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TABLE OF CONTENTSTABLE OF CONTENTS
We are furnishing proxy materials, including this proxy statement, in connection with the solicitation of proxies on behalf of the Board of Directors, to be voted at the 20152018 Annual Meeting of Shareholders of Unum Group and at any adjournment or postponement thereof. Our proxy materials are first being mailed and made available electronically to shareholders on or about April 9, 2015.
12, 2018.
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20152018 PROXY STATEMENT | | 3 |
A LETTER FROM OUR BOARD OF DIRECTORS
Dear Fellow Shareholder:
As members of your Board of Directors, our primary focus is on creating long-term value for our shareholders. We accomplish that by setting a clear strategic course for the company, helping develop sound operating and financial plans, and assuring that these plans are executed in a timely, effective and responsible manner.
Unum’s vision is to be the leading provider of employee benefits products and services that help employers manage their businesses and employees protect their livelihoods. We continue to make progress toward this vision through strong financial results, consistent operating performance and steady growth across our principal operating businesses.
Noteworthy financial and operational highlights from 20141 include:
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| Pre-tax operating incomeWe’re pleased to report that Unum delivered record earnings in 2017, continuing our tradition of $1.29 billiondelivering strong results for our shareholders and after-tax operating incomecustomers. This performance translated into another profitable year for our shareholders. We saw healthy growth in our stock price, generated significant capital in our businesses and executed a robust program of $910.4returning value to our investors. As a result, our total shareholder return outpaced our peers and the broader S&P 500, not only for 2017 but over longer periods of time. We achieved these results by remaining focused on what we do best - providing benefits that protect the livelihoods of individuals and their families. We’re an integral part of the safety net for more than 35 million both record highs,people, and our disciplined approach to running our business is why people have counted on operating revenuesus for 170 years. A central role of $10.49 billion. Operating earnings per share wereour Board is to ensure the company maintains good governance practices, and that starts with strong leadership. In 2017, we continued the orderly leadership transition begun a record $3.55,few years ago with the election of Kevin Kabat as our Chairman at last year’s Annual Meeting. Through this leadership transition and others in the past, Unum has always maintained a 6.9 percent increase overthorough approach to corporate governance that assesses risk, ensures regulatory compliance, and provides oversight of compensation, investment activity and other financial matters. We also conduct a regular outreach and engagement program that ensures we receive valuable feedback from our shareholders on a variety of topics. Corporate sustainability is one topic that is getting more attention among investors these days, however, it's not new to us. With millions of people depending on the prior year; |
| — | | Approximately $6.7 billioncoverage we provide, Unum understands the importance of helping others. That philosophy permeates everything we do - from advocating for access to benefits and investing in benefits paid while continuingthe wellbeing of our people, to achieve consistently high customer satisfaction, a testament toimproving our local communities and minimizing the commitment we make to customers each and every day; |
| — | | An increase in book value per share of 2.8 percent, and continued shareholder returns including $159.4 million in dividends and $301 million in share repurchases. Since 2007,impact we have repurchased $2.8 billionon our environment. You can learn more about our responsibility efforts on our website.While 2017 was a banner year, we look forward with even greater confidence. The leadership positions we enjoy in our markets and the investments we’re making in our products and customer experience allow us to operate from a position of strength. We’re also poised to capitalize on what we believe are good growth opportunities for the future. Our success as a company depends on our shares, or nearly 32%10,000 employees who support our customers every day, and they deserve all our thanks for a job well done. On behalf of shares outstanding;them, we thank you for your investment in Unum and for the trust you place in us to represent your interests as a shareholder. | |
| — | | Significant sales and premium growth across all businesses. |
Behind this success, of course, is an organization of talented employees and leaders. One of our goals as Board members is to ensure the company is not only doing the right things to attract and retain high-caliber individuals, but also that it is proactively ensuring prudent succession planning throughout the organization. Unum has continued to identify and develop individuals capable of managing at a very senior level, which is demonstrated by its ability to execute successful leadership transitions at the business unit level over the last five years.
In 2015 we are undertaking an even more significant leadership transition as Tom Watjen, who has served as Unum’s CEO for 12 years, retires following the Annual Meeting of Shareholders. He is being succeeded by Rick McKenney, who has made an enormous impact as CFO since joining the company in 2009. Rick has the right skills and experience to build on Tom’s accomplishments and leverage Unum’s unique market position. The Board has planned carefully for this succession, and we are confident that Rick’s leadership ability and his deep understanding of the company will position Unum to continue to produce strong returns for shareholders. We are also highly confident in Jack McGarry’s ability to be effective in the CFO position, as he has played a key role in the company’s operational and financial management over the course of his career.
1 Operating results referenced in this letter exclude certain specified items. For 2014, these excluded items were net realized investment gains and losses, non-operating retirement-related gains or losses, costs related to early retirement of debt and the long-term care reserve increase. For reconciliations of the non-GAAP financial measures, including operating income, operating revenue, operating earnings per share, return on equity and book value per share (excluding accumulated other comprehensive income, or AOCI), to the most directly comparable GAAP measures, refer toAppendix A.
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| 4 | | 20152018 PROXY STATEMENT |
A LETTER FROM OUR BOARD
NOTICE OF
DIRECTORSOur focus on succession planning isn’t limited to the executive ranks at the company. In fact, the Board itself will undergo significant change over the next two years as several directors approach mandatory retirement age. Tom Watjen has agreed to serve as non-executive Chairman for a period of two years to help ensure continuity through this transition period at both the Board and management levels. Current Chairman Bill Ryan will become Lead Independent Director until his retirement in 2016.
We’d like to thank Tom for his extraordinary service over his long tenure. His strategic insight and commitment to excellence has not only produced steadily improving operating results and shareholder returns under challenging conditions, but also built Unum into a clear industry leader that is well positioned to capitalize on favorable market dynamics in the years ahead.
As always, we value your continued involvement as shareholders of our company and welcome your feedback. On behalf of our employees and the entire leadership team, thank you for your continued support of Unum.
2018 ANNUAL MEETING OF SHAREHOLDERS
NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS |
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Theodore H. Bunting, Jr. | | E. Michael Caulfield | | Cynthia L. Egan |
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Pamela H. Godwin | | Ronald E. Goldsberry | | Kevin T. Kabat |
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Timothy F. Keaney | | Thomas Kinser | | Gloria Larson |
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A.S. MacMillan, Jr. | | Richard P. McKenney | | Edward J. Muhl |
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Ronald P. O’Hanley | | William J. Ryan | | Thomas R. Watjen |
NOTICE OF 2015 ANNUAL MEETING OF SHAREHOLDERS
NOTICE OF 2015 ANNUAL MEETING OF SHAREHOLDERSDATE: The 2015 annual meeting of shareholders of Unum Group will be held:
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Date: | | Thursday, May 21, 201524, 2018 | | þ | Election of directors | p. 96 |
| TIME: 10 a.m. Eastern Daylight Time | |
Time: | LOCATION: 1 Fountain Square, | | þ | Advisory vote to approve executive compensation | p. 96 |
| Chattanooga, TN 37402 | |
| 10:WEBSITE: www.envisionreports.com/unm
| | þ | Ratification of appointment of independent public accounting firm | p. 97 |
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| | þ | Approval of an Amended and Restated Certificate of Incorporation, including the elimination of supermajority voting requirements | p. 98 |
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| | We mailed this Proxy Statement or a Notice of Internet Availability of Proxy Materials on April 12, 2018. |
| | How to vote |
| | Your vote is important. Please vote as soon as possible by one of the methods shown below. Be sure to have your proxy card, voting instructions form or Notice of Internet Availability in hand and follow the instructions below. |
| Attending | | Mail |
| You will be asked to provide photo identification and appropriate proof of ownership to attend the meeting. You can find more information under "About the Annual Meeting" in the attached proxy statement. Who can vote Shareholders of record of the company’s common stock (NYSE: UNM) at the close of business on March 26, 2018, are entitled to vote at the meeting and any adjournments or postponements of the meeting. | | Proxy Services, c/o Computershare Investor Services, P.O. Box 43126, Providence, Rhode Island 02940-5138 Deadline: Close of business day on May 23, 2018
Telephone 1-800-652-VOTE (8683) Deadline: 2:00 a.m. Eastern Daylight Time, |
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Place: | | Unum Group |
| | 1 Fountain Square |
| | Chattanooga, Tennessee 37402 May 24, 2018
Internet www.envisionreports.com/unm Deadline: 2:00 a.m. Eastern Daylight Time, May 24, 2018
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The items of business are:
| — | | To elect 10 directors named in the proxy statement, each for a one-year term expiring in 2016; |
| — | | To conduct an advisory vote to approve executive compensation; and |
| — | | To ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2015. |
Shareholders also will transact any other business that may properly come before the meeting.
Management will also review the company’s
20142017 performance and its outlook for the future.
Shareholders of record of the company’s common stock (NYSE: UNM) at the close of business on March 26, 2015 are entitled to vote at the meeting and any adjournments or postponements of the meeting.
Susan N. Roth
Vice President, Transactions, SEC and Corporate Secretary
April 9, 2015
Important Notice Regarding
the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May
21, 2015:24, 2018: The proxy statement and annual report to shareholders are available at www.envisionreports.com/
unmunm.J. Paul Jullienne
Vice President, Managing Counsel and Corporate Secretary
April 12, 2018
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6 | | 20152018 PROXY STATEMENT | 5 |
This summary is intended to highlight certain key information contained in this proxy statement that we believe will assist your review of the
business items
of business to be voted on at the
20152018 Annual Meeting of Shareholders of Unum
Group.Group (the "2018 Annual Meeting"). As it is only a summary, we encourage you to review the full proxy statement and our annual report on Form
10-K for the year ended December 31,
20142017 (the
“2014 10-K”"2017 Form 10-K") for more complete information about these topics.
CEO TransitionIn February 2015, Unum Group (“Unum” or the “company”) announced that its President and Chief Executive Officer, Thomas R. Watjen, will retire at the conclusion of the Annual Meeting after more than 20 years with the company, including the last 12 as CEO. Richard P. McKenney, who has served as Executive Vice President and Chief Financial Officer since August 2009, was elected President and a director of the company effective April 1, 2015, and will succeed Mr. Watjen as CEO upon his retirement in May.
If re-elected as a director at the Annual Meeting, Mr. Watjen will assume the role of non-executive Chairman of the Board of Directors to assist in guiding the Board as new directors are recruited and several directors approach mandatory retirement age.
Jack McGarry, formerly President and Chief Executive Officer of Closed Block Operations, succeeded Mr. McKenney as Chief Financial Officer on April 1, 2015.
Performance Highlights
Last
Unum had a very successful year
was another successful one for Unum. Wein 2017 as we delivered consistent financial and operating performance,
acrossand continued our growth trends, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were despite a challenging environment, including the
enterprise, highlighted by strong salespressure of continued low interest rates and
premium growthuncertainty in
our core businesses. This growth, along with improvements in operating performance, partially offset the
impacts to profitability we experiencedU.K. due to
a difficult, sustained low interest rate environment.Brexit.
Financial highlightsHighlights1 for 2014 include: Below are financial highlights from 2017. |
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| Record earnings | | Pre-tax |
Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For the year, we delivered strong after-tax adjusted operating income of $1.29 billion, after tax operating income$976.2 million, based on total revenue of $910.4 million and operating revenues of $10.49 billion; |
| — | | Record$11.3 billion. Adjusted operating earnings per share (EPS) were at an all-time high of $3.55,$4.29, a 6.9%significant increase fromover the prior year and the ninthtwelfth consecutive year of after-tax adjusted operating EPS growth; |
| —growth. | | |
| Return on equity | | |
We continued to put our shareholders' capital to good use. Consolidated adjusted operating return on equity (ROE) of 11.4% (14.7%was 11.6%, while ROE in our three primarycore operating businesses); |
| —segments was 15.9%. | | |
| Book value | | |
Our book value per share growthat the end of 2.8%2017 was up 8.2% from 20132016 (excluding accumulated other comprehensive income, or AOCI),. It was the sixthninth consecutive year of growth; |
| —shareholder equity growth.
| | Strengthening of reserves for future benefits in the long-term care portion of our Closed Block business through an after-tax charge of $453.8 million; and |
1(1) Operating results referenced in this document are non-GAAP financial measures that exclude certain specified items. For 2014,2017, these excluded items were net realized investment gains, loss from a guaranty fund assessment, an unclaimed death benefits reserve increase, and losses, non-operating retirement-related gains or losses, costs related to early retirementa net tax benefit from the impacts of debt and the long-term care reserve increase.U.S. Tax Reform. For reconciliations of the non-GAAP financial measures, including after-tax adjusted operating income, operating revenue,after-tax adjusted operating earnings per share, adjusted operating return on equity and book value per share (excluding accumulated other comprehensive income, or AOCI), to the most directly comparable GAAP measures, refer toAppendix A. Effective December 31, 2017, to more clearly differentiate between the GAAP and non-GAAP financial measures, we changed the naming convention for our non-GAAP financial measures from "operating" measures to "adjusted operating" measures, which includes a change from "after-tax operating income" to "after-tax adjusted operating income", and "operating return on equity" to "adjusted operating return on equity". The definition of these labels remains unchanged.
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20156 | 2018 PROXY STATEMENT |
Operating Highlights
Unum delivered on our mission of supporting our customers in 2017. We paid approximately $7.1 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and partners were high and generally exceeded our plan benchmarks.
We saw impressivesales and healthy premium growth throughout our core businesses, compared with 2016 results. This growth was achieved while maintaining our pricing and risk discipline, and demonstrates that our value story continues to resonate with customers.
We managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.
Strategic Positioning
We have recently taken a number of steps to fuel our growth and position us for the future.
Acquisitions: Unum's acquisitions in 2015 and 2016 of dental providers in the U.K. and U.S. have accelerated our expansion into the dental market and have been positively received. We have also announced our intent to acquire a financial protection provider based in Poland by the end of 2018, expanding our footprint in Europe.
Growth initiatives: We have enhanced our product portfolio with the introduction of dental, vision, stop-loss and new voluntary offerings. Planned geographic expansion is also driving growth.
Business investments: Current and planned investments in technology, customer experience, business development, facilities and our people are designed to further enhance our service capabilities, identify future opportunities for growth, and attract and retain talent.
In addition, we view these key developments in the external environment as likely having a positive impact on our business.
Tax reform: We expect tax legislation enacted by the U.S. federal government in December 2017 to significantly lower our overall effective tax rate in future periods. While there are other offsets in the short-term, we expect the ongoing benefit due to the lower corporate income tax rate to free up capital to reinvest in our business and add value to shareholders.
Business confidence: As a provider of employee benefits offered through the workplace, we expect to benefit as employers gain more confidence in the economic environment, particularly in the U.S. We anticipate these positive trends will translate to greater hiring and wage growth, business investments and investments in employees.
PROXY SUMMARY
| — | | Solid investment results in a difficult interest rate environment and, through our emphasis on sound risk management, a portfolio credit quality that remains among the best in the industry. |
Operating highlights for 2014 include:
| — | | Approximately $6.7 billion in benefits paid to people facing illness, injury or loss of life; |
| — | | Overall sales growth of 17.5%, led by a 21% increase in sales for our Unum US business; |
| — | | Solid premium growth throughout our core businesses; |
| — | | High client satisfaction metrics that generally exceeded our plan benchmarks; and |
| — | | A strong company brand, image and reputation. |
Capital Generation for Shareholders
Our ability to generatestrong statutory earnings result in solid capital remained strong in 2014, allowing us the opportunity to deploy that capitalgeneration, which we have deployed in a number of ways. For the year, we invested in
In addition, our
business, strengthened our long-term care reserves and paid out $159.4 million in dividends, including increasing the dividend rate by 13.8% over the prior year. We also repurchased $301 million worthcredit ratings remain high as a result of our
outstanding shares, bringingstrong balance sheet, our
total share repurchases since 2007 to $2.8 billion.favorable operating results and our highly respected brand in the employee benefits market.
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| 8 | | 20152018 PROXY STATEMENT |
Total Shareholder Return
Our
Unum continues to outperform our peers and the broader S&P 500 in total shareholder return (TSR)
comparisons vary significantly based upon. Over the
time periods used and indices compared.
Onlast decade, we have been an excellent long-term investment during one of the worst financial crises in memory, with a one-year basis,10.8% compound annual return to shareholders during the last 10 years.
We saw our TSR
was 1.27%,grow by more than 27 percent during 2017, despite a continued low interest rate environment. This outpaced the performance of the S&P 500, our peers in
line with the S&P Life and Health Index
– the group that we believe most closely aligns with our industry – but lagging our Proxy Peer Group and the
S&P 500. The uncertainty around interest rates and our long-term care business, we believe, affected investors’ views of our company and overshadowed the strong financial and operating results we achieved throughout the year. On a three- and five-year basis, we were generally in line with both S&P indices but continued to trail our Proxy Peer Group.Over the longer term, as shown in this 10-year indexed TSR performance graph, our TSR continues to outperform our Proxy Peer Group and both S&P indices. During the financial crisis, manyaverage of our Proxy Peer Group companies saw greater declines in shareholder value than(as defined on page 53) during the same time period. Over the most recent three-, five- and 10-year periods, we experienced. These companies have since seen more dramatic increases inexceeded the TSR resulting in less favorable comparisonsperformance of Unum with these companies over the last five years. We remain pleased thatevery index group. This strong performance is due primarily to our longer-term track record of consistent financial returns provides attractive value to shareholders.
market-leading positions, prudent underwriting and risk management discipline, and effective capital management. 
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20152018 PROXY STATEMENT | | 9 |
2017 Say-on-Pay Vote
Last year’s and Shareholder Outreach
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Our 2017 shareholder advisory vote to approve executive compensation (or “say-on-pay” vote) passed with 96% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing over 70% of our outstanding shares. Additionally, during 2017, based on feedback received from shareholders in the prior year, our independent Board Chairman joined us for meetings with our largest shareholders. | |
Seven investors, representing more than 36% of our outstanding shares, accepted our invitation for engagement and we met with over 97% approval. This was higher than the previous year’s vote and included support from each of them. Another six investors, representing approximately 8% of our 25 largest shareholders. We continueoutstanding shares, responded that a meeting was not necessary.
During the meetings, shareholders provided feedback on a variety of topics though we did not receive any suggestions for changes to striveour compensation programs. Overall, the shareholders we spoke with generally had favorable comments about our practices and programs including:
Our thoughtful approach to achievegovernance practices such as:
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| ◦ | Board leadership succession planning; and |
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| ◦ | Our responsiveness to shareholder feedback, including the adoption of special meeting rights; |
Clearly designed programs with an appropriate mix of compensation for executives; and
The smooth transition of management and Board leadership during 2015 and 2016.
Through these meetings, we identified opportunities for further enhancements to the disclosures in our proxy statement and discussed governance topics that some shareholders asked us to consider, including:
Adding a high levelmatrix showing key qualifications and attributes of our directors;
Eliminating supermajority voting requirements; and
Highlighting some of our work in the area of social responsibility in our proxy statement given its importance in driving retention and engagement.
In addition to our meetings with shareholders, we also met with two large proxy advisory firms to provide an update on our shareholder
support forengagement efforts and gain further insight into their views regarding our
named executive officer (NEO) compensation.The Human Capital Committeecompensation and governance practices and disclosures.
Overall, shareholders told us they appreciated the opportunity to engage in these discussions and the
Board appreciate and value the views of our shareholders and routinely receive feedback from them. In considering the results, the Human Capital Committee was pleased that a significant majority of our shareholders approved the proposal, showing strong support for our executive compensation programs.The Human Capital Committee has continuedcompany’s willingness to implement the changes it began in 2013; specifically, the expanded use of performance share units (PSUs), which are based on three-year pre-established goals, for the NEOs. Beginning with the 2015 grant, each NEO received 50% of his or her long-term incentive award in the form of PSUs (up from 25% the prior year for all NEOs other than the CEO, who already had a 50% PSU mix).
consider their input.
Key Corporate Governance
and Executive Compensation Practices
We are committed to good corporate governance, as evidenced by our adoption of the following practices:
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| — | | Pay |
| Executive Compensation Practices | Board Practices |
| A pay for performance;performance philosophy | | All directors other than the CEO are independent, including the Board Chairman |
| — | | Annual say-on-pay votes;votes | | All Board Committees fully independent |
| Programs that mitigate undue risk taking in compensation | | Commitment to diversity at the Board level and within the enterprise |
| Independent compensation consultant to the Human Capital Committee | | High meeting attendance by directors (average attendance of 98% in 2017) |
| Elimination of golden parachute excise tax gross-ups | | Limits on outside board and audit committee service |
| Minimal perquisites | | — |
| No NEOs have employment agreements | Governance Practices |
| Double-trigger provisions for severance | | Annual election of directors |
| Restrictive covenants in our long-term incentive grant agreements | | Majority vote requirement for directors (in uncontested elections) |
| Clawback provisions | | Proxy access bylaws |
| A balance of short- and long-term incentives | | Shareholder right to call special meetings |
| Robust stock ownership and retention requirements | | Annual, proactive shareholder engagement |
| Relevant peer groups for senior officers and directors; |
| benchmarking compensation | — | | Anti-pledging and anti-hedging policies applicable to executives and directors;directors |
| —Robust individual performance assessments of executives and directors | | No poison pill; |
| — | | Majority voting for directors; |
| — | | Board declassification in progress (all directors will stand for election annually starting in 2016); |
| — | | Annual Board, committee, and individual director evaluations;evaluations |
| | — | | Substantially independent Board (13 of 15 directors are independent); |
| — | | Restriction on other board and audit committee service; |
| — | | ExecutiveRegular executive sessions of independent directors at each regularly scheduled Board meeting; |
| | — | | High meeting attendance by directors (average attendance of 97% in 2014); |
| — | | Double-trigger (change in control and termination) required for accelerated vesting of equity; |
| — | | Independent compensation consultant to the Human Capital Committee; |
| — | | Minimal perquisites; and |
| — | | No new excise tax gross-ups since 2010.poison pill |
In addition, at the 2018 Annual Meeting, the Board is requesting that shareholders approve an amended and restated certificate of incorporation. The requested amendments to our certificate of incorporation include the elimination of supermajority voting requirements that currently require the affirmative vote of at least 80% of outstanding shares to remove a director, amend our bylaws, approve certain business combinations, or amend the supermajority voting requirements of the certificate of incorporation. For further information, please refer to Voting Item 4 on page 98.
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10 | | 20152018 PROXY STATEMENT | 11 |
The following items will be voted on at the 2018 Annual Meeting: | | | |
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DescriptionVoting Item | Page | Pages | | | Board Recommends |
Item 1. 1: Election of directorsDirectors | 96 | | 12-18; 87
| | | FOR each nominee |
| | | | | | EACH NOMINEE |
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TenEleven director nominees are standing for election this year, each for a one-year term expiring in 2016at the 2019 Annual Meeting and until his or her respective successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, or removal from office. The Board and the Governance Committee believe that each director nominee possesses the necessary skills and qualifications to provide effective oversight of the business. The director nominees are: |
Theodore H. Bunting, Jr. E. Michael Caulfield Susan D. DeVore Joseph J. Echevarria | Cynthia L. Egan Pamela H. Godwin
Kevin T. Kabat Timothy F. Keaney | | Thomas Kinser
Gloria C. Larson A.S. (Pat) MacMillan, Jr.
| | Richard P. McKenney Edward
Ronald P. O’Hanley Francis J. MuhlShammo | | William J. Ryan |
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Item 2. 2: Advisory vote to approve executive compensation | 96 | | 35-62; 88 | | | FOR |
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We are seeking a non-binding advisory vote to approve the compensation of our named executive officers. We describe our compensation programs in the Compensation Discussion and Analysis section of this Proxy Statement.proxy statement. The Human Capital Committee believes these programs reward performance and align the long-term interests of management and shareholders. TheAlthough non-binding, the Human Capital Committee will take into account the outcome of the advisory vote and shareholder feedback when consideringmaking future executive compensation decisions.
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Item 3. 3: Ratification of appointment of
independent registered public accounting firm | 97 | | 88-89 | | | FOR |
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The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for 2015,2018, and the shareholders are being asked to ratify the appointment.
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Item 4: Approval of an Amended and Restated Certificate of Incorporation, including the elimination of supermajority voting requirements | 98 | FOR |
The Board has approved an Amended and Restated Certificate of Incorporation, and shareholders are now being asked to approve it. The amendments reflected in the Amended and Restated Certificate of Incorporation include the elimination of supermajority voting requirements and other non-material changes.
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201512 | 2018 PROXY STATEMENT |
CORPORATE GOVERNANCE
Board Overview
The Board of Directors is elected by shareholders to oversee management and assure that the long-term interests of shareholders are being served. The Board oversees the CEO and other senior management, who are responsible for carrying out the company's day-to-day operations in a responsible and ethical manner. The Board and its committees meet regularly to review and discuss the company's strategy, business, and performance, as well as important issues that it faces. These discussions take place with management and with appropriate outside advisers who provide independent expertise, perspectives and insights. In addition, the independent members of the Board and its committees hold regular executive sessions to discuss matters free of the presence or influence of management. Board members are also kept apprised of significant developments that arise between meetings.
Board Composition and Refreshment
The Board believes that a critical component of its effectiveness in serving the long-term interests of shareholders is to ensure that its membership remains diverse, possessing a variety of backgrounds, experiences and skill sets from which to draw upon. Fresh views and ideas help the Board to maintain a broad perspective and forward-looking vision capable of anticipating and adapting to the rapid pace of change, just as experience and continuity provide necessary context and stability for important decisions. With that in mind, the Governance Committee periodically reviews the composition of the Board to assure an appropriate balance of experiences, skills, tenure and diversity. This is an ongoing, year-round process.
The Board is committed to effective board succession planning and refreshment, including having honest and difficult conversations with individual directors when necessary. These conversations may arise in connection with the Board evaluation process, succession planning or consideration of the annual slate of Board nominees. As a result of these processes, directors may decide (for personal or professional reasons) or be asked (for reasons related to their ongoing contributions to the Board) not to stand for re-election at the next Annual Meeting. It is expected that these refreshment practices will continue in the future.
Since the beginning of 2015, we have experienced a healthy level of turnover on the Board, with five new directors joining the Board and six retiring. While some companies have tenure limits on Board service, we believe our balanced approach which places a limit on age but not on tenure delivers the right mix of directors with new ideas and perspectives along with those possessing deep knowledge of the company.
Board Qualifications
The Board strives to maintain independence of thought and diverse professional experience among its membership. The Board and the Governance Committee look for directors who have qualifications and attributes in key areas relevant to Unum, and that align with our business strategy. The table below summarizes why these qualifications and attributes are important to Unum and how the composition of our Board, as a whole, meets these needs.
|
| | 11 |
Qualifications and Attributes | Relevance to Unum | Board Composition |
| Accounting/Auditing | We operate in a complex financial and regulatory environment with disclosure requirements, detailed business processes and internal controls. | |
| Business Operations | We have significant operations focused on customer service, claims management, sales, marketing and various back-house functions. | |
| Capital Management | We allocate capital in various ways to run our operations, grow our core businesses and return value to shareholders. | |
| Corporate Governance Leadership | As a public company, we expect effective oversight and transparency, and our stakeholders demand it. | |
| Financial Expertise/Literacy | Our business involves complex financial transactions and reporting requirements. | |
| Independence | Independent directors have no material relationships with us and are essential in providing unbiased oversight. | |
| Industry Experience | Experience in the insurance and financial services industry provides a relevant understanding of our business, strategy, and marketplace dynamics. | |
| International | With global operations in several countries and prospects for further expansion, international experience helps us understand opportunities and challenges. | |
| Investment Markets | We manage a large and long-term investment portfolio to uphold our promises to pay the future claims of our policyholders. | |
| Public Company Executive Experience | Experience leading a large, widely-held organization provides practical insights on need for transparency, accountability, and integrity. | |
| Recent Public Board Experience | We value individuals who understand public company reporting responsibilities and have experience with the issues commonly faced by public companies. | |
| Regulatory/Risk Management | A complex regulatory and risk environment requires us to develop policies and procedures that effectively manage compliance and risk. | |
| Technology | We rely on technology to manage customer data, deliver products and services to the market, and pay claims. | |
Board Tenure
Directors with varied tenure contribute to a range of perspectives and ensure we transition knowledge and experience from longer-serving members to those newer to our Board. We have a good mix of new and long-standing directors, with our 11 director nominees averaging 5.5 years of service on our Board as of the 2018 Annual Meeting.
Board Diversity
Our directors represent a range of backgrounds and overall experience. More than one-third are women or represent a diverse group, which places Unum's Board among the top of our industry in gender and racial/ethnic diversity. In recent years, our Governance Committee has focused on ensuring continued diversity on the Board during refreshment activities by requiring that candidate pools include diverse individuals meeting the recruitment criteria. Our director nominees range from 49 to 71 years of age, with the average age being 60.4 years, as of the 2018 Annual Meeting.
Board Evaluation Process
A healthy and vigorous Board evaluation process is an essential part of good corporate governance. At Unum, this process includes annual evaluations of the Board, each committee, and individual directors.
The Governance Committee establishes and oversees the evaluation process, which focuses on identifying areas where Board, committee and director performance is most effective, as well as opportunities for further development or improvement. Each year, the Governance Committee reviews the format and effectiveness of the evaluation process in identifying actionable feedback for directors to consider, recommending changes in process as appropriate. Determining whether to engage a third-party facilitator is also part of the review.
This past year, the evaluation process was conducted in two phases. The first phase focused on the evaluation of the performance of each committee and the Board as a whole. The second phase focused on the evaluation of each director’s performance, and was led by the Chairman of the Board in advance and in anticipation of the director nomination process. This two-phased approach generates robust discussions at all levels of the Board, and has resulted in changes that have improved Board efficiency and effectiveness.
BOARD AND COMMITTEE EVALUATIONS |
| | | | |
| Evaluation Forms | ð | Board/Committee Meetings | ð | Feedback Incorporated |
| Each director evaluates various measures of performance for the Board and each committee on which the director serves. Topics include composition, structure and engagement. | The full Board and each committee conduct separate closed self-assessment sessions, where results from evaluations and additional feedback are discussed. | Based on evaluation results, changes are considered and implemented, as appropriate. |
DIRECTOR PERFORMANCE EVALUATIONS |
| | | | |
| Peer Evaluation Guide | ð | Individual Interviews | ð | Review Meetings |
A guide provided to each director in advance of individual discussions with the Chairman. | The Chairman conducts individual interviews to solicit feedback from directors on their peers. | Full Board feedback is provided to each director by the Chairman, including discussion around performance strengths and opportunities for growth. |
Process for Selecting and Nominating Directors
Director Nominee and Selection
The Governance Committee is responsible for identifying and evaluating director candidates and recommending to the Board a slate of nominees for election at each Annual Meeting. The Committee has engaged a third-party search firm to assist with recruitment efforts. This firm identifies candidates who meet the criteria of our search, provides requested background and other relevant information regarding candidates, and coordinates arrangements for interviews as necessary. Nominees may also be suggested by directors, management, or shareholders. Ms. DeVore, who was elected to the Board in February 2018, was recommended to the Governance Committee by a third-party search firm.
Shareholders who wish to recommend director candidates for consideration by the Governance Committee must submit to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402 the same information that would be required to nominate a director candidate as described on page 104 in the section titled "Shareholder proposals and nominations for our 2019 Annual Meeting." The Governance Committee’s policy is to consider candidates recommended by shareholders in the same manner as other candidates.
In addition, our bylaws permit shareholders to nominate directors for inclusion in our proxy materials or directly at an Annual Meeting in accordance with the procedures in our bylaws, as described on page 104 in the section titled "Shareholder proposals and nominations for our 2019 Annual Meeting."
Our corporate governance guidelines specify the following criteria to be used in evaluating the candidacy of a prospective nominee:
Reputation for high ethical conduct, integrity, sound judgment, and accountability;
Current knowledge and experience in one or more core competencies identified in the corporate governance guidelines;
Ability to commit sufficient time to the Board and its committees;
Collegial effectiveness; and
Diversity, whether in viewpoints, gender, ethnic background, age, professional experience or other demographics.
The core competencies sought in any particular candidate depend on the current and future needs of the Board based on an assessment of the composition of the Board and the mix of attributes and qualifications represented. In addition, the Governance Committee considers other specific qualifications that may be desired or required of nominees, including their independence and ability to satisfy specific Audit Committee or Human Capital Committee requirements. As part of the director selection and nomination process, the Governance Committee assesses the effectiveness of its Board membership criteria.
In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s interest in continuing to serve, past attendance at meetings, contributions to the Board and committees on which the director serves, the skills, experience and background that the director brings to the Board relative to the Board’s needs and existing composition, and the results of the most recent Board, committee and individual director evaluations.
Annual Election of Directors
Directors are elected each year at the Annual Meeting, to hold office until the next Annual Meeting and until their successors are elected, or until their earlier death, resignation, disqualification, or removal from office. Other than requiring retirement from the Board at the next Annual Meeting after a director reaches the age of 72, there are no term limits. However, the Governance Committee evaluates the qualifications and performance of each incumbent director before recommending the nomination of that director for an additional term.
Majority Voting Standard
Our bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected (an "uncontested election"), each nominee must receive a majority of the votes cast with respect to that nominee to be elected as a director (i.e., the number of shares voted "for" a nominee must exceed the number voted "against" that nominee). If an incumbent director is not re-elected under this majority voting standard, the director must submit an irrevocable letter of resignation to the Board, which will become effective upon acceptance by the Board. The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. If the director submitting the resignation is a member of the Governance Committee, that director will not participate in the Governance Committee’s recommendation to the Board. The Board will act on the Governance Committee’s recommendation and publicly disclose its decision and rationale within 90 days from the date of the certification of the election results.
