Round Stockholder Engagement Process
Following our 2021 Annual Meeting, the Board of Directors was disappointed by the lower than expected support for the advisory say-on-pay proposal. While we have always been focused on hearing our investors’ perspectives and making any necessary enhancements to our practices, in response to the low support level, our management team and the Board undertook an extensive outreach effort to understand how we can best address our stockholders’ concerns. While executive compensation remained a key topic of focus in our conversations, other topics discussed included succession planning initiatives, our Board composition and refreshment, key corporate governance-related matters, and corporate and social responsibility achievements. Our directors, including Jessica Blume, James Dallas, Richard Gephardt and William Trubeck participated in a number of these engagements.
Following these conversations and the valuable feedback received from our investors, our Board and management team continued to undertake several initiatives to demonstrate responsiveness to investor feedback. The key actions taken can be found below on page 52.
Who We Engaged With Since our 2021 Annual Meeting
We report stockholder feedback to our Board on a regular basis throughout the year. The table below highlights how we responded to stockholder feedback in several areas.
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Stockholder Feedback Topic | Our Board responded with the following actions: |
Compensation |
Disclosure of Short- and Long-Term Incentive Program Structure | We have continued to enhance disclosure regarding the design and structure of our incentive programs, including disclosing details of the current year program for the first time, including providing additional disclosure of our targets, the target-setting process and the rigor of goals. |
Alignment of Executive Compensation with Long-Term Strategy | Beginning with our 2022-2024 performance-based RSUs and Cash LTIP, we have moved away from the use of pre-tax margin and revenue metrics and introduced Adjusted Net Earnings Margin percentage and Adjusted Diluted EPS metrics to better align management incentives with the margin expansion strategy of the Company. |
Continue to Set Challenging Targets | We have continued to set targets rigorously, establishing goals that not only exceed prior year target levels but materially exceed prior year actual results as well. |
Pay For Performance Alignment | For the 2019-2021 Cash LTIP performance cycle, the Company did not meet our objectives for our relative Total Shareholder Return (TSR) metric. As a result, we did not provide a payout for the TSR performance metric of the Cash LTIP incentive, illustrating the strong connection between executive pay and performance.
Beginning in 2022, we introduced an additional stock-price aligned component to our executive compensation program through the introduction of performance-based stock options. The stock options vest only if the stock price reaches a targeted level of $100/share (+22% premium to our stock price on December 14, 2021) which aligns stockholder value creation with executive compensation. As with the Cash LTIP and PSUs, the performance-based stock options also provide additional retention as these instruments have a three year cliff based vesting from the time of grant.
A core objective of our executive compensation program is to design and implement performance metrics that challenge our executives to meet and exceed business goals that deliver sustained performance. The performance metrics that we used for the 2021 Annual Cash Incentive are the same adjusted (non-GAAP) financial measures that we use for planning and evaluating our performance and present externally in our earnings materials and SEC reports. We also believe that these adjusted metrics are the same metrics our investors generally use to measure our performance. The Board can exercise negative discretion if they believe that doing so will result in a more appropriate level of compensation for any reason. |
Succession Planning | |
Transparency around Management Succession Planning | We have substantially increased the transparency of our succession planning initiatives across senior management, including the CEO, through increased disclosures of our process and enhanced organization leadership with the establishment of the Office of the Chairman and CEO. |
Access to Senior Management Members | Over the course of 2021, our full senior management team participated in a number of investor conferences and calls, often leading the dialogue with our stockholders. |
Board Composition |
Board Refreshment | We have substantially refreshed our Board within the last year as six new directors joined the Board, three directors retired on January 5, 2022, and three additional directors are expected to retire prior to or at our 2023 annual meeting. Additionally, we implemented a mandatory Board retirement age of 75 for new directors. |
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Committee Refreshment and Chair Rotation | Since November, we have added progressive leadership perspectives to our committees, rotating the Chairs of our Nominating and Governance Committee, our Audit Committee and our Compensation Committee. Additionally, our Compensation Committee has completely refreshed its members over the course of the last year. In addition, our Board has established a targeted period of seven years as a maximum tenure of a Committee Chairman. |
Board Diversity | Over the past year, we have added two additional female members to our Board, increasing our overall board ethnic and gender diversity to 43%. |
Board Leadership | We have strengthened the duties of our Lead Independent Director to include presiding at meetings of the Board at which the Chairman is not present, serving as a liaison between Chairman and the independent Directors and previewing information provided to the Board. In addition, the Company has committed to appointing an Independent Chairman by the end of 2022. |
Governance Practices |
Remove Restrictive Stockholder Provisions | We eliminated the supermajority vote requirement and are proposing an amendment to our Amended and Restated Certificate of Incorporation to declassify the Board of Directors. |
Enhance Stockholder Rights | Our Board is proposing to allow stockholders who own at least 25% of the company’s outstanding shares of common stock, and satisfy certain other procedures and requirements, the ability to require the company to call a special meeting of stockholders. |
Environmental, Social, Health and Governance (ESHG) |
Enhanced Disclosure and Reporting | In an effort to further enhance our sustainability practices, we published disclosures aligned with the Sustainability Accounting Standards Board (SASB) as well as the Task Force on Climate-related Financial Disclosures (TCFD). |
Diversity and Inclusion Reporting | We have enhanced our workforce diversity disclosure by publishing our EEO-1 data in our annual Diversity & Inclusion Report. |
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SECTION 3 - Compensation Philosophy |
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The following principles guide the Company's compensation philosophy:
•Pay for Performance - Our overall compensation philosophy is to pay for performance. Executive compensation is directly linked to performance and the achievement of both Company and individual goals. Superior performance and the achievement of goals results in higher compensation.
•Create Long-Term Stockholder Value - Performance-based and service-based stock, performance-based stock options, and cash awards with meaningful retention requirements are used to encourage sustained stockholder value creation.
•Foster a Culture of Risk Management and Compliance - A portion of NEO compensation is based on meeting individual goals that align with our corporate mission statement and promote a culture of compliance with rules, regulations and the Company's vision and values and rewarding those who mitigate business risks.
•Attract and Retain Top Executive Talent - We offer competitive pay to attract, motivate and retain industry executives with the skills and experience to drive superior long-term Company performance in a high growth company.
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Overview of Compensation Best Practices |
The Compensation Committee establishes and administers the executive compensation philosophy and program and assists the Board of Directors in the development and oversight of all aspects of executive compensation. Presented in the table below are highlights of our compensation practices:
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What We Do |
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ü | Pay for Performance A significant portion of our NEOs' compensation is tied to performance with clearly articulated financial and performance goals.
| ü | Annual Compensation Risk Assessment We regularly analyze risks related to our compensation program and we conduct broad risk assessments.
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| Competitive Compensation Each component of the NEOs' annual total direct compensation is generally targeted around the 50th percentile for the General Industry peer group. Cash compensation generally approximates median while long-term incentives can bring total compensation above the 50th percentile of the General Industry peer group.
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| Stock Ownership Requirements We maintain rigorous stock ownership requirements for our directors, executives and other members of senior management. Our CEO’s requirement is 5x annual base pay; other NEOs’ requirements are 2.5x annual base pay.
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| Long-Term Incentive Awards reward continuous performance on multiple metrics and vest at the end of three-year period.
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| Clawbacks We can recover performance-based cash and equity incentive compensation paid to executives in various circumstances.
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ü | Formula Based Annual Incentive Plan Awards under the Annual Cash Incentive plan are formula based.
| ü | Independent Compensation Consultant The Compensation Committee retains an independent compensation consultant to advise the committee on executive compensation matters.
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ü | Tally Sheets Tally sheets and wealth accumulation analyses for each NEO are reviewed annually before making compensation decisions.
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What We Don't Do |
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X | Excessive Risk-Taking in Our Compensation Programs The long-term incentive plans use multiple performance measures, capped payouts and other features intended to minimize the incentive to take overly risky actions.
| X | No Hedging or Pledging Directors and executives are prohibited from hedging, pledging or engaging in any derivatives trading with respect to Company stock.
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X | No Tax Gross-ups There are no tax “gross-ups” for perquisites or excise tax gross-ups in the event of a change of control related termination.
| X | No Backdating or Repricing of Stock Options Stock options are never backdated or issued with below-market exercise prices. Repricing of stock options without stockholder approval is expressly prohibited.
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X | No Single-Trigger Employment Agreements Any cash payments in executive employment agreements are subject to a "double-trigger" change in control condition.
| X | No Single-Trigger Stock Grants Beginning with our December 2020 grants, equity compensation awards are subject to a "double-trigger" change in control condition.
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Competitive Pay Philosophy |
Centene must leverage its compensation and benefit programs to attract the best talent to compete and achieve aggressive operating objectives. Therefore, Centene views both private equity firms and competitors with larger market capitalization as significant competition for talent. Centene also recognizes that our Company is a source for these firms and competitors to recruit talent if the appropriate compensation programs are not in place at Centene.
For the components of target total compensation, the Compensation Committee's competitive objectives are for:
•base salaries to approximate the 50th percentile of similarly-sized organizations, based on revenues. The 50th percentile will be targeted in most instances; however, up to the 75th percentile or higher may be considered when retaining key employees and recruiting talent from significantly larger companies and private equity firms or when the experience of the executive dictates a higher base salary;
•annual bonus targets to approximate the 50th percentile of similarly-sized organizations; and
•long-term incentive targets to approximate the 50th percentile of similarly-sized organizations.
The goal of these objectives is that based on individual performance, actual total compensation will fall at the 50th percentile of total market based compensation for the general industry (GI) peer group for expected performance and between the 50th and 75th percentile based on extraordinary performance. Exceptions are sometimes made when an individual's experience and impact warrant it, as is the case for our Chairman & CEO and in 2021 with our newly appointed Vice Chairman and our President and COO.
In order to achieve these objectives, the Compensation Committee establishes target, market-based total compensation levels (e.g., base salary, annual bonus target and long-term incentives) from market data from two different peer groups.
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A. Healthcare Industry Peer Group |
Using the Standard and Poor's Global Industry Classification System (GICS) codes and other relevant industry parameters, Exequity, LLP analyzed the managed care industry and determined there are four key segments in the industry:
•Managed Healthcare Companies;
•Healthcare Services;
•Healthcare Distributors; and
•Healthcare Facilities.
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Based on further review by Exequity, LLP, the following companies were included in the Company's Healthcare Industry Managed Care Peer Group for use in determining compensation for NEOs in 2021:
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| MANAGED HEALTH CARE | | | HEALTHCARE SERVICES |
| Direct Competitors | | | CVS Health Corporation |
| Anthem, Inc. | | | |
| Cigna Corporation | | | |
| Humana, Inc. | | | HEALTHCARE DISTRIBUTORS |
| Molina Healthcare, Inc. | | | AmerisourceBergen Corporation |
| UnitedHealth Group, Inc. | | | Cardinal Health, Inc. |
| | | | McKesson Corporation |
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| | | | HEALTHCARE FACILITIES |
| | | | HCA Healthcare, Inc. |
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B. General Industry Group |
Since there is a market for executive talent both within and outside our industry, we also benchmark against the general industry. Therefore, the market data the Compensation Committee utilizes includes not only the managed healthcare industry peer group of 10 companies, but also a general industry peer group of approximately 400 companies derived from the Willis Towers Watson's Compensation Database.
The Compensation Committee engaged Exequity, LLP, to gather, analyze and summarize the market data from the Willis Towers Watson Executive Compensation Database for the CEO and the other NEOs.
For this analysis, which is utilized in determining December equity grant awards and compensation for the forthcoming year, including base salaries, annual cash incentive targets and cash LTIP targets, we size adjust the general industry peer data to be in line with our forecasted revenues for the upcoming year.
All elements of compensation are valued and reviewed in evaluating the relative competitiveness of our compensation practices against both market data and the Compensation Committee's competitive objectives. In addition, the Compensation Committee annually reviews a tally sheet for each NEO, which includes the current value of all outstanding equity-based awards, benefits and perquisites. The Compensation Committee uses the tally sheets to analyze each NEO's base salary, annual incentive target and long-term incentive opportunity in relation to the market and each component of compensation as a percentage of total compensation to determine if there is any risk of retention of key executives.
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SECTION 4 - 2021 Compensation Decisions and 2022 Compensation Targets |
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Alignment of Pay and Performance | | |
In 2021, the Company delivered revenue and adjusted EPS growth, which was key to our strategy to promote long-term stockholder value in a competitive business environment. Our revenues increased 13% over 2020, with a 28% three-year compound annual growth rate, and our stock price grew by 37% during 2021. With the announcement of our Value Creation Office in June 2021, our 2022 compensation targets have been aligned to reflect the new goal of margin expansion. Our NEOs' total incentive compensation opportunities now are contingent on their ability to achieve profitable growth and improve margins that will provide a basis for increasing sustainable long-term value for our stockholders. When reviewing the NEOs' compensation with our independent executive compensation consultant, the Compensation Committee considered these new objectives in conjunction with our executive compensation program in continuing to recognize our pay for performance through the following three primary components:
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Base Pay | + | Cash Awards Under Our Annual Incentive Plan | + | Long-Term Incentives |
Performance-Based RSUs
Time-Based RSUs
Performance-Based Stock Options
Cash LTIP |
We are a multi-national healthcare leader with over $125 billion in revenue, ranking No. 24 on the FORTUNE® 500 list, and again named to FORTUNE magazine's 2022 list of World's Most Admired Companies for the fourth consecutive year. In addition, the Company's 2021 performance included the successful closing of the Magellan Health acquisition in early January 2022. The Company also took the opportunity to reduce its G&A burden on the company by leveraging our size and scale through strategic restructuring of our operating models resulting in run rate savings and reinvesting in strategic capabilities in an effort to position Centene for success through innovation. In addition, the creation of the Value Creation Office in June 2021 is intended to shift the enterprise focus to a profitable growth strategy that emphasizes operational efficiencies and strategic alignment of all assets. Through all of these challenges and during the pandemic, we continued to support our 26 million members, our providers and our employees.
The Board of Directors acknowledged this success and the importance of our CEO's leadership as he led the Company in focusing on advancing initiatives across the enterprise to deliver on the new value creation goals and the 2022 operation objectives. The Board of Directors also recognized his 25 years of tenure in which he has fostered sustained high growth and strong profitability. The Compensation Committee, together with our independent executive compensation consultant, analyzed our CEO's total historical compensation. Based on their review, they determined that total compensation in 2021 continues to mirror the overall growth in Revenues, our Total Shareholder Return (TSR), and Adjusted Diluted EPS over the last five years.
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Our CEO's total compensation alignment with these metrics is illustrated in the following graphs:
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
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2021 NEO Compensation Overview | | |
The following is an overview of our 2021 executive compensation program. Our executive compensation plans are designed to attract and retain key executives integral to the Company's success and long term value proposition. In addition, compensation is centered on long-term incentives and variable performance-based compensation designed to align our executives' pay with the Company's long-term objectives and value brought to our stockholders.
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Annual Incentive Plan |
Performance Measure | % Weight |
Adjusted Diluted EPS Target | 35% |
General and Administrative Expense Management | 15% |
Business Unit Goals / Individual Performance Objectives | 50% |
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Bonus pool is not funded unless the Adjusted EPS objective is achieved. |
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Long-Term Incentive Plans (2019-2021) |
Three-Year Performance-Based RSUs (60% of equity) | Service-Based RSUs (40% of equity) |
Pre-tax Margin (60%) | Ratable vesting over three-year period |
Compound Annual Revenue Growth (40%) |
Three-Year Cash LTIP |
Three-year Relative TSR vs. HCI Peer Group (50%) | Pre-tax Margin (30%) | Compound Annual Revenue Growth (20%) |
Increased pre-tax margin target for 2021-2023 Cash LTIP and PSUs. New goal was established at a higher level of difficulty over the prior target and the actual level of achievement during the 2018-2020 performance cycle. |
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Aggressive and rigorous goals require strong performance to earn target payout and extraordinary performance to earn maximum payout. |
Our pay for performance philosophy can be further depicted by the following graph, which represents our total compensation mix. This pay mix exemplifies that the fixed amount of compensation is only 9% for our CEO and, on average, 9% for all NEOs, resulting in approximately 91% of pay being variable for all NEOS. The graph below illustrates the 2021 values contained in the Summary Compensation Table as percentages of total compensation. The values in the “All Other Compensation” column of the Summary Compensation Table have been excluded from this illustration. Compensation percentages for our NEOs that are former officers are footnoted in the table below.
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| Due to the separation agreements with Mr. Hunter and Mr. Schwaneke, a significant portion of their pay was included in the All Other Compensation of the Summary Compensation Table. Components of their pay are outlined below: |
| •Mr. Hunter: 7% Base Salary, 0% Annual Incentive, 74% Long Term Incentive and 19% All Other Compensation
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| •Mr. Schwaneke: 15% Base Salary, 0% Annual Incentive, 0% Long Term Incentive and 85% All Other Compensation
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Consistent with our compensation philosophy, the Compensation Committee reviewed the target compensation and respective market data of two groups: general industry (GI) and our healthcare industry peer group (HCI). The review of the data indicated that Mr. Neidorff's total target 2021 compensation was the highest of the HCI peer group and above the 50th percentile of the general industry. However, the Compensation Committee noted that the majority of his total target was based in long term incentives and his annual salary was approximately at the 50th percentile and believed that his total compensation target was appropriate for an experienced, seasoned leader who continues to drive high levels of performance for our stakeholders. In determining his compensation, the Compensation Committee also recognized Mr. Neidorff's 25 years of experience as our CEO; his ability to grow the revenues of Centene during his tenure from approximately $300 million in 2001 at the Company's initial public offering, to over $125 billion in 2021; and, his execution of transforming the healthcare landscape in the United States.