INFORMATION ABOUT THE BOARD OF DIRECTORS
INFORMATION ABOUT THE BOARD OF DIRECTORS
Below are brief biographies for each of our
current directors and descriptions of the directors’ key qualifications, skills, and experiences that contribute to the Board’s effectiveness as a whole.
Director Nominees
for Election as Directors with Terms Expiring in 2016 |
| | | | |
Age 59 | | Cynthia L. Egan
Independent Director Current term expires in 2015
| | Member of the
Committees Audit Committee Member of the Regulatory Compliance Committee
|
| Ms. Egan was President of T. Rowe Price Retirement Plan Services, Inc., a retirement planning subsidiary of the global investment management firm T. Rowe Price Group, Inc., from May 2007 until her retirement in December 2012. She recently served as a senior advisor to the U.S. Department of the Treasury on the development of myRA, a Treasury-sponsored program created to support retirement savings for workers not covered by other employer-sponsored plans. Prior to her work at T. Rowe Price, she was a long-time member of the executive team at Fidelity Investments where she was head of Fidelity Institutional Tax-Exempt Services Company and President of the Fidelity Charitable Gift Fund. Ms. Egan is also a director of Envestnet, Inc., a provider of unified wealth management software and services to financial advisors and institutions.
Ms. Egan has operational experience in delivering complex financial products and services on a large scale through her work at T. Rowe Price and Fidelity. Her knowledge of the retirement industry gives her insight into the need for the financial protection benefits we provide. She has experience operating in a regulated environment and qualifies as an “audit committee financial expert” under SEC regulations.
|
| | | | |
Director
since 2004
Age 66
| | Pamela H. Godwin
Independent Director
Current term expires in 2015
| | Member of the Governance Committee
Member of the Risk and Finance Committee
|
| Ms. Godwin has been President of Change Partners, Inc., a consulting firm specializing in organizational change and growth initiatives, since 2001. From 1999 to 2001, she was President and Chief Operating Officer of the personal lines agency division of GMAC Insurance. Prior to that time, she held a number of executive positions within the financial services industry, including Senior Vice President of customer management for the credit card division of Advanta Corporation, President and Chief Operating Officer of Academy Insurance Group, a unit of Providian Corporation, and Senior Vice President of property/casualty claims at Colonial Penn Group, Inc. Ms. Godwin is also a director of the Federal Home Loan Bank of Pittsburgh.
Ms. Godwin brings executive management experience from the insurance industry. Additionally, she has risk-assessment skills from her work as a chartered property/casualty underwriter and experience managing high-risk lines of insurance.
|
INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
Director
since 2012
Age 53
| | Timothy F. Keaney
Independent Director
Current term expires in 2015
| | Chair of the Risk and Finance Committee
Member of the Audit Committee
|
| Mr. Keaney served as Vice Chairman of The Bank of New York Mellon Corporation (BNY Mellon), a banking and financial services company, from October 2010 to September 2014. While at BNY Mellon, he held a number of executive positions, most recently as Chief Executive Officer of Investment Services from January 2013 to June 2014 and Chief Executive Officer of Asset Servicing from September 2010 to December 2012. He served as co-CEO of Asset Servicing at BNY Mellon following its formation in 2007 upon the merger of The Bank of New York Company, Inc. and Mellon Financial Corporation. Prior to the merger, Mr. Keaney was head of The Bank of New York’s asset servicing business and head of that company’s presence in Europe, with management responsibilities for all business activities in the region.
Mr. Keaney possesses significant operational, investment and finance experience, both domestically and internationally. His work has included lengthy periods of executive leadership service in the United Kingdom, which has given him a deep understanding of many of the challenges and opportunities that we face there. He also qualifies as an “audit committee financial expert” under SEC regulations
|
| | | | |
Director
since 2004
Age 71
| | Thomas Kinser
Independent Director
Current term expires in 2015
| | Member of the Audit Committee
Member of the
|
| Mr. Kinser was President, Chief Executive Officer and a director of BlueCross BlueShield of Tennessee from 1994 until his retirement in 2003. From 1991 to 1994, he was Executive Vice President and Chief Operating Officer of BlueCross BlueShield Association in Chicago. Prior to that time, he held a number of executive positions with BlueCross BlueShield of Georgia, including President and Chief Executive Officer.
Mr. Kinser brings extensive executive management and board experience from the health insurance business. Additionally, he has a keen understanding of the complex regulatory environment in which we operate.
|
| Theodore H. Bunting, Jr. | |
| |
2015 PROXY STATEMENT | | 13 |
INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
Director
since 2014
Age 64
| | Gloria Larson
Independent Director
Current term expires in 2015
| | Chair of the Regulatory Compliance Committee
Member of the Governance Committee
|
| Ms. Larson has been the President of Bentley University since July 2007. She previously served as co-chairperson of the Government Practices Group of the law firm Foley Hoag LLP and coordinator for its Administrative Practices Group after joining the firm in 1996. Prior to joining Foley Hoag, she served as Secretary of Economic Affairs and as Secretary of Consumer Affairs and Business Regulation for the Commonwealth of Massachusetts, and prior to that was Deputy Director of Consumer Protection for the Federal Trade Commission. She is also a director of Boston Private Financial Holdings, Inc., a wealth management company servicing high net worth individuals, families and select institutions.
Ms. Larson has executive management experience as president of a major university. In addition, she brings regulatory insight from her service as a regulator and her experience advising clients in the course of her practice of law. She also has previous service on the boards of directors of both public and private companies.
|
| | | | |
Director
since 1995
Age 71
| | A.S. (Pat) MacMillan, Jr.
Independent Director
Current term expires in 2015
| | Member of the Human Capital Committee
Member of the Regulatory Compliance Committee
|
| Mr. MacMillan has served as the Chief Executive Officer of Triaxia Partners, Inc., a strategy, team, leadership and organizational development consulting firm, since 1980. Triaxia’s practice areas include organizational strategy and design, as well as team and leadership development. Specific services include management consulting, management training and organizational audits. He is also a trustee of The Maclellan Foundation, Inc.
Mr. MacMillan brings management and organizational insight from his consulting practice. He also has previous service on the boards of directors of both public and private companies.
|
| | | | |
Director
since 2015
Age 46
| | Richard P. McKenney
President
Current term expires in 2015
| | |
| Mr. McKenney has served as President of Unum since April 1, 2015, and is scheduled to assume the additional position of Chief Executive Officer in May 2015 upon the retirement of Thomas R. Watjen. He previously served as Executive Vice President and Chief Financial Officer from August 2009, having joined our company in July 2009. Before that, Mr. McKenney served as Executive Vice President and Chief Financial Officer of Sun Life Financial Inc., an international financial services company, from February 2007, having joined that company as Executive Vice President in September 2006.
Mr. McKenney has significant executive management, financial and insurance industry experience through his service as chief financial officer of our company and other publicly traded insurance companies.
|
INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
Director
since 2005
Age 70
| | Edward J. Muhl
Independent Director
Current term expires in 2015
| | Member of the Human Capital Committee
Member of the Regulatory Compliance Committee
|
| Mr. Muhl served as the National Leader of the Insurance Regulatory Advisory Practice of PricewaterhouseCoopers from 2001 until his retirement in June 2005. He was Senior Managing Director of Navigant Consulting, Inc. from 1998 to 2000, which he joined as Executive Vice President in 1997. Prior to that time, Mr. Muhl held important regulatory positions within the insurance industry, including Superintendent of Insurance of the State of New York, Insurance Commissioner of the State of Maryland, and President of the National Association of Insurance Commissioners. He is also a director of Farm Family Insurance Company.
Mr. Muhl has over 45 years of experience in the insurance industry, including service as a regulator. He has previously served as a director of a publicly traded company and currently serves as a director of a non-publicly traded insurance company.
|
| | | | |
Director
since 2004
Age 71
| | William J. Ryan
Independent Director
Current term expires in 2015
| | Chairman of the Board of Directors
|
| Mr. Ryan has served as the Chairman of the Board of Directors of our company since October 2011. He was Chairman, President and Chief Executive officer of TD Banknorth Inc., a banking and financial services company, from March 2005 until his retirement in March 2007, and continued as its Chairman until November 2009. He was Chairman, President and Chief Executive Officer of Banknorth Group Inc. from 2000 until its merger with TD Banknorth Inc. in March 2005, and prior to that served as President and Chief Executive Officer of People’s Heritage Savings Bank. He is also a director of Anthem, Inc. (formerly WellPoint, Inc.) and the Chairman of the Board of Directors of Berkshire Hills Bancorp, Inc.
Mr. Ryan has agreed to continue service on the Board as Lead Independent Director if re-elected at the Annual Meeting.
Mr. Ryan has experience as a board chairman and chief executive officer of companies in the banking and financial services industry. He currently serves as a director of other publicly traded companies in regulated industries.
|
INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
Director
since 2002
Age 60
| | Thomas R. Watjen
Chief Executive Officer
Current term expires in 2015
| | |
| Mr. Watjen has served as Chief Executive Officer of Unum since March 2003. He also served as President from March 2003 until April 2015, when he retired from this position. Mr. Watjen previously served as Vice Chairman and Chief Operating Officer from May 2002 until March 2003. He became Executive Vice President, Finance in June 1999. Prior to that, he served in various roles with Provident. Before joining Provident in 1994, Mr. Watjen served as a Managing Director of the insurance practice of the investment banking firm Morgan Stanley & Co. He is also a director of SunTrust Banks, Inc.
Mr. Watjen will retire from his role as Chief Executive Officer following the Annual Meeting and has agreed to serve as non-executive Chairman of the Board of Directors if re-elected at the Annual Meeting.
Mr. Watjen has executive management and financial experience as chief executive officer of our company as well as his prior positions within the financial services industry. He also serves as a director and the chair of the audit committee of another publicly traded company in the financial services industry.
|
Additional Directors
| | | | |
Director
since 2013
Age 56
| | Theodore H. Bunting, Jr.
Independent Director
Current term expires in 2016
| | Member of the Audit Committee
Member of the Regulatory Compliance Committee
|
| Mr. Bunting isretired as the Group President, Utility Operations of Entergy Corporation, an integrated energy company, engaged primarily in electric power production and retail distribution operations in Arkansas, Louisiana, Mississippi and Texas, a position he has held since June 2012. From August 2007 to May 2012, hepreviously served as Senior Vice President and Chief Accounting Officer for Entergy and its subsidiaries. Prior to that, he held numerous executive positions within the Entergy organization, which he joined in 1983.Entergy. He began his professional career in public accounting with Arthur Andersen & Co. in 1981 and is a certified public accountant. Mr. Bunting is also a director of Imation Corp., a global data and information security company. Mr. Bunting possesseshas extensive financial, accounting and operational experience as a senior executive with a public company in a regulated industry. His leadership responsibilities have included strategic and financial planning, customer service, operations support and risk management. He alsoMr. Bunting has experience asbeen a director ofat another publicly traded company, and qualifies asis an “auditaudit committee financial expert”expert under SEC regulations,
and is also a certified public accountant. |
| Career Experience | | Qualifications |
| Entergy Corporation Group President, Utility Operations (2012-2017) Senior Vice President and Chief Accounting Officer (2007-2012) Numerous executive roles with Entergy, which he joined in 1983
Public Company Board Experience Imation Corp. (2012-2014) | | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management |
INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
(also 2004-2005) Age 68 71
Independent Director
Committees Audit (chair) Risk and Finance | | E. Michael Caulfield Independent Director
Current term expires in 2016
| | Chair of the Audit Committee
Member of the Fisk and Finance Committee
|
| | | |
| Mr. Caulfield servedretired as the President of Mercer Human ResourceResources Consulting, from September 2005 until his retirement in September 2006, prior to which he served as Chief Operating Officer from July 2005. He retired fromheld numerous executive positions at Prudential Insurance Company as Executive Vice President in 2000, after having held a number of executive positions, including Executive Vice President of Financial Management, Chief Executive Officer of Prudential Investments, and President of both Prudential Preferred Financial Services and Prudential Property and Casualty Company. He previously served as a director of our company from August 2004brings to July 2005.Mr. Caulfield hasthe Board senior leadership experience in finance, investments and executive management in both the insurance and broader financial services industry. He also qualifiesserves as our Audit Committee chairman and is an “auditaudit committee financial expert”expert under SEC regulations.
|
| Career Experience | | Qualifications |
| Mercer Human Resource Consulting President (2005-2006) Chief Operating Officer (2005) Prudential Insurance Company Executive Vice President, Financial Management CEO of Prudential Investments President of Prudential Preferred Financial Services and Prudential Property and Casualty Company | | Accounting/Auditing Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
INFORMATION ABOUT THE BOARD OF DIRECTORS
|
| | | | |
Age 72 | | Ronald E. Goldsberry
59
Independent Director Retiring in 2015
Committee Audit | | Chair of the Governance Committee
Member of the Risk and Finance Committee
Susan D. DeVore | | |
| Dr. Goldsberry is a consultant to clients in the automotive industry. He
| | |
| Ms. DeVore has served as Chairman of OnStation Corporation from November 1999 until his retirement in August 2006,the President and as Chief Executive Officer of OnStation from JanuaryPremier, Inc., a leading health care improvement company, since its initial public offering in 2013. She served in the same capacity for Premier Healthcare Solutions, Inc. prior to May 2002its reorganization and from November 1999 to March 2001.also served as the Chief Operating Officer for a number of Premier entities. Prior to that time, Dr. Goldsberry served in various capacities with Ford Motor Company, including Global Vice joining Premier, Ms. DeVore had two decades of finance, strategy and healthcare consulting experience. She also qualifies as an audit committee financial expert under SEC regulations. |
| Career Experience | | Qualifications |
| Premier, Inc. President and General Manager of Global Ford Customer ServiceCEO (since 2013) Premier Healthcare Solutions, Inc. President and CEO (2009-2013) COO (2006-2009) Significant consulting experience with Ernst & Young LLP, including service as a Partner, Executive Committee member and Senior Healthcare Industry Management Practice Leader
Public Company Board Experience Premier, Inc., since 2009
| | Accounting/Auditing Business Operations General Manager of the Customer Service Division and General Sales and Marketing Manager for the Parts and Service Division. He was a director of UNUM Corporation from 1993 until its merger with our company in 1999. He is also a director of Canadian Tire Corporation, Limited.Dr. Goldsberry has broad business experience which includes marketing, sales, customer service and international operations. He also brings experience from his prior service on the board and audit committee of another publicly traded company.
Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology |
INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
Age 58 | | Kevin T. Kabat
61
Independent Director Current term expires in 2016
Committees Audit Governance | | Chair of the Human Capital Committee
Member of the Governance Committee
Joseph J. Echevarria | | |
| | | |
| Mr. Kabat isEchevarria retired as the Vice Chairman and Chief Executive Officer of Fifth Third Bancorp, whereDeloitte LLP, a global provider of professional services, prior to which he has held those offices since September 2012 and April 2007, respectively. He is also a director of Fifth Third Bancorp and served as its Chairman from June 2008 to May 2010, President from June 2006 to September 2012, and Executive Vice President from December 2003. Prior to that, he was President and Chief Executive Officer of Fifth Third Bank (Michigan) from April 2001. Prior to joining the Fifth Third Bancorp organization, Mr. Kabat served in a number ofincreasingly senior leadership positions with Deloitte. He brings to the Board significant experience in finance, accounting, global operations, executive management and executive positions with Old Kent Financial Corporation, including as its Vice Chairman and President.corporate governance. Mr. Kabat brings extensive financial and operatingEchevarria has experience as a chief executive officer ofdirector at other publicly traded companies, and is a major regional bank,certified public accountant and in otheran audit committee financial expert under SEC regulations. |
| Career Experience | | Qualifications |
| Deloitte LLP CEO (2011-2014) Various executive positions induring his 36 years with the financial services industry.company My Brother's Keeper Alliance Chair Emeritus President's Export Council Private sector member
Public Company Board Experience Xerox, since 2007 Bank of New York Mellon Corporation, since 2015 (Lead Independent Director since 2016) Pfizer, since 2015 | | Accounting/Auditing Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Regulatory/Risk Management |
INFORMATION ABOUT THE BOARD OF DIRECTORS
|
| | | | |
Age 62
Independent Director
Committees Human Capital (chair) Regulatory Compliance | | Cynthia L. Egan | | |
| | | |
| Ms. Egan retired as the President of T. Rowe Price Retirement Plan Services, Inc., a subsidiary of the global investment management firm T. Rowe Price Group, Inc. Prior to her work at T. Rowe Price, she held various executive positions at Fidelity Investments. She has significant operational experience in delivering complex financial products and services on a large scale, as well as experience in using technology to lead businesses through growth and operational transitions. Ms. Egan is and has been a director at other publicly traded companies. |
| Career Experience | | Public Company Board Experience |
| U.S. Department of the Treasury Senior Advisor on the development of a Treasury-sponsored retirement savings program (2014-2015) T. Rowe Price Retirement Plan Services, Inc. President (2007-2012) Fidelity Investments Various leadership and executive positions, including President of the Fidelity Charitable Gift Fund (1989-2007) | | BlackRock Closed-End Funds, since 2016 The Hanover Insurance Group, Inc., since 2015 Envestnet, Inc. (2013-2016)
Qualifications Business Operations Corporate Governance Leadership Financial Expertise/Literacy Industry Experience Investment Markets Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology |
|
| | | | |
Director since 2008 Age 61
Independent Director
Chairman of the Board of Directors
Committees Governance (chair) Human Capital
| | Kevin T. Kabat | | |
| | | |
| Mr. Kabat is the Chairman of Unum’s Board of Directors, and the retired Chief Executive Officer and Vice Chairman of Fifth Third Bancorp, a diversified financial services company. He also served in numerous executive positions with Fifth Third. He has executive leadership experience, extensive financial, operating and strategic planning expertise and understands the importance of risk management and the challenges of managing a business in a highly regulated industry. Mr. Kabat also has experience serving on boards of publicly traded companies.
|
| Career Experience | | Qualifications |
| Fifth Third Bancorp CEO (2007-2015) President (2006-2012) Other executive roles, including with predecessor companies
Public Company Board Experience E*TRADE Financial Corporation, since 2016 NiSource Inc., since 2015 Age 58
(Vice Chairman since 2018) Fifth Third Bancorp (2007-2016, including Executive Chairman from 2008-2010 and Executive Vice Chairman from 2012-2016) | | Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management
|
INFORMATION ABOUT THE BOARD OF DIRECTORS
|
| | Ronald P. O’Hanley
Independent Director
Current term expires in 2016
| | Member of the Human Capital Committee
Member of the
|
Director since 2012 Age 56
Independent Director
Committees Risk and Finance (chair) Audit | | Timothy F. Keaney | | |
| | | |
| Mr. Keaney retired as the Vice Chairman of the Bank of New York Mellon Corporation (BNY Mellon), a global investments company, prior to which he held various executive positions within the organization. He possesses significant operational, investment and financial experience with a public company in a highly regulated industry, including lengthy periods of executive leadership service in the U.K. Mr. Keaney is considered an Audit Committee Financial Expert under SEC regulations. |
| Career Experience | | Qualifications |
| The Bank of New York Mellon Corporation Vice Chairman (2010-2014) CEO, Investment Services (2013-2014) CEO and co-CEO, Asset Servicing (2007-2012) Other executive roles
| | Accounting/Auditing Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
|
| | | | |
Director since 2004 Age 68
Independent Director
Committees Regulatory Compliance (chair) Governance | | Gloria C. Larson | | |
| | | |
| Ms. Larson is the President of Bentley University, one of the leading business schools in the U.S. Prior to her tenure at Bentley, she held numerous leadership positions in the legal, public policy and business fields. She possesses extensive experience in public service and regulatory issues, corporate governance and advising clients in the course of practicing law. Ms. Larson also has experience serving on boards of publicly traded companies. |
| Career Experience | | Public Company Board Experience |
| Bentley University President (since 2007) Foley Hoag LLP Law firm partner and Co-Chair of Governmental Practices Group Other leadership positions with the Commonwealth of Massachusetts (Secretary of Economic Affairs) and the Federal Trade Commission (Deputy Director of Consumer Protection)
| | Boston Private Financial Holdings, Inc.,since 2015
Qualifications Corporate Governance Leadership Financial Expertise/Literacy Other Public Company Board Experience Regulatory/Risk Management |
INFORMATION ABOUT THE BOARD OF DIRECTORS
|
| | | | |
Director since 2015 Age 49
Director
President and CEO | | Richard P. McKenney | | |
| | | |
| Mr. McKenney is the President and Chief Executive Officer of Unum, previously having served as Executive Vice President and Chief Financial Officer. He has significant executive management, financial and insurance industry experience through his prior service as CFO of Unum and other public insurance companies, and through his current service as CEO. He has an intimate knowledge of all aspects of our business and industry, including operational, risk management and public policy, and close working relationships with senior management. Mr. McKenney also has experience serving on boards of publicly traded companies. |
| Career Experience | | Qualifications |
| Unum President and CEO (since 2015) Chief Financial Officer (2009-2015) Sun Life Financial, Inc. Executive Vice President and Chief Financial Officer
Public Company Board Experience U.S. Bancorp, since 2017 | | Accounting/Auditing Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management |
|
| | | | |
Director since 2015 Age 61
Independent Director
Committees Human Capital Risk and Finance | | Ronald P. O'Hanley | | |
| | | |
| Mr. O’Hanley is the President and Chief Operating Officer of State Street Corporation, a provider of financial services to institutional investors worldwide, having previously served as the President and Chief Executive Officer of State Street Global Advisors, the investment management arm of State Street Corporation, a provider of financial services to institutional investors worldwide. Prior to joining State Street in this capacity in April 2015, he served as President of Asset Management and Corporate Services for Fidelity Investments, a leading provider of financial products and services, from August 2010 until February 2014, and was a member of Fidelity’s Executive Committee. From 2007 until May 2010, Mr. O’Hanley served as Vice Chairman of The Bank of New York Mellon Corporation (BNY Mellon), a banking and financial services company, and President and Chief Executive Officer of BNY Mellon Asset Management. Prior to the 2007 merger of The Bank of New York and Mellon Financial Corporation, he was Vice Chairman of Mellon Financial Corporation and President and Chief Executive Officer of Mellon Asset Management. Before joining Mellon in 1997, he was a partner with McKinsey & Company, Inc., a management consulting firm.Mr. O’HanleyCorporation. He has significantdeep executive management and operational experience within the financial services industry, both domestically and internationally. He has served ininternationally, as well as experience leading investment, financial and risk functions at large, global organizations.
|
| Career Experience | | Qualifications |
| State Street Corporation President and COO (since 2017) Vice Chairman (during 2017) President and CEO, State Street Global Advisors (2015-2017) Fidelity Investments President of Asset Management and Corporate Services, and member of Executive Committee (2010-2014) Other senior leadership positions at large, global organizations, which has included responsibility for finance, human resources, legal, risk, corporate compliance with The Bank of New York Mellon Corporation and enterprise technology functions. McKinsey & Company, Inc. | | Accounting/Auditing Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
Director Compensation
The Human Capital Committee (the Committee) reviews our non-employee director compensation annually and makes recommendations to the Board as appropriate.
Benchmarking
With the assistance of its independent third-party compensation consultant, Pay Governance LLC, the Committee reviews peer group data to understand market practices for director compensation. Our non-employee director compensation is compared to that of companies in two peer groups: (1) the Proxy Peer Group described on page 43 of this proxy statement; and (2) a general industry peer group with market capitalizations ranging from
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18 | | 20152018 PROXY STATEMENT | 23 |
INFORMATION ABOUT THE BOARD OF DIRECTORS
$2 billion to $12 billion, which consisted of 158 companies for the review completed in December 2014. The Committee uses the approximate median of these peer groups as a reference point for setting director compensation. The use of two peer groups provides an indication of director pay levels both within the insurance industry as well as the broader market.
The Committee’s consultant provided its annual analysis of non-employee director compensation at the December 2014 Committee meeting. The analysis showed that total non-employee director compensation remains competitive with the market median of the two comparator groups. Therefore, the Committee decided not to make any changes to non-employee director compensation at the time.
For information about fees paid to Pay Governance for director and executive officer compensation consulting services, see page 42 of this proxy statement.
Elements of Non-Employee Director Compensation
Non-employee directors receive cash retainers and equity awards as outlined in the following table:
CASH AND EQUITY COMPENSATION TO NON-EMPLOYEE DIRECTORS
| | | | | | |
All Directors:
| | | Value: | | | |
| | | |
| | | |
Annual cash retainer
| | | $95,000 | | | |
| | |
Annual restricted stock unit award
| | | 140,000 | | | |
| | |
Committee Chairs:
| | | | | | |
| | | |
| | | |
Additional annual cash retainer - Audit Committee
| | | 22,500 | | | |
| | |
Additional annual cash retainer - Human Capital Committee
| | | 17,500 | | | |
| | |
Additional annual cash retainer - all other Board committees
| | | 10,000 | | | |
| | |
Board Chairman:
| | | | | | |
| | | |
| | | |
| | |
Additional annual cash retainer (paid quarterly)
| | | 160,000 (current)200,000 (effective May 2015)
| | | |
| | |
Lead Independent Director:
| | | | | | |
| | | |
| | | |
| | |
Additional annual cash retainer (paid quarterly)
| | | 50,000 (effective May 2015) | | | |
| | | |
| | | |
For new Board members, these amounts are prorated for partial-year service based on the date of election to the Board. Amounts may be deferred at the election of each director for payment in common stock at a future date. Directors deferring cash compensation receive a number of deferred share rights equal to the number of whole shares of common stock that could be purchased for the deferred amount, based on the closing price of a share of common stock on the date the cash compensation would otherwise be payable.
Directors’ expenses of attending Board and committee meetings, or other meetings relating to company business, are paid by the company. Directors are eligible to participate in our employee matching gifts program. Under this program, we match up to $10,000 each year (increased in 2015 from $7,500 in 2014) for eligible gifts to non-profit organizations.
As announced in February 2015, Thomas R. Watjen will retire as Chief Executive Officer effective upon the conclusion of the Annual Meeting. Mr. Watjen will remain on the Board and assume the role of non-executive Chairman if re-elected at the Annual Meeting. William J. Ryan, the company’s current Chairman, has agreed to continue service on the Board as the Lead Independent Director if re-elected at the Annual Meeting.
INFORMATION ABOUT THE BOARD OF DIRECTORS
In determining the compensation for the non-executive Chairman and Lead Independent Director roles, the Committee utilized its independent consultant, Pay Governance LLC to conduct a competitive review. After considering the compensation practices of peer companies and weighing the importance of the transitional period of Board and executive succession at Unum, the Committee approved the following remuneration levels. Upon becoming non-executive Chairman, Mr. Watjen will receive an annual cash retainer of $200,000, in addition to the $95,000 annual cash retainer and the annual restricted stock unit award with a value of $140,000 that all non-employee directors receive for their service on the Board. For service as the Lead Independent Director, Mr. Ryan will receive a $50,000 annual cash retainer, in addition to the compensation that all non-employee directors receive for their service on the Board.
Mr. McKenney is employed by the company and receives no additional compensation for his Board service. We paid no additional compensation to Mr. Watjen for his Board service during the time that he was an employee of the company.
We do not have a retirement plan for non-employee directors. However, Dr. Goldsberry, who served as a director of UNUM Corporation prior to its merger into our company in 1999, is entitled to receive an annual payment of $27,500 for four years under the UNUM Corporation plan upon his ceasing to be a director.
INFORMATION ABOUT THE BOARD OF DIRECTORS
2014 Compensation
The following table provides details of the compensation of each person who served as a non-employee director during 2014.
NON-EMPLOYEE DIRECTOR COMPENSATION
| | | | | | | | | | | | | | | | | | | | |
Name | | Fees
Earned
or Paid
in Cash(1) | | | Stock Awards(2) | | | Change in Pension Value and
Nonqualified
Deferred
Compensation
Earnings(3) | | | All Other
Compensation(4) | | | Total | |
Theodore H. Bunting, Jr. | | | $95,000 | | | | $140,013 | | | | $ - | | | | $ - | | | | $235,013 | |
| | | | | |
E. Michael Caulfield | | | 117,500 | | | | 140,013 | | | | 8,301 | | | | 5,250 | | | | 271,064 | |
| | | | | |
Cynthia L. Egan | | | 79,167 | | | | 116,650 | | | | - | | | | - | | | | 195,817 | |
| | | | | |
Pamela H. Godwin | | | 95,000 | | | | 140,013 | | | | 8,671 | | | | 2,040 | | | | 245,724 | |
| | | | | |
Ronald E. Goldsberry | | | 104,985 | | | | 140,013 | | | | 7,750 | | | | 5,000 | | | | 257,748 | |
| | | | | |
Kevin T. Kabat | | | 112,492 | | | | 140,013 | | | | 5,651 | | | | - | | | | 258,156 | |
| | | | | |
Timothy F. Keaney | | | 104,985 | | | | 140,013 | | | | 1,056 | | | | - | | | | 246,054 | |
| | | | | |
Thomas Kinser | | | 95,000 | | | | 140,013 | | | | 14,889 | | | | 1,150 | | | | 251,052 | |
| | | | | |
Gloria C. Larson | | | 105,000 | | | | 140,013 | | | | 23,353 | | | | 7,500 | | | | 275,866 | |
| | | | | |
A.S. (Pat) MacMillan, Jr. | | | 95,000 | | | | 140,013 | | | | - | | | | 2,600 | | | | 237,613 | |
| | | | | |
Edward J. Muhl | | | 95,000 | | | | 140,013 | | | | - | | | | 250 | | | | 235,263 | |
| | | | | |
Michael J. Passarella | | | - | | | | - | | | | 459 | | | | 12,500 | | | | 12,959 | |
| | | | | |
William J. Ryan | | | 255,000 | | | | 140,013 | | | | 6,056 | | | | - | | | | 401,069 | |
(1) | Amounts represent retainers, including for Board Chairman and committee chair service, which were paid in cash or deferred for 2014 service. The amount of compensation that was deferred was: Dr. Goldsberry - $104,985; Mr. Kabat - $56,242; and Mr. Keaney - $104,985. Directors electing to defer cash compensation received deferred share rights. |
(2) | On May 20, 2014, each then serving non-employee director was granted 4,257 restricted stock units under the Unum Group Stock Incentive Plan of 2012. Mr. Passarella retired from the Board effective at the Annual Meeting in May 2014 and received no grant of restricted stock units for 2014. Upon her election to the Board on July 28, 2014, Ms. Egan received a prorated grant of 3,330 restricted stock units. The amounts shown are the grant date value of these units. We account for stock-based payments under the requirements of Accounting Standards Codification Topic 718Compensation - Stock Compensation (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2014. The following table provides details of the unvested restricted stock units held by each non-employee director as of December 31, 2014: |
| | | | |
Director Namesince 2015 Age 57
Independent Director
Committees Audit Regulatory Compliance | | Number of Unvested Restricted Stock Units at Fiscal Year EndFrancis J. Shammo | | |
Theodore H. Bunting, Jr. | | 4,298 | |
| Mr. Shammo retired as the Executive Vice President and Chief Financial Officer of Verizon Communications, Inc., a leading communications provider, prior to which he held increasingly senior leadership positions within the organization. He has significant executive management, financial, operational and risk management experience in the technology-heavy telecommunications industry, and has led business units with responsibility for sales, marketing and customer service for customers worldwide. He is also a certified public accountant and qualifies as an audit committee financial expert under SEC regulations. |
| Career Experience | | Qualifications |
E. Michael Caulfield | Verizon Communications, Inc. EVP and CFO (2010-2016) President and CEO, Verizon Telecom and Business (2010) President – Wireline (2009-2010) Other executive positions with Verizon and its predecessor, which he joined in 1989
| | 4,298 | | |
Cynthia L. Egan | | 3,362 | | |
Pamela H. Godwin | | 4,298 | | |
Ronald E. Goldsberry | | 4,298 | | |
Kevin T. Kabat | | 4,298 | | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy International Public Company Executive Experience Regulatory/Risk Management Technology
|
Additional Current Director - Retiring at the Annual Meeting
INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
Timothy F. Keaney
Director since 2004 Age 69
Independent Director
Committees Governance Risk and Finance | | 4,298 | | |
Thomas Kinser | | 4,298 | | |
Gloria C. Larson | | 4,298 | | |
A.S. (Pat) MacMillan, Jr. | | 4,298 | | |
Edward J. Muhl | | 4,298 | | |
Michael J. PassarellaPamela H. Godwin | | 0 |
| | | |
William J. Ryan | Ms. Godwin is President of Change Partners, Inc., a consulting firm specializing in organizational change and growth initiatives. She has executive management and operating experience, and risk assessment skills, from her extensive career in the insurance industry. Ms. Godwin also served as a director of the Federal Home Loan Bank of Pittsburgh from January 2013 through December 2017. |
| Career Experience | | 4,298Public Company Board Experience |
| Change Partners, Inc. President (since 2001) Various executive positions at GMAC Insurance, Advanta, Academy Insurance Group (a unit of Providian Corporation), and Colonial Penn Group, Inc. | | Federal Home Loan Bank of Pittsburgh (2013-2017)
Qualifications
Business Operations Financial Expertise/Literacy Industry Experience Regulatory/Risk Management |
(3) | The amounts shown represent dividend reinvestment earnings on deferred share rights in each director’s account. |
(4) | With the exception of Mr. Passarella, who retired from the Board effective at the Annual Meeting in May 2014, the amounts shown represent the company’s matching gifts resulting from the directors’ charitable gifts. In addition to the $7,500 in matching gifts, the company made a $5,000 charitable contribution in Mr. Passarella’s name in recognition of his retirement from the Board. |
Director Stock Ownership and Retention Requirements
Each non-employee director is required to own Unum equity securities with an aggregate value of five times the director’s annual cash retainer ($475,000). New directors have five years from the date of their election to meet the ownership requirement.
Each non-employee director is required to retain 60% of Unum equity securities received as a result of director compensation for at least one year from the time the equity securities vest, and to retain at least the number of equity securities necessary to meet his or her ownership requirement until retirement from the Board.
The Committee annually reviews each director’s stock ownership level. If a director does not reach his or her ownership requirement within the time period provided, the Committee will determine whether action is appropriate. As of December 31, 2014, 10 of the 12 non-employee directors had met the ownership requirement. The other two non-employee directors recently joined the Board and are expected to meet the ownership requirement within the applicable time period provided for reaching the requirement.
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2224 | | 20152018 PROXY STATEMENT |
CORPORATE GOVERNANCE
CORPORATE GOVERNANCECorporate Governance Guidelines
The Board
INFORMATION ABOUT THE BOARD OF DIRECTORS
Summary of Directors has adopted corporate governance guidelines onDirector Qualifications and Experience
This table provides a
number of significant matters, including director selection and independence, director responsibilities, Board leadership and management succession. The corporate governance guidelines are available on our investor relations website under the “Corporate Governance” heading atwww.investors.unum.com. The Governance Committee regularly reviews developments in corporate governance and recommends updates to the corporate governance guidelines and other documents as necessary or appropriate in response to regulatory requirements and evolving practices.Board Leadership Structure
At present, William J. Ryan, an independent director, serves as Chairmansummary view of the Board,qualifications and Thomas R. Watjen servesattributes of each director nominee as Chief Executive Officer (CEO) of the company. As previously announced, Mr. Watjen will retire as CEO upon the conclusion of the2018 Annual Meeting at which time he will become non-executive Chairman of the Board, provided that he is re-elected to the Board. The independent directors of the Board also have elected Mr. Ryan to serve as the Lead Independent Director effective upon the conclusion of the Annual Meeting if he is re-elected to the Board. Richard P. McKenney, who was named President and elected to the Board effective April 1, 2015, will succeed Mr. Watjen as CEO, and is standing for re-election at the Annual Meeting.
Mr. Watjen began formally discussing his possible retirement plans with the Board in 2014. At the time, the Board was also contemplating the departure of several directors who will reach the company’s mandatory retirement age in the next few years. During these discussions, the possibility of Mr. Watjen becoming non-executive Chairman for a limited duration upon his retirement as CEO was raised as a way to help assure an effective transition for both the leadership team and the Board.
The Board subsequently contracted with an outside advisor to develop a transition plan that effectively served both the company and shareholders. This plan was further evaluated by the Board throughout the second half of the year, generally without Mr. Watjen present. A final plan was approved by both the Human Capital and Governance committees, and ultimately the full Board.
The Board believes the company will greatly benefit from Mr. Watjen’s continued service as non-executive Chairman following his retirement as CEO. Mr. Watjen has proven leadership skills and extensive knowledge of both the company and the markets in which it operates, and we believe his service as Chairman will promote continuity in the boardroom and with company strategy.
As Lead Independent Director, Mr. Ryan will have certain responsibilities outlined in our corporate governance guidelines, including:
| — | | Presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the non-management and independent directors; |
| — | | Communicating actions/issues arising from executive sessions to the Chairman and/or the CEO, as appropriate; |
| — | | Having authority to call meetings of the independent directors; |
| — | | Approving meeting agendas for the Board; |
| — | | Approving meeting schedules to assure sufficient time for discussion of all agenda items; |
| — | | Approving information sent to the Board; |
| | |
| |
20152018 PROXY STATEMENT | | 2325 |
CORPORATE GOVERNANCE
| — | | In conjunction with the Chairman, advising the Board on Board development, including Board and committee leadership succession planning; |
| — | | Unless otherwise determined by the Board, together with the Chairman, meeting with each director to evaluate the Board and committees and reporting this evaluation to the Governance Committee; |
| — | | When requested by the independent directors, hiring advisors to the independent directors, to be paid by the company; |
| — | | Receiving through the Corporate Secretary communications from shareholders seeking to communicate with the Board; |
| — | | Serving as liaison between the Chairman and the independent directors; and |
| — | | If requested by major shareholders, ensuring that he is available for consultation and direct communication. |
The Board believes this leadership structure will continue to provide significant independent oversight of management, as Messrs. Watjen and McKenney are the only members of the Board who would not be independent directors – Mr. Watjen because he will have been a recent employee of our company, and Mr. McKenney because he will continue to be an employee of our company. In addition, the Board has an ongoing practice of holding executive sessions, without management present, as part of each regularly scheduled in-person Board meeting. The non-management directors (all of whom are independent directors) met five times in executive session during 2014, and Mr. Ryan chaired these executive sessions.
Our bylaws and corporate governance guidelines allow the offices of Chairman and CEO to be filled by the same or different individuals. This allows the Board flexibility to select the appropriate leadership for our company based on a number of factors, including the specific needs of the business and what best serves the company and our shareholders at a given time. The independent directors of the Board will continue to review the Board’s leadership structure periodically and may modify this structure from time to time as they determine appropriate in the best interests of the company and our shareholders.
INFORMATION ABOUT THE BOARD OF DIRECTORS
Our corporate governance guidelines provide that a substantial majority of the Board will be independent. For a director to be considered independent, the Board must determine that the director has no material relationship with our company, and the director must meet the requirements for independence under the listing standards of the New York Stock Exchange (NYSE). The Board has also determined that certain categories of relationships are not considered to be material relationships that would impair a director’s independence. These independence standards are listed in our corporate governance guidelines.
The Governance Committee reviews information about the directors’ relationships and affiliations that might affect their independence and makes recommendations to the Board as to the independence of the directors. In making independence determinations, the Board considers all relevant facts and circumstances. In this regard, the Board considered that each of
Messrs. Bunting, Kabat, Keaney, Muhl, O’Hanley and Ryan and Ms. Egan,the non-employee directors (other than Mr. Keaney), or one of their immediate family members, is or was during the last three fiscal years a director, trustee, advisor, or executive or served in a similar position at another business that had dealings with our company during those years. In each case, these have been ordinary course dealings (business where the other business obtains insurance policies from us or we receive interest on debt security investments or make payments for trustee, depository and commercial banking business relationships) involving amounts less than 1% of both our and the other business’ total consolidated revenues for such fiscal
year.year or in which the director's only interest arose only from his or her position as a director of the other business. In addition, each of Mses.
EganDeVore and Larson, or one their immediate family members, is or was during the last three fiscal years, a director, executive, or employee of a charitable organization or university that received contributions from us (other than non-discretionary matching contributions) of less than $120,000 in any one fiscal year.
CORPORATE GOVERNANCE
Based on a review of the findings and recommendations of the Governance Committee and applying the standards described above, the Board has determined that each of Messrs. Bunting, Caulfield, Goldsberry,Echevarria, Kabat, Keaney, Kinser, MacMillan, Muhl, O’Hanley and RyanShammo and Mses. DeVore, Egan, Godwin and Larson is (and(as well as Mr. PassarellaMuhl who retired in 20142017, was during his tenure) an independent directors. director.
Mr. McKenney, our President and CEO, is not an independent director.
Director Compensation
The Human Capital Committee (the "Committee") reviews our non-employee director compensation annually and makes recommendations to the Board as appropriate.
Benchmarking
With the assistance of its independent third-party compensation consultant, Pay Governance LLC, the Committee reviews peer group data to understand market practices for director compensation.
Our non-employee director compensation is compared to that of companies in two peer groups: (1) the Proxy Peer Group described beginning on page 53 of this proxy statement; and (2) a general industry peer group, which consisted of 140 companies for the review completed in December 2017. The Committee believes the companies in the general industry peer group provide appropriate comparisons given that their market capitalizations and revenues are well aligned with those of the company (data below as of December 2016):
Market capitalizations ranging from $5.5 billion at the 25th percentile to $15 billion at the 75th percentile (compared to Unum market capitalization of $10.2 billion); and
INFORMATION ABOUT THE BOARD OF DIRECTORS
Revenues ranging from $4 billion at the 25th percentile to $11 billion at the 75th percentile (compared to Unum revenues of $11 billion).
The use of two peer groups provides an indication of director pay levels both within the insurance industry as well as the broader market. The Committee uses the approximate median of these peer groups as a reference point for setting director compensation.
The Committee’s consultant provided its annual analysis of non-employee director compensation at the December 2017 Committee meeting. Given the competitive positioning of the Board's annual cash retainer and equity grant relative to peers, no increase was recommended. However, the consultant advised that the committee chair retainers were below the Proxy Peer Group median. After discussion, the Committee approved increases to chair retainers to be effective in May 2018, as outlined in the table below.
Elements of Non-Employee Director Compensation in 2017
Non-employee directors receive cash retainers and equity awards as outlined in the following table:
|
| | | | |
| NON-EMPLOYEE DIRECTOR COMPENSATION | | |
| | 2018 Pay | 2017 Pay |
| All Directors: | | |
| Annual cash retainer | $110,000 | $110,000 |
| Annual restricted stock unit award | 150,000 |
| 150,000 |
|
| Committee Chairs: | | |
| Additional annual cash retainer - Audit Committee | 25,000 |
| 22,500 |
|
| Additional annual cash retainer - Human Capital Committee | 20,000 |
| 17,500 |
|
| Additional annual cash retainer - Risk and Finance Committee | 20,000 |
| 10,000 |
|
| Additional annual cash retainer - Governance Committee | 15,000 |
| 10,000 |
|
| Additional annual cash retainer - Regulatory Compliance Committee | 15,000 |
| 10,000 |
|
| Board Chairman: | | |
| Additional annual cash retainer (paid in quarterly installments) | 200,000 |
| 200,000 |
|
For new Board members, these amounts are prorated for partial-year service based on the date of election to the Board. Amounts may be deferred at the election of each director for payment in company common stock at a future date. Directors deferring cash compensation receive a number of deferred share rights equal to the number of whole shares of common stock that could be purchased for the deferred amount, based on the closing price of a share of common stock on the date the cash compensation would otherwise be payable.
Directors’ expenses of attending Board and committee meetings, or other meetings relating to company business, are paid by the company. Directors are eligible to participate in our employee matching gifts program. Under this program, we match up to $10,000 each year for eligible gifts to non-profit organizations.
Mr. McKenney is employed by the company and receives no additional compensation for his Board service.
INFORMATION ABOUT THE BOARD OF DIRECTORS
2017 Compensation
Our Board compensation year starts at the Annual Meeting each year and runs to the next Annual Meeting. The annual Board and committee chair cash retainers and restricted stock unit award are paid/granted annually in advance. The additional cash retainer for the Board Chairman is paid quarterly in advance. The following table provides details of the compensation of each person who served as a non-employee director during 2017. Ms. DeVore did not join the Board until February 2018 and therefore did not receive any compensation during 2017. Mr. Kabat was elected as the Chairman of the Board in May following the 2017 Annual Meeting. In addition, Mr. Kabat served as the chair of the Human Capital Committee until August 2017 and was elected as the chair of the Governance Committee in September 2017. Therefore, his compensation reflects the prorated cash retainer for service as Board Chairman as well as the prorated cash retainers for service as chair of the Human Capital Committee and the Governance Committee. Ms. Egan was elected as the chair for the Human Capital Committee in August 2017 and her compensation reflects a prorated committee chair cash retainer. |
| | | | | | | | |
| NON-EMPLOYEE DIRECTOR COMPENSATION |
| Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total |
| Theodore H. Bunting, Jr. | $110,000 | $150,002 | — |
| $260,002 |
| E. Michael Caulfield | 132,500 |
| 150,002 |
| 10,000 |
| 292,502 |
|
| Joseph J. Echevarria | 109,959 |
| 150,002 |
| — |
| 259,961 |
|
| Cynthia L. Egan | 123,354 |
| 150,002 |
| 10,000 |
| 283,356 |
|
| Pamela H. Godwin | 120,000 |
| 150,002 |
| — |
| 270,002 |
|
| Kevin T. Kabat | 260,647 |
| 150,002 |
| — |
| 410,649 |
|
| Timothy F. Keaney | 120,000 |
| 150,002 |
| — |
| 270,002 |
|
| Gloria C. Larson | 119,992 |
| 150,002 |
| 10,000 |
| 279,994 |
|
| Edward J. Muhl | — |
| — |
| 5,000 |
| 5,000 |
|
| Ronald P. O'Hanley | 109,959 |
| 150,002 |
| 10,000 |
| 269,961 |
|
| Francis J. Shammo | 110,000 |
| 150,002 |
| — |
| 260,002 |
|
| Thomas R. Watjen | 80,000 |
| — |
| 5,000 |
| 85,000 |
|
| |
| (1) | Amounts represent retainers, including for service as Board Chairman and committee chairs, which were paid in 2017, either in cash or deferred shares, for 2017/2018 Board service. Messrs. Echevarria and O'Hanley and Ms. Larson each elected to defer their cash retainers, which were converted to deferred share rights with the value reflected in the table. |
| |
| (2) | On May 25, 2017, each then serving non-employee director was granted 3,304 restricted stock units (RSUs) under our Stock Incentive Plan of 2017. The amounts shown are the grant date fair market values of these units. Messrs. Muhl and Watjen retired from the Board at the 2017 Annual Meeting and did not receive a grant of RSUs for the 2017/2018 Board year. |
We account for stock-based payments under the requirements of Accounting Standards Codification Topic 718 Compensation Stock Compensation (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our CEO,2017 Form 10-K.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The following table provides details of the unvested RSUs, including dividend equivalent units, held by each non-employee director as of December 31, 2017. |
| | | | |
| Director Name | Number of Unvested Restricted Stock Units at Fiscal Year End | | Director Name | Number of Unvested Restricted Stock Units at Fiscal Year End |
| Theodore H. Bunting, Jr. | 3,334 | | Kevin T. Kabat | 3,334 |
| E. Michael Caulfield | 3,334 | | Timothy F. Keaney | 3,334 |
| Joseph J. Echevarria | 3,334 | | Gloria C. Larson | 3,334 |
| Cynthia L. Egan | 3,334 | | Ronald P. O'Hanley | 3,334 |
| Pamela H. Godwin | 3,334 | | Francis J. Shammo | 3,334 |
| |
| (3) | With the exception of Messrs. Muhl and Watjen, who both retired from the company in 2017, the amounts shown represent the company’s matching gifts resulting from the directors’ charitable gifts. For Messrs. Muhl and Watjen, in recognition of their respective retirements from the Board, the company made a $5,000 charitable contribution on behalf of each director. |
Director Stock Ownership and Retention Requirements
Each non-employee director is required to own Unum equity securities with an aggregate value of five times the director’s annual cash retainer (for a total current retention requirement of $550,000 ). New directors have five years from the date of their election to meet the ownership requirement.
In addition, each non-employee director is required to retain 60% of Unum equity securities received as a result of director compensation for at least one year from the time they vest, and to retain at least the amount of equity securities necessary to meet his or her ownership requirement until retirement from the Board.
The Committee annually reviews each director’s stock ownership level. If a director does not reach his or her ownership requirement within the time period provided, the Committee will determine whether action is appropriate. As of December 31, 2017, all of the non-employee directors serving on the Board at that time had met the ownership requirement.
BOARD AND COMMITTEE GOVERNANCE
BOARD AND COMMITTEE GOVERNANCE
Corporate Governance Guidelines
The Board of Directors has adopted corporate governance guidelines on a number of significant matters, including director selection and independence, director responsibilities, Board leadership, and management succession. The corporate governance guidelines are not independent directors.available on our investor relations website under the "Corporate Governance" heading at
Process for Selecting and Nominating Directorswww.investors.unum.com. The Governance Committee is responsible for identifyingregularly reviews developments in corporate governance and evaluating director candidates and recommendingrecommends updates to the Board a slate of nominees for election at each annual meeting of shareholders. The Committee has engaged third-party search firms to assist with recruitment efforts in preparation for anticipated retirements. These firms identify candidates who meet the criteria of our search, provides requested background and other relevant information regarding candidates, and coordinates arrangements for interviews as necessary. Nominees may also be suggested by directors, management or shareholders.
Shareholders who wish to recommend director candidates for consideration by the Governance Committee must submit to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402 the same information that would be required to nominate a director candidate as described on page 94 in the section titled “Shareholder proposals and nominations for our 2016 annual meeting.” The Governance Committee’s policy is to consider candidates recommended by shareholders in the same manner as other candidates. In addition, our bylaws permit shareholders to nominate directors for election, in accordance with the process described on page 94 in the section titled “Shareholder proposals and nominations for our 2016 annual meeting.”
Our corporate governance guidelines specify the following criteriaand other documents as necessary or appropriate in response to be used in evaluating the candidacy ofregulatory requirements and evolving practices.
As a
prospective nominee: | — | | Reputation for high ethical conduct, integrity, sound judgment and accountability; |
| — | | Current knowledge and experience in one or more core competencies identified in the corporate governance guidelines; |
| — | | Ability to commit sufficient time to the Board and its committees; |
| — | | Collegial effectiveness; and |
| — | | Diversity, whether in viewpoints, gender, ethnic background, age, professional experience or other demographics (though no specific diversity policy has been adopted). |
The core competencies sought in any particular candidate depend on the current and future needsreflection of the Board's continuing commitment to strong governance practices, shareholders are being asked to approve an Amended and Restated Certificate of Incorporation at the 2018 Annual Meeting, which includes amendments to eliminate supermajority voting requirements and other non-material changes. For further information please refer to Voting Item 4 on page 98.
Board based on an assessment of the compositionLeadership Structure
Kevin T. Kabat serves as non-executive Chairman of the Board and Richard P. McKenney serves as President and CEO of the mixCompany. Following a deliberate and transparent succession process, members of attributesthe Board elected Mr. Kabat to this position effective upon the retirement of its former Chairman at the 2017 Annual Meeting.
As the non-executive Chairman, Mr. Kabat is also deemed the Lead Independent Director and, qualifications represented. Core competencies include knowledgeas such, has the responsibilities outlined in our corporate governance guidelines, including:
Presiding at all meetings of the Board, including executive sessions of the non-management and experience in financeindependent directors;
Communicating actions/issues arising from executive sessions to the CEO, as appropriate;
Authority to call meetings of the independent directors;
Authority to approve meeting schedules, agendas and accounting, executive management,information provided to the insurance or financial services industry, risk oversight, technology, marketing, strategic planning, regulatory compliance, public policyBoard;
Advising the Board on Board development, including Board and such other areas that may be considered appropriatecommittee leadership succession planning;
Unless otherwise determined by the
Board.In additionBoard, meeting with each director to evaluate the Board and committees and reporting this evaluation to the criteria described above,Governance Committee;
When requested by the Governance Committee considers other specific qualificationsindependent directors, hiring advisors to the independent directors, to be paid by the company;
Receiving, through the Corporate Secretary, communications from shareholders seeking to communicate with the Board;
Serving as a liaison to the independent directors; and
If requested by major shareholders, ensuring that may be desired or requiredhe is available for consultation and direct communication.
The Board believes the current leadership structure provides significant independent oversight of nominees, including their independencemanagement, as Mr. McKenney (our CEO and ability to satisfy specific Audit Committee or Human Capital Committee requirements. The Governance Committee assesses the effectiveness of its Board membership criteria as partan employee of the director selectioncompany) is the only member of the Board
who is not an independent director. The Board holds executive sessions, without management present, at each regularly scheduled in-person Board meeting. In 2017, the independent directors met alone in executive session five times, and nomination process. In determining whethereach session was chaired by Mr. Kabat.
Our bylaws and corporate governance guidelines allow the offices of Chairman and CEO to recommendbe filled by the same or different individuals. This allows the Board flexibility to select the appropriate leadership for our company based on a number of factors, including the specific needs of the business and what best serves the company and shareholders at a given time. The independent directors of the Board will continue to review the Board’s leadership structure periodically and may modify this structure from time to time as they determine appropriate and in the best interests of the company and shareholders.
Board Meetings and Attendance
The Board of Directors met six times during 2017. Depending upon committee assignments, a director
for re-election, the Governance Committee also considers the director’s interestgenerally would have had 17 to 22 meetings to attend in
continuing to serve, past2017. Average director attendance at
Board and committee meetings
contributions towas 98%, and each incumbent director attended at least 89% of the total number of meetings of the Board and committees on which
he or she served during the
directorperiod of the director’s service in 2017. Directors are expected to attend Annual Meetings. All current directors serving on the Board at the time of the 2017 Annual Meeting attended that meeting.
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20152018 PROXY STATEMENT | 31 |
BOARD AND COMMITTEE GOVERNANCE
Committees of the Board
The Board of Directors has five standing committees: Audit, Risk and Finance, Governance, Human Capital, and Regulatory Compliance. Each committee has a charter that is available on our investor relations website under the "Corporate Governance" heading at www.investors.unum.com. In addition to the duties contained in their respective charters, each committee may be assigned additional tasks by the Board, and each is charged with reporting its activities to the Board.
BOARD MEMBERS AND COMMITTEES |
| | | | | | |
| Name | Term Expires | Audit | Risk & Finance | Governance | Human Capital | Regulatory Compliance |
| Theodore H. Bunting, Jr. | 2018 | ● | | | ● | |
| E. Michael Caulfield | 2018 | Chair | ● | | | |
Susan D. DeVore(1) | 2018 | ● | | | | |
Joseph J. Echevarria(2) | 2018 | | ● | ● | | |
Cynthia L. Egan(3) | 2018 | | | | Chair | ● |
Pamela H. Godwin(4)(5) | 2018 | | | ● | | ● |
Kevin T. Kabat(6) | 2018 | | | Chair | ● | |
| Timothy F. Keaney | 2018 | ● | Chair | | | |
| Gloria C. Larson | 2018 | | | ● | | Chair |
| Richard P. McKenney | 2018 | | | | | |
| Ronald P. O'Hanley | 2018 | | ● | | ● | |
| Francis J. Shammo | 2018 | ● | | | | ● |
| 2017 Committee Meetings | | 10 | 6 | 6 | 7 | 5 |
| |
25(1) | Ms. DeVore joined the Board effective February 22, 2018. |
CORPORATE GOVERNANCE
serves,
| |
| (2) | Mr. Echevarria rotated from the Audit Committee to the Risk & Finance Committee in May 2017. |
| |
| (3) | Ms. Egan was named the Chair of the Human Capital Committee in August 2017. |
| |
| (4) | Ms. Godwin rotated from the Risk & Finance Committee to the Regulatory Compliance Committee in May 2017. |
| |
| (5) | As noted on page 24, Ms. Godwin will not stand for re-election at the 2018 Annual Meeting. |
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| (6) | Mr. Kabat was named Chairman of the Board in May 2017 and the Chair of the Governance Committee in September 2017. |
Audit Committee
The Audit Committee assists the skills, experienceBoard in oversight of financial statement and backgrounddisclosure matters, the effectiveness of internal control over financial reporting, the relationship with our independent auditor, the internal audit function, compliance with legal and regulatory requirements, and financial risk. The Audit Committee has the sole authority to appoint, oversee and, if necessary, replace the company’s independent auditors. A more complete description of the responsibilities of the Audit Committee is included in the Report of the Audit Committee beginning on page 41.
BOARD AND COMMITTEE GOVERNANCE
All members of the Audit Committee meet the independence requirements of the SEC and the NYSE for audit committee members and our corporate governance guidelines. The Board has further determined that all five members of the director bringsAudit Committee, Theodore H. Bunting, Jr., E. Michael Caulfield, Susan D. DeVore, Timothy F. Keaney, and Francis J. Shammo, are "audit committee financial experts" under SEC regulations, and are "financially literate" as required by the NYSE.
Governance Committee
The Governance Committee assists the Board in implementation and oversight of our corporate governance policies. Among other responsibilities, the Governance Committee:
Identifies qualified candidates for the Board, consistent with criteria approved by the Board, and recommends the individuals to be nominated by the Board for election as directors;
Develops and recommends to the Board relativeour corporate governance guidelines;
Oversees the process for Board and committee evaluations; and
Advises the Board on corporate governance matters, including with respect to the Board’ssize, composition, operations, leadership, succession plans and the needs of the Board and existing composition,its committees.
All members of the Governance Committee meet the independence requirements of the NYSE and our corporate governance guidelines.
Human Capital Committee
The Human Capital Committee assists the Board in oversight of our compensation and benefit programs and related risks to support business plans, attract and retain key executives and tie compensation to performance. Among other responsibilities, the Human Capital Committee:
Establishes our general compensation philosophy, principles and practices;
Takes into consideration the results of the company’s most recent say-on-pay vote;
Evaluates and approves compensation and benefit plans;
Annually reviews performance and approves compensation of the CEO and other executive officers;
Reviews and recommends to the Board the form and amount of director compensation; and
Reviews the Compensation Discussion and Analysis and related disclosures in our proxy statements.
All members of the Human Capital Committee meet the independence requirements of the NYSE for directors and compensation committee
members and
individual director evaluations.our corporate governance guidelines and are "non-employee directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and "outside directors" for purposes of Section 162(m) of the Internal Revenue Code.
Regulatory Compliance Committee
The GovernanceRegulatory Compliance Committee periodically reviewsassists the mixBoard in its oversight of regulatory, compliance, policy and legal matters and related risks and compliance with laws and regulations. Among other responsibilities, the Regulatory Compliance Committee:
Monitors the effectiveness of our directors’ tenurecompliance efforts concerning applicable regulatory and legal requirements and internal policy;
BOARD AND COMMITTEE GOVERNANCE
Reviews and discusses with management any communication to or from regulators or governmental agencies and any complaints, reports and legal matters that raise significant issues regarding our compliance with applicable laws or regulations; and
Monitors the investigation and resolution of any significant instances of noncompliance or potential compliance violations.
All members of the Regulatory Compliance Committee meet the independence requirements of our corporate governance guidelines.
Risk and Finance Committee
The Risk and Finance Committee assists the Board in oversight of our investments, capital and financing plans and activities, including dividends and borrowings, and related financial matters and the associated risks. It also oversees our enterprise risk management activities and other risks not specifically allocated to another committee. Among other responsibilities, the Risk and Finance Committee:
Monitors, evaluates and recommends to the Board capital and financing plans, activities, requirements and opportunities;
Oversees implementation of and compliance with investment strategies, guidelines and policies;
Authorizes loans and investments of the company;
Reviews, assesses and reports on the Boardimpact of various finance activities on our debt ratings; and favors maintaining
Monitors, evaluates and makes recommendations regarding matters pertaining to our Closed Block segment, including the long-term care business, that could have a balance that helps transition the knowledge and experience of longer-serving directors and contributes to a range of perspectives. The average tenuremeaningful impact upon any of the 12 independent directors who are director nominees or will continue as directors followingmatters for which the Annual Meeting is 7.6 years, with 4Risk and Finance Committee has oversight responsibility.
All members
having served fewer than 5 years, 3 members having served between 5of the Risk and
10 years, and 5 members having served more than ten years.Finance Committee meet the independence requirements of our corporate governance guidelines.
Limits on Board and Audit Committee Service
While we recognize that Board members benefit from service on the boards of other companies and such service is encouraged, the Board believes it is critical that directors be able to dedicate sufficient time to their service on our Board. To that end, no director may serve on more than three public company boards in addition to our Board, or on more than two audit committees of public companies in addition to our Audit Committee.
Board Meetings and AttendanceThe Board of Directors met seven times during 2014. Depending upon committee assignments, a director generally would have had 19 to 25 meetings to attend in 2014. Average director attendance at Board and committee meetings was 97%, and each incumbent director attended at least 75% of the total number of meetings of the Board and committees on which he or she served during the period of the director’s service in 2014.
Directors are expected to attend annual meetings of shareholders. All 13 directors serving on the Board at the time of our 2014 annual meeting attended that meeting.
CORPORATE GOVERNANCE
Committees of the Board
The Board of Directors has five standing committees: Audit, Risk and Finance, Governance, Human Capital and Regulatory Compliance. Each committee has a charter that is available on our investor relations website under the “Corporate Governance” heading atwww.investors.unum.com. In addition to the duties contained in their respective charters, each committee may be assigned additional tasks by the Board, and each is charged with reporting its activities to the Board.
BOARD MEMBERS AND COMMITTEES
| | | | | | | | | | | | | | |
| Name | | Term
Expires | | | Audit | | Risk &
Finance | | Governance | | Human
Capital | | Regulatory
Compliance |
| | | | | | |
Theodore H. Bunting | | | 2016 | | | X | | | | | | | | X |
| | | | | | |
E. Michael Caulfield | | | 2016 | | | Chair | | X | | | | | | |
| | | | | | |
Cynthia L. Egan | | | 2015 | | | X | | | | | | | | X |
| | | | | | |
Pamela H. Godwin | | | 2015 | | | | | X | | X | | | | |
| | | | | | |
Ronald E. Goldsberry | | | 2016 | (1) | | | | X | | Chair | | | | |
| | | | | | |
Kevin T. Kabat | | | 2016 | | | | | | | X | | Chair | | |
| | | | | | |
Timothy F. Keaney | | | 2015 | | | X | | Chair | | | | | | |
| | | | | | |
Thomas Kinser | | | 2015 | | | X | | | | | | X | | |
| | | | | | |
Gloria C. Larson | | | 2015 | | | | | | | X | | | | Chair |
| | | | | | |
A.S. (Pat) MacMillan, Jr. | | | 2015 | | | | | | | | | X | | X |
| | | | | | |
Richard P. McKenney | | | 2015 | | | | | | | | | | | |
| | | | | | |
Edward J. Muhl | | | 2015 | | | | | | | | | X | | X |
| | | | | | |
Ronald P. O’Hanley | | | 2016 | | | | | X | | | | X | | |
| | | | | | |
William J. Ryan | | | 2015 | | | | | | | | | | | |
| | | | | | |
Thomas R. Watjen | | | 2015 | | | | | | | | | | | |
| | | | | | |
2014 Committee Meetings | | | | | | 11 | | 5 | | 7 | | 7 | | 5 |
(1) | As noted on page 30, Dr. Goldsberry will retire from the Board at the Annual Meeting in May 2015. |
Audit Committee
The Audit Committee assists the Board in oversight of financial statement and disclosure matters, the effectiveness of internal control over financial reporting, the relationship with our independent auditor, the internal audit function, compliance with legal and regulatory requirements, and financial risk. The Audit Committee also has the sole authority to appoint, oversee, and if necessary, replace the company’s independent auditors. A more complete description of the responsibilities of the Audit Committee is included in the Report of the Audit Committee beginning on page 32.
In August 2014, the Board transitioned primary responsibility for oversight of the company’s enterprise risk management program from the Audit Committee to the Finance Committee, which was re-named the “Risk and Finance Committee”. This decision was made to enable integrated oversight of risk and capital by a single committee, while recognizing the increasing time demands on the Audit Committee. The Audit Committee has
CORPORATE GOVERNANCE
retained responsibility for discussion of guidelines and policies relating to the company’s risk assessment and management process, and coordinates communications with the Risk and Finance Committee as necessary for this purpose.
All members of the Audit Committee meet the independence requirements of the SEC and the NYSE. The Board has further determined that four members of the Audit Committee, Theodore H. Bunting, Jr., E. Michael Caulfield, Cynthia L. Egan and Timothy F. Keaney, are “audit committee financial experts” under SEC regulations. All members of the Audit Committee have been determined by the Board to be “financially literate” as required by the NYSE.
Risk and Finance Committee
The Risk and Finance Committee (formerly known as the Finance Committee) assists the Board in oversight of our investments, capital and financing plans and activities, including dividends and borrowings, and related financial matters and the associated risks. It also oversees our enterprise risk management activities and other risks not specifically allocated to another committee. Among other responsibilities, the Risk and Finance Committee:
| — | | Monitors, evaluates and recommends to the Board capital and financing plans, activities, requirements and opportunities; |
| — | | Oversees implementation of and compliance with investment strategies, guidelines and policies; |
| — | | Reviews, assesses and reports on the impact of various finance activities on our debt ratings; and |
| — | | Monitors, evaluates and makes recommendations to the Board regarding matters pertaining to our Closed Block segment, including the long-term care business, that could have a meaningful impact upon any of the matters for which the Risk and Finance Committee has oversight responsibility. |
All members of the Risk and Finance Committee meet the independence requirements of our corporate governance guidelines.
Governance Committee
The Governance Committee assists the Board in implementation and oversight of our corporate governance policies. Among other responsibilities, the Governance Committee:
| — | | Oversees compliance with our corporate governance guidelines; |
| — | | Identifies qualified candidates for the Board, consistent with criteria approved by the Board, and periodically reviews such criteria; |
| — | | Oversees the process for Board and committee evaluations; and |
| — | | Periodically makes recommendations to the Board regarding committee membership. |
All members of the Governance Committee meet the independence requirements of the NYSE and our corporate governance guidelines.
Human Capital Committee
The Human Capital Committee assists the Board in oversight of our compensation and benefit programs and related risks to support business plans, attract and retain key executives and tie compensation to performance. Among other responsibilities, the Human Capital Committee:
| — | | Establishes our general compensation philosophy, principles and practices; |
| — | | Takes into consideration the company’s most recent say-on-pay vote; |
CORPORATE GOVERNANCE
| — | | Evaluates and approves compensation and benefit plans; |
| — | | Reviews and approves compensation of the CEO and other senior executives; |
| — | | Reviews and recommends to the Board the form and amount of director compensation; and |
| — | | Reviews the Compensation Discussion and Analysis and related disclosures in our proxy statements. |
All members of the Human Capital Committee meet the independence requirements of the NYSE for directors and compensation committee members and our corporate governance guidelines and are “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code.