The following highlights our 2021 financial results:
•three-year compounded revenue growth of 28%;
•shareholder return of 43% on investment from 2019-2021;
•met our Adjusted Diluted EPS target of $5.15;
•formed our Value Creation Plan, which encompasses SG&A savings, gross margin improvement, and strategic capital allocation;
•successfully executed a share repurchase and completed the divestiture of our majority interest in USMM as part of the associated portfolio optimization in connection with our plan; and,
•positioned the Company to provide whole-health, integrated healthcare solutions resulting from the acquisition of Magellan Health which was announced in 2021 and closed in January 2022.
The HCI peer group and GI peer group are discussed in further detail under Section 3 of the CD&A under the headings "Healthcare Industry Peer Group" and "General Industry Group," respectively.
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A similar analysis of peer data sets is performed on the other NEOs' compensation. The Compensation Committee and Chairman and CEO reviews the performance of each individual and aligns compensation based on this analysis.
In December 2021, the Compensation Committee evaluated the 2022 base salaries of our NEOs and took into account the Company's 2021 estimated revenue of approximately $125 billion. In 2021, our NEOs' base salaries were compared to competitive market data and the Compensation Committee believed that selective increases in base salaries were only required for the Secretary and General Counsel to reflect his promotion to Executive Vice President. Adjustments to base salaries for Mr. Asher, Mr. Layton, and Ms. London were made in connection with their promotions during 2021 and therefore no further salary adjustments were made for 2022.
The NEOs were paid competitive base salaries determined by the evaluation of multiple factors: business results for the prior year, individual performance, and the market value for each specific job. Since Centene is a pay for performance company, only 9% of the CEO’s compensation is comprised of base salary and, on average, only 9% of the other NEOs' compensation is comprised of base salary.
While reviewing market data to determine appropriate annual base salaries, the Compensation Committee also considers:
•the CEO's compensation recommendations for all other NEOs;
•the scope of responsibility, experience, time in position and individual performance of each officer, including the CEO;
•each executive's leadership performance and potential to enhance long-term stockholder value; and,
•internal equity.
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Annual Cash Incentive Plan | | |
Based on a review of industry data, as discussed in Section 3 - Compensation Philosophy, the Compensation Committee approved an annual cash incentive plan target opportunity in 2021 of 150% of base salary for the CEO, Vice Chairman, and President. For other NEOs, the Compensation Committee approved an annual cash incentive plan target opportunity in 2021 of 100% of base salary. The Compensation Committee rewards NEOs with an annual cash incentive bonus if the Company achieves its Adjusted Diluted EPS objective.
The Adjusted Diluted EPS objective is established during our annual business planning process. The Compensation Committee approved a target level of performance for each administrative, operating, health plan and subsidiary company that represents a meaningful improvement above our 2020 performance. Our annual business plan is developed each year based on a pay for performance approach with rigorous performance metrics that the Compensation Committee believes are challenging but attainable for our short-term and long-term incentive programs. In addition, the performance metrics align closely with our business environment and incorporate initiatives and investments during the year that will extend beyond near-term benefits and will also support favorable longer-term impact on our business.
While the Company continues to execute on a rigorous growth strategy, the Compensation Committee continues to set metrics that reflect a continued focus on increased profitability. As illustrated below, based upon the approved Adjusted Diluted EPS metrics, the Compensation Committee had increased these profitability targets for 2021.
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| Threshold | Target | Maximum | Actual Results |
| % of Target | 50% | 100% | 200% |
| 2021 | $5.00 | $5.15 | $5.40 | $5.15 |
| 2020 | $4.64 | $4.74 | $4.90 | $5.00 |
The Compensation Committee assessed how each NEO contributed to achieving this Adjusted Diluted EPS objective and other pre-determined objectives approved by the Compensation Committee at the beginning of the year. For NEOs, the Compensation Committee determined that 35% of the 2021 annual bonus payout would be based on reaching specific adjusted EPS targets and 15% would be based on general and administrative expense management. In addition, the Compensation Committee also determined that at least 50% of an NEO's target award would be aligned with individual performance objectives based on the following factors:
•Leadership
•Diversified Growth
•Financial Discipline
•Operational Excellence
•Quality
The Compensation Committee then followed a two-step process to determine the bonus earned for 2021:
1.Achievement of EPS Objective. The Company's 2021 Adjusted Diluted EPS was $5.15.
2.Evaluation of General and Administrative Expenses. The Compensation Committee assessed the management of general and administrative expenses against the Company's annual business plan.
3.Evaluation of Individual Performance. Based on input from management, the Compensation Committee assessed each NEO's individual performance against pre-determined goals and overall determined that goals of the NEOs were met at target. A summary of each NEO's individual performance, along with their total 2021 Annual Cash Incentive follows.
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Annual Cash Incentive Performance | | |
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| Name | Individual Performance | 2021
Annual
Cash Incentive Paid ($) | % of Target Paid |
| Michael F. Neidorff | •Drove revenues to over $125 billion, an increase of 13% over prior year and met rigorous financial targets. •Led the Company through the announcement and approval of the Magellan Health acquisition, which closed in early 2022. •Has led the Company in continuous improvement of our people priorities. In 2021, the Company was named to the Bloomberg Gender Equality Index, Human Rights Campaign Corporate Equality Index Best Places to Work for LGBTQ Equity, and FORTUNE World's Most Admired Companies. •Although the Adjusted Diluted EPS goal was achieved at target level performance, the Board took into consideration the impact of the pharmacy benefits manager settlement by applying negative discretion and attributing zero performance payout for the Adjusted Diluted EPS portion of the award resulting in an overall bonus payout of 35% below target. | $1,755,000 | 65% |
| Andrew L. Asher | •Successfully met consolidated financial performance targets for 2021, including Total Revenues, Adjusted Diluted EPS of $5.15, and reduced SG&A rate in excess of aggressive plan. •Delivered on integration synergy targets ahead of schedule and operating model changes. •Successfully completed several refinancing arrangements, resulting in lower interest rate and debt expense, leading to significant annual savings. | $916,298 | 100% |
| Christopher A. Koster | •Significantly enhanced regulatory engagement process, laying the foundation for the future efforts. •Skillfully led regulatory approval process in support of the acquisition of Magellan Health. •Responsively streamlined use of external law firms, reducing costs, consolidating expertise and tailoring internal legal department structure to better serve the legal and consultative needs of the enterprise. | $404,423 | 100% |
| Brent D. Layton | •Successfully led operations for Centene in his new role as President and Chief Operating Officer, overseeing the performance of each of our key product lines. •Led the creation of new initiatives focused on enhancing the member and provider experience and achieved key operational goals around claims payments and member enrollments. •Developed a concerted approach for addressing medical cost reductions for Medicaid, delivering gross margin improvement. Completed initiatives to grow Medicare membership. | $1,510,818 | 100% |
| Sarah M. London | •As Vice Chairman, strategically led the Company by establishing the Value Creation Office placing the Company in a position to deliver significant run rate savings. •Executed on portfolio optimization in our Health Care Enterprises business line with the divestiture of our majority interest in USMM. Proceeds were used to repurchase $200 million of our common stock. •Significantly advanced the Company’s telehealth operating model across the utilization management platform and digitization efforts to streamline and enhance clinical and administrative outcomes. | $1,467,693 | 100% |
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Long-Term Incentive Awards |
The Compensation Committee granted long-term incentives to our NEOs in December 2021 based on a review of industry data, as follows:
•Performance-based Restricted Stock Units (PSUs) (45% of shares granted) - The target metrics for the 2022-2024 performance period are 2024 Adjusted Diluted EPS of a target of $7.62 (70% weight) and Adjusted Net Earnings Margin of 3.30% by 2024 (30% weight). Threshold, target
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and maximum metric achievement will result in 50%, 100% or 200% attainment of each metric, respectively. If earned, PSUs will vest in February 2025.
•Performance-based Stock Options (15% of shares granted) - Stock options with a performance condition requiring stock price appreciation to $100 per share (+22% premium) with minimum vesting of three years.
•Service-based Restricted Stock Units (RSUs) (40% of shares granted) - One-third vest annually based on continued service with the Company.
•Cash Long-Term Incentive Plan (Cash LTIP) - The target metrics for the 2022-2024 performance period are 2024 Adjusted Diluted EPS of $7.62 (35% weight) and Adjusted Net Earnings Margin of 3.30% by 2024 (15% weight), as well as a relative Total Shareholder Return objective (50% weight). Threshold, target and maximum metric achievement will result in 50%, 100% or 200% attainment of the metric respectively, while the threshold level of achievement for the Total Shareholder Return metric will be set at the 25% attainment level.
We introduced performance-based stock options in 2021 in our efforts to more closely align our compensation structures with stockholder interests. The Compensation Committee strongly believes that performance-based stock options encourage retention through the vesting period and incentivize stock price performance as the options only have value to the extent our stock increases.
In line with the Value Creation Plan, the Compensation Committee has adopted these enhanced performance metrics for the PSUs and Cash LTIP (2024 Adjusted Diluted EPS of $7.62 and Adjusted Net Earnings Margin of 3.30% by 2024) while maintaining the goal of relative TSR for the Cash LTIP to align management's compensation with stockholder interests. The Compensation Committee has the discretion to evaluate the metrics on an "as adjusted" basis to align the Company's performance in a manner that is consistent with how we believe investors evaluate our financial results.
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2019-2021 Performance-Based Restricted Stock Unit Award Results |
In December 2018, the Compensation Committee established the following metrics, targets and weights for the 2019-2021 PSUs. The Company met or exceeded both targets as shown below with a total percentage earned at 149.6% of the target:
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| Metric Criteria | Weight | 2019-2021 Actual | Metric Payout of Target | Weighted Payout |
| Threshold | Target | Maximum |
| Pre-tax Margin (As Adjusted) | 2.75% | 3.25% | 4.00% | 60% | 3.37% | 116% | 69.6% |
| Compound Annual Revenue Growth Rate | 7.5% | 10.0% | 15.0% | 40% | 24.3% | 200% | 80.0% |
| | | | 100% | | | 149.6% |
The number of shares earned by each NEO at 149.6% are reflected in the table below:
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| Name | Target | Vested Shares | |
| Michael F. Neidorff | 153,580 | 229,756 | |
Andrew Asher 1 | — | — | |
| Christopher A. Koster | 12,000 | 17,952 | |
| Brent Layton | 30,000 | 44,880 | |
Sarah M. London 1 | — | — | |
| Jesse N. Hunter | 27,500 | 41,140 | |
Jeffery Schwaneke 2 | — | — | |
1 Mr. Asher and Ms. London were not eligible to receive an award for this performance cycle as they did not join the Company until 2020. | |
2 Mr. Schwaneke forfeited this award upon his separation from the Company. | |
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2019-2021 Cash Long-Term Incentive Plan Award Results |
In December 2018, the Compensation Committee established the following metrics, targets and weights for the 2019-2021 Cash LTIP. The Company exceeded targets for both Pre-tax Margin (As Adjusted) and Compound Annual Revenue Growth, but was below the threshold for Relative Total Shareholder Return as shown below, resulting in a total percentage earned at 74.8% of the target:
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| Metric Criteria | Weight | 2019 - 2021 Actual | Metric Payout of Target | Weighted Payout |
| Threshold | Target | Maximum |
| Pre-tax Margin (As Adjusted) | 2.75% | 3.25% | 4.00% | 30% | 3.37% | 116.0% | 34.8% |
| Compound Annual Revenue Growth Rate | 7.5% | 10.0% | 15.0% | 20% | 24.3% | 200.0% | 40.0% |
| HCI Peer Group Relative Total Shareholder Return Percentile Rank | 25th | 50th | 90th | 50% | 18th | —% | —% |
| | | | 100% | | | 74.8% |
The amounts earned by each NEO at 74.8% are reflected in the table below:
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| Name | Target ($) | Payout ($) |
| Michael F. Neidorff | $2,250,000 | $1,683,000 |
Andrew L. Asher 1 | — | — |
| Christopher A. Koster | 525,000 | 392,700 |
| Brent D. Layton | 600,000 | 448,800 |
Sarah M. London 1 | — | — |
| Jesse N. Hunter | 664,583 | 497,108 |
Jeffrey A. Schwaneke 2 | — | — |
1 Mr. Asher and Ms. London did not have a payout as they were not with the Company at the time of grant for this performance cycle. |
2 Mr. Schwaneke did not have a payout due to his separation from the Company. |
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Competitive Compensation in Connection with Succession Planning |
In 2021, the Compensation Committee approved the grant of additional awards to recognize the achievements and promotions of our NEOs as well as to incentivize retention during our leadership succession plan. We face increased competition for key talent in our industry, including key executive talent, and retention during our CEO succession process is instrumental to the continued success of the Company. These awards were given primarily given in the form of RSUs and are not part of our NEOs’ regular annual compensation. In most cases, these awards will not be awarded on a recurring basis. In approving these awards, the Compensation Committee considered the following factors for each of our NEOs:
Sarah London, Vice Chairman, Centene Board of Directors
•Ms. London has played a critical role at the Company in helping to resolve critical operational issues, leading the financial direction changes that resulted in our new Value Creation Strategy as well as the Company's successful investor day.
•In light of her recent promotion, Ms. London has taken on a number of additional responsibilities integral to the success of the Company including:
◦Serving on the Company’s Board of Directors.
◦Overseeing the Company’s Health Care Enterprises and Envolve divisions, technology, corporate strategy, quality operations, business digitization, internal audit, compliance and enterprise risk management.
•Given the foregoing circumstances, the Compensation Committee approved succession planning and promotion cash and stock awards for Ms. London. The September stock award is subject to a three-year cliff vest, which further emphasizes its connection to retaining key talent.
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Brent Layton, President and Chief Operating Officer
•Mr. Layton has been a vital employee to the Company, working for Centene for over 20 years, leading the development, implementation and growth of Centene health plans, playing an instrumental role in product design and growth, and overseeing strategic international capabilities.
•In light of his recent promotion, Mr. Layton’s enhanced role better positions the Company for accelerated growth and operational expertise, as he has taken on a number of additional responsibilities integral to the success of the company including: overseeing a number of strategic areas of the business including Health Plans, Products, Business Operations, Population Health and Clinical Operations, Marketing, Health Plan Medical, International and Business Development.
•Given the foregoing circumstances, the Compensation Committee approved succession planning and promotion stock awards for Mr. Layton. The September stock award is subject to a three-year cliff vest, which further emphasizes its connection to retaining key talent.
Andrew Asher, Executive Vice President, Chief Financial Officer
•Mr. Asher has played a critical role in assisting with financial direction changes that resulted in our new Value Creation Strategy as well as the Company's successful investor day.
•In light of Mr. Asher's promotion to Chief Financial Officer, he has taken on a number of additional responsibilities integral to the success of the company including: overseeing Centene's accounting, treasury, tax, actuarial services, health economics, enterprise performance excellence, financial planning and procurement.
•Given the foregoing circumstances and as part of his promotion, the Compensation Committee approved stock awards for Mr. Asher. These awards vest in equal installments on the first three anniversaries of the date of grant.
Christopher Koster, Executive Vice President, Secretary & General Counsel
•Mr. Koster has been an instrumental part of Centene’s senior team during pivotal times of growth, including playing a critical role in helping to resolve significant operational issues, assisting with the financial direction changes that resulted in our new Value Creation Strategy as well as the Company's successful investor day.
•Mr. Koster’s experience in legal services both in the private and public sector has been an asset to the Company as we have grown and evolved.
•Given the foregoing circumstances, the Compensation Committee approved succession planning stock awards for Mr. Koster. These awards vest in equal installments on the first three anniversaries of the date of grant.
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2022 Annual Cash Incentive |
The Compensation Committee rewards NEOs with an annual cash incentive bonus for achieving the Company's EPS objective. Annually, the Compensation Committee assesses how each NEO contributed to achieving the EPS objective and other pre-determined objectives approved by the Compensation Committee.
As mentioned in Section 4, the Adjusted Diluted EPS objective is established during our annual business planning process. The Compensation Committee approves a target level of performance for each administrative, operating, health plan and subsidiary company that represents a meaningful improvement year over year. Our annual business plan targets are developed each year based on a pay for performance mentality with rigorous performance metrics at target that the Compensation Committee believes are challenging but attainable for our short-term and long-term incentive programs and stretch goals to reach to pay above target. For 2022, the company must first meet its Adjusted EPS threshold before any bonuses are paid out. For NEO's, the variability in annual cash incentives can be defined as follows:
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A. Must Meet Adjusted EPS Objective (Funding of Bonus) |
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| Metric Criteria | | |
| Threshold | Target | Maximum | | |
| % of Target | 50% | 100% | 200% | | |
| Adjusted EPS | $5.15 | $5.40 | $5.80 | | |
If the Company does not meet its threshold EPS objective, no payments are made.
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B. Allocation of Bonus Payout for 2022 |
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Metric | Weight |
Adjusted EPS | 50% |
Business Goals | 40% |
Leadership, Profitable Growth, Financial Discipline, Operational Excellence |
Quality, member and provider satisfaction | 10% |
| 100% |
The Compensation Committee will assess and evaluate how each NEO contributed to achieving this Adjusted Diluted EPS objective and the other pre-determined objectives stated above.
Individual awards under our bonus plan are approved by the Compensation Committee based primarily upon:
•business performance versus our business plan;
•the effectiveness of each executive's leadership performance and potential to enhance long-term stockholder value;
•targeted bonus amounts, which are based upon market data; and,
•the recommendation of the Chief Executive Officer (for all NEOs other than the CEO).
Overall, 50% of each award is aligned with the Adjusted Diluted EPS target, 10% is based on specific metrics tied to quality of the overall company and the remaining 40% is aligned with specific goals of each NEO.
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| | | | | | | | | | | | | | Annual Cash Incentive Award |
| Target Incentive Opportunity | | | | Performance | | |
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| Base Salary | x | Individual Target Award % | | x | | Adjusted Diluted EPS Performance | + | Business Goals | + | Quality Objectives | | = |
| | | Pool Range: 0% to 200% | Pool Range: 0% to 200% | Pool Range: 0% to 200% | | (Maximum Pool @ 200% of Target) |
| | | Multiplied by 50% Weight | Multiplied by 40% Weight | Multiplied by 10% Weight | |
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In 2022, we will continue to focus on long-term stockholder value through meeting our financial metrics and continue to emphasize the following factors in achieving our goals:
•compliance & quality;
•people, talent & leadership;
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•profitable growth;
•financial discipline with a focus on meeting specific margin improvement targets; and,
•operational excellence, including successful integrations of acquisitions.
As part of our Quality objectives, we have goals that are tied to key metrics such as:
•Centers for Medicare & Medicaid Services (CMS) Star ratings;
•National Committee for Quality Assurance (NCQA) accreditation;
•Healthcare Effectiveness Data and Information Set (HEDIS) measures; and,
•Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey results.
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2022-2024 Long-Term Incentives |
Our long-term incentive compensation is designed to attract and retain key executives, build an integrated management team, reward for innovation and appropriate risk-taking, balance short-term planning with long-term successes and align executive and stockholder interests. This includes using relative TSR, Adjusted Diluted EPS, and adjusted net earnings margin targets. Annual grants are based on performance but are guided by market practices.
These long-term incentives take the form of the following:
•PSUs (45% of Stock Granted) that are based on meeting predetermined performance targets (adjusted diluted EPS and adjusted net earnings margin) vest at the end of the three-year performance period. The following metrics were approved by the Compensation Committee for the 2022-2024 PSU cycle:
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| Metric Criteria | Weight |
| Threshold | Target | Maximum |
| 2024 Adjusted Diluted EPS | $7.00 | $7.62 | $8.25 | 70% |
| 2024 Adjusted Net Earnings Margin | 3.00% | 3.30% | 3.60% | 30% |
| | | | 100% |
|
•Performance-based Stock Options (15% of Stock Granted) - Stock options with a performance condition requiring stock price appreciation to $100 share (+22% premium) with minimum vesting of three years.
•RSUs (40% of Stock Granted) that vest ratably over three years.
•Cash LTIP that is based on meeting three-year relative TSR, adjusted diluted EPS and adjusted net earnings margin:
◦Chairman, Vice Chairman, and President - 150% of Annual Base Salary.
◦Other NEOs - 100% of Annual Base Salary.
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| Metric Criteria | Weight | Metric Payout of Target |
| Threshold | Target | Maximum |
| 2024 Adjusted Diluted EPS | $7.00 | $7.62 | $8.25 | 30% | 0%-200% |
| 2024 Adjusted Net Earnings Margin | 3.00% | 3.30% | 3.60% | 20% | 0%-200% |
| HCI Peer Group Relative Total Shareholder Return Percentile Rank | 25th | 50th | 90th | 50% | 0%-200% |
| | | | 100% | |
|
The Compensation Committee utilizes the Cash LTIP to complement the stock incentive plan, manage dilution and supplement the number of shares available under the Company's stock incentive plan.
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The Compensation Committee strongly believes that performance-based stock options encourage retention through the vesting period and incentivize performance since the options only have value to the extent the market value of our stock increases. We also view stock options as easy to understand and as long-term focused. As Centene is keenly focused on stockholder return, we believe that granting performance-based stock options will further align our executive compensation philosophy with the long-term success of Centene and our stockholders.
Long-term incentives are provided both through equity (PSUs at 45%, RSUs at 40%, and performance-based stock options at 15%) and cash, while ensuring that the maximum number of shares of common stock granted in any calendar year (excluding shares granted in connection with an acquisition) does not exceed a level associated with competitive practice. Excluding acquisitions, the Company does not annually grant equity compensation exceeding 2% of the outstanding shares of the Company. In 2021, our run rate was 0.8%. Due to the growth of the Company, the competitive nature of our business and the necessity of retaining key management level employees, equity grants can be awarded to levels below senior executives. For NEOs, PSUs, Performance-Based Stock Options and RSUs are normally granted at the annual December Compensation Committee meeting, but may also be approved at other times for a promotion, extraordinary performance, a newly hired executive or as determined by the Compensation Committee.
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Comments about Performance Targets |
As mentioned previously, the Compensation Committee sets performance targets at levels it believes to be rigorous and challenging. The performance criteria may include any of the metrics identified in the plan document. We believe the specific performance metrics related to the PSUs and the Cash LTIP plans and the range of awards related to the achievement of such measures are reflective of our overall business strategy and constitute confidential information. The Compensation Committee may determine that the performance parameters used to measure the appropriate payout include or exclude items which are deemed extraordinary. These items include, but are not limited to, those stated in the plan document.
We provide our NEOs with a defined contribution 401(k) retirement program, which is the same program that is generally provided to all our employees. We also provide our NEOs with a non-qualified deferred compensation plan to make up for matching contributions that are capped by compensation limits imposed on qualified retirement plans under the Internal Revenue Code. We do not provide our NEOs with a defined benefit retirement program. We also do not provide retiree medical coverage to our NEOs, with the exception of Mr. Neidorff, as specified in his employment agreement.
With respect to most other benefits, the benefits provided to NEOs and other executive officers are comparable to those provided to the majority of salaried and hourly Company employees. We require all NEOs to have their tax returns prepared or reviewed by an independent certified public accounting firm. Due to this requirement, costs related to these services are paid by the Company. In addition, each NEO has the option to use a financial advisor for fees that do not exceed $15,000 annually, in total, for both tax preparation and financial advisement. These costs are also fully taxable to them and are not grossed up to cover any personal income tax liability. Additionally, other benefits can include relocation, premiums for life insurance benefits and Company entertainment event tickets
The Board of Directors believes that additional security is required for the position of Chairman and CEO and other NEOs. Pursuant to a policy implemented by our Board, Mr. Neidorff is required to use Company-provided aircraft for all air travel. We also have aircraft time sharing agreements with our NEOs that permit them to reimburse us for incremental costs when they use the aircraft for personal travel. In addition, we provide home security services to our NEOs. The personal use of Company provided aircraft and home security services are fully taxable to our NEOs and are not grossed up to cover any personal income tax liability.
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SECTION 5 - Other Compensation Policies and Information |
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Stock Ownership Guidelines |
We utilize stock ownership guidelines for our NEOs, corporate officers and Board. We believe that ownership of our stock helps align the interests of our executives and stockholders, and encourages executives to act in a manner that is expected to increase stockholder value. The stock ownership guidelines for our officers are as follows:
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| Minimum Ownership Requirement as a Multiple of Base Salary |
Chairman and Chief Executive Officer | 5x |
Vice Chairman, President & Executive Vice Presidents | 2.5x |
Senior Vice Presidents | 2x |
Market & Specialty Company Presidents & other Corporate Executives | 1x |
The Compensation Committee annually reviews the stock ownership levels of the Board and all officers. Future stock awards take into consideration the executive's level of attainment of the suggested stock ownership amount. The Compensation Committee may elect to award the annual incentive to an executive in stock instead of cash if the suggested stock ownership amount is not achieved.
Officers who fail to achieve these ownership levels may not be eligible to receive any stock-based awards until they achieve their required ownership level. Shares owned directly by the officer (including those held as a joint tenant or as tenant in common), unvested RSUs, shares owned in a self-directed IRA, “phantom shares” held in the deferred compensation plan and certain shares owned or held for the benefit of a spouse or minor children are counted toward the guidelines. Options and unearned PSUs are not counted toward the ownership guidelines.
The Board has established a policy requiring executive officers to retain ownership of the shares received from the vesting or payout of any RSU award granted under our stock incentive plan (net of any shares used to satisfy tax obligations) for one year following such vesting or payout. An executive may substitute the tax basis of the shares under restriction for other shares held outright.
As of the close of the last fiscal year and the date of this report, all NEOs subject to the ownership guidelines are in compliance with the guidelines. At $82.40 per share (the December 31, 2021 closing stock price), our executive officers held Company stock as of a multiple of their ending 2021 base salaries as follows:
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Name | Minimum Ownership Requirement as a Multiple of Base Salary | Ownership as a Multiple of 2021 Base Salary |
Michael F. Neidorff | 5x | 300.8x |
Andrew L. Asher | 2.5x | 16.1x |
Christopher A. Koster | 2.5x | 11.8x |
Brent D. Layton | 2.5x | 32.3x |
Sarah M. London | 2.5x | 12.8x |
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Stock ownership guidelines for members of our Board require them to own 7.5 times the annual cash retainer within five years of being appointed to the Board. As of December 31, 2021, all directors were in compliance with this requirement.
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Hedging and Pledging Policies |
The Board maintains the Company's insider trading policy, which prohibits pledging of shares by executive officers and members of the Board. Our insider trading policy also prohibits members of the Board and any employees from engaging in short-term or speculative transactions involving our securities. Our insider trading policy provides that members of the Board and employees may not engage in short sales of our securities, including short sales "against the box," or purchase sales of puts or calls for speculative purposes. As of February 25, 2022, all executive officers and directors were in compliance with these policies.
The Compensation Committee is aware of the consequences to companies that have not appropriately balanced risk and rewards in executive compensation. The Compensation Committee believes that the emphasis on long-term performance in the stock incentive plan and the Cash LTIP results in an overall compensation program that does not encourage or reward excessive risk-taking for the Company. Risk is further limited by the ownership guidelines mentioned previously and a clawback provision that provides that any cash bonuses that are paid from the annual incentive plan, Cash LTIP or vesting of PSUs that are a result of material financial impropriety (as defined by the Audit Committee of the Board), including but not limited to financial restatements due to these improprieties, may result in any officers becoming obligated to pay back the amount to the Company.
The Company's compensation strategy is intended to mitigate risk by emphasizing long-term compensation and financial performance measures correlated with growing stockholder value rather than rewarding shorter performance and payout periods. A recent review of the Company's compensation programs by Exequity, LLP did not identify any programs that unduly incentivize employees to take any excessive risks.
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Employment Contracts, Termination of Employment Arrangements, Change in Control Arrangements, and Retirement Provisions |
Michael F. Neidorff serves as Chairman of our Board and CEO pursuant to an employment agreement dated November 8, 2004 (as subsequently amended). Under this agreement, we paid Mr. Neidorff a 2021 annual salary of $1.8 million and will pay Mr. Neidorff a 2022 annual salary of $1.8 million, which is subject to an annual review by our Board. Mr. Neidorff is eligible for a target annual incentive of 150% of base salary. The agreement also awarded Mr. Neidorff 500,000 RSUs (split adjusted three times to 4,000,000) as of November 8, 2004. The RSUs and all of the related shares of common stock shall be distributed to Mr. Neidorff on the later of (a) January 15 of the first calendar year following termination of Mr. Neidorff's employment or (b) the date that is six months after Mr. Neidorff's “separation of service” as defined in the Code. Mr. Neidorff shall continue to vest in all of his outstanding long-term incentive awards while he serves as Chairman of the Board and shall fully vest in any outstanding long-term incentives (subject to any performance measures to be determined at the end of the applicable performance period) upon his ultimate termination from the Board. Upon a change in control or change in control and termination, depending on the award agreement, any existing equity awards held by Mr. Neidorff will vest in full.
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For five years following his retirement, he will continue to be subject to the Company’s security policy requiring him to use Company-provided aircraft for all air travel, as well as the same security measures currently applicable to Mr. Neidorff as CEO. In addition, for the remainder of his life, Mr. Neidorff will continue to have an office at the Company’s headquarters and use of one full-time administrative assistant. Mr. Neidorff will also have use of an additional part-time administrative assistant through December 31, 2024. Upon his retirement, Mr. Neidorff will have the right to purchase one of the Company’s aircraft on commercially reasonable terms and/or he may elect to assume the Company’s lease on a Company aircraft at his own expense. In addition, Mr. Neidorff may elect to lease an aircraft he owns to the Company on commercially reasonable terms and the Company will maintain such aircraft.
Mr. Neidorff has agreed not to compete with us or solicit any of our employees for a period of 12 months after his employment period ends. Mr. Neidorff's employment may be terminated by the Company for cause or permanent disability, or by Mr. Neidorff for good reason (as defined in the employment agreement). If Mr. Neidorff is terminated by the Company without cause or if he terminates for good reason prior to the 2023 Stockholders' Meeting, he is entitled to receive salary continuation equivalent to six months of his salary plus the maximum amount he could have earned as a target bonus for the year of termination if all goals and targets were achieved, lifetime medical insurance for him and his spouse, lifetime life insurance coverage, full acceleration of any unvested stock options or other equity awards, subject to any performance measures to be determined at the end of the applicable performance period. The health and welfare benefits that Mr. Neidorff or his spouse would be entitled to, if he is terminated without cause or for good reason, were commitments made in his original employment agreement in 2004.
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Offer Letter Agreement - Andrew L. Asher |
Pursuant to an offer letter with Mr. Asher, dated May 4, 2021, Mr. Asher agreed to serve as our Executive Vice President and Chief Financial Officer with an initial annual base salary of $975,000 and an initial annual cash bonus target of 100% of his base salary. Mr. Asher is eligible to participate in Centene’s cash long-term incentive plan, with a target cash opportunity of 100% of his base salary and with the potential to earn up to 200% of his target opportunity. Mr. Asher also received an award of 50,000 time-based restricted stock units which vest in equal installments on each of the first three anniversaries of the date of grant.
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Severance and Change in Control Agreements |
Andrew Asher, Christopher Koster, Brent Layton, and Sarah London serve as executive officers pursuant to executive severance and change in control agreements (the agreements, as amended), and their 2022 annual salaries are $975,000, $750,000, $1,100,000, and $1,250,000, respectively.
The agreements generally provide that, if within 24 months following a change in control (as defined in the agreements), the executive's employment is terminated by the Company other than for cause (as defined in the agreements) or by the executive for good reason (as defined in the agreements), the executive will receive a lump sum cash payment equal to the sum of (1) an amount equal to 24 months of salary, (b) the average of the executive's last two annual bonuses multiplied by two, and (c) a prorated annual bonus for the year in which the termination occurs. The executive will also receive 18 months of medical coverage, and all existing equity awards will vest in full at the time of a change in control or change in control and termination depending on the award agreement.
The agreements also generally provide that, if an executive's employment is terminated by the Company other than for cause (absent a change in control), the executive will receive 12 months of salary continuation, a prorated annual bonus for the year in which the termination occurs, 12 months of medical coverage and 12 months of continued vesting of the executive's existing equity awards. The terms of the agreements do not include tax gross-up benefits for excise taxes payable upon a change in control.
Under the terms of any new executive severance and change in control agreement and Mr. Neidorff's amended employment agreement, if any parts or amounts payable under the agreement are deemed to be “excess parachute payments” within the meaning of Section 280G of the Code or similar provision, the
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
amount shall be reduced to the extent necessary so that no amounts paid shall be deemed excess parachute payments or, if the net benefit is greater, no reduction will be made, but the executive will be required to pay any additional taxes.
In the agreements, the executives agree to non-competition and non-solicitation provisions that extend through the first anniversary of termination of employment, unless the termination was due to a change in control as defined in the agreement.
The Board has determined that it is in the best interests of the Company and our stockholders to ensure that we will have the continued dedication of the executive, notwithstanding the possibility, threat, or occurrence of a change in control. The Board believes it is imperative to diminish the inevitable distraction of the executive by virtue of the personal uncertainties and risks created by a pending or threatened change in control, to encourage the executive's full attention and dedication to the Company, and to provide the executive with compensation and benefits arrangements upon a change in control which (i) will satisfy the executive's compensation and benefits expectations and (ii) are competitive with those of other major corporations.