Regulatory Compliance Committee
The Regulatory Compliance Committee assists the Board in its oversight of regulatory, compliance, policy and legal matters and related risks and compliance with laws and regulations. Among other responsibilities, the Regulatory Compliance Committee:
| — | | Monitors the effectiveness of our compliance efforts concerning applicable regulatory and legal requirements and internal policy; |
| — | | Reviews and discusses with management any communication to or from regulators or governmental agencies and any complaints, reports and legal matters that raise significant issues regarding our compliance with applicable laws or regulations; and |
| — | | Monitors the investigation and resolution of any significant instances of noncompliance or potential compliance violations. |
All members of the Regulatory Compliance Committee meet the independence requirements of our corporate governance guidelines.
The Board’s Role in Risk Oversight
The Board has an active role, as a whole and also at the committee level, in overseeing management of the company’s risks. The Board is responsible for managing strategic risk, and it regularly reviews information regarding our capital, liquidity and operations, as well as the risks associated with each. The Risk and Finance Committee is responsible for oversight of the company’s enterprise risk management program and receives a report on these activities at least quarterly. This responsibility was transitioned from the Audit Committee to the Risk and Finance Committee in August 2014. The Risk and Finance Committee is also responsible for overseeing risks associated with investments and related financial matters, including those pertaining to our Closed Block segment, and any other risks not specifically allocated to another committee for oversight. The Audit Committee is responsible for oversight of financial risk and continues to fulfill its NYSE-mandated responsibility to discuss guidelines and policies with respect to the process by which the company undertakes risk assessment and risk management. The Audit Committee and Risk and Finance Committee may also meet jointly as
BOARD AND COMMITTEE GOVERNANCE
appropriate to oversee certain risks for which they have overlapping responsibility, including operational risks relating to data privacy, cybersecurity and business
continuity and disaster recovery.continuity. The Human Capital Committee is responsible for overseeing the management of risks relating to our compensation plans and programs and, as more fully described below, receives an annual report from the company’s chief risk officer with respect to these risks. The Regulatory Compliance Committee oversees management of risks related to regulatory, compliance, policy and legal matters, both current and emerging and whether of a local, state, federal or international nature. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire
CORPORATE GOVERNANCE
Board of Directors is regularly informed through committee reports about such risks in addition to the risk information it receives directly.
Each year, the company’s chief risk officer, in consultation with the Human Capital Committee,
has undertakenundertakes a risk assessment of our compensation programs and practices.
TheThis year’s process included the following steps:
| — | | Review the overall design and philosophy of the incentive compensation programs. |
| — | | Review and assess the 2014 annual incentive program and long-term incentive program performance measures for alignment between actual results and achievement payout levels. |
| — | | Identify fundamental principles to test, including the SEC’s non-exclusive list of situations where compensation programs may have the potential to raise material risks to the company. |
| — | | Assess the incentive programs in light of the company’s primary risks (as disclosed in the company’s 2014 10-K) and the company’s annual financial and capital plans. |
| — | | Assess the effect of any proposed design changes to the 2015 incentive plans. |
Review of the overall design and philosophy of the incentive compensation programs.
Review and assessment of the 2017 annual incentive program and long-term incentive program performance measures for alignment between actual results and achievement payout levels.
Identification of fundamental principles to test, including the SEC’s non-exclusive list of situations where compensation programs may have the potential to raise material risks to the company.
Assessment of the incentive programs in light of the company’s primary risks (as disclosed in the company’s 2017 Form 10-K) and the company’s annual financial and capital plans.
Assessment of proposed design changes to the 2018 incentive plans.
Assessment of the sales compensation programs to identify behaviors incented, inherent risks and existing safeguards.
Based on this assessment, the following conclusions were reached by the chief risk officer and presented to the Human Capital Committee:
| — | | The company’s incentive program targets, thresholds, caps, weights and payout curves are effective control mechanisms. |
| — | | The incentive plans are balanced and align the long-term interests of stakeholders and management. |
| — | | The program’s goals are effectively balanced and consistent with the risk levels embedded in the company’s financial and capital plans. |
| — | | All potential awards are subject to Human Capital Committee discretion and the company has a recoupment policy in place in the event of a material earnings restatement. |
The company’s incentive program targets, thresholds, caps, metric weightings and payout curves are effective control mechanisms.
The incentive plans are balanced and align the long-term interests of stakeholders and management.
The program’s goals are effectively balanced and consistent with the risk levels embedded in the company’s financial and capital plans.
All potential awards are subject to Human Capital Committee discretion and the company has a recoupment policy in place in the event of a material earnings restatement.
Accordingly, our chief risk officer and the Human Capital Committee do not believe the company’s compensation programs create risks that are reasonably likely to have a material adverse effect on the
company.company, and that the programs fall within the range of the company's risk appetite.
Director Retirement Policy
Our bylaws do not allow any person to serve as a director beyond the date of the annual meeting of shareholders immediately following his or her
72nd72nd birthday.
In accordance with this policy, Dr. Goldsberry will retire from the Board effective at the Annual Meeting. We expect that three other directors (Messrs. Kinser, MacMillan and Ryan) will retire pursuant to this policy at the annual meeting of shareholders in 2016.
BOARD AND COMMITTEE GOVERNANCE
Compensation Committee Interlocks and Insider Participation
During
2014,2017, Ms. Egan and Messrs. Bunting, Kabat, Muhl, and O'Hanley each served as a member of our Human Capital Committee. None of the members has served as an officer of the company, and during 2017 none of the members
of the Human Capital Committee was an
officer or employee of the
company, and nonecompany. None of our executive officers served as a member of a board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Human Capital Committee.
CORPORATE GOVERNANCE
Related Party Transactions and Policy
The Board has adopted a written policy concerning related party transactions. This policy covers any transaction in which the company was or is to be a participant and the amount involved exceeds $120,000, and in which any related party had or will have a direct or indirect material interest. A
“related party”"related party" means any of our directors, director nominees, executive officers, persons known to us to beneficially own more than 5% of our outstanding common stock, and any of their respective immediate family members, and any entity in which any of these persons has an interest as an employee, principal or 10% or greater beneficial owner or other material financial interest.
Prior to entering into a transaction that may be viewed as a related party transaction, the related party must notify our general counsel of the facts and circumstances of the transaction. If the general counsel determines that the proposed transaction is a related party transaction, it is submitted to the disinterested members of the Audit Committee for consideration at the next Committee meeting (or to the chair of the Committee if it is not practical to wait until the next meeting and the chair is not a related party to the transaction). The Committee considers all relevant facts and circumstances, including the benefits to the company, if the related party is an independent director or nominee, the potential effect of entering into the transaction on the director’s or nominee’s independence, any improper conflict of interest that may exist, the availability of other sources for the products and services, the terms of the transaction, and the terms available from or to unrelated third parties generally.
The transaction may be approved if it is determined in good faith not to be inconsistent with the best interests of the company and shareholders. Certain types of transactions are deemed to be pre-approved by the Audit Committee, including executive officer and director compensation arrangements approved by the Board of Directors or the Human Capital Committee, indemnification payments and any transaction between the company and any entity in which a related party has a relationship solely as a director, less than 10% equity holder, or employee (other than an executive officer), or all of these relationships.
Transactions with Related Persons
During 2014
The company employs a sister-in-law of Michael Q. Simonds, Executive Vice President, President and
upChief Executive Officer of Unum US. Charlene Glidden serves as Vice President, Business Planning and Technology Strategy for Colonial Life and does not report within the Unum US organization. Her compensation for 2017 was approximately $461,736, and she participated in compensation and benefit arrangements generally applicable to
the date of this proxy statement, there have been no related party transactions required to be disclosed.similarly-situated employees.
BOARD AND COMMITTEE GOVERNANCE
Codes of Conduct and Ethics
The Board has adopted a codeCode of conductConduct establishing certain business practices and ethics applicable to all of our directors, officers and employees. Our Code guides employees on how to abide by the company's principles and access the resources available to address any ethical issues that arise. We provide online and toll-free access to report ethical issues confidentially, conduct annual training and offer self-service access to a variety of educational materials related to issues covered in our Code. The Board has also adoptedimplemented a separate codeCode of ethicsEthics applicable to our CEO and certain of our senior financial officers.
We expect all employees and officers of Unum to abide by the principles and policies set forth in our codes. Both of these codes, together with any information on certain amendments or any waivers applicable to certain of our executive officers, are available on our investor relations website under the “Corporate Governance”"Corporate Governance" heading atwww.investors.unum.com.www.investors.unum.com.
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20152018 PROXY STATEMENT | 37 |
OTHER GOVERNANCE MATTERS
Shareholder Engagement
In line with our commitment to open communication and transparency, we have a robust shareholder engagement process that occurs throughout the year.
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| In the late summer and early fall, we begin our shareholder engagement efforts by contacting each of our top 50 investors, which in 2017 represented over 70% of our outstanding shares. The focus of these meetings is to discuss our business strategy and our governance and compensation practices, as well as to learn about any other topics that are important to our shareholders. In addition, during 2017, based on feedback from shareholders in the prior year, our independent Board Chairman joined management for the meetings with our largest shareholders. In the late fall, we also meet with key proxy advisory firms to provide an update on our shareholder engagement efforts and gain further insight into their views regarding our compensation and governance practices and proxy disclosures. These communications promote greater engagement with our shareholders on various corporate governance issues and provide an open forum to share perspectives on our policies and practices. | |
Summer
Review current trends in global compensation and governance practices. Schedule fall meetings with top shareholders. | ð |
Fall
Conduct meetings with shareholders to discuss key issues and solicit shareholder feedback. |
| ñ | | ò |
|
Spring
Hold follow-up conversations with top shareholders, as necessary, to address important annual meeting issues. | ï |
Winter
Review shareholder feedback with the Board. Enhance proxy disclosures and adjust our compensation and governance practices as appropriate. |
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During the winter, we review with our Governance and Human Capital Committees, and with the full Board, the feedback we received during these shareholder meetings and use it to enhance proxy disclosures and make any recommended governance and compensation changes prior to the next Annual Meeting. Following our Annual Meeting in the spring, we review our shareholder voting results, consider compensation and governance trends and current best practices, and conduct follow-up meetings with investors to address any issues.
For additional information on feedback we received from our shareholders during our outreach efforts, refer to page 49.
Corporate Social Responsibility
At Unum, social responsibility has long been integrated into our business. With millions of people depending on the coverage we provide, Unum understands the importance of helping others. That philosophy permeates everything we do - from advocating for access to benefits and investing in the wellbeing of our people, to improving our local communities and minimizing the impact we have on our environment. Here are just a few of the ways that we aspire to integrate social responsibility into our business.
Advocating for financial protection benefits
We participate in public policy discussions on a variety of issues related to our business and industry. One of our primary areas of focus is advocating for greater access to financial protection benefits for workers and their families in the U.S. and U.K. This is an issue that continues to grow in significance as governmental revenue and funding for public safety net initiatives has declined.
Our engagement in these issues includes:
Funding research on disability trends, the economic impact of financial protection benefits and consumer insurance purchasing habits;
Sponsoring state legislation to encourage greater participation in financial protection benefits through employee auto-enrollment, with the option to opt-out;
Providing expertise to federal and state agencies related to disability benefits; and
Active participation in industry associations such as the American Council of Life Insurers.
Through engagement with legislators and other public officials at the state and federal level, we educate policymakers on the importance of making financial protection benefits widely available and easy to enroll in.
Building a great culture
The wellbeing of our employees is one of our top priorities and starts with a dynamic and welcoming workplace that embraces diversity, fosters collaboration and encourages employees to bring their best ideas to work every day.
In 2017, we kicked off a multi-year modernization of our main home offices. This investment will transform our workspaces to spark greater collaboration, innovation and flexibility, and introduce upgraded food service and fitness amenities for employees. We believe the introduction of a more contemporary workplace will support the recruitment of top talent and the delivery of best-in-class customer service.
We are also committing greater resources to foster a workplace that welcomes diverse backgrounds and perspectives, and reflect our customers and our communities. Our commitment starts at the top, and we’re pleased to have been recognized as being a leader in gender diversity at the Board level. We set diversity and inclusion performance goals for the CEO and senior leadership team. We have also committed to creating an office of diversity in 2018 led by a chief diversity officer.
These and other inclusion initiatives have resulted in Unum being recognized for leadership in diversity and inclusion. In 2017, Unum was recognized for gender diversity on our Board by the Women's Forum of New York and the 20% by 2020 campaign for female representation on boards of U.S. companies by the year 2020. We also received a perfect score on the Corporate Equality Index by the Human Rights Campaign Foundation for our corporate policies and practices related to LGBTQ workplace equality. This year, we were named a Top 100 Innovator in Diversity & Inclusion by Mogul.
Work-life balance is a core value of ours, and we provide access to benefits and resources employees need to enhance their health and wellbeing. We offer comprehensive health plans, annual screenings, on-site fitness and health resource centers at our primary facilities and programs that educate employees and help them manage chronic health issues. We also provide generous retirement benefits and support the professional development of our employees through a wide range of training and tuition assistance programs.
We’re proud to have been named a Forbes Best Places to Work for the last three years, and we will continue to make investments in our people and our culture to create a world-class workplace.
Positively impacting our communities
We’re dedicated to building stronger communities in the places where we live and work. Through financial gifts and employee volunteering, we partner with community organizations to improve educational opportunities, promote health and wellness, and support the arts. We encourage employee engagement in community outreach by providing time off for volunteer activities and matching employee giving to qualified organizations.
In 2017, we and our employees contributed more than $12.8 million to charitable causes, including volunteering nearly 80,000 hours. We partner with dozens of local charities every year and provide significant support in the U.S. to public education, health and wellness, and arts and culture. For more information about our community outreach, visit our website.
Being good stewards of the environment
We’re committed to helping protect the valuable resources that we all depend on to support quality of life for everyone. We do that by striving to effectively manage our impact on the environment. Our facilities account for our biggest environmental impacts, and we have made significant strides in several areas to improve efficiencies. We’ve also developed employee ‘green teams’ that champion initiatives on campus promoting environmentally smart ways of living and working. Because of our efforts, we have reduced energy usage by 16% since 2013 and reduced greenhouse gas emissions by more than 8% during the same time period. In 2017, we scored an A- on the Carbon Disclosure Project Leadership Index. By better managing our impacts today, we are investing in a better future.
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (in this report, the
“Committee”"Committee") is appointed by the Board of Directors and operates under a written charter adopted by the Board, a copy of which is available on the company’s investor relations website
under the heading "Corporate Governance" at
www.investors.unum.com. www.investors.unum.com. The Committee is comprised solely of independent directors who meet the independence requirements of the SEC and the NYSE. All members of the Committee are
“financially literate”"financially literate" as required by the NYSE, and the Board has determined that
four of theall five
current members are
“audit"audit committee financial
experts”experts" under SEC regulations. In
May 2014, E. Michael Caulfield was appointed asAugust 2017, committee member Joseph J. Echevarria rotated from the Committee
chair followingto the
retirement of Michael J. Passarella. In July 2014, Cynthia L. EganRisk and Finance Committee. Additionally, in February 2018, Susan D. DeVore became a member of the Committee upon her election to the Board.
The primary purpose of the Committee is to assist the Board in its oversight of the:
| — | | Integrity of the company’s financial statements and related disclosures; |
| — | | Effectiveness of the company’s internal control over financial reporting; |
| — | | Compliance by the company with legal and regulatory requirements; |
| — | | Qualifications, independence and performance of the company’s independent auditor; |
| — | | Responsibilities and performance of the company’s internal audit function; and |
| — | | Management of the company’s financial risks. |
The Committee’s responsibilities previously included oversight of the company’s enterprise risk management programfinancial statements and related disclosures;
Effectiveness of the managementcompany’s internal control over financial reporting;
Compliance by the company with legal and regulatory requirements;
Qualifications, independence and performance of operational risksthe company’s independent auditor;
Responsibilities and other risks not specifically allocated to another committee. In balancing a desire to integrate oversightperformance of riskthe company’s internal audit function; and capital in a single committee with increasing demands on
Management of the Committee’s time, the Board transitioned these responsibilities to the Finance Committee (re-named the Risk and Finance Committee) in August 2014. company’s financial risks.
The Committee
has retained responsibility to discussis also responsible for discussing guidelines and policies with respect to the process by which the company undertakes risk assessment and management, and communicates with the Risk and Finance Committee as necessary for this purpose.
The Committee receives regular enterprise risk management (ERM) reports, including results of the Own Risk and Solvency Assessment (ORSA). In 2017, the Committee Chair and another member of the Committee reviewed and provided input in the development of the ORSA Summary Report. This report provides strong evidence of the strengths of the company’s ERM framework, measurement approaches, key assumptions utilized in assessing our risks, and prospective solvency assessments under both normal and stressed conditions.
The Committee met
1110 times during
2014.2017. The Committee
regularly held executive sessions and met separately with its independent auditor, Ernst & Young, and with the internal auditors without management present.
In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management and the independent auditor matters relating to the company’s accounting and financial reporting processes, including the internal control over financial reporting; reviewed and discussed with management and the independent auditor the company’s annual and quarterly financial statements and related disclosures in reports filed with the SEC; pre-approved all audit services and permitted non-audit services to be performed by the company’s independent auditor; reviewed and discussed with management the responsibilities and performance of the internal audit function; discussed with management policies relating to risk assessment and risk management, as well as specific financial risks; and obtained and reviewed reports concerning the company’s policies and procedures for ensuring compliance with
applicable laws, regulationslegal and
the company’s Code of Conduct.
REPORT OF THE AUDIT COMMITTEE
regulatory requirements.
Management is primarily responsible for the preparation, presentation and integrity of the company’s financial statements and for the reporting process, including the establishment and effectiveness of the company’s internal control over financial reporting. The company’s independent auditor is responsible for performing an
REPORT OF THE AUDIT COMMITTEE
independent audit of the financial statements and of the effectiveness of the company’s internal control over financial reporting in accordance with auditing standards promulgated by the Public Company Accounting Oversight Board (PCAOB). The independent auditor reports directly to the Committee, which is responsible for the appointment, compensation, retention and oversight of the work performed by the independent auditor.
The Committee reviewed and discussed with management the company’s audited financial statements for the year ended December 31,
2014,2017, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and assumptions which could impact the amounts reported in the company’s financial statements, and the clarity of disclosures in the financial statements. The Committee reviewed and discussed with the independent auditor the overall scope and results of the independent audit and its judgments of the quality and acceptability of the company’s accounting principles. The Committee also engaged in discussions with management and the independent auditor, among other matters, concerning management’s assessment of reserve adequacy across all major business lines, which is presented to the Committee each year. The Committee discussed with the independent auditor the matters required to be discussed by applicable standards of the PCAOB. The Committee received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence. The Committee also discussed with the independent auditor matters relating to its independence, including consideration of whether the independent auditor’s provision of non-audit services to the company is compatible with the auditor’s independence.
In order to assure continuing auditor independence, the Committee periodically considers whether there should be a regular rotation of the independent auditor.
The company’s internal audit function, under the direction of the chief auditor, reports directly to the Committee, which is responsible for the oversight of the work performed by the internal auditors. The internal auditors are responsible for, among other matters, conducting internal audits designed to evaluate the company’s system of internal controls. The Committee reviewed and discussed with the company’s internal auditors, and received regular status reports from them concerning, the overall scope and plans for their audits. The Committee met with the internal auditors, with and without management present, to discuss their audit observations and findings, and management’s responses, and their evaluation of the effectiveness of the company’s internal control over financial reporting.
The Committee evaluates the performance of its independent auditor, including the senior audit engagement team, each year and considers whether to retain the current independent auditor or consider other audit firms. In doing so, the Committee took into consideration a number of factors, including the professional qualifications of the firm and the lead audit partner, the quality and candor of the firm’s communications with the Committee and the company, and evidence supporting the firm’s independence, objectivity, and professional skepticism. The Committee also reviewed the
20132016 PCAOB inspection report of Ernst & Young which was published in
20142017 and discussed its findings with the independent auditor.
TheIn conjunction with the mandated rotation of the independent auditor’s lead engagement partner, the Committee
is alsoand its chair are directly involved in the selection of the
independent auditor’s lead
auditengagement partner, including the current partner who assumed this role in 2014 after meeting with a subgroup of the Committee
whereinduring which his qualifications were discussed.
REPORT OF THE AUDIT COMMITTEE
Based on this evaluation, the Committee has determined that the continued retention of Ernst & Young to serve as the company’s independent auditor is in the best interests of the company and its shareholders. Accordingly, the Committee appointed Ernst & Young as the company’s independent auditor for 2015.2017. Ernst & Young has served as the company’s independent auditor since the merger of Unum and Provident in 1999, and before that served at various times as the independent auditor for the company and certain predecessor companies. Although the Committee has sole authority to appoint the independent auditor, the Committee
REPORT OF THE AUDIT COMMITTEE
recommended that the Board of Directors seek shareholder ratification of the appointment at the Annual Meeting as a matter of good corporate governance.
Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the company’s audited financial statements for the year ended December 31,
20142017 be included in the company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
2017Audit Committee1:
E. Michael Caulfield, Chair
Theodore H. Bunting, Jr.
Cynthia L. Egan
Timothy F. Keaney
Thomas Kinser
Francis J. Shammo
1Joseph J. Echevarria rotated from the Audit Committee to the Risk and Finance Committee in August 2017, and therefore did not participate in Committee actions with respect to the Report of the Audit Committee contained in this proxy statement. In addition, Susan D. DeVore became a member of the Audit Committee following her election to the Board in February 2018, and therefore did not participate in Committee actions with respect to the Report of the Audit Committee contained in this proxy statement.
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34 | | 20152018 PROXY STATEMENT | 43 |
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS
In this section, we provide an overview of our compensation philosophy and processes, and explain how the Human Capital Committee of our Board (referenced throughout
this section as the
“Committee”"Committee") arrived at its compensation decisions for the below named executive officers (NEOs) for
2014, all of whom are included in the 2014 Summary Compensation Table on page 64. | — | | Thomas R. Watjen, Chief Executive Officer(1) |
| — | | 2017.Richard P. McKenney, President(1) |
| — | | Breege A. Farrell, Executive Vice President, Chief Investment Officer |
| — | | Michael Q. Simonds, Executive Vice President, Chief Executive Officer, Unum US |
| — | | Randall C. Horn, former Executive Vice President, Colonial Life (retired March 31, 2015) |
| — | | Kevin P. McCarthy, former Executive Vice President and Chief Operating Officer (retired March 31, 2014) |
| (1) | Mr. Watjen was President and Chief Executive Officer of Unum Group until April 1, 2015. Mr. McKenney was Executive Vice President and Chief Financial Officer of Unum Group until April 1, 2015. See additional details below regarding these leadership changes. |
As previously announced, Mr. Watjen will retire as CEO upon the conclusion of the Annual Meeting after more than 20 years of service with the company. If re-elected as a director at the Annual Meeting, he will become non-executive Chairman of the Board. Mr. McKenney succeeded Mr. Watjen as , President effective April 1, 2015 and will assume the additional role of CEO when Mr. Watjen retires following the Annual Meeting. JackChief Executive Officer
John F. McGarry who had served as , Executive Vice President and Chief Financial Officer
Michael Q. Simonds, President and Chief Executive Officer, of our Closed Block Operations, succeeded Mr. McKenney as Chief Financial Officer effective April 1, 2015.In May 2014, Mr. Horn announced his intent to retire in March 2015, after more than 10 years of service with the company. He relinquished his duties as President of Colonial Life in July 2014, when his responsibilities were assumed by Timothy G. Arnold. Mr. Arnold assumed the responsibilities of CEO of Colonial Life when Mr. Horn stepped down from that role on December 31, 2014. Mr. Horn served as Unum US
Breege A. Farrell, Executive Vice President of Colonial Life until his retirement on March 31, 2015.After more than 35 years of service with the company, Mr. McCarthy retired on March 31, 2014. Following his retirement, the company entered into an agreement with Mr. McCarthy to provide consulting services for the remainder of 2014. The company paid Mr. McCarthy a total of $23,400 under this arrangement.
and Chief Investment Officer
Lisa G. Iglesias, Executive Vice President and General Counsel
Business and Performance Review
We are a leading provider of financial protection benefits in the United States and United Kingdom. Our products
which areinclude disability, life, accident, critical illness, dental and vision insurance. These products, primarily offered through the workplace,
include disability, life, accident and critical illness insurance and help protect millions of working people and their families from the financial hardships that can occur in the event of illness, injury, or loss of life.
Our business operations are divided into three primary segments
selling products – Unum US, Unum UK, and Colonial Life – and a Closed Block of business that includes products we service and support but no longer actively market.
2017 Performance
Unum had a very successful year in 2017 as we delivered consistent financial and operating performance, and continued our growth trends, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were despite a challenging environment, including the pressure of continued low interest rates and uncertainty in the U.K. due to Brexit.
| | |
| |
201544 | 2018 PROXY STATEMENT | | 35 |
COMPENSATION DISCUSSION AND ANALYSIS
2014 PerformanceFinancial Highlights1
|
| | |
| Record earnings | | |
| Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For the year, we delivered strong after-tax adjusted operating income of $976.2 million, based on total revenue of $11.3 billion. Adjusted operating earnings per share (EPS) were at an all-time high of $4.29, a significant increase over the prior year and the twelfth consecutive year of after-tax adjusted operating EPS growth. | | |
| Return on equity | | |
| We continued to put our shareholders' capital to good use. Consolidated adjusted operating return on equity (ROE) was 11.6%, while ROE in our core operating segments was 15.9%. | | |
| Book value | | |
Our book value per share at the end of 2017 was up 8.2% from 2016 (excluding accumulated other comprehensive income, or AOCI). It was the ninth consecutive year of shareholder equity growth.
| | |
Operating Highlights
Unum delivered strong financialon our mission of supporting our customers in 2017. We paid approximately $7.1 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and operational performance in 2014, continuingpartners were high and generally exceeded our track record of solid profitability, consistent results and returning value to shareholders that we have demonstrated over the past several years. plan benchmarks.
We saw strong impressivesales and healthy premium growth for the year throughout all of our core businesses.businesses, compared with 2016 results. This growth alongwas achieved while maintaining our pricing and risk discipline, and demonstrates that our value story continues to resonate with improvements in operating performance, partially offsetcustomers.
We managed our investment portfolio well despite the impacts to profitability we experienced due to a difficult, sustainedcontinued low interest rate environment. We continuedDue to generate excess capital that we used to strengthenthe nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.
______________________
(1) Operating results referenced in this document are non-GAAP financial measures that exclude certain specified items. For 2017, these excluded items were net realized investment gains, loss from a guaranty fund assessment, an unclaimed death benefits reserve increase, and a net tax benefit from the impacts of U.S. Tax Reform. For reconciliations of the non-GAAP financial measures, including after-tax adjusted operating income, after-tax adjusted operating earnings per share, adjusted operating return on equity and book value per share (excluding accumulated other comprehensive income, or AOCI), to shareholders.
the most directly comparable GAAP measures, refer to Appendix A. Effective December 31, 2017, to more clearly differentiate between the GAAP and non-GAAP financial measures, we changed the naming convention for our non-GAAP financial measures from "operating" measures to "adjusted operating" measures, which includes a change from "after-tax operating income" to "after-tax adjusted operating income", and "operating return on equity" to "adjusted operating return on equity". The definition of these labels remains unchanged.
| | |
| |
36 | | 20152018 PROXY STATEMENT | 45 |
COMPENSATION DISCUSSION AND ANALYSIS
Operating highlights
Strategic Positioning
We have recently taken a number of steps to fuel our growth and position us for
2014 include: | — | | The payment of more than $6.7 billion in benefits to people facing illness, injury or loss of life; |
| — | | Overall sales growth of 17.5%, led by a 21% increase in sales for our Unum US business; |
| — | | Solid premium growth throughout our core businesses; |
| — | | A continued emphasis on disciplined pricing, growing sales with existing clients and improving our internal processes; |
| — | | Strong client satisfaction that generally exceeded our benchmarks; |
| — | | A company brand, image and reputation that remains at historically high levels; and |
| — | | Recognition of our corporate citizenship efforts by several independent organizations, including being named one of Forbes Most Reputable Companies and one of America’s Greenest Companies by Newsweek, being included in the Dow Jones Sustainability North American Index and being recognized as one of the Best Places to Work in Insurance by Business Insurance. |
the future.
Acquisitions: Unum's acquisitions in 2015 and 2016 of dental providers in the U.K. and U.S. have accelerated our expansion into the dental market and have been positively received. We have also announced our intent to acquire a financial protection provider based in Poland by the end of 2018, expanding our footprint in Europe.
Growth initiatives: We have enhanced our product portfolio with the introduction of dental, vision, stop-loss and new voluntary offerings. Planned geographic expansion is also driving growth.
Business investments: Current and planned investments in technology, customer experience, business development, facilities and our people are designed to further enhance our service capabilities, identify future opportunities for growth, and attract and retain talent.
In addition, we view these key developments in the external environment as likely having a positive impact on our business.
Tax reform: We expect tax legislation enacted by the U.S. federal government in December 2017 to significantly lower our overall effective tax rate in future periods. While there are other offsets in the short-term, we expect the ongoing benefit due to the lower corporate income tax rate to free up capital to reinvest in our business and add value to shareholders.
Business confidence: As a provider of employee benefits offered through the workplace, we expect to benefit as employers gain more confidence in the economic environment, particularly in the U.S. We anticipate these positive trends will translate to greater hiring and wage growth, business investments and investments in employees.
Capital Generation for Shareholders
Our strong statutory earnings results in solid capital generation, remained strong and allowed us to deploy that capitalwhich we have deployed in a number of ways. For the year, we invested in
In addition, our
business, strengthened our long-term care reserves and paid out $159.4 million in dividends, including increasing the dividend rate by 13.8% over the prior year. We also repurchased $301 million worth of our outstanding shares, bringing our total share repurchases since 2007 to $2.8 billion. Our credit ratings remain high as a result of
the strength of our
strong balance sheet,
the consistency of our
earningsfavorable operating results and our
continued commitment to these capital generation principles.CAPITAL GENERATION AND DEPLOYMENT
| | | | |
| Year | | Share Repurchases | | Dividend Increase |
| 2008 | | $700 million | | — |
| | |
| 2009 | | — | | 10.0% |
| | |
| 2010 | | $356 million | | 12.1% |
| | |
| 2011 | | $620 million | | 13.5% |
| | |
| 2012 | | $500 million | | 23.8% |
| | |
| 2013 | | $319 million | | 11.5% |
| | |
| 2014 | | $301 million | | 13.8% |
| | |
| |
201546 | 2018 PROXY STATEMENT | | 37 |
COMPENSATION DISCUSSION AND ANALYSIS
The following are
20142017 performance highlights within our primary business segments and other key areas of the company:
|
| | |
| Unum US | | |
| |
— 0.3% decrease in operating income
— 21% increase in sales
— 3.2% increase in premium income
— 13.5% operating return on equity
| | Our Unum US segment, representing 59.8%63.3% of our consolidated premium income in 2014,2017, continued its trend of profitable growth. The business delivered strong results for the year driven by impressiverecord-breaking sales growth, solidand healthy premium growth, and launched our new dental and vision offerings across the U.S. These results, combined with favorable risk results. Operatingbenefits experience and effective expense management, drove adjusted operating income was slightly below last year’s level, primarily duehigher compared to the low interest rate environment.2016. | |
|
Unum UK |
| | |
— 12% increase in operating income
— 7.2% increase in sales (GBP)
— 9.1% increase in premium income
— 18.3% operating return on equity
Unum UK | | |
Our Unum UK segment, representing 7.8%6.0% of our consolidated premium income in 2014, showed significant improvement as a result of actions we took2017, faced continued headwinds from the uncertain environment due to address profitability. Strongthat country's vote to leave the European Union. While adjusted operating income declined, due in part to less favorable benefits experience, the business did see steady sales and modest premium growth, coupled with favorable risk results, led to an excellent ROE and a good year for this business.growth. | |
|
Colonial Life |
| | |
— 5.4% increase in operating income
— 11.6% increase in sales
— 3.4% increase in premium income
— 16.8% operating return on equity
Colonial Life | | |
Our Colonial Life segment, representing 16.3%17.6% of our consolidated premium income in 2014,2017, had aanother good year. The business continued its trend of strong year with record-setting sales strongand premium growth and stable risk results.growth. Consistent with past years, Colonial Life continues to generate solid margins and returns.
|
|
Closed Block |
|
Our Closed Block segment performed at or above expectations last year, with solid growth of 12.1% in operating earnings. We continue to see consistent results from this block of business largely as a result of our recent investments in management resources and capabilities. |
|
Investments |
|
Our investment results remain solid, although we recorded lower net investment income in 2014, primarily due to a decline in yield on invested assets as we continue to invest new cash flows at lower rates. Our asset quality remains strong, with a net unrealized gain on our fixed maturity securities of $6.3 billion at December 31, 2014. |
Closed Block
Our Closed Block segment, representing 13.1% of our consolidated premium income in 2017, delivered stable performance, with a decrease in adjusted operating income of 4.3%. We continue to see consistent results from this block of business largely as a result of our continued investments in management resources and capabilities.
Investments
Our investment results remained solid, generally exceeding our plan benchmarks. Although we recorded lower net investment income in 2017, our asset quality remains strong and our portfolio provides a consistent source of income for our business.
| | |
| |
38 | | 20152018 PROXY STATEMENT | 47 |
COMPENSATION DISCUSSION AND ANALYSIS
Total Shareholder Return
Our
Total shareholder return is used as part of the company's long-term incentive program as outlined on page 61. Unum continues to outperform our peers and the broader S&P 500 in total shareholder
return. Over the last decade, we have been an excellent long-term investment during one of the worst financial crises in memory, with a 10.8% compound annual return
(TSR) comparisons vary significantly based uponto shareholders during the
time periods used and indices compared.
On a one-year basis,last 10 years.
We saw our TSR
was 1.27%,grow by more than 27 percent during 2017, despite a continued low interest rate environment. This outpaced the performance of the S&P 500, our peers in
line with the S&P Life and Health Index
– the group that we believe most closely aligns with our industry – but lagging our Proxy Peer Group and the
S&P 500. The uncertainty around interest rates and our long-term care business, we believe, affected investors’ views of our company and overshadowed the strong financial and operating results we achieved throughout the year. On a three- and five-year basis, we were generally in line with both S&P indices but continued to trail our Proxy Peer Group.Over the longer term, as shown in this 10-year indexed TSR performance graph, our TSR continues to outperform our Proxy Peer Group and both S&P indices. During the financial crisis, manyaverage of our Proxy Peer Group companies saw greater declines in shareholder value than(as defined on page 53) during the same time period. Over the most recent three-, five- and 10-year periods, we experienced. These companies have since seen more dramatic increases inexceeded the TSR resulting in less favorable comparisonsperformance of Unum with these companies over the last five years. We remain pleased thatevery index group. This strong performance is due primarily to our longer-term track record of consistent financial returns provides attractive value to shareholders.
market-leading positions, prudent underwriting and risk management discipline, and effective capital management.
| | |
| |
201548 | 2018 PROXY STATEMENT | | 39 |
COMPENSATION DISCUSSION AND ANALYSIS
2014 Say-on-Pay Vote
Last year’s advisory vote to approve executive compensation (or “say-on-pay” vote) passed with over 97% approval. This was higher than the previous year’s vote and included support from each of our 25 largest shareholders. We continue to strive to achieve a high level of shareholder support for our NEO compensation.
The Committee and the Board appreciate and value the views of our shareholders. In considering the results, the Committee was pleased that a significant majority of our shareholders approved the proposal, showing strong support for the Committee’s administration of our executive compensation programs.
After consideration of this voting result, the Committee continued to implement the changes it began in 2013; specifically, the expanded use of performance share units (PSUs), which are based on three-year pre-established goals, for the NEOs. Beginning with the 2015 grant, each NEO received 50% of his or her long-term incentive award in the form of PSUs (up from 25% the prior year for all NEOs other than the CEO, who already had a 50% PSU mix).
Key
Executive Compensation
We are committed to good corporate governance, as evidenced by our adoptionexecutive compensation programs that align with best practices. A list of the following practices:notable practices we have implemented is below. |
| — | | Pay |
| A pay for performance;performance philosophy | | Double-trigger provisions for severance |
| — | | Annual say-on-pay votes;votes | | Clawback provisions |
| —Programs that mitigate undue risk taking in compensation | | Restrictive covenants in our long-term incentive grant agreements |
| Independent compensation consultant to the Committee | | Relevant peer groups for benchmarking compensation |
| Elimination of golden parachute excise tax gross-ups | | A balance of short- and long-term incentives |
| Minimal perquisites | | Robust stock ownership and retention requirements for senior officers and directors; |
| —No NEOs have employment agreements | | Anti-pledging and anti-hedging policies applicable to |
| Robust individual performance assessment and compensation evaluation for executives and directors; |
2017Say-on-Pay Vote and Shareholder Outreach |
| |
Our 2017 shareholder advisory vote to approve executive compensation passed with 96% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of long-term incentives which would only occur upon termination following a changeour top 50 investors, representing over 70% of our outstanding shares. Additionally, during 2017, based on feedback received from shareholders in control;the prior year, our independent Board Chairman joined us for meetings with our largest shareholders. | |
Seven investors, representing more than 36% of our outstanding shares, accepted our invitation for engagement and we met with each of them. Another six investors, representing approximately 8% of our outstanding shares, responded that a meeting was not necessary.
During the meetings, shareholders provided feedback on a variety of topics though we did not receive any suggestions for changes to our compensation programs. Overall, the shareholders we spoke with generally had favorable comments about our practices and programs including:
Our clearly designed programs with an appropriate mix of compensation for executives; and
The smooth transition of management during 2015 and 2016.
Following consideration of the results of our say-on-pay vote and feedback we received through these meetings, we did not make any changes to our executive compensation program but we identified opportunities for further enhancements to our proxy statement disclosures and discussed other governance topics, as described under the Proxy Summary on page 10.
|
| — |
| 2018 PROXY STATEMENT | | Independent compensation consultant to the Human Capital Committee;49 |
| — | | Minimal perquisites; and |
| — | | No new excise tax gross-ups since 2010. |
COMPENSATION DISCUSSION AND ANALYSIS
In addition to our meetings with shareholders, we also met with two large proxy advisory firms to provide an update on our shareholder engagement efforts and gain further insight into their views regarding our compensation and governance practices and disclosures.
Overall, shareholders told us they appreciated the opportunity to engage in these discussions and the company’s willingness to consider their input with respect to both executive compensation and governance practices.
Compensation Program Structure and Committee Decisions
Our executive compensation philosophy is
designed to reward performance that helps us achieve our corporate objectives, increase shareholder
return andreturns, attract and retain talented
individuals.individuals, and promote a culture of ownership and accountability in the company. We do this by:
| — | | Offering base salaries that reflect the competitive market as well as the roles, skills, abilities, experience and performance of employees; |
| — | | Providing incentive opportunities for all employees based on the achievement of corporate and individual performance goals; and |
| — | | Aligning the long-term interests of management and shareholders by offering performance-based equity compensation opportunities and requiring senior officers to own a specified value of shares and retain equity awards for a specified period of time after vesting. This practice also promotes a culture of ownership and accountability in the company. |
COMPENSATION DISCUSSION AND ANALYSIS
Offering base salaries that reflect the competitive market as well as the roles, skills, abilities, experience, and performance of employees;
Providing incentive opportunities for all employees based on the achievement of corporate and individual performance goals; and
Aligning the long-term interests of management and shareholders by offering performance-based equity compensation opportunities and requiring senior officers to own a specified value of shares and retain equity awards for a specified period of time after vesting.
There are five primary elements of pay in our executive compensation program, which are summarized in the
table below.following table.
|
| | | | | |
| BASE PAY | ANNUAL INCENTIVE | PERFORMANCE-BASED RSUs | PSUs | RETIREMENT & WORKPLACE BENEFITS |
| Primary Purpose | Reflects the market for similar positions as well as individual skills, abilities & performance | Rewards short-term performance | Rewards long-term performance, aligns interest with stockholders & promotes a culture of ownership and accountability | Addresses health, welfare & retirement needs |
| Performance Period | Ongoing | 1 year | 1 year (vests over 3 years) | 3 years prospective | N/A |
| Form | <--------------- Cash ---------------> | <--------------- Equity ---------------> | N/A |
| Payment/Grant Date | Ongoing | <----- In March based on prior year performance -----> | Ongoing |
COMPENSATION DISCUSSION AND ANALYSIS
Those pay elements that are
“at"at risk,
”" or contingent
onupon individual or corporate performance, are noted in the
tablecharts below. Our NEOs, as the most senior officers of the company, have a majority of their targeted total direct compensation
(includes(i.e., fixed salary and variable annual and long-term incentive awards)
, at risk. This design creates an incentive for achievement of performance goals (short- and long-term) and aligns the interests of
our executives with those of our shareholders. For
2014,2017, 88% of Mr.
Watjen’sMcKenney’s targeted total direct compensation was at risk. For the remaining NEOs,
(except Mr. McCarthy who retired on March 31, 2014), an average of
70%71% of their aggregate targeted total direct compensation was at risk.
|
PAY ELEMENTS
|
Annual base salary |
|
To provide a fixed amount of compensation that is reflective of the market for similar jobs as well as individual skills, abilities and performance. Aligns with our compensation philosophy of attracting and retaining talented individuals. |
|
Annual incentive awards (at risk) |
|
To motivate executives to achieve short-term corporate financial goals as well as individual objectives. This form of compensation is paid in cash based on the achievement of corporate and individual achievement and aligns with our compensation philosophy of rewarding performance in the achievement of short-term corporate objectives. |
|
Long-term incentive awards (at risk) |
|
To motivate long-term performance and align the interests of management and shareholders. This form of compensation is awarded in restricted stock units and performance share units (PSUs) based on a corporate earnings threshold and individual performance. Additionally, the PSU vesting is based on achievement of corporate financial goals modified by total shareholder return. This aligns with our compensation philosophy of rewarding long-term performance and attracting and retaining talented individuals. |
|
Retirement and workplace benefits |
|
To provide a competitive program that addresses health, welfare and retirement needs of executives and other employees. Aligns with our compensation philosophy of attracting and retaining talented individuals. |
|
Perquisites and other personal benefits |
|
Most perquisites were eliminated as of 2008. The limited perquisites we currently offer are in support of a specific business purpose or a pre-existing contractual arrangement. |
Roles of the Committee, Executive Officers and Consultants
The Committee, CEO, and compensation consultant each have important roles in our compensation program. The Committee, with input from the CEO, and compensation consultant, has the final authority to:
| — | | Evaluate, design and administer a compensation program for executive officers that appropriately links pay, company and individual performance, and the creation of shareholder value; |
| — | | Establish performance goals and certify whether they have been attained; |
| — | | Review the performance of the CEO, with input from the full Board, and determine his compensation; and |
| — | | Determine compensation for each of the other NEOs. |
Evaluate, design, and administer a compensation program for our executive officers that appropriately links pay, company and individual performance, and the creation of shareholder value;
Establish performance goals and certify whether they have been attained;
Review the performance of the CEO, with input from the full Board, and determine his compensation; and
Determine compensation for each of the other NEOs.
The CEO provides to the Committee:
COMPENSATION DISCUSSION AND ANALYSIS
| — | | A self-assessment outlining his own performance for the year; |
| — | | Performance assessments and compensation recommendations for executives who report directly to him, which includes all of the NEOs except Ms. Farrell, who reported to Mr. McKenney for all of 2014 and continues to do so in 2015 (Mr. McKenney provided an assessment and compensation recommendation for Ms. Farrell); and |
| — | | His perspective on the business environment and the company’s performance. |
A self-assessment outlining his own performance for the year;
Performance assessments and compensation recommendations for executives who report directly to him, which includes all of the NEOs; and
His perspective on the business environment and the company’s performance.
The CEO does not participate in any decisions related to his own compensation.
Pay Governance LLC, as independent compensation consultant to the Committee, provides objective, expert analyses, independent advice, and comparative data across peer companies on executive and director
COMPENSATION DISCUSSION AND ANALYSIS
compensation. Pay Governance reports directly to the Committee, which is responsible for the appointment, compensation, retention, and oversight of the work performed by the consultant. A senior representative of the compensation consultant generally attends Committee meetings, participates in executive sessions of the Committee without management present, and communicates directly with Committee members outside of meetings. Management interacts with the compensation consultant only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval.
The Committee has adopted a policy requiring that its compensation consultant be independent. During
2014,2017, the Committee completed its annual assessment of the independence of Pay Governance, taking into account the following factors:
| — | | Compliance with the Committee’s independence policy; |
| — | | Other services, if any, provided to the company by the consultant; |
| — | | The amount of fees paid by the company to the consultant as a percentage of the consultant’s total revenues; |
| — | | Any business or personal relationships between the consultant (including its representatives) and the company’s directors or senior officers; and |
| — | | The policies and procedures the consultant has in place to prevent conflicts of interest, which includes a prohibition against stock ownership in the company. |
Compliance with the Committee’s independence policy;
Other services, if any, provided to the company by the consultant;
The amount of fees paid by the company to the consultant as a percentage of the consultant’s total revenues;
Any business or personal relationships between the consultant (including its representatives) and the company’s directors or senior officers; and
The policies and procedures the consultant has in place to prevent conflicts of interest, which include a prohibition against stock ownership in the company.
Pay Governance has attested to its independence and does not provide any services to the company other than those related to director and executive compensation consulting. Fees paid to Pay Governance for such services provided in
20142017 totaled
$167,109.$195,191.
Based on its assessment, the Committee concluded that
the compensation consultantPay Governance is independent under the Committee’s policy and that
the compensation consultant’sPay Governance's work has not raised any conflict of interest.
The company’s finance, human resources, and legal staff, including the chief financial officer, support the Committee in its work. Employees from these departments discuss various executive compensation topics with the Committee and
its compensation consultant,Pay Governance, including how compensation plans fit in with other programs and business objectives. Although these staff members may make recommendations, the final decision on all executive compensation matters rests solely with the Committee.
Compensation Benchmarking
The Committee compares the compensation of our
named executive officersNEOs to the median pay of executives in similar positions at peer companies. By
generally targeting each pay element to the approximate median of the applicable comparator group (as described below), we ensure that the balance among the elements is competitive, while at the same time allowing company and individual performance to determine a majority of the compensation received by our NEOs. Overall, these benchmarking comparisons are used as points of reference and are secondary to the primary factors considered by the Committee when making compensation decisions. The primary factors are: company performance; individual performance; the executive’s level of
responsibility;responsibility and tenure; internal equity considerations; the creation of shareholder value; our executive compensation philosophy; and the results of the most recent shareholder say-on-pay
vote.vote and engagement with shareholders.
| | |
| |
4252 | | 20152018 PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS
The two sources used by the Committee for benchmarking executive compensation are:
| — | | For CEO and CFO compensation, a proxy peer group comprised of insurance and financial services companies that are either our business competitors or primary competitors for talent (Proxy Peer Group). The Proxy Peer Group is also a reference for compensation programs and practices. The composition of the Proxy Peer Group is determined by the Committee and reviewed annually as outlined below. |
| — | | For the compensation of our other NEOs, the Towers Watson Diversified Insurance Study of Executive Compensation (Diversified Insurance Study). This source is used because responsibilities of our other NEOs may not be directly comparable with those of named executives at other companies in the Proxy Peer Group. |
For CEO and CFO compensation, a proxy peer group comprised of insurance and financial services companies that are either our business competitors or primary competitors for talent (the "Proxy Peer Group"). The Proxy Peer Group is also a reference for compensation programs and practices. The composition of the Proxy Peer Group is determined by the Committee and reviewed annually as outlined below; and
For the compensation of our other NEOs, the Willis Towers Watson Diversified Insurance Study of Executive Compensation (the "Diversified Insurance Study"). This source is used because responsibilities of our other NEOs may not be directly comparable with those of named executives at other companies in the Proxy Peer Group.
In addition to benchmarking executive compensation, the Committee uses a subset of the Proxy Peer Group (which we refer to as the "PSU Peer Group") for purposes of measuring relative TSR for our PSU awards (see page 61 for details on these awards). This subset is selected because they are considered to be direct business competitors of Unum.
The Committee evaluates the composition of the Proxy Peer Group every year. Peer companies are determined based on five primary criteria (life and health GICS code; reasonable range of: assets, revenues, and market capitalization; and competition with Unum for talent and/or market share). Based on the most recent peer review in August 2017, on average, the companies in the Proxy Peer Group met three of the five criteria. Overall, Unum is at 29% of the median asset level and approximately 90% of the revenue median (as of the 12 months ended March 31, 2017). Additionally, 8 of the 11 peers (73%) selected Unum as a peer for compensation benchmarking purposes in their 2017 proxy statements.
During its annual Proxy Peer Group analysis in August 2017, the Committee with its consultant, Pay Governance, considered other insurance and financial services companies and determined that no companies should be removed and no additional companies were appropriate for inclusion in the Proxy Peer Group at the time.
The following table lists the companies in the
ProxyDiversified Insurance Study (DIS), PSU Peer Group and
the Diversified Insurance Study.Proxy Peer Group.
COMPENSATION DISCUSSION AND ANALYSIS
BENCHMARKING EXECUTIVE COMPENSATION |
| | | | | | | | |
| | | | Proxy Peer Group Indicators(1)(2) |
| Company | DIS Survey Partici- pant(1) | PSU Peer Group(3) | 2017 Proxy Peer Group(2) | Life & Health GICS | 0.4x to 2.5x Unum Revenues | 0.4x to 2.5x Unum Assets | 0.5x to 5.0x Unum Market Capitalization | List Unum as a Peer |
| Aflac | ● | ● | ● | ● | ● | ● | ● | ● |
| Allstate | ● | | | | | | | |
| AXA Group | ● | | | | | | | |
| Cigna | ● | | | | | | | |
| CNO Financial Group | ● | | ● | ● | ● | ● | ● | ● |
| Genworth Financial | ● | | ● | ● | ● | ● | | ● |
| Guardian Life | ● | | | | | | | |
| Hartford Financial Services Group | ● | ● | ● | | ● | | ● | ● |
| John Hancock | ● | | | | | | | |
| Lincoln National Corporation | ● | ● | ● | ● | ● | | ● | ● |
| Massachusetts Mutual | ● | | | | | | | |
| MetLife | ● | ● | ● | ● | | | | |
| Nationwide | ● | | | | | | | |
| New York Life | ● | | | | | | | |
| Northwestern Mutual | ● | | | | | | | |
| OneAmerica Financial | ● | | | | | | | |
| Pacific Life | ● | | | | | | | |
| Phoenix Companies | ● | | | | | | | |
| Principal Financial Group | ● | ● | ● | ● | ● | | ● | |
| Prudential Financial | ● | ● | ● | ● | | | ● | |
| Reinsurance Group of America | | | ● | | ● | ● | ● | ● |
| Securian Financial | ● | | | | | | | |
| Sun Life Financial | ● | | | | | | | |
| Thrivent Financial | ● | | | | | | | |
| TIAA-CREF | ● | | | | | | | |
| Torchmark Corporation | | ● | ● | ● | ● | | ● | ● |
| Transamerica | ● | | | | | | | |
| USAA | ● | | | | | | | |
| Voya Financial | ● | ● | ● | | ● | | ● | ● |
| |
Aetna
Aflac
Aon
Assurant
Cigna
| | CNO Financial
Genworth Financial
Hartford Financial Services
Humana
| | Lincoln Financial
Marsh & McLennan
MetLife
Principal Financial
| | Protective Life
Prudential Financial
Stancorp Financial
Torchmark
|
Diversified Insurance Study | | | | |
| | | |
Aflac
AIG
Allstate
AXA Group
Cigna
CNO Financial
Genworth Financial
| | Guardian Life
Hartford Financial Services
ING
John Hancock
Lincoln Financial Massachusetts Mutual
MetLife
| | Nationwide
New York Life
Northwestern Mutual
One America Financial
Pacific Life
Phoenix Companies
Principal Financial
| | Prudential Financial
Securian Financial
Sun Life Financial
Thrivent Financial
TIAA-CREF
Transamerica
USAA
|
| (1) | For compensation decisions made in early 2014,2017, benchmarking comparisons were made using the 2013 Diversified Insurance Study2017 Proxy Peer Group and the 2013 Proxy Peer Group.2016 DIS (the latest data available at the time). Although Unum participates in the Diversified Insurance Study,DIS, we are excluded from this table. Both peer groupsThe number of participants in the DIS remained the same for purposes of all 2014 compensation decisions.as the prior year. |
| |
| (2) | The Proxy Peer Group includes both property and casualty insurers and life and health insurers, with Unum’s assets equal to 109%29% of the peer median as of December 31, 2013,2016, and our revenue at 87%89% of the peer median for the year ended December 31, 2013.2016. Unum is not part of the Proxy Peer Group. |
The Committee evaluates the composition of the Proxy Peer Group every year. In 2014, the peer companies were determined based on five primary criteria (life and health GICS code; reasonable range of: assets; revenues; market capitalization; and whether they compete with Unum for talent and/or market share). Based on the review in 2014, on average, the peer companies met three of the five criteria. Overall, Unum is above the median asset level and approximately 84% of the revenue median. Additionally, 11 of the 17 peers (65%) selected Unum as a peer for compensation benchmarking purposes in their 2014 proxy statements.
The Committee last conducted its annual proxy peer group analysis in August 2014. At the meeting the Committee determined that Protective Life, as a result of being acquired and taken private, will not be included in the Proxy Peer Group for future compensation decisions. Furthermore, the Committee considered other insurance and financial services companies with its consultant, Pay Governance, LLC, and determined that Reinsurance Group of America, a company that the Committee believes closely matches the criteria above based on its discussion and analysis with its consultant in the August meeting, will be added to the Proxy Peer Group.
| |
| (3) | This peer group will be used for the relative TSR comparison under the 2017 PSU grant. These companies are our direct competitors, are generally followed by the same sell-side research analysts, and generally compete with us for talent. |
|
| |
201554 | 2018 PROXY STATEMENT | | 43 |
COMPENSATION DISCUSSION AND ANALYSIS
Since the group contains a dispersion of companies (7 proxy peers are larger than Unum based on assets; 9 are smaller), annual sensitivity tests are performed to understand the impact of both larger and smaller peers on median CEO compensation levels. For the tests conducted in 2014, excluding the two smallest and two largest peers for testing purposes had no impact on CEO targeted total direct compensation (TDC). An additional sensitivity test was conducted using a common statistical approach known as regression analysis. Regression analysis considers the correlation between two factors (e.g., compensation and asset or revenue size) and is commonly used to adjust compensation data to remove the effects of company size. A regression analysis that considers the correlation between asset size and compensation yielded a TDC level that was 10% less than the median TDC. A regression analysis that considers the correlation between revenue and compensation yielded a TDC that was 17% less than the median.
Individual Performance Assessments
The Committee uses individual performance assessments as a factor in its determination of compensation for each NEO.
Individual Performance Goal Areas
Individual performance is measuredevaluated against the leadership criteriaNEO's goals and metrics, specific to his or her respective business area. These goals and metrics are set at the beginning of the year and include the following performance categories:
Business and financial objectives the Board approved for the company;
Strategic objectives by business area;
Talent management initiatives; and
Operational effectiveness and efficiency.
Evaluation Criteria
In evaluating how effectively each NEO met their goals, the Committee considered:
Company performance;
For the CEO, the Board’s assessment goal areas described inof his performance, as well as his self-assessment;
For NEOs other than the table below,CEO, the performance assessments of the NEOs. For each individual, the performance assessment is based on a combination of performance feedback from the individual’s direct manager (the CEO), peers, direct reports, and other partners, as well as the commonindividual’s self-assessment; and
Written assessments by all Board members of each NEO against their stated goals in the areas listed below:
|
| |
| ○ Ability to balance complex and competing factors | ○ Board relations |
| ○ Balance of putting the company first with appropriate self-care and resilience | ○ Demonstrated performance |
| ○ Building and sustaining a high-functioning organization and team | ○ Humility and ego maturity |
| ○ Commitment to the enterprise and their business unit | ○ Leadership |
| ○ Strategic planning, succession planning, and leadership development | ○ Statesmanship |
Based on the NEOs' individual performance goals
outlined onand Board assessment in combination with the
following page. Collectively, these can beCEO's assessment of those reporting to him, the Committee awarded each an individual performance percentage which is used to adjust
the earned annual incentive and long-term incentive awards between 0% and 125%.
Evaluation Criteria
In evaluating how effectively each NEO met the leadership criteria, the Committee considers:
| — | | For the CEO, the Board’s assessment of Mr. Watjen’s performance, as well as Mr. Watjen’s self-assessment of his own performance; |
| — | | For NEOs other than the CEO, the CEO’s and CFO’s performance assessments of the NEOs that report to them. For each individual, the performance assessment includes a self-assessment and performance feedback using a combination of the individual’s direct manager, peers, direct reports and other partners; and |
| — | | Written assessments by all Board members of each NEO against the stated goals in the areas listed in the table below. |
INDIVIDUAL PERFORMANCE ASSESSMENTS
| | |
Leadership Criteria | | Board Assessment Goal Areas |
| |
— Delivers results
| | — Strategic planning
|
— Builds organizational talent
| | — Demonstrated performance
|
— Makes effective decisions
| | — Building and sustaining a high-functioning organization and team
|
— Creates business and enterprise value
| | — Humility and ego maturity
|
— Engages employees in the corporate vision
| | — Statesmanship
|
— Adheres to the company’s values
| | — Balance of putting the company first with appropriate self-care and resilience
|
| | — Ability to balance complex competing factors
|
| | — Commitment to enterprise as well as business unit
|
COMPENSATION DISCUSSION AND ANALYSIS
2014 Performance Assessment and Highlights
As noted above, the named executive officers’ achievement levels, for purposes of annual incentive paid in 2014 and long-term incentive awards granted in February 2015, were determined in part based on the following common performance goals. Each common performance goal has specific areas of focus for each executive and his or her respective business areas.
2014 COMMON PERFORMANCE GOALS
Achieve the business and financial objectives the Board approved for the company, which includes the following areas of focus:
| — | | Positioning each business to leverage current market positions and opportunities |
| — | | Appropriately redeploying the company’s excess capital |
| — | | Continuing to consider and develop additional centers of excellence |
Deepen the management talent and employee engagement throughout the company:
| — | | Strengthen the CEO and senior executive team succession plan |
| — | | Build organizational depth throughout the company |
| — | | Continue to take actions to assure that our workforce diversity matches that of our key stakeholders |
Continue to develop the culture and values of the company at all levels which includes:
Further enhance the image and reputation of the company:
| — | | Including with regulators, media and public policy makers |
Based on the above criteria, the Committee assessed the individual performance of our NEOs and awarded each an individual performance percentage. These percentages were used to calculate the final payout of 20142017 annual incentives and long-term incentive awards granted in 2015,2018, as described later in this section.
COMPENSATION DISCUSSION AND ANALYSIS
2017 Performance Assessment and Highlights
The NEOs’ achievement levels, for purposes of the 2017 annual incentive paid in March 2018 and long-term incentive awards granted in March 2018, were determined in part based on the following performance goals.
Individual performance highlights for each NEO, and their respective awarded performance percentages, are included below:
Thomas R. Watjen
Chief Executive Officer
In assessing Mr. Watjen’s performance for 2014, the Committee noted that he:
| — | | Achieved substantially all of the company’s business objectives, with each segment meeting or exceeding its goals for the year. This resulted in operating earnings per share growth of 6.9%, which is the ninth consecutive year of operating earnings per share growth; |
| — | | Maintained a strong balance sheet and capital position. The company returned capital to shareholders by increasing the dividend for the sixth successive year and repurchasing $301 million in outstanding shares in 2014, for a total of $2.8 billion in share repurchases since 2007; |
| — | | Deepened the talent level throughout the organization while maintaining consistently high company performance. Because of Mr. Watjen’s significant focus on leading a very effective succession planning process, we have seen most of the senior leadership team assume new roles over the past five years; |
COMPENSATION DISCUSSION AND ANALYSIS
| — | | Further strengthened the company’s culture and values, with a particular emphasis on ethics, risk management and social responsibility; and |
| — | | Further enhanced the already solid brand and image of the organization with our customers, brokers, regulators, public officials and the communities in which we operate. |
Given the significant accomplishments noted above, the Committee agreed that increased targets for Mr. Watjen’s 2014 annual incentive award and 2015 long-term incentive award produced year-over-year increases in pay that fully reflected his strong 2014 performance.
President and
Former Chief
FinancialExecutive Officer
In assessing Mr. McKenney’s performance for
2014,2017, the Committee noted that he:
Led the company to record levels of financial performance that exceeded plan in 2017, continuing a consistent pattern of outstanding results that have created significant shareholder value. Results were well-balanced across core business segments and included ongoing stability in Closed Block operations. Total shareholder return has outperformed peers and benchmarks over the most recent three-, five- and 10-year periods;
Has taken actions and delivered statutory results to ensure the Company maintains a very strong balance sheet and capital position. This capital position has allowed the company to invest in the business, pursue acquisitions and expansion, and return capital to shareholders. Importantly, it provides the company with the flexibility to respond to future challenges and opportunities;
Has undertaken a number of strategic initiatives designed to position the company for ongoing success. These include an aggressive change management agenda focused on enhancing capabilities and customer experience as well as product and geographic expansion;
Has taken actions to be certain the Company has a strong brand with a variety of constituents. In particular, the company has been a leading voice for our industry in building partnerships with policymakers and groups to further the goal of protecting the financial security of more workers and their families; and
Continuously exhibits effective leadership and has demonstrated impressive personal development as CEO since being named to the position. He has focused on the development of his leadership team while maintaining employee engagement at levels exceeding industry leading benchmarks. In 2017, he accelerated programs and actions to further diversity in the organization and build a culture of inclusion.
Given these accomplishments and the company’s overall performance achievement of 120%, the Committee awarded Mr. McKenney an individual performance percentage of 115% for his 2017 annual incentive award and 120% as the individual performance modifier for his long-term incentive award granted in March 2018.
John F. McGarry
Executive Vice President and Chief Financial Officer
In assessing Mr. McGarry’s performance for 2017, the Committee noted that he:
Provided strong leadership as CFO during 2017 as the company exceeded most financial objectives, with each business segment generally meeting or exceeding its goals for the year;
Has ensured the company maintains a strong capital position, which allowed the company to continue to invest in the growth of the business, fund product expansion, and return capital to shareholders
|
| — |
| 56 | | Achieved substantially all of the company’s financial objectives, with each business segment meeting or exceeding its goals for the year. As noted above, this resulted in operating earnings per share growth of 6.9%, which is the ninth consecutive year of operating earnings per share growth;2018 PROXY STATEMENT |
| — | | Maintained a strong balance sheet and capital position, which allowed the company to further invest in the growth of our businesses while also returning capital to shareholders through dividend increases and share repurchases; |
| — | | Effectively led the company’s operating committee and further deepened his involvement with our business segments at all levels; |
| — | | Strengthened the talent and effectiveness of the finance organization, as well as contributed to talent development efforts throughout the broader enterprise; and |
| — | | Further enhanced the company culture of high performance, disciplined execution and responsibility to all of our stakeholders |
COMPENSATION DISCUSSION AND ANALYSIS
through dividend increases and share repurchases. This financial flexibility also positions the company for future opportunities and challenges;
Continued his focus on the Closed Block which includes financial performance within expectations, internal actions to better position the business for the future, and representing the company effectively with external constituents as a very credible expert;
Has been an important contributor to our strategic assessment and actions. His effective balance of growth while managing a strong balance sheet is a critical element of our strategy; and
Worked closely with the Finance leadership team to drive change, strengthen talent and create a more efficient organization.
Given these accomplishments, the Committee applied an individual performance percentage of 110% for Mr. McGarry’s 2017 annual incentive award and 105% as the individual performance modifier for his long-term incentive award granted in March 2018.
Michael Q. Simonds
Executive Vice President, President and Chief Executive Officer, Unum US
In assessing Mr. Simonds’ performance for 2017, the Committee noted that he:
Led Unum US to very strong financial results that exceeded expectations, including record levels of before-tax adjusted operating income;
Delivered strong premium growth and solid sales results, while maintaining risk and pricing discipline. Premium growth was 3.9% and sales growth was 19.6%. Margins and return on equity remain at the very top of the industry;
Launched work in Unum US to drive operational improvement and an enhanced customer experience;
Has been a significant contributor to our strategic efforts. This includes effectively integrating our new dental acquisition, launching a new stop loss product, and identifying future opportunities for growth; and
Continued to focus on talent development across the enterprise including support for our diversity and inclusions efforts.
Given these accomplishments, the Committee applied an individual performance percentage of 120% for Mr.
McKenney’s 2014Simonds’ 2017 annual incentive
award. Hisaward and 115% as the individual performance modifier for his long-term incentive award granted in
February 2015 was set at $3 million, which represents a prorated target for the portion of the year that he will serve as Chief Executive Officer.March 2018.
Executive Vice President and Chief Investment Officer
In assessing Ms. Farrell’s performance for
2014,2017, the Committee noted that she:
Led the investment team to a very successful year in 2017 despite a difficult environment with very low interest rates;
Delivered results that exceeded all of our internal investment metrics;
Remained disciplined in credit selection. The overall quality of our portfolio is strong with minimal credit impacts during the year;
|
| — |
| 2018 PROXY STATEMENT | | Achieved solid results in a difficult long-term investment environment;57 |
| — | | Operating within the company’s risk tolerances, the Investment department maintained the strong overall credit quality of the portfolio; |
| — | | Continued to strengthen partnerships with our business segments to ensure the company’s investment strategy fully aligns with our business objectives; |
| — | | Strengthened the effectiveness of the Investment organization through an emphasis on talent development and succession planning; and |
| — | | Further leveraged her strong connections and respect throughout the investment community, adding to our knowledge and understanding of investment trends and outlooks. |
COMPENSATION DISCUSSION AND ANALYSIS
Continued to develop the investment team with good balance between the senior group and an impressive junior cohort; and
Brings an important perspective to the company’s change agenda.
Given these accomplishments, the Committee applied an individual performance percentage of 100% for Ms. Farrell’s
20142017 annual incentive award and 100% as the individual performance modifier for her long-term incentive award granted in
February 2015.
COMPENSATION DISCUSSION AND ANALYSIS
March 2018.
Michael Q. SimondsLisa G. IglesiasChief
Executive
Officer of Unum USVice President and General Counsel
In assessing
Mr. Simonds’Ms. Iglesias’ performance for
2014,2017, the Committee noted that
he: | — | | Led Unum US to strong financial results, achieving all of our goals despite a difficult interest rate environment; |
| — | | Delivered exceptional sales and solid premium growth. Unum US sales increased 21%, while premium earnings increased 3.2%; |
| — | | Aggressively promoted the importance of talent development across the enterprise, specifically in our efforts to attract and retain new talent, develop leadership from within the company and in our commitment to diversity; |
| — | | Effectively balanced near-term operating performance and results with long-term strategic planning, which positions Unum US for future success; and |
| — | | Expanded his outreach and effectiveness in his new role with a variety of outside stakeholders, including shareholders, customers, regulators and brokers. |
she:
Provided effective leadership for the legal department in the role of General Counsel;
Delivered strong performance as the legal team executed on a high volume of work including our expanded growth agenda;
Has been an important link to the Board and Governance Committee. Overall support and communication with the Board has been excellent;
Led organizational work in the department over the last few years that has created an effective team with a solid set of leaders; and
Set the early pace for our diversity and inclusion efforts as both an executive sponsor as well as with her community involvement.