Jeffrey Schwaneke, our Former Executive Vice President, Chief Financial Officer and Executive Vice President – HealthCare Enterprises resigned effective September 22, 2021. In connection with his resignation, Mr. Schwaneke and the Company entered into a separation agreement and release. Pursuant to this agreement and in accordance with the terms of his Executive Severance and Change in Control Agreement, Mr. Schwaneke is entitled to receive one year of his base salary and subsidized COBRA benefits. Notwithstanding the terms of the Executive Severance and Change in Control Agreement, Mr. Schwaneke will not receive a prorated annual bonus for 2021 or continued vesting of his outstanding and unvested equity awards. The separation agreement and release further provides that none of his outstanding and unvested equity awards will vest in connection with his resignation. In exchange for relinquishing any vesting under the Executive Severance and Change in Control Agreement and the terms applicable to his outstanding and unvested equity awards, Mr. Schwaneke received a lump-sum cash payment of $3,000,000. Mr. Schwaneke is subject to cooperation, confidentiality, non-competition, non-solicitation, non-disparagement, and other covenants and provided a release of claims in favor of the Company.
Jesse Hunter, our Former Executive Vice President, Mergers and Acquisitions & Chief Strategy Officer departed from the Company on November 5, 2021. In connection with his departure, Mr. Hunter entered into a separation agreement and general release with a subsidiary of the Company. Pursuant to this agreement, Mr. Hunter is entitled to receive a lump sum payment of $1,556,250 representing (i) 12 ½ months of his base salary (ii) a pro-rated annual bonus for 2021 and (iii) a pro-rated portion of the outstanding cash award under the 2021-2023 Cash LTIP, along with subsidized COBRA benefits and outplacement services. In addition, his outstanding and unvested service-based restricted stock units will continue to vest through December 31, 2022 and a pro rata amount of his outstanding and unvested performance-based restricted stock units and outstanding 2019-2021 and 2020-2022 Cash LTIP awards remain eligible to vest. Mr. Hunter is subject to cooperation, confidentiality, non-competition, non-solicitation, non-disparagement, and other covenants and provided a release of claims in favor of Centene.
For all employees, Company stock awards include a qualified retirement definition. Employees who are at least 55 years of age and have 10 years of employment at the time of retirement are eligible for the following:
•A pro-rated number of PSUs vesting at the end of the performance period, based on the amount of time employed during the performance period and actual performance outcomes.
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•A one-year acceleration of vesting of RSUs for individuals who are retirement eligible. RSUs for the Company's executive officers are not accelerated, but will have a one-year continuation of vesting upon a qualified retirement.
Currently, none of our NEOs are eligible for retirement benefits with the exception of Mr. Neidorff, through the provisions of his employment agreement.
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Deductibility of Executive Compensation |
Section 162(m)(6), which was enacted as part of the Patient Protection and Affordable Care Act, amended the Code to limit the amount that certain healthcare insurers and providers, including the Company, may deduct for compensation to any employee in excess of $500,000 for a tax year beginning after December 31, 2012. This legislation does not create any exceptions for performance-based compensation and is not otherwise impacted by the adoption of the Tax Cuts and Jobs Act enacted on December 22, 2017. The Compensation Committee reserves the right to use its judgment to authorize compensation payments that may be subject to the limit when the Compensation Committee believes such payments are appropriate and in the best interests of our stockholders, after taking into consideration changing business conditions and the performance of its employees. We were subject to the limitation in 2021.
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Equity Compensation Plan Information | | |
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The following table provides information as of December 31, 2021, about the securities authorized for issuance under our equity compensation plans, consisting of our, 2012 Stock Incentive Plan and 2002 Employee Stock Purchase Plan.
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Plan Category1 | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | (c) Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
| Equity compensation plans approved by stockholders | 6,636,524 | | $ | 69.78 | | 21,581,665 | |
| Equity compensation plans not approved by stockholders | 373,455 | | — | | — | |
| Total | 7,009,979 | | $ | 69.78 | | 21,581,665 | |
1 Does not include 529,335 shares of common stock issuable pursuant to outstanding restricted stock units granted under the WellCare 2019 Incentive Compensation Plan and the WellCare 2013 Incentive Compensation Plan (collectively, the WellCare Plan), which were assumed by the Company in connection with the acquisition on January 23, 2020. |
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The number of securities in column (a) and footnote 1 include 397,556 options with a weighted-average remaining life of 9.2 years and 7,141,758 shares of restricted stock and restricted stock units.
The number of securities in column (c) includes 4,554,119 shares available for future issuance under the 2002 Employee Stock Purchase Plan.
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Summary Compensation Table | | |
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The following table summarizes the compensation of our NEOs for the fiscal years ended December 31, 2021, 2020 and 2019. Additional descriptions of each component of compensation for our NEOs are included elsewhere in this Proxy Statement under the caption, “Compensation Discussion and Analysis.”
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| Name & Principal Position | Year | Salary
($) | Bonus ($) 6 | Stock Awards | Option Awards ($) 1 | Non-Equity Incentive Plan Compensation ($) 2 | All Other
Compensation
($) | Total
($) |
Performance Based
($) | Service Based
($) | Total ($) 1,5 |
| Michael F. Neidorff | 2021 | $ | 1,800,000 | | $ | — | | $ | 6,750,006 | | $ | 6,000,014 | | $ | 12,750,020 | | $ | 2,249,984 | | $ | 3,438,000 | | $ | 399,986 | | 3 | $ | 20,637,990 | |
| Chairman and Chief Executive Officer | 2020 | 1,800,000 | | — | | 8,959,500 | | 5,973,000 | | 14,932,500 | | 2,941,500 | | 4,765,500 | | 517,277 | | | 24,956,777 | |
| 2019 | 1,500,000 | | — | | 10,199,968 | | 6,800,019 | | 16,999,987 | | 380,360 | | 7,065,000 | | 493,078 | | | 26,438,425 | |
| Andrew L. Asher | 2021 | 916,298 | | — | | 1,350,034 | | 4,459,503 | | 5,809,537 | | 450,004 | | 916,298 | | 106,901 | | 4 | 8,199,038 | |
| Executive Vice President, Chief Financial Officer | | | | | | | | | | | |
| Christopher A. Koster | 2021 | 674,039 | | — | | 1,575,040 | | 2,374,662 | | 3,949,702 | | 524,987 | | 797,123 | | 39,981 | | 4 | 5,985,832 | |
| Executive Vice President, Secretary and General Counsel | | | | | | | | | | | |
| Brent D. Layton | 2021 | 1,007,212 | | — | | 1,350,034 | | 9,255,403 | | 10,605,437 | | 450,004 | | 1,959,618 | | 83,473 | | 4 | 14,105,744 | |
| President and Chief Operating Officer | | | | | | | | | | | |
| Sarah M. London | 2021 | 978,462 | | 300,000 | | 1,350,034 | | 10,255,383 | | 11,605,417 | | 450,004 | | 1,467,693 | | 425,946 | | 4 | 15,227,522 | |
| Vice Chairman | | | | | | | | | | | |
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| Jesse N. Hunter | 2021 | 732,673 | | — | | 5,119,776 | | 3,122,822 | | 8,242,598 | | — | | — | | 2,171,101 | | 4 | 11,146,372 | |
| Former Executive Vice President, Mergers and Acquisitions & Chief Strategy Officer | 2020 | 785,000 | | — | | 3,225,420 | | 2,150,280 | | 5,375,700 | | — | | 1,404,650 | | 114,052 | | | 7,679,402 | |
| 2019 | 750,000 | | — | | 1,775,100 | | 1,183,400 | | 2,958,500 | | — | | 2,271,000 | | 139,469 | | | 6,118,969 | |
| Jeffrey A. Schwaneke | 2021 | 729,904 | | — | | — | | — | | — | | — | | — | | 4,033,739 | | 4 | 4,763,643 | |
| Former Executive Vice President, Chief Financial Officer | 2020 | 925,000 | | — | | 3,225,420 | | 2,150,280 | | 5,375,700 | | — | | 1,590,550 | | 115,463 | |
| 8,006,713 | |
| 2019 | 860,000 | | — | | 3,550,200 | | 2,366,800 | | 5,917,000 | | — | | 2,489,500 | | 167,784 | | | 9,434,284 | |
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1 | The amounts reported as Stock Awards and Option Awards for Mr. Neidorff, Mr. Asher, Mr. Koster, Mr. Layton, and Ms. London, reflect the grant date fair value of grants made during the current year under the 2012 Stock Incentive Plan in accordance with ASC 718. Note 15to the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021, describes the assumptions used to determine the grant date fair value for overall Company equity awards. There can be no assurance that the grant date fair value of stock awards will ever be realized.
Stock awards granted to the NEOs include performance-based restricted stock units. Performance-based units are disclosed at target value. The 2021 performance-based restricted stock units have a maximum payout of 200%. If the maximum performance metrics are achieved, the grant date fair value of the performance awards would be $13,500,012 for Mr. Neidorff, $2,700,068 for Mr. Asher, $3,150,079 for Mr. Koster, $2,700,068 for Mr. Layton, $2,700,068 for Ms. London, and $7,319,846 for Mr. Hunter. Performance-based stock options are subject to a performance condition requiring stock price appreciation to $100 per share. The Summary Compensation Table reflects the probable amount of shares to be earned under the performance condition. Refer to footnote 5 for a description of 2021 performance-based restricted stock units as disclosed for Mr. Hunter.
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2 | The amounts shown in the Non-Equity Incentive Plan Compensation column include both the annual cash incentive and the Cash LTIP award payouts. |
3 | All other compensation for Mr. Neidorff includes $81,735 of personal use of Company provided aircraft. Pursuant to the policy established by our Board, our Chairman and CEO is required to use Company provided aircraft for all travel, a taxable benefit to Mr. Neidorff pursuant to the applicable Internal Revenue Service regulations. For flights on corporate aircraft, the cost is calculated based on a cost-per-flight-hour charge developed by a nationally recognized and independent service. This charge reflects the operating and periodic maintenance costs of the aircraft, crew travel expenses and other miscellaneous costs. The other amounts in other compensation for Mr. Neidorff include $146,500 in life insurance benefits, $126,300 in nonqualified deferred compensation match, $8,700 in 401(k) match, security services, tax preparation and financial advisor fees, Company entertainment event tickets, and life insurance benefits. |
4 | All other compensation includes tax preparation and financial advisor fees, security services and life insurance benefits. All other compensation also includes 401K match of $8,700 each for Mr. Asher, Mr. Layton, Ms. London, Mr. Hunter, and Mr. Schwaneke and $7,327 for Mr. Koster. All other compensation also includes non-qualified deferred compensation match of $18,789, $12,894, $45,516, $20,654, $36,830, and $40,947 for Mr. Asher, Mr. Koster, Mr. Layton, Ms. London, Mr. Hunter and Mr. Schwaneke, respectively. Mr. Asher and Ms. London's all other compensation also includes relocation expenses of $62,709 and $383,739, respectively. Mr. Hunter and Mr. Schwaneke's other compensation also includes severance payments of $2,053,358 and $3,950,000, respectively, in connection with their separation agreements. Mr. Hunter's other compensation includes $38,415 of personal use of Company provided aircraft, valued as described in footnote 3. |
5 | In October 2021, we entered into a separation agreement with Mr. Hunter which resulted in a modification of 44,002 time-based restricted stock units and 58,500 performance-based stock awards. The modification resulted in an incremental grant-date fair value of$8,242,598.
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6 | Ms. London's Bonus represents a cash promotion award of $300,000. |
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Grants of Plan-Based Awards Table | | |
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The following table provides information on 2021 grants of performance and service-based restricted stock units and performance-based stock options, under the 2012 Stock Incentive Plan, as well as 2021 cash-based grants under the Cash LTIP and Annual Cash Incentive Plan to each of our NEOs. For Mr. Hunter, the following table provides information on the incremental fair value as a result of the modification of certain of his outstanding awards in connection with his separation agreement. Mr. Schwaneke is excluded from the table as he did not receive any awards during 2021. The grant date fair values and incremental fair value of these stock awards are included in the Summary Compensation Table. The vesting provisions of the equity awards are included in the footnotes to the Outstanding Equity Awards at Fiscal Year-End Table.
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| Name | Grant Date | Date of Board Action | Estimated Future Payouts Under Non-Equity Incentive Plan Awards 1 | Estimated Future Payouts Under Equity Incentive Plan Awards: Number of Shares of Stock or Units (#) 2 | All Other Stock Awards: Number of Shares of Stock or Units (#) 3 | All Other Option Awards: Number of Securities Underlying Options (#) | Closing Market Price on Date of Grant
($/Sh) | Exercise or Base Price of Options Awards ($/Sh) 4 | Grant Date Fair Value of Stock and Option Awards ($) 5 |
| Threshold ($) | Target
($) | Maximum ($) | Threshold | Target | Maximum |
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| Michael F. Neidorff | 12/15/2021 | 12/14/2021 | 540,000 | | 2,700,000 | | 5,400,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | 12,370 | | 82,468 | | 6 | 164,936 | | — | | — | | — | | — | | 6,750,006 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | 73,305 | | — | | — | | — | | 6,000,014 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | — | | 67,244 | | 83.33 | | 81.85 | | 2,249,984 | |
| Andrew L. Asher | 12/15/2021 | 12/14/2021 | 73,125 | | 975,000 | | 1,950,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | 195,000 | | 975,000 | | 1,950,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | 2,474 | | 16,494 | | 6 | 32,988 | | — | | — | | — | | — | | 1,350,034 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | 14,661 | | — | | — | | — | | 1,200,003 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | — | | 13,449 | | 83.33 | | 81.85 | | 450,004 | |
| 5/7/2021 | 5/7/2021 | — | | — | | — | | — | | — | | | — | | 50,000 | | — | | — | | — | | 3,259,500 | |
| Christopher A. Koster | 12/15/2021 | 12/14/2021 | 56,250 | | 750,000 | | 1,500,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | 150,000 | | 750,000 | | 1,500,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | 2,886 | | 19,243 | | 5 | 38,486 | | — | | — | | — | | — | | 1,575,040 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | 17,104 | | — | | — | | — | | 1,399,962 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | — | | 15,690 | | 83.33 | | 81.85 | | 524,987 | |
| 6/23/2021 | 6/23/2021 | — | | — | | — | | — | | — | | | — | | 13,500 | | — | | — | | — | | 974,700 | |
| Brent D. Layton | 12/15/2021 | 12/14/2021 | 123,750 | | 1,650,000 | | 3,300,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | 330,000 | | 1,650,000 | | 3,300,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | 2,474 | | 16,494 | | 5 | 32,988 | | — | | — | | — | | — | | 1,350,034 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | 14,661 | | — | | — | | — | | 1,200,003 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | — | | 13,449 | | 83.33 | | 81.85 | | 450,004 | |
| 6/23/2021 | 6/23/2021 | — | | — | | — | | — | | — | | | — | | 13,500 | | — | | — | | — | | 974,700 | |
| 9/7/2021 | 9/7/2021 | — | | — | | — | | — | | — | | | — | | 110,000 | | — | | — | | — | | 7,080,700 | |
| Sarah M. London | 12/15/2021 | 12/14/2021 | 140,625 | | 1,875,000 | | 3,750,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | 375,000 | | 1,875,000 | | 3,750,000 | | — | | — | | | — | | — | | — | | — | | — | | — | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | 2,474 | | 16,494 | | 5 | 32,988 | | — | | — | | — | | — | | 1,350,034 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | 14,661 | | — | | — | | — | | 1,200,003 | |
| 12/15/2021 | 12/14/2021 | — | | — | | — | | — | | — | | | — | | — | | 13,449 | | 83.33 | | 81.85 | | 450,004 | |
| 2/28/2021 | 2/28/2021 | — | | — | | — | | — | | — | | | — | | 17,082 | | — | | — | | — | | 999,980 | |
| 6/23/2021 | 6/23/2021 | — | | — | | — | | — | | — | | | — | | 13,500 | | — | | — | | — | | 974,700 | |
| 9/7/2021 | 9/7/2021 | — | | — | | — | | — | | — | | | — | | 110,000 | | — | | — | | — | | 7,080,700 | |
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| Jesse N. Hunter | 10/27/2021 | 10/25/2021 | — | | — | | — | | — | | — | | | — | | 26,330 | | — | | — | | — | | 1,868,640 | |
| 10/27/2021 | 10/25/2021 | — | | — | | — | | — | | — | | | — | | 14,810 | | — | | — | | — | | 1,051,066 | |
| 10/27/2021 | 10/25/2021 | — | | — | | — | | 3,500 | | 17,500 | | 7 | 35,000 | | — | | — | | — | | — | | 1,241,975 | |
| 10/27/2021 | 10/25/2021 | — | | — | | — | | 2,700 | | 13,500 | | 7 | 27,000 | | — | | — | | — | | — | | 958,095 | |
| 10/27/2021 | 10/25/2021 | — | | — | | — | | — | | — | | | — | | 4,268 | | — | | — | | — | | 302,900 | |
| 10/27/2021 | 10/25/2021 | — | | — | | — | | — | | — | | | — | | 2,400 | | — | | — | | — | | 170,328 | |
| 10/27/2021 | 10/25/2021 | — | | — | | — | | — | | — | | | — | | 13,334 | | — | | — | | — | | 946,314 | |
| 10/27/2021 | 10/25/2021 | — | | — | | — | | — | | — | | | — | | 24,000 | | — | | — | | — | | 1,703,280 | |
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1 | The amounts shown in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards columns represent the range of annual and long-term cash incentive awards as described in the sections titled "2022 Annual Cash Incentive" and "2022-2024 Long-Term Incentives" in the Compensation Discussion and Analysis, above. |
2 | The amounts shown in the Estimated Future Payouts Under Equity Incentive Plan Awards columns represent the range of shares that may be earned at the end of the performance period applicable to our PSUs assuming achievement of the relevant performance objectives, as described in the section titled "2022-2024 Long-Term Incentives" in the Compensation Discussion and Analysis, above. |
3 | The amounts shown in the All Other Stock Awards column represent the RSUs described in the section titled "2022-2024 Long-Term Incentives" in the Compensation Discussion and Analysis, above. For Mr. Hunter, amounts include the fair value modification associated with previously issued awards as a result of the continued vesting of such awards in connection to his separation agreement, including performance-based awards for the 2019-2021 performance cycle at their final payout of 149.6%, which vested in February 2022. |
4 | Consistent with historical practice, the exercise price of the option awards was established based on the grant date previous day closing market price. |
5 | The amounts shown in the Grant Date Fair Value of Stock Awards column represent the grant date fair value, measured in accordance with ASC 718. |
6 | Equity incentive grants contain a performance condition based upon our 2024 adjusted net earnings margin and adjusted EPS. For performance between the threshold and the target or the target and the maximum, the number of performance-based restricted stock units earned will be interpolated. |
7 | Represents the fair value modification of pro-rated performance-based stock awards for the 2020-2022 performance cycle and the 2021-2023 performance cycle in connection with Mr. Hunter's separation agreement. Amounts included are based on target performance. |
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Outstanding Equity Awards at Fiscal Year-End Table | | |
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The following table shows the number of shares covered by exercisable and unexercisable options and unvested RSUs and PSUs held by our NEOs on December 31, 2021. Mr. Schwaneke is excluded from the table as he has no unexercised options or unvested equity awards as of December 31, 2021.