Given these accomplishments, the Committee applied an individual performance percentage of
115%100% for
Mr. Simonds’ 2014Ms. Iglesias’ 2017 annual incentive award and
120%110% as the individual performance modifier for
hisher long-term incentive award granted in
February 2015.Randall C. Horn
Former Chief Executive Officer of Colonial Life (retired March 31, 2015)
In assessing Mr. Horn’s performance for 2014, the Committee noted that he:
| — | | Led Colonial Life to strong financial results. The Colonial Life business achieved all of its financial and operating goals for the year; |
| — | | Delivered exceptional sales and strong premium growth. Colonial Life sales increased a record 11.6%, while premium earnings increased 3.4%; |
| — | | Effectively executed a planned leadership transition in Colonial Life and positioned the company well for his retirement in 2015; |
| — | | Continued to develop strategic partnerships within the company to leverage enterprise capabilities and achieve operational efficiencies; and |
| — | | Represented both Colonial Life and the broader enterprise effectively with customers, brokers, the Columbia community and other key stakeholders. |
Given these accomplishments, the Committee applied an individual performance percentage of 120% for Mr. Horn’s 2014 annual incentive award. He did not receive a long-term incentive award in February 2015 due to his retirement on March 31, 2015.
Kevin P. McCarthy
Former Executive Vice President, Chief Operating Officer (retired March 31, 2014)
In assessing Mr. McCarthy’s performance for 2014, the Committee noted that he:
| — | | Set the foundation, in his role as Chief Operating Officer prior to his March 2014 retirement, for our strong operational results; |
COMPENSATION DISCUSSION AND ANALYSIS
| — | | Positioned the Unum US business for continued success through a successful leadership transition upon his retirement; |
| — | | Continued to represent the company with a variety of external constituents, including shareholders, customers, regulators and the communities where we have significant locations; |
| — | | Embedded the principles of disciplined growth and consistent execution through his long-term leadership of Unum US, positioning that business segment for ongoing success; and |
| — | | Provided strong leadership that produced steady and consistently strong results during his tenure in senior management. |
Given these accomplishments, the Committee applied an individual performance percentage of 125% for Mr. McCarthy’s 2014 annual incentive award. This modifier was applied to Mr. McCarthy’s eligible earnings for 2014 prior to his March 31, 2014 retirement. Because of his retirement in March 2014, he was not eligible for a long-term incentive award in February 2015.
2018.
Company Performance Targets
Each year, the Committee sets targets for several performance measures that are used to calculate annual and long-term incentive awards. Performance measures and their respective targets are established for the company as a whole as well as for each of our
principal operating business
units, and weightingssegments. Weightings are assigned to each performance measure based on its relative importance to the company or business
unit.segment.
For 2017, a change was made to move all employees (other than Investments) into a common plan, the Unum Group incentive plan. Nearly half of the employees were already in the Unum Group plan and incentivizing everyone on a common set of metrics fosters our collaborative environment. We increased the weighting of the sales metric from 10% to 15% given the importance to our overall growth plans and correspondingly reduced the weighting assigned to Operating ROE (from 20% to 15%).
The performance targets are aligned with the company’s primary business objectives:
Strong operational performance
Disciplined growth
Effective risk management
Consistent capital generation
COMPENSATION DISCUSSION AND ANALYSIS
The performance goals in our incentive plans are a direct output of our business plans which are approved by the Board each year.
The business plans and the associated metrics carefully balance the current performance of the business and the risk appetite of the enterprise with an appropriate amount of stretch designed to drive consistent growth and improvement. In addition, the Committee considered external economic factors including: (1) the overall economic growth rate, (2) employment and wage growth which impacts our overall premium levels, and (3) the interest rate and investment environment which can have a significant impact on our overall profit margins.
We set challenging business plans and performance measures to ensure that their achievement will drive long-term value for shareholders. In setting the business plans and performance metrics, a number of sensitivity tests are run to determine the possible upside and downside scenarios to the plan. These scenarios are reviewed to be certain we have the appropriate degree of rigor in the plan.
Once the performance measures are established, the incentive payout targets are set to appropriately align pay with performance.
Generally, the payout range for each annual incentive performance measure is set based on what is appropriate for the variability of the metric. The actual ranges for each performance metric can be determined from the table on page 60. The payout range for each metric in 2017 was 0 - 200% and the overall plan maximum payout was capped at 150%. In 2018, the Committee has decided to use 0 -150% as the payout range for each metric which eliminates the need for the additional payout cap.
The ROE performance measure is used under both our annual and long-term incentive plans. The Committee has concluded that ROE is one of the most important metrics for shareholders, over both a near-term and an extended timeframe. The Committee believes that using this metric in incentive plans that pay out over both one-year and three-year periods encourages executives to focus on both short- and long-term results. The Committee also believes that any risk of overemphasizing ROE in the annual and long-term incentive plans is avoided by assigning it only a 15% weighting for the annual incentive performance measure and by weighting it equally with another performance measure in the long-term incentive plan (in recent years, average after-tax adjusted operating earnings per share) with further adjustment based on relative TSR for PSUs awarded under our long-term incentive plan.
Our incentive plans are subject to an annual risk assessment by our chief risk officer, which is discussed with the Committee as described on page 35.
Incentive Funding Performance Requirement
Our annual and long-term incentive plans
do not pay out unlessare conditioned on the company
achievesachieving a specified level of performance. We apply an incentive funding performance requirement because we believe employees and officers should receive incentive awards only after our shareholders and creditors are paid. Additionally,
for PBRSUs and PSUs granted prior to 2018, the company
intendsintended that
meeting this incentive funding performance requirement
willwould allow the company to retain certain deductions in accordance with
the "qualified performance-based compensation" exemption to Section 162(m) of the Internal Revenue Code (the
“Code”"Code"). However,
the Committee retains discretion to payfor taxable years beginning after December 31, 2017, this exemption has been repealed for all but certain grandfathered compensation
arrangements that
were in effect as of November 2, 2017. The scope of relief for grandfathered arrangements is
not deductible under Section 162(m) of the Code, and it is possiblecurrently uncertain. As such, there can be no assurance that
any compensation
intended to qualify for exemption under Section 162(m) of the Code may not so qualify if all requirements for the “qualified performance-based compensation” exemption are not met.For 2014, theawarded in prior years will be fully tax deductible.
COMPENSATION DISCUSSION AND ANALYSIS
The Annual Incentive Plan specifies a performance requirement established by the Committee to fund the annual and long-term incentive plans wasof $250 million of statutory after-tax operating earnings which is more thanto fund the plan. At the time the plan was established, this was approximately enough to cover dividends to shareholders and after-tax interest on our recourse debt. For 2017, the Committee established the same performance requirement to fund grants under the long-term incentive plan. Funds used to attain the performance requirement wereare derived from statutory after-tax operating earnings and other sources of cash flow available from the company’s insurance and non-insurance subsidiaries.
The company successfully achieved the 2014 performance requirement for funding the 20142017 annual incentive awards and the long-term incentive grants made in February 2015. A portion ofMarch 2018.
While the
"qualified performance-based compensation" exception under Section 162(m) was eliminated in 2017, the Committee has reaffirmed our pay-for-performance alignment and determined that our annual and long-term incentive
granted for each NEO was convertedplans will continue to
be predicated upon the company achieving a specified level of performance. Therefore, in 2018, we will continue to use the performance
share units (PSUs), which will vest dependent upon achievementrequirement of
three-year (2015-2017) pre-established average$250 million of statutory after-tax operating earnings
per shareto fund our annual and
average return on equity goals, modified (up to +/-20%) based on Unum’s relative total shareholder return as described below.long-term incentive plans.
Depending on their role in the company,
our NEOs’the annual incentive awards
for our NEOs are tied in various ways to the performance of Unum Group and its business units. The annual incentive awards of
Messrs. Watjen,Mr. McKenney,
Mr. McGarry, Mr. Simonds and
McCarthyMs. Iglesias are based entirely on Unum Group
performance.performance though the individual goals for Mr. Simonds include financial goals related to his business unit. For Ms. Farrell, 25% of her award is based on Unum Group performance and 75% is based on
Investments performance. For Mr. Simonds, 25% of his award is based on
COMPENSATION DISCUSSION AND ANALYSIS
Unum Group performance and 75% is based on Unum US performance. For Mr. Horn, 25% of his award is based on Unum Group performance and 75% is based on Colonial LifeInvestment’s performance. The following table outlines thesethe targets for annual incentives awarded for 20142017 performance and how the company and business units performed against those targets in 2014.
2014 ANNUAL INCENTIVE AWARD PERFORMANCE TARGETS ($S/£S IN MILLIONS)
| | | | | | | | | | |
| |
Performance Measure | | Component
Weighting | | Threshold(1) | | Target | | Maximum | | Actual |
Unum Group | | | | | | | | | | |
| | | | | |
After-tax operating income(2) | | 40% | | $684.8 | | $913.1 | | $1,050.1 | | $910.4 |
| | | | | |
Business area composite(3) | | 40% | | 75.0% | | 100% | | 115% | | 105% |
| | | | | |
Return on equity(4) | | 20% | | 8.22% | | 10.96% | | 12.60% | | 11.40% |
Unum US | | | | | | | | | | |
| | | | | |
Before-tax operating income(5) | | 40% | | $615.4 | | $879.1 | | $1,054.9 | | $856.3 |
| | | | | |
Earned premium | | 20% | | $3,905.8 | | $4,595.1 | | $5,514.1 | | $4,659.7 |
| | | | | |
Sales | | 15% | | $600.3 | | $800.4 | | $1,120.6 | | $902.1 |
| | | | | |
Service(6) | | 15% | | 90% | | 100% | | 150% | | 106% |
| | | | | |
Operating expense ratio | | 10% | | 21.94% | | 19.94% | | 17.94% | | 20.30% |
Colonial Life | | | | | | | | | | |
| | | | | |
Before-tax operating income(5) | | 40% | | $203.0 | | $290.0 | | $348.0 | | $300.2 |
| | | | | |
Earned premium | | 20% | | $1,082.6 | | $1,273.6 | | $1,528.3 | | $1,273.7 |
| | | | | |
Sales | | 15% | | $289.5 | | $386.0 | | $540.4 | | $410.1 |
| | | | | |
Service(6) | | 15% | | 90% | | 100% | | 150% | | 102% |
| | | | | |
Operating expense ratio | | 10% | | 18.25% | | 16.25% | | 14.25% | | 16.60% |
Unum UK | | | | | | | | | | |
| | | | | |
Before-tax operating income(5) | | 40% | | £62.9 | | £89.8 | | £107.8 | | £89.8 |
| | | | | |
Earned premium | | 20% | | £304.5 | | £358.2 | | £429.8 | | £368.6 |
| | | | | |
Sales | | 15% | | £38.2 | | £50.9 | | £71.3 | | £51.9 |
| | | | | |
Service(6) | | 15% | | 90% | | 100% | | 150% | | 106% |
| | | | | |
Operating expense ratio | | 10% | | 22.91% | | 20.91% | | 18.91% | | 21.70% |
Investments | | | | | | | | | | |
| | | | | |
Net Investment Income(7) | | 50% | | $2,430.7 | | $2,555.7 | | $2,680.7 | | $2,540.6 |
| | | | | |
Avoided Losses(8) | | 25% | | ($100.0) | | $2.5 | | $150.0 | | $5.0 |
| | | | | |
Market Composite(9) | | 25% | | 83% | | 100% | | 175% | | 105% |
|
| | | | | |
| 2017 ANNUAL INCENTIVE AWARD PERFORMANCE TARGETS AND RESULTS ($s/£s IN MILLIONS) |
| Performance Measure | Component Weighting | Threshold(1) | Target | Maximum | Actual |
| Unum Group | | | | | |
After-tax adjusted operating income(2) | 35% | $688.8 | $918.4 | $1,056.2 | $976.2 |
Consolidated adjusted operating return on equity(3) | 15% | 8.22% | 10.95% | 12.60% | 11.6% |
Earned premium(4) | 15% | $6,355.2 | $7,476.7 | $8,972.1 | $7,467.9 |
| Sales | 15% | $1,248.4 | $1,664.6 | $2,330.4 | $1,734.6 |
Customer experience(5) | 10% | 270% | 300% | 450% | 307% |
Operating expense ratio(6) | 10% | 19.70% | 17.70% | 15.70% | 17.42% |
| Investments | | | | | |
Net investment income(7) | 50% | $2.299.6 | $2,424.6 | $2,549.6 | $2,454.3 |
Avoided losses(8) | 25% | $(100.0) | $7.4 | $150.0 | $14.9 |
Market composite(9) | 25% | 83% | 100% | 175% | 119.2% |
COMPENSATION DISCUSSION AND ANALYSIS
| (1) | For each performance measure, there is no payout at or below the threshold. For each performance measure, the payout would be 200% for performance at or above the maximum. However, the overall payout for the aggregate annual incentive plan is capped at 150% of target. For performance between defined levels, the payout is interpolated. |
COMPENSATION DISCUSSION AND ANALYSIS
| |
| (2) | After-tax adjusted operating income is defined as net income adjusted to exclude after-tax net realized investment gains or losses and after-tax non-operating retirement-related gains or losses and certain other items specified in the reconciliation of non-GAAP (generally accepted accounting principles) financial measures attached hereto as Appendix A. |
| |
| (3) | The business area composite component weighting for Unum Group includes a weighted average of the overall business unit incentive plan results (excluding before-taxConsolidated adjusted operating earnings which is already captured in both after-tax operating income and return on equity), weighted as follows: Unum US at 40%, Unum UK at 25%, Colonial Life at 25% and Investments at 10%. Performance for each business unit could be zero to a maximum of 150%. |
(4) | Return on equity is calculated by taking after-tax adjusted operating income and dividing it by the average of the beginning- and end-of-year stockholders’ equity adjusted to exclude the net unrealized gain or loss on securities and the net gain on cash flow hedges. |
(5) | Before-tax operating income |
| (4) | Earned premium is defined as net income adjusted to exclude net realized investment gains or losses, non-operating retirement-related gains or lossescalculated for our core operations (Unum US, Unum UK, and certain other items specified in the reconciliation of non-GAAP measures and income tax expense.Colonial Life). |
(6) | Service |
| (5) | Customer Experience is based on the averagequality of several service metrics for policyholders, producersour customers' experiences and claimants.includes measures which focus on areas that impact customer loyalty and satisfaction. |
| |
| (6) | The operating expense ratio is equal to operating expenses as a percentage of earned premium (or total company expense over total company earned premium) inclusive of Closed Block and the Corporate Segment. |
| |
| (7) | Net investment income reflects the impact of investment results on after-tax adjusted operating income. Net investment income excludes interest on policy loans, investment income on floating rate securities backing floating rate debt, investment income on index-linked securities which support claim reserves that provide for index-linked claim payments, variances to plan for asset levels and specified portions of miscellaneous net investment income, and includes investment income related to investments managed by Unum supporting reserves related to a block of individual disability business assumed through a modified coinsurance agreement. |
| |
| (8) | Avoided losses are calculated by multiplying an industry standard weighted default rate by Unum’s total credit exposure and comparing to Unum’s actual investment losses. |
| |
| (9) | Market composite consists of comparing the average of three targets: (1) credit spreads on purchases to a specified benchmark, (2) yields on purchases to a specified benchmark, and (3) realized investment losses to a specified peer group. |
Each performance target has been selected because the Committee believes it is an appropriate driver of long-term shareholder value:
|
| — | |
| Incentive Metric | | ThePurpose |
● Sales ● Earned Premium | ð | ● Measures growth and competitiveness of the company are measured using sales and earned premium targets;business |
● After-Tax Adjusted Operating Income ● Net Investment Income for Investments | —ð | ● Measures profitability achievement |
●Operating Return on Equity | Profitability achievement is measured using after-tax operating income for Unum Group and pre-tax operating income for Unum US, Colonial Life and Unum UK; |
| ð | — | | The balance● Measures effectiveness of balancing profitability and capital management effectiveness is measured using return on equity; andpriorities |
● Customer Experience ● Adjusted Operating Expense Ratio | —ð | | Effective● Measures effective and efficient customer service is measured using the service and operating expense ratio targets. |
A business area composite performance measure is included in Unum Group’s annual incentive targets to better align our corporate staff functions, which provide support to each of our business units, with the results generated in those units.
Long-Term Incentive Targets
The achievement of a corporate performance threshold must be met before any award may be granted under the company’s long-term incentive program, as described on page
48.59. All of our NEOs received a portion of the long-term incentive grant in February 2014March 2017 in the form of PSUs.Performance Share Units (PSUs). The PSUs will vest based on the achievement of three-year, prospective (2014-2016)(2017-2019) average adjusted operating earnings per share and average adjusted operating return on equity goals, and the achievement will be modified (up to +/-20%) based on linear interpolation on our total shareholder return (TSR) relative to 9eight members of our Proxy"PSU Peer Group." These 9eight companies (Aflac, Assurant, Hartford Financial Services, Lincoln Financial, MetLife, Principal Financial, Prudential Financial, Stancorp,Torchmark and Torchmark)Voya Financial) were selected because they are considered to be direct business competitors of Unum. The group previously included Protective Life, which was removed becauseUnum (see discussion beginning on page 53 for the differences between our Proxy Peer Group and PSU Peer Group). We believe it is no longer a public company.appropriate to modify these awards based on relative TSR performance, since Unum’s individual TSR performance directly affects the value of the equity awards. The table below
COMPENSATION DISCUSSION AND ANALYSIS
outlines the three-year performance targets established by the Committee for the PSU grants made in
February 2014.
COMPENSATION DISCUSSION AND ANALYSIS
TARGETS FOR PERFORMANCE SHARE UNITS GRANTED IN 2014
| | | | | | | | | | |
Corporate Performance Factors | | Driver of Shareholder Value | | Component Weighting | | Threshold | | Target | | Maximum |
Average 3-year return on equity (2014-2016) | | Capital Management Effectiveness | | 50% | | 8.56% | | 11.41% | | 13.12% |
Average 3-year after-tax EPS (2014-2016) | | Profitability | | 50% | | $2.87 | | $3.82 | | $4.40 |
Relative Total Shareholder Return | | Modifier
Percentile | | -20% @
35th | | 0 @
50th | | +20% @
75th |
March 2017.
|
| | | | | |
| TARGETS FOR PERFORMANCE SHARE UNITS (PSUs) GRANTED IN 2017 |
Corporate Performance Factors | Driver of Shareholder Value | Component Weighting | Threshold | Target | Maximum |
| Average 3-year Adjusted Operating Return on Equity (2017-2019) | Capital Management Effectiveness | 50% | 8.10% | 10.80% | 12.42% |
Average 3-year After-Tax Adjusted Operating EPS (2017-2019) | Profitability | 50% | $3.22 | $4.30 | $4.95 |
| Relative Total Shareholder Return | Modifier Percentile | -20% @
35th | 0 @ 50th | +20% @ 75th |
Items Excluded When Determining Company Performance
When settingpre-establishing the performance measures and weightings for 2014,2017, the Committee determined that the effect of certain items not included in the 20142017 financial plan would be excluded from the calculation of the company’s performance, for purposes of both the annual and long-term incentive plans, should they occur. These criteria are the same ones that we used in 2016 and the Committee has also approved them for use in the 2018 plans as well. These items are:
Unplanned adjustments resulting from accounting policy changes, legal, tax or regulatory rule or law changes;
The impact of any unplanned acquisitions, divestitures, or block reinsurance transactions;
Unplanned adjustments to the Closed Block of business;
The effect of any unplanned regulatory, legal, or tax settlements;
The effect of unplanned changes to strategic asset allocation;
Unplanned debt issuance, repurchasing or retirement; or stock repurchase or issuance;
The effect of differences between actual currency exchange rates versus exchange rates assumed in the financial plan;
Unplanned fees or assessments, including tax assessments, from new legislation; and
The effect on revenue from unplanned variances from floating rate securities and index-linked securities.
In addition to the above, the Committee also approved the exclusion of the following items for the 2018 plans:
The effect of market value adjustments in Net Investment Income; and
For the Investment plan only, the effect of lost income from bond calls.
The Committee believes it is appropriate to exclude these items because
theythey: (1) are unusual or infrequent in nature,
(2) do not directly reflect company or management performance, or
(3) could serve as a disincentive to
capital management or other decisions which are in the best interest of the company and shareholders.
These items were:
|
| — |
| 62 | | Unplanned adjustments resulting from accounting policy changes, legal or regulatory rule or law changes;2018 PROXY STATEMENT |
| — | | The impact of any unplanned acquisitions, divestitures, or block reinsurance transactions; |
| — | | Unplanned adjustments to the Closed Block of business; |
| — | | The effect of any unplanned regulatory, legal or tax settlements; |
| — | | The effect of unplanned changes to strategic asset allocation; |
| — | | Unplanned debt issuance, repurchasing or retirement; or stock repurchase or issuance; |
| — | | The effect of differences between actual currency exchange rates versus exchange rates assumed in the financial plan; |
| — | | Unplanned fees or assessments, including tax assessments, from new legislation; and |
| — | | The effect on revenue from unplanned variances from floating rate securities and index-linked securities. |
COMPENSATION DISCUSSION AND ANALYSIS
Applying these criteria, the Committee adjusted
targetsthe annual incentive plan performance calculations for the impact of the following
threeseven items on our
20142017 financial results that were not included in the
20142017 financial plan from which the targets were initially derived:
| — | | The effect of differences between actual stock repurchase versus the amount assumed in the financial plan; |
| — | | The effect of differences between actual foreign currency rates versus exchange rates assumed in the financial plan; and |
| — | | The after-tax charge of $453.8 million, which was taken after a review of the long term care business. |
The effect of revaluation of the net deferred tax liability as a result of tax reform (impact to earnings and equity);
The effect of increased sales resulting from an update to the New York disability law for paid family leave (this reduced the sales performance achievement);
The effect of unplanned acquisition expenses, the majority of which were related to Pramerica Życie TUiR SA (impact to earnings, operating expense ratio, and equity);
The effect of a reserve increase related to the settlement with a third party regarding unclaimed death benefits (UDB) (impact to earnings and equity);
The effect of differences between actual stock repurchases and the amount assumed in the financial plan (actual repurchases were slightly higher than plan and the impact was immaterial);
The effect of differences between actual foreign currency rates and the exchange rates assumed in the financial plan; and
The impact of a loss from a guaranty fund assessment (impact to earnings and equity).
As outlined above, the overall positive impact due to tax reform was removed from our 2017 annual incentive plan results. Expected changes due to tax reform have been built into our 2018 annual incentive plan targets.
Each year, the Committee
also undertakes an overall assessment of the results while also maintaining the discretion to make final adjustments. Any adjustments are based on a review of the actual achievement for each performance measure compared to the
annual incentive targets listed on page
49,60, as well as a qualitative assessment of results. For
2014,2017, the Committee
also made
minor adjustments to each business unit’s performance based on a numberan adjustment in consideration for the impact of
qualitative considerations that slightlyan individual disability income (IDI) reserve release which reduced the aggregate annual incentive payout
(by less than 1%)by approximately 3%. The resulting annual incentive plan achievement levels for
2014 and their comparison to the previous year2017 are shown in the
accompanying table.table below.The achievement levels for 2017 were used in calculations for annual incentive awards described in the "Compensation Decisions" section below.
|
| | |
| ANNUAL INCENTIVE PLAN ACHIEVEMENT LEVELS |
2015 PROXY STATEMENT Plan | 2017 | 51
|
| Unum Group | 120 | % |
| Investments | 118 | % |
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | | | | | |
The resulting plan achievement levels for 2014 were used in calculations for annual incentive awards described in the “Compensation Decisions” section below. Compensation Decisions Annual Base Salary | | PLAN ACHIEVEMENT LEVELS | |
| Plan | | | 2014 | | | | 2013 | |
| Unum Group | | | 103% | | | | 111% | |
| Unum US | | | 103% | | | | 103% | |
| Unum UK | | | 103% | | | | 110% | |
| Colonial Life | | | 108% | | | | 105% | |
| Investments | | | 99% | | | | 109% | |
Compensation Decisions
Annual Base Salary
Salaries for our NEOs are established based on their position, skills, experience, responsibility, and performance. Competitiveness of salary levels is assessed annually relative to the approximate median of salaries in the marketplace using the sources noted above beginning on page 4352 for similar executive positions. Increases may be considered for factors such as changes in responsibilities, individual performance, and/or
COMPENSATION DISCUSSION AND ANALYSIS
changes in the competitive marketplace.
At its February 2014 meeting, In early 2017, the Committee approved base salary increases for NEOs as outlined in the following changes to base salaries for NEOs, effective March 1, 2014: Mr. Watjen $1,150,000 (an increase of 2.5%); Mr. McKenney $715,000 (an increase of 2.1%); Ms. Farrell $435,625 (an increase of 2.5%); Mr. Simonds $525,000 (an increase of 16.7% as a result of taking on the additional duties of CEO, Unum US); and Mr. Horn $515,000 (an increase of 3.0%). Mr. McCarthy was not given an increase due to his retirement on March 31, 2014.table. For a discussion of 20152018 salary adjustments, see “2015"2018 Compensation Decisions”Decisions" beginning on page 56.
69.
|
| | | |
| 2017 ANNUAL BASE SALARY DECISIONS |
| Name | 2017 | 2016 | Change |
| Mr. McKenney | $1,000,000 | $1,000,000 | – |
| Mr. McGarry | 630,000 | 600,000 | +5.0% |
| Mr. Simonds | 615,000 | 600,000 | +2.5% |
| Ms. Farrell | 460,000 | 453,000 | +1.5% |
| Ms. Iglesias | 505,000 | 495,000 | +2.0% |
Setting Incentive Targets
For purposes of determining the amount of annual incentive and long-term incentive awards for our NEOs, the Committee establishes a target amount as a percentage of each executive’s salary, except that the long-term incentive target is set as an absolute dollar amount for the CEO. In establishing
theeach target
for 2017 awards, the Committee considered market data from the appropriate peer group as well as each individual’s target relative to other NEOs, given their respective levels of responsibility.
Mr. Watjen’s In early 2017, the Committee approved annual and long-term incentive targetstarget award values for 2013 were subject to adjustment based uponeach NEO as outlined in the company’s 1- and 3-year TSRs at year-end relative to peer companies. If the company’s TSRs exceeded the medians of the comparable TSRs of the Proxy Peer Group, his annual and long-term incentive targets would be 200% and $6 million, respectively. If the company’s TSRs did not exceed the medians of the comparable TSRs of the Proxy Peer Group, his annual and long-term incentive targets would be 150% and $5 million, respectively.
As previously reported in our 2014 proxy statement, based on its February 2014 review of Proxy Peer Group data provided by its consultant, the Committee set Mr. Watjen’s annual incentive target for 2014 at 200% and his long-term incentive target at $6 million and determined that these targets will no longer be subject to adjustment. These decisions were based on consideration of the following:
tables below. |
| | | |
| 2017 ANNUAL INCENTIVE TARGET DECISIONS |
| Name | 2017 | 2016 | Change |
| Mr. McKenney | 175% | 175% | – |
| Mr. McGarry | 100% | 100% | – |
| Mr. Simonds | 90% | 90% | – |
| Ms. Farrell | 120% | 120% | – |
| Ms. Iglesias | 75% | 75% | – |
|
| | | |
| 2017 LONG-TERM INCENTIVE TARGET DECISIONS |
| Name | 2017 | 2016 | Change |
| Mr. McKenney | $5,500,000 | $5,250,000 | +4.8% |
| Mr. McGarry | 175% | 150% | +25 pts |
| Mr. Simonds | 160% | 150% | +10 pts |
| Ms. Farrell | 110% | 100% | +10 pts |
| Ms. Iglesias | 125% | 125% | – |
| — | | The competitiveness of Mr. Watjen’s compensation: |
o The Committee’s philosophy is to target the approximate median of peers. The new targets resulted in Mr. Watjen’s targeted total compensation approximating the median.
| — | | At the time the relative TSR hurdles were added, there was no TSR component in Mr. Watjen’s compensation. However, 50% of his long-term incentive award is paid in the form of PSUs, which are tied to three-year pre-established performance goals with a relative TSR modifier. Thus a significant portion of Mr. Watjen’s compensation is now dependent on the company’s financial performance and the company’s stock price; |
| | |
| |
5264 | | 20152018 PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS
| — | | Mr. Watjen’s consistent performance over the past several years, especially during a difficult financial environment; and |
| — | | Mr. Watjen’s continued leadership, which the Committee believes will continue to position the company to achieve its long-term goals. |
Our annual incentive awards reward performance based on the achievement of both company and individual performance, which the Committee believes aligns compensation with the objectives of shareholders. The Annual Incentive Plan, under which
20142017 annual incentive awards were granted, includes:
| — | | Eligibility for all non-sales employees to receive an annual incentive; |
| — | | An Executive Officer Incentive Plan in which our NEOs participate; and |
| — | | An objective performance threshold of $250 million of statutory after-tax operating earnings and other sources of cash flow available from the company’s insurance and non-insurance subsidiaries for the fiscal performance year that provides funding for incentive payments. This goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are paid. |
Eligibility for all non-sales employees to receive an annual incentive;
An Executive Officer Incentive Plan in which our NEOs participate; and
An objective performance threshold of $250 million of statutory after-tax operating earnings and other sources of cash flow available from the company’s insurance and non-insurance subsidiaries for the fiscal performance year that provides funding for incentive payments. This goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are paid.
The decision making process to determine
20142017 annual incentive awards was as follows:
| |
| (1) | The Committee exercises discretion as to the final percentage considering all performance factors, including, but not limited to, the quality of financial results. For details on adjustments for 2014,2017, see page 51.62. |
| |
| (2) | Individual performance may range from 0% to 125%. |
Once it was determined that the performance threshold had been met for
2014,2017, specific awards for our NEOs were arrived at by:
| — | | Determining the individual annual incentive targets, which had been set in early 2014 as a percentage of each individual’s base salary; |
| — | | Calculating company and business unit performance percentages by comparing actual results to the performance targets listed on page 49 (the Committee may also take into account other factors, including economic considerations as well as non-financial goals); |
| — | | Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 44; and |
COMPENSATION DISCUSSION AND ANALYSIS
| — | | Multiplying company and business unit performance by individual performance and the NEO’s annual incentive target. The “qualified performance-based compensation” exemption under Section 162(m) of the Code requires that a maximum individual award be established. The maximum award that an individual may receive under the Annual Incentive Plan is $8 million. |
Applying the individual annual incentive targets, which had been set in early 2017, to each individual’s base salary;
Calculating company and business unit performance percentages by comparing actual results to the performance targets described beginning on page 58 (the Committee may also take into account other factors, including economic considerations as well as non-financial goals);
Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 55; and
Multiplying company and business unit performance by individual performance and the NEO’s annual incentive target.
The table below
describessets forth the target incentive and the actual annual incentive awards approved by the Committee to our NEOs for
20142017 performance. For a discussion of
20152018 annual incentive award targets, see
“2015"2018 Compensation
Decisions”Decisions" beginning on page
56. ANNUAL INCENTIVE PAID IN 2015 (for 2014 performance)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Executive | | 2014
Incentive
Target
(%) | | | | | Eligible
Earnings(5)
($) | | | | | | Company
Performance
(%) | | | | | Individual
Performance
(%) | | | | | 2014 Annual Incentive Paid ($) | |
Mr. Watjen(1) | | 200% | | | X | | | $ | 1,145,154 | | | | X | | | 103.0% | | | X | | | 100% | | | = | | | $ | 2,359,017 | |
Mr. McKenney(1) | | 100% | | | X | | | | 712,404 | | | | X | | | 103.0% | | | X | | | 120% | | | = | | | | 880,531 | |
Ms. Farrell(2) | | 120% | | | X | | | | 433,786 | | | | X | | | 100.0% | | | X | | | 100% | | | = | | | | 520,543 | |
Mr. Simonds(3) | | 90% | | | X | | | | 512,019 | | | | X | | | 103.0% | | | X | | | 115% | | | = | | | | 545,838 | |
Mr. Horn(4) | | 80% | | | X | | | | 512,404 | | | | X | | | 106.75% | | | X | | | 120% | | | = | | | | 525,112 | |
Mr. McCarthy(1) | | 100% | | | X | | | | 159,923 | | | | X | | | 103.0% | | | X | | | 125% | | | = | | | | 205,901 | |
COMPENSATION DISCUSSION AND ANALYSIS
|
| | | | | | | | | |
| ANNUAL INCENTIVE PAID IN 2018 | (for 2017 performance) |
| Executive | 2017 Incentive Target (%) | | Eligible Earnings ($) | | Company Performance (%) | | Individual Performance (%) | | 2017 Annual Incentive Paid ($) |
Mr. McKenney(1) | 175% | X | 1,000,000 | X | 120% | X | 115% | = | 2,415,000 |
Mr. McGarry(1) | 100% | X | 623,077 | X | 120% | X | 110% | = | 822,462 |
Mr. Simonds(1) | 90% | X | 611,538 | X | 120% | X | 120% | = | 792,554 |
Ms. Farrell(2) | 120% | X | 458,385 | X | 118.5% | X | 100% | = | 651,822 |
Ms. Iglesias(1) | 75% | X | 502,692 | X | 120% | X | 100% | = | 452,423 |
| |
| (1) | Company performance for Messrs. Watjen, McKenney, McGarry and McCarthySimonds and Ms. Iglesias was weighted 100% based on Unum Group achievement of 103%.performance. |
| |
| (2) | Company performance for Ms. Farrell was weighted with 75% based on Investments and 25% based on Unum Group performance. Investments achievement was 99%118% and Unum Group achievement was 103%120%, which when weighted, resultedresulting in anoverall achievement of 100%118.5%. |
(3) | Company performance for Mr. Simonds was weighted with 75% based on Unum US and 25% based on Unum Group performance. Both Unum US achievement and Unum Group achievement were 103%. |
(4) | Company performance for Mr. Horn was weighted with 75% based on Colonial Life and 25% based on Unum Group performance. Colonial Life achievement was 108% and Unum Group achievement was 103%, which when weighted, resulted in an achievement of 106.75%. |
(5) | Eligible earnings differed from the annual salary amounts discussed above because the 2014 increases, if any, became effective on March 1, 2014. Mr. McCarthy’s eligible earnings reflect his salary actually paid prior to his retirement on March 31, 2014. |
Long-Term Incentive Awards
Granted in 2017
Our long-term incentive plan aligns the long-term interests of management and shareholders by tying a substantial portion of executive compensation directly to the company’s stock price. For awards grantedThe grants to the NEOs in 2014,March 2017 were based on the Committee’s March 2017 assessment of their performance for the prior year.