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| Name | Option Awards | Stock Awards |
Number of
Securities Underlying
Unexercised Options Exercisable (#) | Number of
Securities Underlying
Unexercised Options Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option
Exercise
Price
($) | Option
Expiration
Date | Number of Shares or Units of Stock That Have Not Vested (#)5 | Market Value of Shares or Units of Stock That Have Not Vested ($)6 | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)5 | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)6 |
| Michael F. Neidorff | 6,667 | | 6,667 | | — | | $ | 59.62 | | 1 | 12/11/2029 | 2 | 38,019 | | 7 | $ | 3,132,766 | | 120,000 | | 10 | $ | 9,888,000 | |
| 50,000 | | 10,000 | | — | | 59.30 | | 1 | 12/15/2030 | 3 | 66,667 | | 8 | 5,493,361 | | 171,083 | | 11 | 14,097,239 | |
| | — | | — | | 67,244 | | 81.85 | | 1 | 12/15/2031 | 4 | 73,305 | | 9 | 6,040,332 | | 300,000 | | 12 | 24,720,000 | |
| — | | — | | — | | — | | | — | | | — | | | — | | 82,468 | | 13 | 6,795,363 | |
| Andrew L. Asher | — | | — | | 13,449 | | 81.85 | | 1 | 12/15/2031 | 4 | 11,317 | | 14 | 932,521 | | 50,924 | | 12 | 4,196,138 | |
| — | | — | | — | | — | | | — | | | 13,334 | | 8 | 1,098,722 | | 60,000 | | 12 | 4,944,000 | |
| — | | — | | — | | — | | | — | | | 50,000 | | 15 | 4,120,000 | | 16,494 | | 13 | 1,359,106 | |
| — | | — | | — | | — | | | — | | | 14,661 | | 9 | 1,208,066 | | — | | | — | |
| Christopher A. Koster | — | | — | | 15,690 | | 81.85 | | 1 | 12/15/2031 | 4 | 3,000 | | 16 | 247,200 | | 13,500 | | 11 | 1,112,400 | |
| — | | — | | — | | — | | | — | | | 10,667 | | 8 | 878,961 | | 48,000 | | 12 | 3,955,200 | |
| — | | — | | — | | — | | | — | | | 13,500 | | 17 | 1,112,400 | | 19,243 | | 13 | 1,585,623 | |
| — | | — | | — | | — | | | — | | | 17,104 | | 9 | 1,409,370 | | — | | | — | |
| Brent D. Layton | — | | — | | 13,449 | | 81.85 | | 1 | 12/15/2031 | 4 | 6,667 | | 16 | 549,361 | | 30,000 | | 11 | 2,472,000 | |
| — | | — | | — | | — | | | — | | | 13,334 | | 18 | 1,098,722 | | 126,000 | | 12 | 10,382,400 | |
| — | | — | | — | | — | | | — | | | 28,000 | | 8 | 2,307,200 | | 16,494 | | 13 | 1,359,106 | |
| — | | — | | — | | — | | | — | | | 16,667 | | 19 | 1,373,361 | | — | | | — | |
| — | | — | | — | | — | | | — | | | 13,500 | | 20 | 1,112,400 | | — | | | — | |
| — | | — | | — | | — | | | — | | | 110,000 | | 21 | 9,064,000 | | — | | | — | |
| — | | — | | — | | — | | | — | | | 14,661 | | 9 | 1,208,066 | | — | | | — | |
| Sarah M. London | — | | — | | 13,449 | | 81.85 | | 1 | 12/15/2031 | 4 | 17,176 | | 22 | 1,415,302 | | 60,000 | | 12 | 4,944,000 | |
| — | | — | | — | | — | | | — | | | 13,334 | | 8 | 1,098,722 | | 16,494 | | 13 | 1,359,106 | |
| — | | — | | — | | — | | | — | | | 17,082 | | 23 | 1,407,557 | | — | | | — | |
| — | | — | | — | | — | | | — | | | 13,500 | | 20 | 1,112,400 | | — | | | — | |
| — | | — | | — | | — | | | — | | | 110,000 | | 21 | 9,064,000 | | — | | | — | |
| — | | — | | — | | — | | | — | | | 14,661 | | 9 | 1,208,066 | | — | | | — | |
| Jesse N. Hunter | — | | — | | — | | — | | | — | | | 6,667 | | 16 | 549,361 | | 26,330 | | 25 | 2,169,592 | |
| — | | — | | — | | — | | | — | | | 12,000 | | 24 | 988,800 | | 14,810 | | 25 | 1,220,344 | |
| — | | — | | — | | — | | | — | | | — | | | — | | 17,500 | | 26 | 1,442,000 | |
| — | | — | | — | | — | | | — | | | — | | | — | | 27,000 | | 27 | 2,224,800 | |
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
| | | | | |
1 | The option price for each grant is equal to the previous day's closing market price. |
2 | The unvested options granted to Mr. Neidorff vest on December 11, 2022. |
3 | The unvested options granted to Mr. Neidorff vest in two equal installments on the anniversary of the grant date beginning on December 15, 2022. |
4 | Performance Stock Option granted on December 15, 2021, may become exercisable on or after the third anniversary of the grant date if the average closing price of Centene's common stock equals or exceeds $100 per share for 20 consecutive trading days following the grant date. |
5 | Upon the occurrence of a change in control and subsequent termination, any unvested RSUs and PSUs will vest, with the PSUs vesting at the greater of the actual or target level of performance, with the exception of the grants made before December 2020, which will vest upon a change in control only. |
6 | Determined with reference to $82.40, the closing stock price of a share of Centene common stock on December 31, 2021. |
7 | The RSUs vest on December 11, 2022. |
8 | The RSUs vest in two equal installments on the anniversary of the grant date beginning on December 15, 2022. |
9 | The RSUs vest in three equal installments on the anniversary of the grant date beginning on December 15, 2022. |
10 | The RSUs vest and become non-forfeitable on the date that Mr. Neidorff has identified a successor Chief Executive Officer. Vested RSUs shall be converted into shares of Centene common stock and distributed to Mr. Neidorff on the later of (i) the January 15 following the year in which Mr. Neidorff's date of termination occurs, or (ii) the date which is six months after Mr. Neidorff's date of termination. |
11 | The PSUs will vest or be forfeited based on the attainment of the applicable three year performance metrics ending 2022. |
12 | The PSUs will vest or be forfeited based on the attainment of the applicable three year performance metrics ending 2023. |
13 | The PSUs will vest or be forfeited based on the attainment of the applicable three year performance metrics ending 2024. |
14 | The RSUs vest in two equal installments on the anniversary of the grant date beginning on March 2, 2022. |
15 | The RSUs vest in three equal installments on the anniversary of the grant date beginning on May 7, 2022. |
16 | The RSUs vest on December 10, 2022. |
17 | The RSUs vest in three equal installments on the anniversary of the grant date beginning on June 23, 2022. |
18 | The RSUs vest in two equal installments on the anniversary of the grant date beginning on March 24, 2022. |
19 | The RSUs vest in two equal installments on the anniversary of the grant date beginning on December 22, 2022. |
20 | The RSUs vest in three equal installments on the anniversary of the grant date beginning on June 23, 2022. |
21 | The RSUs vest in three equal installments on the anniversary of the grant date beginning on September 7, 2022. |
22 | The RSUs vest in two equal installments on the anniversary of the grant date beginning on September 14, 2022. |
23 | The RSUs vest in three equal installments on the anniversary of the grant date beginning on February 28, 2022. |
24 | The RSUs vest on December 15, 2022. |
25 | The pro-rated PSUs vested in accordance with Mr. Hunter's separation agreement at their final payout of 149.6% in February 2022. |
26 | The pro-rated PSUs will vest in accordance with Mr. Hunter's separation agreement for the applicable three year performance metrics ending 2023. |
27 | The pro-rated PSUs will vest in accordance with Mr. Hunter's separation agreement for the applicable three year performance metrics ending 2024. |
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
| | | | | | | | | | | | | | |
| | | | |
Option Exercises and Stock Vested Table | | |
| | | | |
The following table shows the number of shares of our stock acquired by our NEOs in 2021 upon exercise of options or vesting of RSUs or PSUs. Mr. Schwaneke is excluded from the table as he did not exercise or vest in any equity awards during 2021.
| | | | | | | | | | | | | | |
| Name | Option Awards | Stock Awards |
Number of Shares
Acquired on Exercise
(#) | Value Realized
on Exercise
($) | Number of Shares Acquired on Vesting
(#) | Value Realized on
Vesting
($) |
| Michael F. Neidorff | 14,166 | | 232,350 | | 185,340 | | 27,093,330 | |
| Andrew L. Asher | — | | — | | 15,347 | | 1,457,497 | |
| Christopher A. Koster | — | | — | | 29,754 | | 3,981,934 | |
| Brent D. Layton | — | | — | | 48,049 | | 6,940,527 | |
| Sarah M. London | — | | — | | 8,426 | | 1,085,797 | |
| Jesse N. Hunter | — | | — | | 35,409 | | 4,330,446 | |
| | | | |
| | | | |
| | | | |
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
| | | | | | | | | | | | | | |
| | | | |
Nonqualified Deferred Compensation Table | | |
| | | | |
Under the Company's Deferred Compensation Plan, the NEOs may contribute a designated percentage of salary and/or bonus into the plan which serves as an excess savings plan due to tax limitations under our tax qualified 401(k) plan. The following table shows the change in the Nonqualified Deferred Compensation balances for our NEOs who participate, as well as the market value of deferred restricted stock units for Michael Neidorff as discussed in Footnote 5, for the fiscal year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Name | Executive Contributions in Last FY ($) 1 | Registrant Contributions in Last FY ($) 2 | Aggregate Earnings (Losses) in Last FY ($) 3 | | | | Aggregate
Withdrawals /
Distributions ($) | Aggregate Balance at Last FYE ($) 4 |
| Michael F. Neidorff | $ | 270,000 | | $ | 126,300 | | $ | 4,776,637 | | | | | $ | (793,930) | | $ | 18,701,234 | | |
| | | | | | | | 329,600,000 | | 5 |
| Andrew L. Asher | 54,978 | | 18,789 | | 5,970 | | | | | — | | 1,283,194 | | |
| Christopher A. Koster | 315,046 | | 12,894 | | 159,865 | | | | | — | | 752,639 | | |
| Brent D. Layton | 209,211 | | 45,516 | | 55,983 | | | | | (220,932) | | 1,269,384 | | |
| Sarah M. London | 58,708 | | 20,654 | | 981 | | | | | — | | 80,343 | | |
| Jesse N. Hunter | 112,039 | | 36,830 | | 701,237 | | | | | (3,788,438) | | — | | |
| Jeffrey A. Schwaneke | 121,827 | | 40,947 | | 262,801 | | | | | — | | 1,691,753 | | |
| | | | | | | | | |
| | | | | |
1 | Executive contributions are included in the Salary and/or Non-Equity Incentive Plan Compensation columns in the Summary Compensation Table. |
2 | All registrant contributions are included in the All Other Compensation column in the Summary Compensation Table. |
3 | The Company does not pay above market interest or preferential dividends on investments in the Deferred Compensation Plan. Investment options in the Deferred Compensation Plan are substantially the same as the 401(k) plan, with the exception of the investment in Centene common stock. The returns on the investments available to employees during 2021 ranged from -2.83% to 37.26%, with a median return of 17.83% for the year ended December 31, 2021. |
4 | The amounts shown in the Aggregate Balance at Last Fiscal Year-End column include money the Company owes these individuals for salaries and incentive compensation they earned in prior years but did not receive because they elected to defer receipt of it until a later time. For fiscal 2021, the amounts described in Footnote 1 above are included in the Summary Compensation Table as described in Footnote 1. For fiscal 2021, the following aggregate amounts of executive contributions were included in the Summary Compensation Table: Mr. Neidorff - $324,000; Mr. Schwaneke - $188,670; and Mr. Hunter - $167,760. For fiscal 2019, the following aggregate amounts of executive contributions were included in the Summary Compensation Table: Mr. Neidorff - $360,000; Mr. Schwaneke - $189,313; Mr. Hunter - $163,851. For prior years, all amounts contributed by a NEO in such years have been reported in the Summary Compensation Table in our previously filed proxy statements in the year earned, to the extent the executive was named in such proxy statements and the amounts were so required to be reported in such tables. |
5 | Represents the receipt of a previous grant of 500,000 RSUs (split adjusted three times to 4,000,000). Pursuant to the terms of the grant agreement, the receipt of the RSUs which vested from 2009 through 2014 has been deferred until retirement. The total value of the RSUs is reflected in the aggregate balance based on the December 31, 2021 market value. |
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
| | | | | | | | | | | | | | |
| | | | |
Potential Payments Upon Termination or Change in Control |
| | | | |
The section below describes the payments that may be made to our NEOs upon termination or a change in control. Our NEOs may also be entitled to payments under the Company’s Deferred Compensation Plan as set forth in the Nonqualified Deferred Compensation Table section above. Generally, pursuant to our executive agreements, a change in control is deemed to occur under the conditions of "double trigger" criteria:
•If any individual, entity or group (other than a group which includes the executive) acquires 40% or more of the voting power of our outstanding securities;
•If a majority of the incumbent Board of Directors are replaced. For these purposes, the incumbent Board of Directors means the directors who were serving as of the effective date of the applicable executive agreement and any individual who becomes a director subsequent to such date whose election or nomination for election was approved by a majority of such directors, other than in connection with a proxy contest; or
•Upon the consummation of a merger or consolidation of the Company with another person, other than a merger or consolidation where the individuals and entities who were beneficial owners, respectively, of our outstanding voting securities immediately prior to such merger or consolidation own 50% or more of the then-outstanding shares of the combined voting power of the then-outstanding voting securities of the corporation resulting from such merger or consolidation.