The mix of
the CEO’s awardawards for each NEO was 50% performance-based restricted stock units (PBRSUs) and 50% performance share units (PSUs)
, while other NEOs received 75%. PBRSUs
and 25% PSUs. | — | | PBRSUs were awarded in 2014 based on the achievement of an after-tax statutory earnings threshold for 2013 (as described in page 48) as modified by individual achievement factors. They vest ratably over three years. |
were awarded in 2017 based on the achievement of an after-tax statutory earnings threshold for 2016, as modified by individual achievement factors for 2016. They vest ratably over three years.
PSUs granted in
20142017 vest based upon the achievement of three-year
(2014-2016)(2017-2019) pre-established average
adjusted operating earnings per share and average
adjusted operating return on equity goals, modified (up to +/-20%) based on Unum’s relative total shareholder return as described
above. Beginning withon page 61. Assuming performance above the
February 2015 grant, all NEOs will receive 50% PBRSUs and 50% PSUs.threshold, PSUs can be
earnedpaid out at
between 40% to 180% of target.
COMPENSATION DISCUSSION AND ANALYSIS
All long-term incentive awards
arein 2017 were granted under the Stock Incentive Plan of
2012.2017. Our long-term incentive award mix is based on a review of peer practices as well as what the Committee believes most appropriately retains and rewards our NEOs and ensures that a significant portion of each executive’s compensation is tied to the increase of our stock price over the long-term.
PBRSUs, which are valued in terms of company stock, do not include any actual stock issued at the time of grant. Instead, company stock is issued only when the grant is settled. During the restricted period,
dividends are not paid in the form of cash but rather additional PBRSUs that are settleddividend equivalents accrue and vest only when and to the extent that the underlying PBRSUs vest. In addition, there are no shareholder voting rights unless and until the award is settled in shares.
PSUs are notional units that will track the value of our share price over the three-year performance period, and will vest
and be settled through the issuance of shares based upon the achievement of
the predetermined performance metrics. Dividend equivalents accrue during the three-year performance period and will vest only when and to the extent that the underlying
sharesPSUs vest.
COMPENSATION DISCUSSION AND ANALYSIS
The decision-making process to determine long-term incentive awards granted in
February 2014March 2017 was as follows:
| |
| (1) | Individual performance may range from 0% to 125%. |
As outlined in the
previous diagram,
above, once it was determined that the performance threshold had been met, the total value of the long-term incentive awards for our NEOs were determined by:
| — | | Determining the individual long-term incentive targets, which were set in early 2013 by considering the market data from the appropriate comparator group (as described beginning on page 43) as well as each individual’s target relative to other NEOs, given their respective levels of responsibility. The long-term incentive targets are set as a dollar amount for Mr. Watjen and as a percentage of base salary for other NEOs. |
| — | | Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 44; and |
| — | | Multiplying each NEO’s long-term incentive target by his or her individual performance. The maximum award that each NEO could receive for 2014 grants was 300% of target. |
Applying the individual long-term incentive targets, which were set in early 2016 by considering the market data from the appropriate comparator group (as described beginning on page 52) as well as each individual’s target relative to other NEOs, given their respective levels of responsibility, to each individual’s base salary, except that, the long-term incentive target is set as a dollar amount for Mr. McKenney;
Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 55 (for a discussion of the individual NEO performance assessments for 2016 that determined the individual performance percentage for these 2017 grants, see page 50 of our 2017 Proxy Statement); and
Multiplying each NEO’s long-term incentive target by his or her individual performance percentage.
Once the long-term incentive award value was determined, it was
deliveredawarded as described below:
| — | | The CEO’s 2014 long-term incentive award was divided evenly between PBRSUs (50%) and PSUs (50%); |
| — | | The 2014 long-term incentive awards for all other NEOs were granted as 75% PBRSUs and 25% PSUs; and |
| — | | The PBRSU awards vest based on each NEO’s continued service over a three-year period. The PSUs vest based on the achievement of three-year pre-established goals (2014-2016) for return on equity and earnings per share, modified by relative total shareholder return as described above. |
COMPENSATION DISCUSSION AND ANALYSIS
The 2017 long-term incentive award was divided evenly between PBRSUs (50%) and PSUs (50%) for each NEO; and
The PBRSUs vest based on each NEO’s continued service over a three-year period. The PSUs vest based on the achievement of three-year pre-established goals (2017-2019) for average adjusted operating return on equity and average adjusted operating earnings per share, modified by relative total shareholder return as previously described.
In
February 2014,March 2017, the Committee approved grants of PBRSUs and PSUs for the NEOs as outlined below. For a discussion of
20152018 long-term incentive award targets, see
“2015"2018 Compensation
Decisions”Decisions" below.
| | | | | | | | | | | | | | | | | | |
LONG-TERM INCENTIVE GRANTED IN 2014 | |
Executive | | Long-Term
Incentive
Target | | | | | | Individual
Performance | | | | | 2013 Long-Term
Incentive Granted(2) | |
| | | | | |
Mr. Watjen(1) | | | $5,000,000 | | | | X | | | 118% | | | = | | | | $5,900,000 | |
| | | | | |
Mr. McKenney | | | 1,400,000 | | | | X | | | 120% | | | = | | | | 1,680,000 | |
| | | | | |
Ms. Farrell | | | 425,000 | | | | X | | | 105% | | | = | | | | 446,250 | |
| | | | | |
Mr. Simonds | | | 506,250 | | | | X | | | 120% | | | = | | | | 607,500 | |
| | | | | |
Mr. Horn | | | 500,000 | | | | X | | | 110% | | | = | | | | 550,000 | |
| | | | | |
Mr. McCarthy | | | 1,260,000 | | | | X | | | 125% | | | = | | | | 1,575,000 | |
COMPENSATION DISCUSSION AND ANALYSIS
|
| | | | | |
| LONG-TERM INCENTIVE GRANTED IN 2017 | (for 2016 Performance) |
| Executive | Long-Term Incentive Target | | Individual Performance | | 2017 Long-Term Incentive Grant(2) |
Mr. McKenney(1) | $5,250,000 | X | 105% | = | $5,512,500 |
| Mr. McGarry | 900,000 | X | 111% | = | $1,000,000 |
| Mr. Simonds | 900,000 | X | 111% | = | $1,000,000 |
| Ms. Farrell | 453,000 | X | 105% | = | $475,650 |
| Ms. Iglesias | 618,750 | X | 100% | = | $618,750 |
| |
| (1) | Mr. Watjen’sMcKenney’s target iswas set as a dollar amount, vs.rather than as a percentage of salary as for the other NEOs. |
| |
| (2) | The 2013 long-term incentive was granted in February 2014. The grant date fair value of the long-term incentive grant (as reported in the Summary Compensation Table on page 64 differs slightly76) was calculated based on the rounding of shares andMonte Carlo PSU valuation. The long-term incentive granted in March 2017 was calculated based on the valuationclosing stock price of the PSUs based on a Monte Carlo valuation:grant date. |
| | | | | | | | | | |
| Executive | | Grant Date Fair Value | | | Performance Share
Units Granted (Feb. 2014) | | Restricted Stock Units
Granted (Feb. 2014) | | |
Mr. Watjen | | $ | 5,900,003 | | | 87,123 | | 87,124 | | |
Mr. McKenney | | | 1,679,999 | | | 12,404 | | 37,212 | | |
Ms. Farrell | | | 446,257 | | | 3,295 | | 9,884 | | |
Mr. Simonds | | | 607,487 | | | 4,485 | | 13,456 | | |
Ms. Horn | | | 550,005 | | | 4,061 | | 12,183 | | |
Mr. McCarthy | | | 1,575,008 | | | 11,629 | | 34,886 | | |
Of the 50% portion
|
| | | |
| Executive | Grant Date Fair Market Value | Performance Share Units Granted (Mar. 2017) | Restricted Stock Units Granted (Mar. 2017) |
| Mr. McKenney | $5,499,957 | 55,154 | 55,154 |
| Mr. McGarry | 999,992 | 10,028 | 10,028 |
| Mr. Simonds | 999,992 | 10,028 | 10,028 |
| Ms. Farrell | 475,664 | 4,770 | 4,770 |
| Ms. Iglesias | 618,763 | 6,205 | 6,205 |
Vesting of Mr. Watjen’s2015 Performance Share Units (PSUs)
The long-term incentive awardmix for our NEOs' 2015 awards included 50% in the form of PSUs, which vested based on performance over a three-year performance period that ended on December 31, 2017.
The table below provides an overview of the three-year goals for the 2015 PSU grant as well as their actual achievement levels.
|
| | | | | |
| 2015 PERFORMANCE SHARE UNIT (PSU) AWARDS |
| Corporate Performance Factors | Component Weighting | Threshold | Target | Maximum | Actual |
| Average 3-year Adjusted Operating Return on Equity (2015-2017) | 50% | 8.12% | 10.83% | 12.45% | 11.33% |
| Average 3-year After-Tax Adjusted Operating EPS (2015-2017) | 50% | $2.82 | $3.76 | $4.33 | $3.93 |
| Relative Total Shareholder Return | Modifier Percentile | -20% @ 35th | 0 @ 50th | +20% @ 75th | @ 87.5th |
Based on the above performance, and after taking into account the factors described below, in February 2018, the Committee certified the results for this grant and approved a payout. The business goals were achieved at 115.1%, with relative TSR at the 87.5th percentile which resulted in a 20% increase for a final payout of 138.1%.
COMPENSATION DISCUSSION AND ANALYSIS
When setting the performance measures and weightings for the 2015 PSU grant, the Committee determined that certain items not included in the financial plan for fiscal years 2015 to 2017 would be excluded from the calculation of the company’s performance, for purposes of the performance share units, should they occur. The list of items is the same list used for our annual incentive plan, the details of which can be found under "Items Excluded When Determining Company Performance," beginning on page 62.
Applying these criteria, the Committee adjusted targets for the impact of the following nine items that were not included in the financial plans from which the targets were initially derived:
The effect of unplanned debt issuance; favorable conditions in debt markets allowed us to accelerate debt issuance that was paid in PBRSUs, 50% will be settled inplanned for the future which was an advantage to shareholders;
The effect of revaluation of the net deferred tax liability as a result of tax reform;
The effect of unplanned acquisition expenses and operating earnings related to Starmount Life Insurance Company, National Dental Plan Limited and associated companies, Pramerica Życie TUiR SA and other acquisition expenses;
The effect of a reserve increase related to the settlement with a third party regarding unclaimed death benefits (UDB);
The effect of a change to the presentation of the Company's prior period adjusted operating earnings as a result of the inclusion of amortization of prior period actuarial gains or losses, a component of net periodic benefit cost for our pension and other postretirement benefit plans;
The effect of an unplanned reinsurance treaty;
The impact of a loss from a guaranty fund assessment;
The effect of differences between actual stock repurchases and 50% will be settled in cash upon vesting. This change was made in February 2010 by the Committee to reflect the fact that Mr. Watjen had a very significant ownership positionamount assumed in the companyfinancial plan; and it was
The effect of differences between actual foreign currency rates and the exchange rates assumed in the best interestfinancial plan.
The Committee elected to make an additional adjustment in consideration of the
companyIDI reserve release which reduced the payout calculation from 139.9% to
reduce the amount of additional equity issued.2015138.1%.
2018 Compensation Decisions
At its February
20152018 meeting,
after consideration of company and individual performance during 2017, each executive’s responsibilities, tenure and market data, the Committee made decisions with respect to our NEOs’ base salaries
as well asand annual and long-term incentive targets for
each of the NEOs for 20152018 as outlined below.
After consideration The decisions also reflect the continued execution of companya multi-year program for all newly-promoted executives to adjust their pay to full competitive norms as performance and individual performance during 2014, each executive’s responsibilities, tenure and market data,experience in the Committee approved the following base salaries for the NEOs effective March 1, 2015: Ms. Farrell $446,500 (an increase of 2.5%); and Mr. Simonds $575,000 (an increase of 9.52%); Messrs. Horn and Watjen were not given increases due to their retirement/anticipated retirement on March 31, 2015 and May 21, 2015, respectively. job grows.
COMPENSATION DISCUSSION AND ANALYSIS
|
| | | |
| 2018 ANNUAL BASE SALARY DECISIONS |
| Name | 2018 | 2017 | Change |
| Mr. McKenney | $1,000,000 | $1,000,000 | – |
| Mr. McGarry | 630,000 | 630,000 | – |
| Mr. Simonds | 630,375 | 615,000 | +2.5% |
| Ms. Farrell | 460,000 | 460,000 | – |
| Ms. Iglesias | 525,200 | 505,000 | +4.0% |
The base salary increases noted above, other than Mr. Simonds, whose increase is partially related to a market driven adjustment, were approved in recognition of theireach NEO’s individual performance in 2014. The Committee believes that these increases positioned all2017 as well as consideration of our NEOs targeted TDC within an appropriate range oftheir comparison to market median given each executive’s performancebenchmarks.
Annual and
time in the their current position.As previously reported on a Form 8-K dated January 30, 2015, Mr. McKenney’s salary was set at $975,000 (an increase of 36%) effective April 1, 2015 when he assumed the role of President.
COMPENSATION DISCUSSION AND ANALYSIS
Annuallong-term incentive targets were set based on consideration of each NEO’s current target, the approximate median of the appropriate comparator group, and each individual’s target relative to other NEOs given their respective levels of responsibility.
|
| | | |
| 2018 ANNUAL INCENTIVE TARGET DECISIONS |
| Name | 2018 | 2017 | Change |
| Mr. McKenney | 200% | 175% | +25 pts |
| Mr. McGarry | 110% | 100% | +10 pts |
| Mr. Simonds | 100% | 90% | +10 pts |
| Ms. Farrell | 120% | 120% | – |
| Ms. Iglesias | 90% | 75% | +15 pts |
|
| | | |
| 2018 LONG-TERM INCENTIVE TARGET DECISIONS |
| Name | 2018 | 2017 | Change |
| Mr. McKenney | $6,500,000 | $5,500,000 | +18.2% |
| Mr. McGarry | 200% | 175% | +25 pts |
| Mr. Simonds | 175% | 160% | +15 pts |
| Ms. Farrell | 110% | 110% | – |
| Ms. Iglesias | 130% | 125% | +5 pts |
The
2015 annual incentive targets were set as follows: Mr. Watjen 200% (no change); Mr. McKenney 100% forCommittee believes the
period2018 compensation decisions position all of
January – March 2015 and 175% effective April 1, 2015 when he assumed the role of President; Ms. Farrell 120% (no change); Mr. Simonds 90% (no change) and Mr. Horn 80% (no change). In accordance with the termsour NEOs’ targeted total direct compensation within an appropriate range of the
Annual Incentive Plan and Mr. Watjen’s employment agreement, Messrs. Horn and Watjen will be eligible for a prorated payout for 2015 based on their retirement dates of March 31, 2015 and May 21, 2015, respectively.Long-term incentive (LTI) targets for 2015 were set as follows: Mr. McKenney $5 million (pro-rated at $3 million for the 2015 grant), effective April 1, 2015 when he assumed the role of President; Ms. Farrell 100% (no change); and Mr. Simonds 150% (no change). No 2015 LTI targets were established for Mr. Hornmarket median given his retirement on March 31, 2015 or for Mr. Watjen for his anticipated retirement on May 21, 2015.
Mr. Horn retired from Unum on March 31, 2015. Our stock plan provides for vesting upon retirement, which is defined as age 55 with 15 years of service. However, recognizing that certain employees hired in mid-career might retire without meeting the requirements, the Committee established criteria in 2005 that allows unvested equity to vest for employees with a minimum of 10 years of service, with Committee approval.
Given Mr. Horn’seach executive’s performance and his 11 year tenure with the company, on May 19, 2014, the Committee approved retirement status for purposes of acceleration of his unvested restricted stock units and unvested stock options upon his retirement. This provision also impacts Mr. Horn’s stock options (both vested and unvested) and the period during which he can exercise the options. The options will now expire on the earlier oftime in their original expiration, or five years from his retirement date. Finally, the provision will also provide that Mr. Horn has the opportunity to vest in his PSUs based on actual company performance during the performance period (2014-2016). The Committee’s decision with respect to Mr. Horn’s retirement was treated as a modification under the accounting rules and has been reported as such in the Summary Compensation Table as well as the Grants of Plan Based Awards Table. In providing this approval, the Committee considered Mr. Horn’s years of service with the company and his effective leadership of Colonial Life in a difficult financial environment.
current position.
COMPENSATION DISCUSSION AND ANALYSIS
Retirement and Workplace Benefits
We provide a benefits package for employees, including all NEOs, and their dependents, portions of which are paid for, in whole or in part, by the employee.
Among the retirement benefits we offer are:
| — | | Defined Contribution. Beginning January 1, 2014, we offer new defined contribution benefits that replace our defined benefit pension plans which were frozen as to further accruals as of December 31, 2013, as described below. These include a non-contributory tax-qualified defined contribution plan for all regular U.S. employees who are scheduled to work at least 1,000 hours per year (which is offered within our existing tax-qualified 401(k) plan), and a non-qualified defined contribution plan for employees whose benefits under the tax qualified plan are limited by the Internal Revenue Code (the Code). Base pay and annual incentives are included in covered earnings for these defined contribution plans but long-term incentive awards are not. Unum provides a company contribution equal to 4.5% of covered earnings for those employees who have completed one year of service. In addition, for employees who meet specific age and service requirements, a company “transition contribution” of 3.5% is made on all earnings, with an additional 3.5% transition contribution for earnings above $70,000. The transition contributions are being provided to eligible employees to more closely align to the benefits which were accrued under the frozen defined benefit plans. This provides a benefit to those employees who, due to their age and years of service, would not have the same
|
COMPENSATION DISCUSSION AND ANALYSIS
| The Unum Group Defined Contribution Retirement Plan. On January 1, 2014, Unum replaced its defined benefit pension plans, which were frozen to further accruals as of December 31, 2013, with an enhanced defined contribution retirement offering. This includes: (1) a non-contributory tax-qualified defined contribution plan for all regular U.S. employees who meet eligibility requirements and are generally scheduled to work at least 1,000 hours per year, which is offered within our existing tax-qualified 401(k) retirement plan (401(k) Plan), and (2) a separate, non-qualified defined contribution plan (Non-Qualified Plan) for employees whose benefits under the tax-qualified plan are limited by the Internal Revenue Code (the "Code"). New hires are automatically enrolled in the 401(k) and Non-Qualified Plan at a 5% deferral rate 45 days after hire but are able to make adjustments to their deferral rate. Base pay and annual incentives are included in covered earnings for these defined contribution plans, but long-term incentive awards are not. Unum provides the following contributions: A 5% match contribution (for elected deferrals provided through the 401(k) and Non-Qualified Plans); A 4.5% contribution (provided through the 401(k) and Non-Qualified Plans); and For employees who meet certain age and service requirements, a 3.5% transition contribution on covered earnings and an additional 3.5% transition contribution for covered earnings above $70,000 (provided through the 401(k) Plan and, for those eligible employees whose earnings exceed the qualified plan limits, the Non-Qualified Plan) The transition contributions are being provided to eligible employees to more closely align with the benefits which were accrued under the frozen defined benefit plans. This benefit is provided to those employees who, due to their age and years of service, would not have the same opportunity to adjust to the new defined contribution plan as other employees. Transition contributions will be made to active eligible employees until December 31, 2020. The Unum Group Defined Benefit Retirement Plan. We sponsor both a tax-qualified defined benefit pension plan and a non-qualified defined benefit pension plan for employees whose benefits under the tax-qualified plan are limited by the Code. Base pay and annual incentives are counted in eligible earnings for purposes of the defined benefit pension plans, but long-term incentive earnings are not. As noted above, during 2013, we amended the terms of our defined benefit pension plans (tax-qualified and non-qualified) to freeze the further accrual of retirement benefits provided under those plans as of December 31, 2013. For a more complete description of pension benefits for our NEOs, see page 82. The other employees. Transition contributions will be made to active eligible employees until December 31, 2020. |
| — | | 401(k). We provide a tax-qualified 401(k) retirement plan for all regular U.S. employees who are scheduled to work at least 1,000 hours per year, and, effective January 1, 2014, a non-qualified 401(k) plan for employees whose benefits under the tax qualified plans are limited by the IRS. Base pay and annual incentives are counted in eligible earnings for purposes of the 401(k) plans but long-term incentives are not. Unum provides up to a 5% company match for those employees who contribute to these plans and have completed at least one year of service. |
| — | | Pension plans. We sponsor both a tax-qualified defined benefit pension plan and a non-qualified defined benefit pension plan for employees whose benefits under the tax-qualified plans are limited by the Code. Base pay and annual incentives are counted in eligible earnings for the purposes of the defined benefit pension plans, but long-term incentive earnings are not. Since 2000, the CEO also has participated in the Unum Group Senior Executive Retirement Plan (the SERP) and is the only active employee covered under the SERP. As noted above, during 2013, we amended the terms of our defined benefit pension plans (tax-qualified and non-qualified) and the SERP to freeze the further accrual of retirement benefits provided under those plans as of December 31, 2013. For a more complete description of pension benefits for our NEOs, see page 73. |
The workplace benefits we offer include: life, health, dental, vision, voluntary products and disability insurance; dependent and healthcare reimbursement accounts; health savings accounts; tuition reimbursement; an employee stock purchase plan; paid time off; holidays; and a matching gifts program for charitable contributions.
In April 2000, we purchased corporate owned life insurance (COLI) on all officers who gave their approval. In the event of a covered officer’s death while still employed, we will provide a death benefit to the officer’s beneficiary in the amount of $200,000.
OfMr. McGarry is the
NEOs, Messrs. McKenney, Hornonly NEO who was an officer at the company at such time, and
Simonds and Ms. Farrell are notis covered under a COLI
policy either because they were not employees of the company or not officers at that time.policy.
COMPENSATION DISCUSSION AND ANALYSIS
Perquisites and Other Personal Benefits
We provide a limited number of perquisites to our employees, including all NEOs, which are described below:
| — | | One of our largest employee locations is in Tennessee, which has no state income tax. Due to the frequency of travel between our corporate offices and other locations, employees often incurnon-resident state taxes in multiple states. Therefore, when any employee travels to other company locations outside of his or her primary state of employment and incurs state income tax based on another state’s law, we provide a tax gross-up for the non-resident state taxes. |
| — | | While corporate policy would have entitled Mr. Watjen to a company-paid benefit of up to 40 hours of personal use of the corporate aircraft, he has voluntarily elected to discontinue this company-paid benefit. In addition, he has entered into a time-sharing agreement under which he reimburses the company for the costs of personal use of the aircraft. During 2014, he made payments to the company of $35,978 for 15.5 hours of personal usage. This amount has not been included in the Summary Compensation Table because there is no incremental cost to the company of such benefit. |
| — | | As part of the transition in leadership, the Committee decided that it will no longer offer the 40 hours of personal use of the corporate aircraft. However, the frequency of travel between our corporate offices and other locations, employees often incur non-resident state taxes in multiple states. Therefore, when any employee travels to other company locations outside of his or her primary state of employment and incurs state income tax based on another state’s law, we provide a tax gross-up for the non-resident state taxes.The company has entered into an aircraft time-sharing agreement with Mr. McKenney dated effective as of May 21, 2015, pursuant to which he agrees to reimburse the company for the costs of his personal use of the corporate aircraft. |
COMPENSATION DISCUSSION AND ANALYSIS
| — | | A tax gross-up is provided to employees who incur income on company-sponsored events where attendance is expected, including a limited number of events we host each year to recognize the contributions of various employees. These functions serve specific business purposes, and in some cases the attendance of an NEO and his or her spouse or guest is expected. If so, we attribute income to the NEO for these costs when required under Internal Revenue Service regulations. For more information, see the All Other Compensation table on page 66. |
Compensation Contracts and Agreements
We have the following compensation contracts and agreements with NEOs.
Employment Agreements
Mr. Watjen is the only NEO covered under an employment agreement. Although the agreement currently extends through December 30, 2016, it will terminate upon Mr. Watjen’s retirement in May 2015. Under the agreement, Mr. Watjen is entitled to the following compensation:
| — | | Base salary of at least $1,122,000; |
| — | | Target annual incentive of no less than 150% of his base salary, excluding any special or supplemental bonuses that may be awarded; |
| — | | Eligibility for annual equity grants and/or cash-based awards as determined by the Committee; |
| — | | Participation in all savings, retirement, health and welfare benefit programs generally available to our other senior executive officers; |
| — | | A minimum annual retirement benefit equal to 2.5% of Mr. Watjen’s final average earnings, defined as the average of the highest 5 years’ earnings in the 10 years of employment prior to the date the plan was frozen on December 31, 2013, multiplied by his years of service, which benefit was frozen as to further accruals as of December 31, 2013; and |
| — | | Post-retirement welfare benefit coverage for a period of three years following the date of termination in the event of termination by the company without cause or by Mr. Watjen for good reason within certain change in control periods, and for a period of two years if such terminations occur outside of these change in control periods. |
The agreement further stipulates that Mr. Watjen would be prohibited from using or divulging confidential information and from competing with us or soliciting any officer at the level of vice president or above for a period of 18 months after his termination. These non-competition and non-solicitation covenants would be terminated upon a change in control.
Mr. Watjen also entered into an aircraft time-sharing agreement with Mr. McKenney effective as of May 21, 2015, pursuant to which he agrees to reimburse the company for the costs of his personal use of the corporate aircraft. Mr. McKenney did not use this benefit during 2017.
A tax gross-up is provided to employees who incur income on company-sponsored events where attendance is expected, including a limited number of events we host each year to recognize the contributions of various employees. These functions serve specific business purposes, and in 2007. This agreement will terminate upon Mr. Watjen’s retirement in May 2015. Details about that agreement can be found insome cases the Perquisitesattendance of an NEO and his or her spouse or guest is expected. If so, we attribute income to the NEO for these costs when required under Internal Revenue Service regulations. For more information, see the All Other Personal Benefits section beginningCompensation table on page 58.77. Severance and Change in Control Arrangements
We have the following severance and change in control contracts and plans covering the NEOs.
The company provides severance benefits to all employees in the event of involuntary termination, other than for death, disability or cause.
Mr. Watjen’s severance benefits are provided under his employment agreement and are outlined beginning on page 78.
COMPENSATION DISCUSSION AND ANALYSIS
Mr. McKenney’s severance benefits are provided under a severance agreement dated effective as of April 1, 2015. This agreement replaced his prior change in control severance agreement (described below) and provides comparable severance benefits in the event of his termination of employment within two years after a change in control, except that if termination is by the company other than for cause, death or disability or
is a resignation by Mr. McKenney for good reason, the severance payment is three times salary plus bonus, and medical and other benefits will continue for three years after termination. The agreement also eliminated the
golden parachute excise tax gross-up provided under his prior agreement and instead provides for
“best"best net
after-tax”after-tax" provisions that cut back payments to avoid potential excise taxes, but only if the after-tax value is greater than providing full payments (which would be subject to excise tax that would be borne by Mr. McKenney). The agreement also provides for severance when termination of employment
occurs outside the two-year period followingis not related to a change in control, and in such circumstances the severance payment is two times salary and bonus, and medical and other benefits will continue for two years after termination.
The remaining NEOs are covered under our Separation Pay Plan for Executive Vice Presidents. In general, we provide severance in order to give our employees competitive benefits with respect to the possibility of an involuntary termination of their employment.
When termination of employment is accompanied by severance payments, the former executive is required to release all claims he or she may have against us. The release contains restrictions on the former executive with respect to confidentiality, solicitation of company employees, competition, and disparagement. We also agree
COMPENSATION DISCUSSION AND ANALYSIS
to indemnify the former executive for certain actions taken on the company’s behalf during his or her employment.
Change in Control Severance Agreements
Each
of the NEOs,NEO, other than
Messrs. Watjen andMr. McKenney,
areis covered by a change in control severance agreement with the company. These agreements provide an enhanced severance benefit in the event of a termination following a change in control. This ensures that shareholders have the benefit of our NEOs’ focused attention during the critical times before and after a major corporate transaction regardless of any uncertainty with respect to their future employment. Details about these agreements can be found in the
“Terminations"Terminations Related to a Change in
Control”Control" section beginning on page
78.While some86.
None of
these agreements include a modifiedthe NEOs have an excise tax gross-up provision
the company decided in May 2010 not to enter into any new or materially amended agreements with executive officers that include excise tax gross-up provisions with respect to payments contingent upon a change in control. For this reason, Mr. Simonds and Ms. Farrell, who became executive officers after May 2010, do not have an excise gross-up provision in their agreements.
Change
As described above, change in control benefits are available to Mr.
Watjen under the terms of his employment agreement and to Mr. McKenney under his severance
agreement as described above, but neither of the agreements provide for excise tax gross-ups.Other Contracts
In 2014, the company entered into an agreement with Mr. McCarthy to provide consulting services to the company following his retirement until the end of the year. Under the agreement, Mr. McCarthy advised the company on business projects where his knowledge and expertise would be needed and add value. In return for his services, he received a consulting fee of $300 per hour. Mr. McCarthy worked a total of 78 hours and was paid $23,400 pursuant to this agreement.
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Policies and Practices
Equity grants awarded under the long-term incentive program are approved at the February meeting of the Committee, which typically occurs two to three weeks after the company’s annual earnings are released to the public. The
date of approval isMarch 1, 2017 grant was approved at the
grant dateFebruary 2017 meeting of the
awards.Committee. The closing stock price on the grant date is used to determine the number of units awarded.
Stock Ownership and Retention Requirements
Ensuring that senior officers have a significant ownership stake in the company aligns the long-term interests of management and shareholders and promotes a culture of
ownership.ownership and accountability. We require certain senior officers, including each NEO, to:
| — | | Hold a multiple of the officer’s base salary in Unum shares (including unvested restricted stock units) throughout employment; and |
| — | | Retain a fixed percentage of the net shares (shares after the payment of taxes and the costs of exercise and commissions) received as compensation for a specified period of time. These retention requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs and PSUs. Exceptions to this requirement may be made only by the Board of Directors. |
Hold a multiple of the officer’s base salary in Unum shares (including unvested restricted stock units) throughout employment; and
Retain a fixed percentage of the net shares (shares after the payment of taxes and the costs of exercise and commissions) received as compensation for a specified period of time. These holding period requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs and PSUs even if the stock ownership requirements have been met. Exceptions to this requirement may be made only by the Board.
The following table presents the stock ownership and retention requirements for our NEOs. Newly promoted or newly hired senior officers have five years to achieve the ownership requirement. Not meeting the requirements may impact future equity grants. All of our
then employed NEOs
with the exception of Mr. Simonds, who became an Executive Vice President July 1, 2013, exceeded the requirements as of December 31,
2014.STOCK OWNERSHIP2017.
COMPENSATION DISCUSSION AND
RETENTION REQUIREMENTS(*)(as of December 31, 2014) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Executive | | Common
Stock(1) | | | Restricted
Stock Units(2) | | | Total Current
Ownership | | | Ownership
as % of Salary | | | Retention
Requirements | |
| | | | Owned | | | Required | | | Retention
%(3) | | | Holding
Period(4) | |
| | | | | | | | |
Mr. Watjen | | $ | 14,086,811 | | | $ | 4,300,530 | | | $ | 18,387,341 | | | | 16.0x | | | | 6x | | | | 75 | % | | | 3 years | |
| | | | | | | | |
Mr. McKenney | | | 3,168,360 | | | | 3,004,563 | | | | 6,172,923 | | | | 8.6x | | | | 3x | | | | 60 | % | | | 1 year | |
| | | | | | | | |
Ms. Farrell | | | 843,468 | | | | 967,536 | | | | 1,811,004 | | | | 4.2x | | | | 3x | | | | 60 | % | | | 1 year | |
| | | | | | | | |
Mr. Simonds | | | 555,324 | | | | 977,756 | | | | 1,533,080 | | | | 2.9x | | | | 3x | | | | 60 | % | | | 1 year | |
| | | | | | | | |
Mr. Horn | | | 2,588,724 | | | | 949,050 | | | | 3,537,774 | | | | 6.9x | | | | 3x | | | | 60 | % | | | 1 year | |
* Mr. McCarthy was excluded from this table because of his March 31, 2014 retirement.