The amounts presented below assume the termination or change in control occurred as of December 31, 2021. The NEOs would receive other payments and benefits to which they were already entitled or vested on such date, including amounts under the Deferred Compensation Plan under the 'Nonqualified Deferred Compensation Table'. The applicable agreements are discussed in the CD&A under the heading “Employment Contracts, Termination of Employment Arrangements, Change in Control Arrangements, and Retirement Provisions” included in this proxy statement. The change in control cash payments are subject to the conditions of the "double-trigger" criteria in each of the NEO's employment agreement or executive severance and change in control agreements. The equity award acceleration amounts below were calculated using the closing price of our common stock on December 31, 2021 of $82.40. In the Change in Control column, the Cash LTIP and PSU awards are included at the greater of the target or actual level of performance as of December 31, 2021. Beginning on December 15, 2020, our equity award agreements include a "double-trigger" provision, which provides for accelerated vesting only if there is a change in control and the executive officer's employment is terminated without "cause" or the executive officer terminates his or her employment for "good reason" within twenty-four months of the change in control. Stock awards that are subject to the double-trigger criteria are included in the Change in Control column.
| | | | | | | | | | | | | | | | | | | | | |
Executive Benefits and
Payments Upon Terminations | Voluntary
Termination/Retirement | Involuntary
Not for Cause
or Voluntary
with Good
Reason
Termination | For Cause
Termination | | Death | Disability | Change in
Control |
| Severance | $ | — | | $ | 2,250,000 | | $ | — | | | $ | 2,250,000 | | $ | 2,250,000 | | $ | 2,250,000 | |
| Pro rata Bonus Payment | 2,700,000 | | 2,700,000 | | — | | | 2,700,000 | | 2,700,000 | | 2,700,000 | |
| Unvested Stock Option Spread | 2,455,858 | | 2,455,858 | | — | | | 2,455,858 | | 2,455,858 | | 2,455,858 | |
| Unvested RSUs and PSUs | 57,807,061 | | 57,807,061 | | — | | | 57,807,061 | | 57,807,061 | | 58,511,581 | |
| Cash LTIP | 7,083,000 | | 7,083,000 | | — | | | 7,083,000 | | 7,083,000 | | 7,083,000 | |
| Welfare Benefits Values | 2,830,728 | | 2,830,728 | | — | | | 6,515,833 | | 2,830,728 | | 2,830,728 | |
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
| | | | | | | | | | | | | | | | | | | | |
Executive Benefits and
Payments Upon Terminations | Voluntary Termination | Involuntary Not for Cause Termination | For Cause
Termination | Death | Disability | Change in
Control |
| Severance | $ | — | | $ | 975,000 | | $ | — | | $ | — | | $ | — | | $ | 3,642,226 | |
| Pro rata Bonus Payment | — | | 916,298 | | — | | — | | — | | 916,298 | |
| Unvested Stock Option Spread | — | | — | | — | | — | | — | | 7,397 | |
| Unvested RSUs and PSUs | — | | 3,562,976 | | — | | 2,888,395 | | 2,888,395 | | 14,320,406 | |
| Cash LTIP | — | | — | | — | | 825,000 | | 825,000 | | 2,511,000 | |
| Welfare Benefits Values | — | | 21,411 | | — | | 430,000 | | — | | 32,117 | |
| Outplacement | — | | 25,000 | | — | | — | | — | | 25,000 | |
| | | | | | | | | | | | | | | | | | | | | |
Executive Benefits and
Payments Upon Terminations | Voluntary Termination | Involuntary Not for Cause Termination | For Cause
Termination | | Death | Disability | Change in
Control |
| Severance | $ | — | | $ | 675,000 | | $ | — | | | $ | — | | $ | — | | $ | 2,129,423 | |
| Pro rata Bonus Payment | — | | 404,423 | | — | | | — | | — | | 404,423 | |
| Unvested Stock Option Spread | — | | — | | — | | | — | | — | | 8,630 | |
| Unvested RSUs and PSUs | — | | 2,639,602 | | — | | | 1,586,200 | | 1,586,200 | | 8,436,277 | |
| Cash LTIP | 392,700 | | 392,700 | | — | | | 1,034,367 | | 1,034,367 | | 2,442,700 | |
| Welfare Benefits Values | — | | 14,206 | | — | | | 340,000 | | — | | 21,308 | |
| Outplacement | — | | 25,000 | | — | | | — | | — | | 25,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Executive Benefits and
Payments Upon Terminations | Voluntary Termination | Involuntary Not for Cause Termination | For Cause
Termination | Death | Disability | Change in
Control | | | | | | |
| Severance | $ | — | | $ | 1,100,000 | | $ | — | | $ | — | | $ | — | | $ | 4,510,818 | | | | | | | |
| Pro rata Bonus Payment | — | | 1,510,818 | | — | | — | | — | | 1,510,818 | | | | | | | |
| Unvested Stock Option Spread | — | | — | | — | | — | | — | | 7,397 | | | | | | | |
| Unvested RSUs and PSUs | — | | 6,184,450 | | — | | 4,731,078 | | 4,731,078 | | 26,031,314 | | | | | | | |
| Cash LTIP | 448,800 | | 448,800 | | — | | 1,307,133 | | 1,307,133 | | 3,873,800 | | | | | | | |
| Welfare Benefits Values | — | | 12,618 | | — | | 1,167,000 | | — | | 18,927 | | | | | | | |
| Outplacement | — | | 25,000 | | — | | — | | — | | 25,000 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Executive Benefits and
Payments Upon Terminations | Voluntary Termination | Involuntary Not for Cause Termination | For Cause
Termination | Death | Disability | Change in
Control |
| Severance | $ | — | | $ | 1,250,000 | | $ | — | | $ | — | | $ | — | | $ | 4,156,155 | |
| Pro rata Bonus Payment | — | | 1,467,693 | | — | | — | | — | | 1,467,693 | |
| Unvested Stock Option Spread | — | | — | | — | | — | | — | | 7,397 | |
| Unvested RSUs and PSUs | — | | 2,499,686 | | — | | 2,332,579 | | 2,332,579 | | 19,278,057 | |
| Cash LTIP | — | | — | | — | | 733,333 | | 733,333 | | 3,375,000 | |
| Welfare Benefits Values | — | | 21,899 | | — | | 750,000 | | — | | 32,848 | |
| Outplacement | — | | 25,000 | | — | | — | | — | | 25,000 | |
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
Mr. Schwaneke and Mr. Hunter are not included in the tables above as they left the Company during 2021 and, in connection with their departures, each entered into a separation agreement with the Company as described in Section 5 of Compensation Discussion and Analysis. The actual payments and benefits received or to be received by Mr. Hunter are as follows: severance - $1,072,083, pro rata bonus payment - $484,167, unvested RSUs and PSUs - $9,564,640 - Cash LTIP - $955,025, and welfare benefits values - $21,341. The actual payments and benefits received or to be received by Mr. Schwaneke are as follows: severance - $3,950,00, welfare benefits values - $22,868, and outplacement - $25,000.
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
INFORMATION ABOUT EXECUTIVE COMPENSATION |
| | | | | | | | | | | | | | |
| | | | |
CEO to Median Employee Pay Ratio Information |
| | | | |
Pursuant to Item 402(u) of Regulation S-K, we have included below a disclosure of the ratio of the median employee's annual total compensation to the annual total compensation of our CEO, Mr. Neidorff. Since the applicable SEC rules allow companies to use a variety of methods to determine this ratio, the ratio disclosed by the Company may not be comparable to the ratio disclosed by other companies.
Mr. Neidorff's annual total compensation for the year ended December 31, 2021 was $20,647,990, which reflects the amount reported in the Summary Compensation Table of this proxy statement plus $10,000 of the Company-paid portion of Mr. Neidorff’s medical plan premiums. Due to acquisitions and divestitures, the Company recalculated our median employee for 2021. The annual total compensation for the median employee for the year ending December 31, 2021 was $71,217, inclusive of the Company-paid portion of the employee's medical plan premiums. Mr. Neidorff's annual total compensation was 290 times that of our median employee's pay.
In determining the median employee, we examined total cash compensation (i.e. base wages plus short-term incentive payments) for individuals, excluding our CEO, who were employed by the Company as of December 31, 2021. During this analysis, the compensation for employees hired during the year was annualized. We included all employees, whether employed on a full-time or part-time basis, except for employees which were excluded under the de minimis exemption (1,500 in the United Kingdom), approximately 9,000 employees of our United Kingdom affiliate which we recently acquired, and employees who appeared to have anomalous pay characteristics that could significantly distort the pay ratio calculation. This resulted in 64,825 employees being included in our median employee calculation.
After identifying the median employee, we calculated annual total compensation of the employee using the same methodology used for our NEOs within the Summary Compensation Table of this proxy statement, plus company-paid medical plan premiums capped at $10,000.
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2022 NOTICE OF MEETINGSTOCKHOLDERS AND PROXY STATEMENT |
| OTHER MATTERS |
| | | | | | | | | | | | | | |
| | | | |
| Other Matters | | |
| | | | |
| Information About Stock Ownership |
| | | | |
The following table sets forth information regarding beneficial ownership of our common stock as of February 25,August 10, 2022, (except as indicated in a note to the following table), for:
•each person, entity or group of affiliated persons known by us to beneficially own more than 5% of our outstanding common stock;
•each of our NEOsnamed executive officers and directors (five of whom are nominated for re-election or election);directors; and
•all of our executive officers and directors as a group.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | | |
Outstanding
Shares | Shares
Acquirable
Within 60 Days | Total
Beneficial
Ownership | Percent
of Class | | |
| The Vanguard Group, Inc. | 62,485,541 | | | — | | | 62,485,541 | | | 10.7 | | | |
100 Vanguard Blvd.
Malvern, PA 19355 | | | | | | | | | |
| Capital World Investors | 46,851,859 | | | — | | | 46,851,859 | | | 8.0 | | | |
333 South Hope Street, 55th Floor
Los Angeles, CA 90071 | | | | | | | | | |
| BlackRock, Inc. | 41,158,173 | | | — | | | 41,158,173 | | | 7.1 | | | |
55 East 52nd Street
New York, NY 10055 | | | | | | | | | |
| FMR LLC | 35,163,459 | | | — | | | 35,163,459 | | | 6.0 | | | |
245 Summer Street
Boston, MA 02210 | | | | | | | | | |
| Michael F. Neidorff | 2,416,713 | | | 4,415,325 | | 1 | 6,832,038 | | | 1.2 | | | |
| Kenneth Burdick | 337,302 | | | 1,100 | | | 338,402 | | | * | | |
| Federick H. Eppinger | 165,543 | | | 169,449 | | | 334,992 | | 2 | * | | |
| Brent D. Layton | 241,216 | | | 6,667 | | | 247,883 | | | * | | |
| Andrew L. Asher | 112,442 | | | 5,658 | | | 118,100 | | | * | | |
| William Trubeck | 95,414 | | | 7,018 | | | 102,432 | | 2 | * | | |
| Orlando Ayala | 71,579 | | | 3,300 | | | 74,879 | | | * | | |
| Christopher A. Koster | 64,850 | | | — | | | 64,850 | | | * | | |
| Richard A. Gephardt | 26,272 | | | 11,965 | | | 38,237 | | 2 | * | | |
| H. James Dallas | 29,719 | | | 7,018 | | | 36,737 | | 2 | * | | |
| Jessica L. Blume | 33,300 | | | 3,300 | | | 36,600 | | | * | | |
| Sarah M. London | 21,875 | | | 5,694 | | | 27,569 | | | * | | |
| Lori J. Robinson | 15,485 | | | 3,300 | | | 18,785 | | | * | | |
| Theodore Samuels | 14,730 | | | 1,100 | | | 15,830 | | | * | | |
| Christopher Coughlin | 10,000 | | | 1,100 | | | 11,100 | | | * | | |
| Wayne DeVeydt | 10,000 | | | 1,100 | | | 11,100 | | | * | | |
| Leslie Norwalk | 10,000 | | | 1,100 | | | 11,100 | | | * | | |
| Jesse Hunter | 13,041 | | | 41,140 | | | 54,181 | | | * | | |
| Jeffrey Schwaneke | 27,834 | | | — | | | 27,834 | | | * | | |
| All directors and executive officers as a group (25 persons) | 4,103,958 | | | 4,710,732 | | | 8,814,690 | | | 1.5 | | | |
| | | | | | | | |
2022 NOTICE OF MEETING AND PROXY STATEMENT |
OTHER MATTERS |
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| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | | |
Outstanding
Shares | Shares
Acquirable
Within 60 Days | Total
Beneficial
Ownership | Percent
of Class | | |
The Vanguard Group, Inc.1 | 62,485,541 | | | — | | | 62,485,541 | | | 10.9 | | | |
100 Vanguard Blvd.
Malvern, PA 19355 | | | | | | | | | |
Capital World Investors1 | 46,851,859 | | | — | | | 46,851,859 | | | 8.2 | | | |
333 South Hope Street, 55th Floor
Los Angeles, CA 90071 | | | | | | | | | |
BlackRock, Inc.1 | 41,158,173 | | | — | | | 41,158,173 | | | 7.2 | | | |
55 East 52nd Street
New York, NY 10055 | | | | | | | | | |
FMR LLC1 | 35,163,459 | | | — | | | 35,163,459 | | | 6.2 | | | |
245 Summer Street
Boston, MA 02210 | | | | | | | | | |
| Frederick H. Eppinger | 168,842 | | | 166,997 | | | 335,839 | | 2 | * | | |
| Kenneth Burdick | 329,159 | | | — | | | 329,159 | | | * | | |
| Brent D. Layton | 234,010 | | | — | | | 234,010 | | | * | | |
| Andrew L. Asher | 112,531 | | | — | | | 112,531 | | | * | | |
| William Trubeck | 88,714 | | | 11,323 | | | 100,037 | | 2 | * | | |
| Orlando Ayala | 74,879 | | | — | | | 74,879 | | | * | | |
| Christopher A. Koster | 51,712 | | | 3,016 | | | 54,728 | | | * | | |
| H. James Dallas | 26,084 | | | 11,292 | | | 37,376 | | 2 | * | | |
| Jessica L. Blume | 16,600 | | | 20,000 | | | 36,600 | | | * | | |
| Sarah M. London | 13,965 | | | 8,588 | | | 22,553 | | | * | | |
| Richard A. Gephardt | 11,572 | | | 8,665 | | | 20,237 | | 2 | * | | |
| Lori J. Robinson | 7,585 | | | 6,666 | | | 14,251 | | | * | | |
| Christopher Coughlin | 13,978 | | | — | | | 13,978 | | | * | | |
| Theodore Samuels | 12,857 | | | — | | | 12,857 | | | * | | |
| Wayne DeVeydt | 1,857 | | | — | | | 1,857 | | | * | | |
| All directors and executive officers as a group (20 persons) | 1,323,896 | | | 285,757 | | | 1,609,653 | | | * | | |
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| * | Represents less than 1% of outstanding shares of common stock. |
| 1 | Shares acquirable within 60 days includes a previous grant of 500,000 shares (split adjusted three times to 4,000,000) in the form of RSUs, payable in shares of common stock, pursuant to the executive employment agreement with Mr. Neidorff dated November 8, 2004. Of the original 500,000 stock grant, 300,000 shares (split adjusted to 2,400,000) vested in November 2009 and 200,000 shares (split adjusted three times to 1,600,000) vested in each of November 2010 through 2014 and will be distributedFor 5%+ holders, ownership is based on the later of (a) January 15 of the first calendar year following termination of Mr. Neidorff's employment and (b) the date that is six months after Mr. Neidorff's “separation of service” as defined in the Code.most recent 13D/13G filing. |
| 2 | Shares beneficially owned by Messrs. Eppinger, Trubeck, Dallas, and Gephardt include 166,997, 4,657, 4,626, and Dallas include 166,149, 3,718, 8,665, and 3,718, respectively, which represent RSUs acquired through the Non-Employee Directors Deferred Stock Compensation Plan. |
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Centene Corporation 91
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2022 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| OTHER MATTERS |
As of February 25,August 10, 2022, there were 582,875,035571,580,843 shares of our common stock outstanding. Beneficial ownership is determined in accordance with the rules of the SEC. To calculate a stockholder's percentage of beneficial ownership, we include in the numerator and denominator those shares underlying options beneficially owned by that stockholder that are vested or that will vest within 60 days of February 25,August 10, 2022. Options held by other stockholders, however, are disregarded in the calculation of beneficial ownership. Therefore, the denominator used in calculating beneficial ownership among our stockholders may differ.
Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, except to the extent authority is shared by spouses under applicable community property laws.
No director, executive officer, affiliate or owner of record, or beneficial owner of more than five percent of any class of our voting securities, or any associate of such individuals or entities, is a party adverse to us or any of our subsidiaries in any material proceeding or has any material interest adverse to us or any of our subsidiaries.
Information with respect to the outstanding shares beneficially owned by The Vanguard Group, Inc. is based on Schedule 13G/A filed with the SEC on February 9, 2022, by such firm, related to their Centene ownership. The Vanguard Group, Inc. beneficially owns 62,485,541 shares. Of the shares The Vanguard Group, Inc. owns, it has shared voting power over 937,606 shares, shared dispositive power over 2,355,934 shares, and sole dispositive power over 60,129,607 shares.
Information with respect to the outstanding shares beneficially owned by Capital World Investors is based on Schedule 13G/A filed with the SEC on February 11, 2022, by such firm, related to their Centene ownership. Capital World Investors beneficially owns 46,851,859 shares. Of the shares Capital World Investors owns, it has sole voting and sole dispositive power over 46,851,859 shares.
Information with respect to the outstanding shares beneficially owned by BlackRock, Inc. is based on Schedule 13G/A filed with the SEC on February 3, 2022, by such firm, related to their Centene ownership. BlackRock, Inc. beneficially owns 41,158,173 shares. Of the shares BlackRock, Inc. owns, it has sole voting power over 36,293,275 shares and sole dispositive power over 41,158,173 shares.
Information with respect to the outstanding shares beneficially owned by FMR, LLC is based on Schedule 13G/A filed with the SEC on February 9, 2022, by such firm, related to their Centene ownership. FMR, LLC beneficially owns 35,163,459 shares. Of the shares FMR, LLC owns, it has sole voting power over 4,210,071 shares and sole dispositive power over 35,163,459 shares.
92 Centene Corporation 11
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2022 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| OTHER MATTERS |
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Delinquent Section 16(a) Reports |
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Directors, executive officers and beneficial owners of more than ten percent of our common stock are required by Section 16(a) of the Exchange Act to file reports with the SEC detailing their beneficial ownership of our common stock and other equity securities and reporting changes in such beneficial ownership. We are required to disclose any late filings of such reports. In 2021, the Company became aware of a transaction by Mark Brooks related to the acquisition of 1,214.145 phantom shares in 2020 that was not reported timely on a Form 4 due to an administrative error. Except for the foregoing, to our knowledge, based solely on our review of copies of reports furnished to us and written representations by the persons required to file these reports that no reports were required, all other Section 16(a) filing requirements during 2021 were complied with on a timely basis.
If an executive officer or member of the Board wants to sell shares of the Company's stock, we require them to sell through a Rule 10b5-1 sales plan in order to afford themselves affirmative defenses, protections and safeguards provided by Rule 10b5-1 promulgated under the Exchange Act.
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Related Party Transactions |
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Our policy concerning pre-approval of related party transactions is incorporated into the provisions of our Business Ethics and Code of Conduct Policy. Related parties include any of our directors or executive officers, certain of our stockholders, and their immediate family members. Related party transactions include any transaction or arrangement in which the amount involved exceeds $120,000 where the Company is a participant and a related party has a direct or indirect material interest. The Company compiles and reviews all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such parties have a direct or indirect material interest. As required under SEC rules, we disclose in our Proxy Statement any related party transactions determined to be directly or indirectly material to us or a related party.
Effective January 23, 2021, the Company entered into a consulting agreement with Kenneth Burdick, our former Executive Vice President, Markets and Products and former CEO of WellCare. Under the terms of the agreement, Mr. Burdick provided strategy advice and counsel, including, but not limited to WellCare legacy operations, integration matters, and ongoing guidance to his successor. In exchange for these services, the Company paid Mr. Burdick $350,000 per quarter in cash. The agreement expired in accordance with its terms on January 22, 2022.
In 2021, two of our executive officers had a related party employed by the Company who earned total compensation above $120,000. Both employees compensation and benefits are consistent with total compensation and benefits provided to other employees of the same level with similar responsibilities. The Compensation Committee reviewed these employee's compensation and benefits and determined them to be at market rates.
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| Submission of Stockholder Proposals and Director Nominations for 2023 Annual Meeting |
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Under SEC rules, a stockholder who wishes to present a proposal for inclusion in our proxy statement for our 2023 Annual Meeting of Stockholders must submit the proposal in writing to Christopher A. Koster, our Secretary, at 7700 Forsyth Boulevard, St. Louis, Missouri 63105, before November 14,11, 2022. SEC rules set standards for the types of stockholder proposals and the information that must be provided by the stockholder making the request.
A stockholder may also submit a proposal (including director nominations) to be considered at ourthe 2023 Annual Meeting of Stockholders pursuant to ourCurrent By-Laws (and not under SEC rules). In that case, under our Current By-Laws, the proposal would not be required to be included in our proxy statement for our 2023 Annual Meeting of Stockholders and the proposal must be received by our Secretary not less than 120 days nor more than 150 days before the first anniversary of the
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
OTHER MATTERS |
2022 Annual Meeting. This notice must include the information required by the provisions of ourthe Current By-Laws, a copy of which may be obtained by writing to our Secretary at the address specified above. The deadline for delivery of a stockholder proposal pursuant to ourCurrent By-Laws would be no earlier than November 27, 2022 and no later than December 27, 2022.
Finally, a stockholder or group of stockholders who wish to submit a director nominee for inclusion in our proxy statement for our 20222023 Annual Meeting of Stockholders must comply with the notice and other requirements set forth in ourthe Current By-Laws. Among other requirements, notice of proxy access director nominees must be submitted no earlier than November 27, 2022 and no later than December 27, 2022.
However, in connection with the Board’s adoption of the Declassification Amendment, the Special Meeting Amendment and the Action by Written Consent Amendment, the Board approved an amendment to the Current By-Laws that changes the time period under the By-Laws (and not under SEC Rules) for the submission proposals to be considered at our annual meetings of stockholders or pursuant to the proxy access provisions of our By-Laws to the period that is not less than 90 days nor more than 120 days before the first anniversary of the previous year’s annual meeting of stockholders. Such amendment to the By-Laws will become effective following the conclusion of the Special Meeting. Accordingly, the deadline for delivery of a stockholder proposal (including director nominations) pursuant to our By-Laws, including pursuant to the proxy access provisions of our By-Laws, would be no earlier than December 27, 2022 and no later than January 26, 2023.
We have not set a date for our 2023 Annual Meeting of Stockholders.Meeting. If the date of our 2023 Annual Meeting of Stockholders is advanced or delayed by more than 30 days from April 26, 2023, we shall inform our stockholders, in our earliest possible quarterly report on Form 10-Q, of such change and the new dates for submitting stockholder proposals or director nominations. In addition, to comply with the universal proxy rules (once effective), a stockholder who intends to solicit proxies in support of director nominees other than Centene nominees must provide notice that sets forth the information required by SEC rules no later than February 25, 2023.
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2022 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| OTHER MATTERS |
Some banks, brokers and other nominee record holders may be participating in the practice of “householding.” This means that only one copy of either the Notice of Internet Availability of Proxy Materials or this proxy statement our 2021 Annual Review and Annual Report on Form 10-K may have been sent to multiple stockholders sharing an address unless the stockholders provide contrary instructions. We will promptly deliver a separate copy of these documentsthis proxy statement to you if you call, write or e-mail us at:
Centene Corporation
7700 Forsyth Boulevard
St. Louis, Missouri 63105
Attn: Christopher A. Koster, Secretary
(314) 725-4477
christopher.a.koster@centene.com
If you want to receive separate copies of our proxy statements and annual reports to stockholders in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address, phone number or e-mail address.
Centene Corporation 95
Centene Corporation 13
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| NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| APPENDIX A |
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| Appendix A | | |
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RECONCILIATION OF NON-GAAP MEASURESAmended and Restated Centene Corporation Certificate of Incorporation |
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This proxy statement includes certain non-GAAP financial measures as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally to allow management to focus on period-to-period changes in the Company's core business operations. Therefore, the Company believes that this information is meaningful in addition to the presented GAAP financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for related GAAP financial information.AMENDED AND RESTATED
CENTENE CORPORATION
CERTIFICATE OF INCORPORATION
Specifically,Centene Corporation, a Delaware corporation (hereinafter called the Company believes the presentation of non-GAAP financial information that excludes amortization of acquired intangible assets, acquisition related expenses,“Corporation”), does hereby certify as well as other items, allows investors to develop a more meaningful understanding of the Company's performance over time. The tables below provide reconciliations of non-GAAP items.
Reconciliation of GAAP Diluted EPS to Adjusted Diluted EPS:
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| Year Ended December 31, | | | | |
| 2021 | 2020 | 2019 | 2018 | 2017 | | | | |
| GAAP Diluted EPS attributable to Centene | $ | 2.28 | | $ | 3.12 | | $ | 3.14 | | $ | 2.26 | | $ | 2.34 | | | | | |
Amortization of acquired intangible assets (1) | 1.00 | | 0.95 | | 0.47 | | 0.41 | | 0.28 | | | | | |
Acquisition related expenses (2) | 0.24 | | 0.86 | | 0.19 | | 0.81 | | 0.04 | | | | | |
Other adjustments (3) | 1.63 | | 0.07 | | 0.62 | | 0.06 | | (0.14) | | | | | |
| Adjusted Diluted EPS | $ | 5.15 | | $ | 5.00 | | $ | 4.42 | | $ | 3.54 | | $ | 2.52 | | | | | |
(1) AmortizationThe Corporation’s original Certificate of acquired intangible assets per diluted share are netIncorporation was filed with the Secretary of State of the income tax benefitState of $0.31, $0.29, $0.14, $0.12, and $0.16 for the years ended December 31, 2021, 2020, 2019, 2018, and 2017, respectively.Delaware on September 26, 2001.
(2) Acquisition related expenses per diluted share are netThis Amended and Restated Certificate of Incorporation restates and integrates and further amends the provisions of the income tax benefitCertificate of $0.07, $0.18, $0.06, $0.25,Incorporation of this Corporation and $0.02, respectively, forhas been duly adopted in accordance with Section 242 and Section 245 of the years ended December 31, 2021, 2020, 2019, 2018,General Corporation Law of the State of Delaware. This Amended and 2017, respectively.Restated Certificate of Incorporation shall become effective on the date of filing of this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.
(3) 2021 - (a) legal settlement expense and related legal fees of $1,264 million, or $1.76 per diluted share, net of an income tax benefit of $0.38; (b) debt extinguishment costs of $125 million, or $0.16 per diluted share, net of an income tax benefit of $0.05; (c) severance costs due to a restructuring of $54 million, or $0.06 per diluted share, net of an income tax benefit of $0.03; (d) a reduction to the previously reported gain due to the finalizationThe text of the working capital adjustment relatedCertificate of Incorporation is hereby restated and further amended to the divestiture of certain products of our Illinois health plan of $62 million, or $0.08 per diluted share, net of an income tax benefit of $0.02; (e) non-cash gain related to the acquisition of the remaining 60% interest of Circle Health of $309 million, or $0.52 per diluted share, net of income tax expense of $0.00; (f) non-cash impairment of our equity method investment in RxAdvance of $229 million, or $0.32 per diluted share, net of an income tax benefit of $0.07; and gain related to the divestiture of U.S. Medical Management (USMM) of $150 million, or $0.23 per diluted share, net of an income tax expense of $0.02
2020 - (a) gain related to the divestiture of certain products of our Illinois health plan of $104 million, or $0.10 per diluted share, net of an income tax expense of $0.08; (b) non-cash impairment of our third-party care management software business of $72 million, or $0.10 per diluted share, net of an income tax benefit of $0.02; and (c) debt extinguishment costs of $61 million, or $0.07 per diluted share, net of an income tax benefit of $0.04.read as set forth below.
2019 - (a) non-cash goodwill and intangible asset impairmentFIRST: The name of $271 million or $0.57 per diluted share, net of an income tax benefit of $0.08 and (b) debt extinguishment costs of $30 million or $0.05 per diluted share, net of an income tax benefit of $0.02;the Corporation is Centene Corporation (the "Corporation").
2018 -SECOND: The address of the impactregistered office of retroactive changes to the California minimum medical loss ratio (MLR)Corporation in the State of $30 millionDelaware is Corporation Trust Center, 1209 Orange Street, in the City of expense or $0.06 per diluted share, netWilmington, New Castle County, Delaware 19801. The name of an income tax benefit of $0.02; andits registered agent at that address is The Corporation Trust Company.
2017 - (a)THIRD: The purpose of the Penn Treaty assessment expenseCorporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of $56 million or $0.10 per diluted share, netthe State of an income tax benefit of $0.06; (b) the cost sharing reduction (CSR) expense of $22 million or $0.04 per diluted share, net of an income tax benefit of $0.02; (c) the charitable contribution commitment of $40 million or $0.07 per diluted share, net of an income tax benefit of $0.05; and (d) the benefit associated with income tax reform of $125 million or $0.35 per diluted share.Delaware (the "GCL").
FOURTH: (a) Authorized Capital Stock. The total number of shares of stock which the Corporation shall have authority to issue is 810,000,000 shares of capital stock, consisting of (i) 800,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).
(b) (A) A total of 39,000,000 shares of Common Stock shall be known and designated as Series A Common Stock ("Series A Common Stock"). A total of 1,000,000 shares of Common Stock shall be known and designated as Series B Common Stock ("Series B Common Stock"). The powers, preferences and rights, and the qualifications, limitations and restrictions, of each class of the Common Stock are as follows:
(1) General. The Series A Common Stock and the Series B Common Stock shall have identical designations, preferences and relative, participating, optional or other special rights except that the holders of Series B Common Stock shall not be entitled to vote (except as otherwise required by law) but shall be entitled to notice of all meetings of shareholders. The holders of Series A Common Stock shall be entitled to one vote for each share of Series A Common Stock held with respect to all matters submitted to vote or written consent of stockholders. The holders of shares of Series A Common Stock shall not have cumulative voting rights.
(2) Dividends; Stock Splits. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Certificate of Incorporation, as it may be amended from time to time, holders of shares of Series A Common Stock and Series B Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or
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2020 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| APPENDIX A | | |
Reconciliationproperty of GAAP Earningsthe Corporation when, as and if declared thereon by the Board of Directors from time to Adjusted EBITDA ($ in millions):
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| | | | 2021 | 2018 |
| Net earnings attributable to Centene Corporation | | | | | $ | 1,347 | | $ | 900 | |
| Income tax expense | | | | | 477 | | 474 | |
| Interest expense | | | | | 665 | | 343 | |
| Depreciation and amortization | | | | | 1,456 | | 497 | |
| Non-cash stock compensation expense | | | | | 203 | | 145 | |
| Impairment loss | | | | | 229 | | — | |
| Debt extinguishment | | | | | 125 | | — | |
| Adjusted EBITDA | | | | | $ | 4,502 | | $ | 2,359 | |
(3) Liquidation, Dissolution, etc. In the event of any liquidation, dissolution or winding up (either voluntary or involuntary) of the Corporation, the holders of shares of Series A Common Stock and Series B Common Stock shall be entitled to receive the assets and funds of the Corporation available for distribution after payments to creditors and to the holders of any Preferred Stock of the Corporation that may at the time be outstanding, in proportion to the number of shares held by them, respectively.
(4) Merger, etc. In the event of a merger or consolidation of the Corporation with or into another entity (whether or not the Corporation is the surviving entity), the holders of each share of Series A Common Stock and Series B Common Stock shall be entitled to receive the same per share consideration on a per share basis.
(5) No Preemptive or Subscription Rights. No holder of shares of Series A Common Stock and Series B Common Stock shall be entitled to preemptive or subscription rights.
(B) The Series A Common Stock and the Series B Common Stock shall automatically be converted into shares of Common Stock immediately upon the closing of a public offering pursuant to an effective Registration Statement under the Securities Act of 1933, as amended, covering the Corporation's Common Stock in a firm-commitment, underwritten public offering by a nationally recognized investment banking firm with aggregate net cash proceeds to the Corporation (after deducting underwriters' discounts and expenses), at the public offering price, of at least $10 million and an equivalent public offering price per share of Common Stock (as such shares of such stock are presently constituted) of at least $1.33. Thereafter, the Corporation shall have only one class of Common Stock which shall have the same powers, preferences and rights, and the same qualifications, limitations and restrictions as the Series A Common Stock immediately prior to such conversion.
(c)
Preferred Stock
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Appendix B | | |
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Proposed Amendment to the Centene Amended and Restated Certificate of Incorporation to Eliminate the Classification of the Board |
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CERTIFICATE OF AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CENTENE CORPORATION
Centene Corporation (the “Corporation”), a corporation organized and existing underDirectors is hereby expressly authorized to provide for the laws and by virtueissuance of all or any shares of the General Corporation Law ofPreferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the State of Delaware (the “GCL”),
DOES, HEREBY CERTIFY:
1.This Certificate of Amendment (the “Certificate of Amendment”) amends the Amended and Restated Certificate of Incorporation of the Corporation (the “Amended and Restated Certificate of Incorporation”) filed with the Secretary of State of the State of Delaware on April 27, 2021, and has been dulyresolution or resolutions adopted by the Board of Directors providing for the issuance of such class or series, including, without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and bywith such adjustments; all as may be stated in such resolution or resolutions.
(d) Power to Sell and Purchase Shares. Subject to the stockholdersrequirements of applicable law, the Corporation shall have the power to issue and sell all or any part of any shares of any class of stock herein or hereafter authorized to such persons, and for such consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issue or sale of the same number of shares of another class, and as otherwise permitted by law. Subject to the requirements of applicable law, the Corporation shall have the power to purchase any shares of any class of stock herein or hereafter authorized from such persons, and for such consideration, as the Board of Directors shall from time to time, in accordance with Section 242its discretion, determine, whether or not less consideration could be paid upon the purchase of the GCL.same number of shares of another class, and as otherwise permitted by law.
2.Article FIFTH of the Amended and Restated Certificate of Incorporation is hereby deleted in its entirety and replaced with the following:
“FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
(a)The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
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| NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| APPENDIX A |
(b)The number of directors of the Corporation shall be as from time to time fixed by the Board of Directors, within any limitations as may be fixed by the By-Laws. Election of directors need not be by written ballot unless the By-Laws so provide.
(c)Until the conclusion of the Corporation’sCorporation's 2025The term of office of all directors serving as of the effective date of this Certificate of Incorporation shall expire at the 2023 annual meeting of stockholders (the “2025(the "2025 Annual Meeting”Meeting"), the directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. Each person elected as a director of the Corporation at or after the annual meeting of stockholders that is held in calendar year 2023 (the “2023"2023 Annual Meeting”Meeting"), whether to succeed a person whose term of office as a director has expired or to fill any vacancy, shall be elected for a term expiring at the next annual meeting of stockholders. Each director elected prior to the 2023 Annual Meeting shall continue to serve as a director for the term for which he or she was elected. In each case, each director shall hold office until such director’sdirector's successor shall is duly elected and qualified, or until such director’sdirector's earlier death, resignation, retirement, disqualification or removal from office.
(d)Subject to the terms of any one or more classes or series of Preferred Stock, any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the directorsBoard of Directors then in office,; provided that a quorum is present, and any other vacancy occurring on the Board of Directors may be filled by a majority of the directorsBoard of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall hold office for a term expiring at the next annual meeting of stockholders. Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of the Corporation’sCorporation's then issued and outstanding capital stock entitled to vote generally in the election of directors;directors; provided, however, any director elected prior to the 2025 Annual Meeting and any director appointed to fill a vacancy of any director elected prior to the 2025 Annual Meeting may be removed from office only for cause by the affirmative vote of the holders of at least a majority of the voting power of the Corporation’sCorporation's then issued and outstanding capital stock entitled to vote generally in the election of directors.directors. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of
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2022 NOTICE OF MEETING AND PROXY STATEMENT |
| | APPENDIX B |
Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation applicable thereto.
(e)In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.”
3.ExceptSIXTH: No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the GCL as the same exists or may hereafter be amended. If the GCL is amended hereafter to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the GCL, as so amended. Any repeal or modification of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
SEVENTH: The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by law, as now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a
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| NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| APPENDIX A |
proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article SEVENTH shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition.
The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article SEVENTH to directors and officers of the Corporation.
The rights to indemnification and to the advance of expenses conferred in this Article SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under this Certificate of Incorporation, the By-Laws of the Corporation, any statute, agreement, vote of stockholders or disinterested directors or otherwise.
Any repeal or modification of this Article SEVENTH by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to the advancement of expenses of a director or officer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.
EIGHTH: The name and mailing address of the incorporator is John L. Gillis, Jr., One Metropolitan Square, St. Louis, Missouri 63102-2740.
NINTH: Unless otherwise required by law, special meetings of stockholders, for any purpose or purposes may be called by either (i) the Chairman of the Board of Directors, if there be one, (ii) the Chief Executive Officer, or (iii) the Board of Directors. The ability of the stockholders to call a special meeting is hereby specifically denied.
NINTH: Reserved.
TENTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation, and the ability of the stockholders to consent in writing to the taking of any action is hereby specifically denied.
TENTH:
(a) All actions required or permitted to be taken by stockholders at an annual or special meeting of stockholders (a "Corporate Action") may be taken without a meeting, without prior notice and without a vote, if a written consent or consents, setting forth the Corporate Action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such a Corporate Action at a meeting at which all othershares entitled to vote thereon were present and voted, in each case, in accordance with the GCL and this Certificate of Incorporation (such written consent or consents, a "Written Consent"); provided, however, that no Corporate Action by Written Consent may be taken except in accordance with the provisions of this Article TENTH and applicable law.
(b) The record date for determining stockholders entitled to effect a Corporate Action by Written Consent shall be as fixed by the Board of Directors or as otherwise established under this Article TENTH. Any stockholder seeking to have the stockholders take a Corporate Action by Written Consent shall request that a record date be fixed for such purpose by written notice addressed and delivered to the secretary of the Corporation and signed by a stockholder or stockholders holding ten percent (10%) or more of the voting power of the shares of capital stock entitled to vote on such Corporate Action. The written notice must contain the information set forth in paragraph (c) of this Article TENTH. Following delivery of this notice, the Board of Directors shall, by the later of (i) ten (10) days after delivery of a valid request to set a record date and (ii) five (5) days after delivery of any information requested by the Corporation to determine the validity of the request for a record date or to determine whether the Corporate Action to which the request relates may be taken by Written Consent pursuant to this Article TENTH, determine the validity of the request and whether the request relates to a Corporate Action that may be taken by a Written Consent pursuant to this Article TENTH, and, if appropriate, adopt a resolution fixing the record date for such purpose. The record date for such purpose shall be no more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not precede the date such resolution is adopted. If the Board of Directors determines that such request is valid and relates to a
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| NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| APPENDIX A |
Corporate Action that may be taken by a Written Consent pursuant to this Article TENTH or if no such determination shall have been made by the date required by this Article TENTH, and in either event no record date has been fixed by the Board of Directors, the record date shall be the first date on which a signed Consent (as defined in paragraph (f) of this Article TENTH) relating to the proposed Corporate Action is delivered to the Corporation in accordance with paragraph (g) of this Article TENTH; provided that, if prior action by the Board of Directors is required under the provisions of the AmendedGCL, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
(c) Any notice required by paragraph (b) of this Article TENTH (i) must describe the Corporate Action proposed to be taken by Written Consent and Restated Certificate(iii) must contain (A) such information and representations, to the extent applicable, then required by Article II Section 7, Article III, Section 2 or any other applicable sections of Incorporationthe Corporation’s By-Laws as though such stockholder was intending to make a nomination or to bring any other matter before a meeting of stockholders and (b) the text of the proposal(s) (including the text of any resolutions to be adopted by Written Consent and the language of any proposed amendment to the By-Laws of the Corporation). The Corporation may require the stockholder(s) submitting such notice to furnish such other information as may be requested by the Corporation to determine the validity of the request for a record date and to determine whether the request relates to a Corporate Action that may be taken by Written Consent under this Article TENTH. In connection with any Corporate Action proposed to be taken by Written Consent in accordance with this ArticleTENTH, the stockholders seeking such Corporate Action by Written Consent shall remainfurther update and supplement the information previously provided to the Corporation in full force and effect.connection therewith, if necessary, as required by Article II Section 7, Article III, Section 2 or any other applicable section of the Corporation’s By-Laws
[Remainder of this page intentionally left blank](d) Stockholders are not permitted to take a Corporate Action by Written Consent if:
* * * *(i) such Corporate Action relates to an item of business that is not a proper subject for stockholder action under applicable law;
(ii) the request for a record date for such Corporate Action by Written Consent is received by the Corporation during the period commencing ninety (90) days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders and ending on the date of the next annual meeting of stockholders;
(iii) an annual or special meeting of stockholders that included an item of business substantially the same as, or substantially similar to, such Corporate Action (a “Similar Item”) was held not more than one hundred twenty (120) days before such request for a record date was received by the secretary of the Corporation;
(iv) a Similar Item is to be included in the Corporation’s notice as an item of business to be brought before a meeting of stockholders that is to be called within forty (40) days after the request for a record date is received and held as soon as reasonably practicable thereafter; or
(v) such record date request was made in a manner that involved a violation of Regulation 14A under the Securities Exchange Act of 1934 (the “Exchange Act”) or other applicable law.
For purposes of this paragraph (d), the nomination, election or removal of directors shall be deemed to be a Similar Item with respect to all actions involving the nomination, election or removal of directors, changing the size of the Board of Directors and filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of directors.
The Board of Directors shall determine in good faith whether a record date is required to be set under the provisions of this Article TENTH.
(e) Stockholders may take a Corporate Action by Written Consent only if consents are solicited by the stockholder or group of stockholders seeking to take such Corporate Action by Written Consent from all
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| NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| APPENDIX A |
holders of capital stock of the Corporation entitled to vote on such Corporate Action pursuant to a consent solicitation conducted pursuant to Regulation 14A of the Exchange Act, without reliance upon the exemption contained in Rule 14a‑2(b)(2) of the Exchange Act and in accordance with this Article TENTH and applicable law.
(f) Every written consent purporting to take or authorize the taking of Corporate Action by Written Consent (each such written consent, a “Consent”) must bear the date of signature of each stockholder who signs the Consent, and no Consent shall be effective to take the such CorporateAction unless, within sixty (60) days of the earliest dated Consent delivered to the Corporation in the manner required by paragraph (g) of this Article TENTH and not later than one hundred twenty (120) days after the record date, Consents signed by a sufficient number of stockholders to take such Corporate Action are so delivered to the secretary of the Corporation.
(g) No Consents may be delivered to the Corporation until fifty (50) days after the record date. Consents must be delivered to the Corporation by delivery to the Corporation’s secretary at the Corporation’s principal place of business. Delivery must be made by hand or by certified or registered mail, return receipt requested. In the event of the delivery to the Corporation of Consents, the secretary of the Corporation, or such other officer of the Corporation as the Board of Directors may designate, shall provide for the safe‑keeping of such Consents and any related revocations and shall promptly conduct such ministerial review of the sufficiency of all Consents and any related revocations and of the validity of the Corporate Action to be taken by Written Consent as the secretary of the Corporation, or such other officer of the Corporation as the Board of Directors may designate, as the case may be, deems necessary or appropriate, including, without limitation, whether the stockholders of a number of shares having the requisite voting power to authorize or take the Corporate Action specified in such Consents have delivered Consent thereto; provided, however, that if the Corporate Action to which the Consents relate is the removal or replacement of one or more members of the Board of Directors, the secretary of the Corporation, or such other officer of the Corporation as the Board of Directors may designate, as the case may be, shall promptly designate one (1) person, who shall not be members of the Board of Directors, to serve as inspector (“Inspector”) with respect to such Consents and such Inspector shall discharge the functions of the secretary of the Corporation, or such other officer of the Corporation as the Board of Directors may designate, as the case may be, under this Article TENTH. If, after such investigation, the secretary of the Corporation, such other officer of the Corporation as the Board of Directors may designate or the Inspector, as the case may be, shall determine that the Corporate Action purported to have been taken is duly authorized by the Consents, that fact shall be certified on the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders and the Consents shall be filed in such records. In conducting the investigation required by this section, the secretary of the Corporation, such other officer of the Corporation as the Board of Directors may designate or the Inspector, as the case may be, may, at the expense of the Corporation, retain special legal counsel and any other necessary or appropriate professional advisors as such person or persons may deem necessary or appropriate and, to the fullest extent permitted by law, shall be fully protected in relying in good faith upon the opinion of such counsel or advisors.
(h) If the Board of Directors shall determine that any request to fix a record date or to take a Corporate Action by Written Consent was not properly made in accordance with, or relates to a Corporate Action that may not be taken by Written Consent pursuant to, this Article TENTH, or the stockholder or stockholders seeking to take such Corporate Action do not otherwise comply with this Article TENTH, then the Board of Directors shall not be required to fix a record date and any such purported Corporate Action by Written Consent shall be null and void to the fullest extent permitted by applicable law. No Corporate Action by Written Consent shall be effective until such date as the secretary of the Corporation, such other officer of the Corporation as the Board of Directors may designate or the Inspector, as the case may be, certify to the Corporation that the Consents delivered to the Corporation in accordance with paragraph (g) of this ArticleTENTH represent not less than the minimum number of votes that would be necessary to authorize or take such Corporate Action at a meeting at which all shares of capital stock entitled to vote thereon were present and voted, in each case, in accordance with the GCL and this Certificate of Incorporation.
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| APPENDIX A |
(i) Nothing contained in this Article TENTH shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any Consent or related revocations, whether before or after such certification by the secretary of the Corporation, such other officer of the Corporation as the Board of Directors may designate or the Inspector, as the case may be, or to take any other action (including, without limitation, the commencement, prosecution, or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
(j) Notwithstanding anything to the contrary set forth above, (i) none of the foregoing provisions of this Article TENTH shall apply to any solicitation of any Corporate Action by Written Consent by or at the direction of the Board of Directors and (ii) the Board of Directors shall be entitled to solicit any Corporate Action by Written Consent in accordance with applicable law.
ELEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.
TWELFTH: In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the Board of Directors shall have the power to adopt, amend, alter or repeal the Corporation's By-Laws. The affirmative vote of at least a majority of the entire Board of Directors shall be required to adopt, amend, alter or repeal the Corporation's By-Laws. The Corporation's By-Laws also may be adopted, amended, altered or repealed by the affirmative vote of the holders of at least a majority of the voting power of the shares entitled to vote at an election of directors.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed in this Certificate of Incorporation, the Corporation's By-Laws or the GCL, and all rights herein conferred upon stockholders are granted subject to such reservation; provided, however, in addition to any other vote that may be required by law, the affirmative vote of the holders of at least a majority of the voting power of the shares entitled to vote at an election of directors shall be required to include any provisions in this Certificate of Incorporation requiring, for any corporate action, the vote of a larger portion of the voting power of the shares of Common Stock, other securities of the Corporation, or of any other class or series thereof, than is required by the GCL.
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| NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT |
| APPENDIX A |
IN WITNESS WHEREOF, this Amended and Restated Certificate of AmendmentIncorporation of Centene Corporation has been duly executed by the officer below this _____ day of _________.____________, 2022.
By:
Name:
Centene Corporation B-2A-8
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| CENTENE CORPORATION |
| C/O BROADRIDGE |
| PO BOX 1342 |
| BRENTWOOD, NY 11717 |
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| VOTE BY INTERNET - www.proxyvote.com |
| Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
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| ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS |
| If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. |
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| VOTE BY PHONE - 1-800-690-6903 |
| Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. |
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| VOTE BY MAIL |
| Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | |
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| KEEP THIS PORTION FOR YOUR RECORDS |
| DETACH AND RETURN THIS PORTION ONLY |
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| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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| | The Board of Directors recommends you vote FOR the following: | | | | | | | | | | |
| | 1. | ELECTION OF DIRECTORS | | | | proposals 1, 2, 3 and 4. | | | | | | | | | | |
| | | Nominees | | | | For | Against | Abstain | | |
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| | 1a.1. | Orlando Ayala | | | To adopt an amendment to Centene Corporation's Amended and Restated Certificate of Incorporation to declassify the Board of Directors immediately. | | o | | | o | | | o | | | |
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| | 1b.2. | Kenneth A. Burdick | | | To adopt an amendment to Centene Corporation's Amended and Restated Certificate of Incorporation to eliminate the prohibition on stockholders calling special meetings. | | o | | | o | | | o | | | |
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| 3. | 1c. | H. James Dallas | | | To adopt an amendment to Centene Corporation's Amended and Restated Certificate of Incorporation to grant stockholders the right to act by written consent, subject to certain terms and conditions. | | o | | | o | | | o | | | |
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| | 1d. | Sarah M. London | | | | | o | | | o | | | o | | | |
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| | 1e. | Theodore R. Samuels | | | | | o | | | o | | | o | | | |
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| | The Board of Directors recommends you vote FOR proposals 2, 3, 4, and 5: | | | | | | |
| | 2. | ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION. | | o | | | o | | | o | | | |
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| | 3. | RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022. | | o | | | o | | | o | | | |
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| 4. | APPROVAL OF AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS. | | o | | | o | | | o | | | |
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| 5. | BOARD PROPOSAL REGARDING STOCKHOLDER RIGHT TO CALL FOR A SPECIAL STOCKHOLDER MEETING. | | o | | | o | | | o | | | |
| The BoardTo approve the adjournment of Directors recommends you vote AGAINST the following: | | | | | | | | | | |
| 6. | STOCKHOLDER PROPOSAL FOR THE SHAREHOLDER RIGHT TO CALL FOR A SPECIAL SHAREHOLDER MEETING.Special Meeting to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of any of Proposals 1, 2 or 3 if there are insufficient votes at the time of the Special Meeting to approve any such Proposal. | | o | | | o | | | o | | | |
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| Note: Such other business as may properly come before the meeting or any adjournment thereof.
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| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | |
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| Signature [PLEASE SIGN WITHIN BOX] | Date | | | Signature (Joint Owners) | Date | |
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Important Notice Regarding the Availability of Proxy Materials for the AnnualSpecial Meeting: The Notice & Proxy Statement Form 10-K, Annual Review is/are available at www.proxyvote.com |
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| CENTENE CORPORATION |
| ANNUALSPECIAL MEETING OF STOCKHOLDERS, APRIL 26,SEPTEMBER 27, 2022 |
| THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS |
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| | | The undersigned hereby appoints Andrew L. Ashereach of H. James Dallas, Sarah M. London and Christopher A. Koster and each of them, with full power of substitution, Proxies of the undersigned to vote all shares of Common Stock of Centene Corporation, standing in the name of the undersigned or with respect to which the undersigned is entitled to vote, at the AnnualSpecial Meeting of Stockholders of Centene Corporation, to be held at Centene Plaza, 7700 Forsyth Blvd., St. Louis, Missouri 63105, on Tuesday, April 26,September 27, 2022, at 10:12:00 AM,PM, Central Time, and at any adjournments thereof. If more than one of the above named Proxies shall be present in person or by substitution at such meeting or at an adjournment thereof, then bothall of said Proxies shall exercise all of the powers hereby given. The undersigned hereby revokes any proxy heretofore given to vote at such meeting. | |
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| | | This proxy when properly executed will be voted in the manner directed herein by the undersigned. If no direction is made, this proxy will be voted "FOR" all the named nominees for director and "FOR"with respect to Proposals 1, 2, 3 4 and 5, and "AGAINST" proposal 6, and in the discretion of the named Proxies upon such other business as may properly come before the meeting and any adjournment thereof.4. | |
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| | PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE. | |
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| | Continued and to be signed on reverse side |
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