ANALYSIS
|
| | | | | | | |
| STOCK OWNERSHIP AND RETENTION REQUIREMENTS | (as of December 31, 2017) |
| | | | | Ownership as % of Salary | Retention Requirements |
| Executive | Common Stock(1) | Restricted Stock Units(2) | Total Current Ownership | Owned | Required | Retention %(3) | Holding Period(4) |
| Mr. McKenney | $10,940,840 | $7,434,905 | $18,375,745 | 18.4x | 6x | 75% | 3 years |
| Mr. McGarry | 2,566,437 | 1,352,984 | 3,919,421 | 6.2x | 3x | 60% | 1 year |
| Mr. Simonds | 2,120,565 | 1,473,632 | 3,594,197 | 5.8x | 3x | 60% | 1 year |
| Ms. Farrell | 2,049,208 | 693,810 | 2,743,018 | 6.0x | 3x | 60% | 1 year |
| Ms. Iglesias | 663,455 | 1,438,996 | 2,102,451 | 4.2x | 3x | 60% | 1 year |
| |
| (1) | Amount includes shares held in certificate form, brokerage accounts, and 401(k) Plan accounts. Shares were valued using a closing stock price of $34.88$54.89 on December 31, 2014,29, 2017, the last trading day of the year. |
| |
| (2) | Shares/units were valued using a closing stock price of $34.88$54.89 on December 31, 2014,29, 2017, the last trading day of the year. Performance-based restricted stock units (PBRSUs) vest over three years (see the Vesting Schedule for Unvested Restricted Stock Units table on page 71)81). |
| |
| (3) | Retention percentage is the net percentage of shares to be held after the payment of taxes and the costs of exercise and commissions. Retention requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs and PSUs. |
| |
| (4) | After this holding period, the officer would then be able to sell the shares as long as his or her ownership requirement is met or would be reached in the time period allotted. |
COMPENSATION DISCUSSION AND ANALYSIS
Hedging, Pledging and Insider Trading Policies
We have a policy that no director or executive officer, which includes our NEOs, may purchase or sell options, puts, calls, straddles, equity swaps or other derivatives that are directly linked to our stock.
In addition, our insider trading policy prohibits directors, executive officers (including NEOs) and employees from buying or selling our stock while in possession of material nonpublic information about the company and from conveying any such information to others. Under this policy, additional trading restrictions apply to the NEOs and other
“corporate"corporate insiders,
”" who are generally permitted to buy or sell our stock only during predetermined window periods following earnings announcements, and only after they have pre-cleared the transactions with our general counsel or designee. Also under this policy, no corporate insider may make
“short sales”"short sales" of our stock, and no director or executive officer may pledge our stock as security for a loan.
If the company makes a material restatement of its financial results, then the Board will, to the extent permitted by applicable law, seek recoupment of performance-based compensation paid to certain senior officers if it determines that:
| — | | The senior officer has committed or engaged in fraud or willful misconduct that resulted, either directly or indirectly, in the need to make such restatement; and |
| — | | Such performance-based compensation paid or awarded to the senior officer would have been a lesser amount if calculated using the restated financial results. |
The senior officer has committed or engaged in fraud or willful misconduct that resulted, either directly or indirectly, in the need to make such restatement; and
Such performance-based compensation paid or awarded to the senior officer would have been a lesser amount if calculated using the restated financial results.
The amount of performance-based compensation to be recouped will be determined by the Board after taking into account the relevant facts and circumstances. Performance-based compensation includes annual cash
COMPENSATION DISCUSSION AND ANALYSIS
incentive awards, bonuses and all forms of equity compensation. The company’s right to recoup compensation is in addition to other remedies that may be available
to us under applicable law.
The Dodd-Frank Act, which contemplates an expansion of the reach of recoupment policies, was enacted into law in July 2010. Once the Securities and Exchange Commission provides rules and administrative guidance on requirements of this legislation, the Committee will implement any necessary changes to our current recoupment policy at that time.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code generally places a limit of $1 million per year on the amount of deductible compensation paid to
allcertain "covered employees," which includes our named executive
officers other thanofficers. Section 162(m) exempted from this limitation "qualified performance-based compensation" with respect to taxable years beginning on or before December 31, 2017. Recent changes to the
CFO, unlessCode provide for a transition rule that continues to exempt qualified performance-based compensation that is payable pursuant to a binding written agreement in effect on November 2, 2017 but otherwise generally repeals the
compensation satisfies the “qualifiedexemption for performance-based
compensation” exception to Section 162(m).The currentcompensation.
Historically, our annual incentive payout and long-term incentive grants
arewere intended to be deductible under Section 162(m).
From timeThe Committee did, however, reserve the right to,
time, the Committee may, in its sole discretion, pay compensation that
iswas not deductible under Section 162(m) if it
determinesdetermined that paying such compensation
iswas needed in order to attract, retain or provide
incentiveincentives to our NEOs, or
iswas otherwise
desirable, anddesirable. Given complexities in the tax rules, it is
also possible that compensation intended to qualify for the
“qualified"qualified performance-based
compensation”compensation" exception
doesdid not so qualify.
In light of the repeal of the performance-based compensation exception to Section 162(m), the Committee expects compensation granted or paid in 2018 and future tax years will not be fully deductible for income tax purposes. While, the Committee believes that shareholder interests are best served if it retains discretion and flexibility in awarding compensation, even though some compensation awards may result in non-deductible compensation expenses, the Committee intends to maintain strong pay-for-performance alignment of executive compensation arrangements notwithstanding loss of deductibility repeal of the exemption for performance-based compensation.
We account for stock-based payments under the requirements of ASC Topic 718. A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our
20142017 Form 10-K. Each year, the company provides a report to the Committee of the expense for stock-based payments. Additionally, in the event the Committee is considering new equity-based compensation programs or changes to existing programs, the accounting implications of the program or change are presented and discussed as part of the decision process.
REPORT OF THE HUMAN CAPITAL COMMITTEE
REPORT OF THE HUMAN CAPITAL COMMITTEE
The Human Capital Committee
1 has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2014.2017.
2017 Human Capital Committee:
Cynthia L. Egan, Chair
Theodore H. Bunting, Jr.
Kevin T. Kabat
ChairThomas Kinser
A.S. (Pat) MacMillan, Jr.
Edward J. Muhl
1
Ronald P. O’Hanley
did not join the Committee until February 26, 2015, and, therefore, did not participate in Committee actions with respect to the Compensation Discussion and Analysis contained in this proxy statement.
| | |
| |
20152018 PROXY STATEMENT | | 6375 |
2017 Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary
($) | | | Bonus
($) | | | Stock
Awards
($)(5) | | | Option
Awards
($) | | | Non-Equity
Incentive
Plan
Compen-
sation
($) | | | Change in
Pension Value
& Nonqualified
Deferred
Compensation
Earnings
($) | | | All Other
Compen-
sation
($) | | | TOTAL
($) | | | | | Total
Without
Change in
Pension
Value ($)* | |
| Thomas R. Watjen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Chief Executive Officer,
and a Director(1) | | 2014 | | | $1,145,154 | | | | $ – | | | | $5,985,384 | (6) | | | $ – | | | | $2,359,017 | (9) | | | $3,227,000 | (10) | | | $598,034 | (11) | | | $13,314,589 | | | | | | $10,087,589 | |
| 2013 | | | 1,118,277 | | | | – | | | | 5,609,489 | | | | – | | | | 2,141,221 | | | | 144,000 | | | | 99,933 | | | | 9,112,920 | | | | | | 8,968,920 | |
| 2012 | | | 1,100,000 | | | | – | | | | 5,250,014 | | | | 1,750,004 | | | | 1,489,125 | | | | 4,133,000 | | | | 89,164 | | | | 13,811,307 | | | | | | 9,678,307 | |
| Richard P. McKenney | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| President, and a Director(2) | | 2014 | | | 712,404 | | | | – | | | | 1,692,153 | (7) | | | – | | | | 880,531 | (9) | | | 175,000 | (10) | | | 226,237 | (11) | | | 3,686,325 | | | | | | 3,511,325 | |
| 2013 | | | 696,869 | | | | – | | | | 1,165,358 | | | | 388,455 | | | | 889,553 | | | | 26,000 | | | | 51,413 | | | | 3,217,648 | | | | | | 3,191,648 | |
| 2012 | | | 678,771 | | | | – | | | | 1,005,474 | | | | 335,161 | | | | 709,316 | | | | 177,000 | | | | 74,658 | | | | 2,980,380 | | | | | | 2,803,380 | |
| Breege A. Farrell | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Executive Vice President
and Chief Investment
Officer | | 2014 | | | 433,786 | | | | – | | | | 449,470 | (7) | | | – | | | | 520,543 | (9) | | | 79,000 | (10) | | | 90,526 | (11) | | | 1,573,325 | | | | | | 1,494,325 | |
| 2013 | | | 417,131 | | | | – | | | | 424,278 | | | | – | | | | 560,922 | | | | 234,000 | | | | 17,242 | | | | 1,653,573 | | | | | | 1,419,573 | |
| Michael Q. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Executive Vice President,
President and Chief
Executive Officer,
Unum US | | 2014 | | | 512,019 | | | | – | | | | 611,877 | (7) | | | – | | | | 545,838 | (9) | | | 344,000 | (10) | | | 93,728 | (11) | | | 2,107,462 | | | | | | 1,763,462 | |
| Randall C. Horn | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retired Executive
Vice President,
Chief Executive Officer,
Colonial Life(3)
(retired March 31, 2015) | | 2014 | | | 512,404 | | | | – | | | | 1,103,382 | (7)(8) | | | 274,935 | (7) | | | 525,112 | (9) | | | 225,000 | (10) | | | 212,888 | (11) | | | 2,853,721 | | | | | | 2,628,721 | |
| 2013 | | | 498,731 | | | | – | | | | 315,808 | | | | 105,272 | | | | 467,411 | | | | 53,000 | | | | 68,180 | | | | 1,508,402 | | | | | | 1,455,402 | |
| 2012 | | | 491,260 | | | | – | | | | 387,026 | | | | 129,008 | | | | 336,022 | | | | 224,000 | | | | 45,935 | | | | 1,613,251 | | | | | | 1,389,251 | |
| Kevin P. McCarthy | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retired Executive
Vice President and
Chief Operating Officer | | 2014 | | | 159,923 | (4) | | | – | | | | 1,586,394 | (7) | | | – | | | | 205,901 | (9) | | | 1,935,857 | (10) | | | 182,250 | (11) | | | 4,070,325 | | | | | | 2,134,468 | |
| 2013 | | | 627,462 | | | | – | | | | 1,095,470 | | | | 365,154 | | | | 870,604 | | | | 4,023 | | | | 33,332 | | | | 2,996,045 | | | | | | 2,992,022 | |
| 2012 | | | 615,000 | | | | – | | | | 921,368 | | | | 307,121 | | | | 738,000 | | | | 1,604,312 | | | | 23,626 | | | | 4,209,427 | | | | | | 2,605,115 | |
* The year-over-year change in pension value had a significant impact on 2014 total compensation, as determined under applicable SEC rules. To illustrate the impact, we have included a separate column to show total compensation excluding the change in pension value. The Total Without Change in Pension Value represents total compensation, as determined under applicable SEC rules, minus the change in pension value reported in the Change in Pension Value and Non-qualified Deferred Compensation Earnings column (but including the non-qualified deferred compensation earnings reported in that column, which are only applicable to Mr. McCarthy).
The amounts reported in the Total Without Change in Pension Value column are not a replacement for Total compensation, but rather an alternative measure which may be useful to our shareholders. We do not believe a year-over-year change in pension value is the most helpful measure in evaluating compensation since it is subject to actuarial assumptions and other external factors that are beyond our control.
The change in actuarial present value of accumulated pension benefits for 2014 was significantly greater than the change in 2013 for most of our NEOs primarily due to a lower discount rate and the adoption of a revised mortality table. The discount rate was lower due to the historically low interest rate environment, and the updated mortality assumptions include mortality improvements published by the Society of Actuaries in 2014. Of the $3.2 million increase in the pension value for Mr. Watjen, approximately $2.1 million of the increase (66%) was due solely to the reduction in the assumed discount rate and $0.7 million was attributable to the change in mortality assumption.
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Salary | Bonus | Stock Awards | | Option Awards | Non-Equity Incentive Plan Compen- sation | | Change in Pension Value & Non-qualified Deferred Compensation Earnings | | All Other Compen- sation | | TOTAL |
Name and Principal Position(1) | Year | ($) | ($) | ($)(2) | | ($) | ($) | | ($) | | ($) | | ($) |
| Richard P. McKenney | | | | | | | | | | | | | |
President and Chief Executive Officer, and a Director | 2017 | 1,000,000 |
| — |
| 5,720,021 |
| (3 | ) | — |
| 2,415,000 |
| (4 | ) | 119,000 |
| (5 | ) | 429,925 |
| (6 | ) | 9,683,946 |
|
| 2016 | 994,231 |
| — |
| 5,176,835 |
| | — |
| 2,100,937 |
| | 84,000 |
| | 315,316 |
| | 8,671,319 |
|
| 2015 | 905,000 |
| — |
| 3,051,050 |
| | — |
| 1,527,033 |
| | — |
| | 247,931 |
| | 5,731,014 |
|
| John F. McGarry | | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Executive Vice President and Chief Financial Officer | 2017 | 623,077 |
| — |
| 1,040,004 |
| (3 | ) | — |
| 822,462 |
| (4 | ) | 322,000 |
| (5 | ) | 231,242 |
| (6 | ) | 3,038,785 |
|
| 2016 | 588,461 |
| — |
| 912,245 |
| | — |
| 744,404 |
| | 273,000 |
| | 196,724 |
| | 2,714,834 |
|
| 2015 | 517,860 |
| — |
| 629,287 |
| | — |
| 509,513 |
| | — |
| | 221,024 |
| | 1,877,684 |
|
| Michael Q. Simonds | | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Executive Vice President, President and Chief Executive Officer, Unum US | 2017 | 611,538 |
| — |
| 1,040,004 |
| (3 | ) | — |
| 792,554 |
| (4 | ) | 248,000 |
| (5 | ) | 132,521 |
| (6 | ) | 2,824,617 |
|
| 2016 | 594,231 |
| — |
| 953,678 |
| | — |
| 676,532 |
| | 168,000 |
| | 127,479 |
| | 2,519,920 |
|
| 2015 | 566,346 |
| — |
| 961,052 |
| | — |
| 564,888 |
| | — |
| | 113,967 |
| | 2,206,253 |
|
| Breege A. Farrell | | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Executive Vice President and Chief Investment Officer | 2017 | 458,385 |
| — |
| 494,697 |
| (3 | ) | — |
| 651,822 |
| (4 | ) | 47,000 |
| (5 | ) | 112,834 |
| (6 | ) | 1,764,738 |
|
| 2016 | 451,500 |
| — |
| 448,816 |
| | — |
| 598,689 |
| | 38,000 |
| | 99,493 |
| | 1,636,498 |
|
| 2015 | 444,618 |
| — |
| 443,024 |
| | — |
| 557,551 |
| | — |
| | 109,762 |
| | 1,554,955 |
|
| Lisa G. Iglesias | | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Executive Vice President and General Counsel | 2017 | 502,692 |
| — |
| 643,520 |
| (3 | ) | — |
| 452,423 |
| (4 | ) | — |
| (5 | ) | 105,505 |
| (6 | ) | 1,704,140 |
|
| 2016 | 492,692 |
| — |
| 639,854 |
| | — |
| 424,946 |
| | — |
| | 91,033 |
| | 1,648,525 |
|
| 2015 | 470,077 |
| — |
| 1,149,997 |
| | — |
| 381,291 |
| | — |
| | 40,410 |
| | 2,041,775 |
|
COMPENSATION TABLES
Shareholders interested in the pension benefits provided to our NEOs may find the present value of pension benefits in the Current Value of Pension Benefits table on page 76 a more useful calculation.
| (1) | Mr. WatjenMcKenney was named President in April 2015 and subsequently assumed the role of CEO following Mr. Watjen's retirement in May 2015. Before that, he served as Unum's Executive Vice President and Chief Financial Officer. Mr. McGarry, who had previously served as President and Chief Executive Officer of Unum Group until April 1, 2015. |
(2) | the Closed Block Operations, succeeded Mr. McKenney previously served as Executive Vice President and Chief Financial Officer in April 2015. As a result of Unum Group until April 1,these promotions, the Committee approved adjustments to their compensation packages to reflect their new responsibilities. Their compensation for 2016 reflects their first full year of compensation in their current positions, whereas the compensation for 2015 when he was appointed toreflects pro-ration of payments based on the roleportion of President.the year that they held their current and prior positions. |
(3) |
| Mr. Horn previously served as Executive Vice President, President and Chief Executive Officer of Colonial Life until July 1, 2014. He continued to serve as CEO, Colonial Life through December 31, 2014, and became Executive Vice President, Colonial Life on January 1, 2015. |
| 76 | 2018 PROXY STATEMENT |
(4) | This amount |
| (2) | "Stock Awards" consists of Mr. McCarthy’s salary earned prior to his retirement on March 31, 2014. |
(5) | performance share units (PSUs) and performance-based restricted stock units (PBRSUs). The number of shares payable under thesethe PSU awards will be based on the actual results as compared to pre-established performance, conditionsmodified (+/- 20%) based on relative total shareholder return, and can range from 0-180%may result in the ultimate award of 40-180% of the target award. Performance share unitsinitial number of PSUs issued, with the potential for no award if company performance goals are not achieved during the three-year performance period. The value of PSUs, assuming the highest possible outcomes of performance conditions (180%) to which 20142017 awards are subject, determined based on the award amount and share price at the time of grant and thus excluding dividend equivalent units that accrue during the performance period, would be: $5,309,973 for Mr. Watjen; $755,999 for Mr. McKenney; $200,824 for Ms. Farrell; $273,352 for Mr. Simonds; $247,510 for Mr. Horn; and $708,764 for Mr. McCarthy. Performance share units assuming the highest possible outcomes of performance conditions to which the 2013 award is subject, determined based on the award amount at the time of grant and thus excluding dividend equivalent units that accrue during the performance period, would in total be $4,916,271be: $4,949,961 for Mr. Watjen. No other NEOs were awarded performance share units in 2013. Performance share units were not granted in 2012.McKenney; $899,993 for Mr. McGarry; $899,993 for Mr. Simonds; $428,098 for Ms. Farrell; and $556,886 for Ms. Iglesias. |
(6) | The award was |
| (3) | These awards were comprised of 50% performance share unitsPSUs and 50% performance-based restricted stock unitsPBRSUs granted to Mr. Watjen on February 25, 2014March 1, 2017 for his performance in 2013.2016. The grant date fair value of stock awards for the performance share unitsPSUs was calculated in accordance with FASB ASC Topic 718 – Compensation – Stock Compensation (ASC 718) as the number of units multiplied by the Monte Carlo simulation value of $34.84$53.85 on the grant date. The grant date fair value of stock awards for the performance-based restricted stock unitsPBRSUs was calculated in accordance with ASC 718 as the number of units multiplied by the closing market price of $33.86 on the grant date. Mr. Watjen’s performance-based restricted stock units will be 50% stock settled and 50% cash settled upon vesting. |
(7) | The award was comprised of 75% performance-based restricted stock units and 25% performance share units granted to Messrs. McKenney, Simonds, Horn and McCarthy and Ms. Farrell on February 25, 2014 for their performance in 2013. The grant date fair value of stock awards for performance-based restricted stock units on February 25, 2014 was calculated in accordance with ASC 718 as the number of units multiplied by the value of $33.86 on the grant date. The grant date fair value of stock awards for the performance share units was also calculated in accordance with ASC 718 as the number of units multiplied by the Monte Carlo simulation value of $34.84$49.86 on the grant date. |
(8) | On February 25, 2014 Mr. Horn was awarded a long-term incentive grant consisting of 75% performance-based restricted stock and 25% performance share units for his 2013 performance. On May 19, 2014, the Committee approved Mr. Horn’s retirement status allowing him to vest in all of his unvested equity awards. The acceleration was treated as a modification for accounting purposes and the company recognized an additional $261,815 in additional expense. Based on SEC staff guidance, these have been reported in the Summary Compensation Table by adding the grant date fair value of all modified awards as of May 19, 2014, to the grant date fair value of the February 25, 2014 equity grant. |
(9)(4) | Amounts reflect the annual incentive awards grantedpaid in February 2015March 2018 for performance in 2014.2017. These are discussed in further detail beginning on page 5365 under the Annual Incentive Awards heading. |
(10) | |
| (5) | The amounts shown reflect the increase in the actuarial present value sinceincreases from December 31, 2013 of the named executive officer’s benefits under all pension plans established by the company.2016 through December 31, 2017. Pension values may fluctuate from year-to-year depending on a number of factors, including age at benefit commencement and the assumptions used to determine the present value, such as the discount rate and mortality rate. The assumptions used by the company in calculating the change in pension value are described beginning on page 7684 and are consistent with those set forth in Note 9 of our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on2017 Form 10-K, for the year ended December 31, 2014, except as otherwise provided in footnotes to the Pension Benefits table on page 76.84. |
(11) | The amount reported for Mr. McCarthy also includes the amount of above-market interest that exceeds 120% of the applicable federal long-term rate prescribed under section 1274(d) of the Internal Revenue Code. During 2014, that amount was $2,857. “All |
| (6) | "All Other Compensation”Compensation" amounts are included withinset forth in the following table. |
|
| | | | | | | | | | | | | | | |
| 2017 ALL OTHER COMPENSATION |
| | Mr. McKenney | Mr. McGarry | Mr. Simonds | Ms. Farrell | Ms. Iglesias |
Employee and Spouse/Guest Attendance at Company Business Functions(a) | 52,009 |
| — |
| 4,178 |
| — |
| 4,597 |
|
| Total Perquisites |
| $52,009 |
|
| $— |
|
| $4,178 |
|
| $— |
|
| $4,597 |
|
Matching Gifts Program(b) | 10,000 |
| 3,200 |
| 200 |
| 10,000 |
| 10,000 |
|
Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | 155,047 |
| 68,374 |
| 64,404 |
| 52,854 |
| 46,382 |
|
Non-Resident State Taxes(d) | 43,677 |
| 1,420 |
| 1,515 |
| 2,355 |
| 2,385 |
|
Company Contributions to the Qualified and Non-Qualified Defined Contribution Retirement Plan(e) | 139,542 |
| 154,811 |
| 57,963 |
| 47,568 |
| 41,744 |
|
Tax Reimbursement Payments(f) | 29,650 |
| 114 |
| 4,261 |
| 57 |
| 397 |
|
Foreign Assignment(g) | — |
| 3,323 |
| — |
| — |
| — |
|
| Total All Other Compensation |
| $429,925 |
|
| $231,242 |
|
| $132,521 |
|
| $112,834 |
|
| $105,505 |
|
COMPENSATION TABLES
2014 ALL OTHER COMPENSATION
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Mr.
Watjen | | | Mr.
McKenney | | | Ms.
Farrell | | | Mr.
Simonds | | | Mr.
Horn | | | Mr.
McCarthy | |
| Employee and Spouse/Guest Attendance at Company Business Functions(a) | | | $44,260 | | | | $58,064 | | | | $ - | | | | $12,437 | | | | $52,036 | | | | $96 | |
Total Perquisites | | | $44,260 | | | | $58,064 | | | | $0 | | | | $12,437 | | | | $52,036 | | | | $96 | |
| Matching Gifts Program(b) | | | $ - | | | | $7,500 | | | | $5,500 | | | | $210 | | | | $575 | | | | $7,500 | |
| Matching Contributions Under our Qualified and Nonqualified 401(k) Retirement Plan(c) | | | 87,300 | | | | 52,451 | | | | 35,999 | | | | 37,380 | | | | - | | | | 24,994 | |
| Non-Resident State Taxes(d) | | | 62,267 | | | | 11,363 | | | | 4,165 | | | | 321 | | | | 182 | | | | 4,149 | |
| Consulting Fees(e) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 23,400 | |
| Company Contributions to the Defined Contribution and Transition Plans(f) | | | 381,433 | | | | 72,088 | | | | 44,762 | | | | 39,691 | | | | 110,229 | | | | 122,011 | |
| Tax Reimbursement Payments(g) | | | 22,774 | | | | 24,771 | | | | 100 | | | | 3,689 | | | | 49,866 | | | | 100 | |
Total All Other Compensation | | | $598,034 | | | | $226,237 | | | | $90,526 | | | | $93,728 | | | | $212,888 | | | | $182,250 | |
| (a) | Spouses or guests sometimes accompany the named executive officerNEO at company business functions. When their attendance is expected, a tax gross up payment is provided. Where applicable, these payments have been included under “Tax"Tax Reimbursement Payments.”" Additionally, when these trips included travel on the corporate aircraft, the incremental cost was calculated to determine amounts to be included.reported. For purposes of compensation disclosure, the use of company aircraft is valued using an incremental cost that takes into account fuel costs, landing fees, parking, weather monitoring and maintenance fees per hour of flight. Crew travel expenses are included based on the actual amount incurred for a particular trip. Fixed costs that do not change based on usage, such as pilot salaries and depreciation of the aircraft, are excluded. Amounts represent the imputed income each NEO incurred for such attendance plus the incremental cost of the aircraft when the aircraft was used. |
| |
| (b) | Amounts represent those provided through our Matching Gifts Program, available to all full-time employees and non-employee directors. During 2014,2017, the company matched eligible gifts from a minimum of $50 to an aggregate maximum gift of $7,500 per employee/non-employee director, per calendar year. Amounts listed only represent matching gifts made to qualified non-profit organizations and educational institutions on behalf of the named executive officers, and do not represent total charitable contributions made by them during the year. |
of $10,000 per employee/non-employee director, per calendar year. Amounts listed only represent company matching gifts made to qualified non-profit organizations and educational institutions on behalf of the NEOs, and do not represent total charitable contributions made by them during the year.
| |
| (c) | Amounts represent the aggregate matching contributions into our qualified 401(k) Retirement Plan as well as matching contributions into our non-qualified 401(k) RetirementNon-Qualified Plan. Matching contributions under our qualified 401(k) Retirement Plan are provided to all eligible employees participating in the plan as described beginning on page 5771 in the Retirement and Workplace Benefits section. The company matched contributions dollar-for-dollar up to 5% of eligible earnings in 2014.2017. Matching contributions under our non-qualified 401(k) RetirementNon-Qualified Plan are provided to eligible officers participating in the plan as described beginning on page 5771 in the Retirement and Workplace Benefits section. The company matched contributions dollar-for-dollar up to 5% of eligible earnings in 2014.2017. |
| |
| (d) | Many of our employees are required to travel to other company locations outside of their primary state of employment. While working in a state other than their primary state of employment, employees may become subject to state income taxes in that state if days worked or earnings accrued exceed an amount specified inunder state law. When this happens, we pay the state income tax on behalf of those employees (including our executives)NEOs) and gross up the income amount for FICA and Medicare taxes (gross ups on these amounts are included in row g)"Tax Reimbursement Payments"). The employee remains responsible for any taxes they would have incurred had they worked only in their primary state of employment. |
| |
| (e) | This amount represents consulting fees paid to Mr. McCarthy in 2014 following his retirement. |
| (f) | These amounts represent the aggregate of Defined Contribution Plan (DC Plan)company and Transition Plantransition contributions under our 401(k) and Non-Qualified Plans as described beginning on page 5771 in the Retirement and Workplace Benefits section. Full-time employees with one year of service with the company receive 4.5% of their salary and annual incentive contributed into their 401(k) through the DC Plan. Full-time employees who, as of December 31, 2013, had either: (i) reached a minimum of 60 points (age plus service) and at least 15 years of service or (ii) reached the age of 50 with 10 years of service with the company, as of December 31, 2013 (when the defined benefit pension plan was frozen) receive an additional contribution into their DC Plan401(k) and Non-Qualified Plans through the Transition Plan,transition contributions, as disclosed above in the Retirement and Workplace Benefits section. |
| (g) |
| (f) | The amounts shown in this rowAmounts represent tax payments made by us on behalf of each named executive officerNEO relating to other itemsEmployee and Spouse/Guest Attendance at Company Business Functions and Non-Resident State Taxes. In 2017, Mr. McGarry also received a tax reimbursement payment related to his foreign assignment, which ended in this table.2012. |
| |
| (g) | This amount includes tax equalization and foreign tax preparation benefits. We provided expatriate tax benefits to Mr. McGarry in connection with his non-permanent relocation, at the company's request, to the United Kingdom, consistent with the company's expatriate assignment policy. Under the company's expatriate assignment policy, the employee is responsible for the amount of taxes he would have incurred if he had continued to live and work in his home country. These taxes were paid in British Pounds and have been converted to U.S. dollars at a rate of GBP£1 = US$1.2347. Additionally, we provide all expatriate employees (including executives) foreign tax preparation services while they are on assignment outside their home countries and for the three-year period after they return. Mr. McGarry was the only NEO to receive this benefit in 2017. |
|
| |
6678 | | 20152018 PROXY STATEMENT |
2017 Grants of Plan-Based Awards
| | | | | | | | | | | | | | | | | | | | | | |
Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (#)(3) | | All Other Stock Awards (Number of Shares of Stock or Units) | | All Other
Option Awards (Number of Securities Underlying Options) | | Exercise
or Base
Price of Option Awards | | Grant Date Fair Value of Stock and Option Awards | |
| | Threshold | | Target | | Max | | Threshold | | Target | | Max | | (#)(4)(5) | | (#) | | ($)/SH | | ($) | |
Mr. Watjen(2) | | | | | | | | | | | | | | | | | | | | | | |
— | | 572,577 | | 2,290,308 | | 4,580,616 | | | | | | | | | | | | | | | | |
02/25/14 | | | | | | | | | | | | | | 87,124 | | | | | | | 2,950,019 | |
02/25/14 | | | | | | | | 34,849 | | 87,123 | | 156,821 | | | | | | | | | 3,035,365 (18) | |
Mr. McKenney | | | | | | | | | | | | | | | | | | | | | | |
— | | 178,101 | | 712,404 | | 1,424,808 | | | | | | | | | | | | | | | | |
02/25/14 | | | | | | | | | | | | | | 37,212 | | | | | | | 1,259,998 | |
02/25/14 | | | | | | | | 4,962 | | 12,404 | | 22,327 | | | | | | | | | 432,155 (18) | |
Ms. Farrell | | | | | | | | | | | | | | | | | | | | | | |
— | | 130,136 | | 520,543 | | 1,041,086 | | | | | | | | | | | | | | | | |
02/25/14 | | | | | | | | | | | | | | 9,884 | | | | | | | 334,672 | |
02/25/14 | | | | | | | | 1,318 | | 3,295 | | 5,931 | | | | | | | | | 114,798 (18) | |
Mr. Simonds | | | | | | | | | | | | | | | | | | | | | | |
— | | 115,204 | | 460,817 | | 921,634 | | | | | | | | | | | | | | | | |
02/25/14 | | | | | | | | | | | | | | 13,456 | | | | | | | 455,620 | |
02/25/14 | | | | | | | | 1,794 | | 4,485 | | 8,073 | | | | | | | | | 156,257 (18) | |
Mr. Horn | | | | | | | | | | | | | | | | | | | | | | |
— | | 102,481 | | 409,923 | | 819,846 | | | | | | | | | | | | | | | | |
02/25/14 | | | | | | | | | | | | | | 12,183 | | | | | | | 412,516 | |
02/25/14 | | | | | | | | 1,624 | | 4,061 | | 7,310 | | | | | | | | | 141,485 (18) | |
05/19/14 | | | | | | | | | | | | | | 8,158 | | | | | | | 268,398 (19) | |
05/19/14 | | | | | | | | 1,632 | | 4,079 | | 7,342 | | | | | | | | | 134,281 (20) | |
05/19/14 | | | | | | | | | | | | | | 4,459 | | | | | | | 146,701 (21) | |
05/19/14 | | | | | | | | | | | | | | | | 10,775(6) | | 24.25(12) | | | 116,706 (22)(23) | |
05/19/14 | | | | | | | | | | | | | | | | 13,191(7) | | 23.35(13) | | | 99,645 (22)(24) | |
05/19/14 | | | | | | | | | | | | | | | | 11,035(8) | | 26.29(14) | | | 37,000 (22)(24) | |
05/19/14 | | | | | | | | | | | | | | | | 15,895(9) | | 20.78(15) | | | 13,527 (22)(24) | |
05/19/14 | | | | | | | | | | | | | | | | 33,624(10) | | 11.37(16) | | | 0 (22)(24) | |
05/19/14 | | | | | | | | | | | | | | | | 29,623(11) | | 23.74(17) | | | 8,057 (22)(24) | |
Mr. McCarthy(2) | | | | | | | | | | | | | | | | | | | | | | |
— | | 39,981 | | 159,923 | | 319,846 | | | | | | | | | | | | | | | | |
02/25/14 | | | | | | | | | | | | | | 34,886 | | | | | | | 1,181,240 | |
02/25/14 | | | | | | | | 4,652 | | 11,629 | | 20,932 | | | | | | | | | 405,154 (18) | |
|
| | | | | | | | | |
Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1) | Estimated Future Payouts Under Equity Incentive Plan Awards (#)(3) | All Other Stock Awards (Number of Shares of Stock or Units) | Grant Date Fair Value of Stock Awards | |
| Threshold | Target | Max | Threshold | Target | Max | (#)(4) | ($) | |
| Mr. McKenney | | | | | | | | | |
| — | 437,500 | 1,750,000 | 3,281,250 | | | | | | |
| 3/1/2017 | | | | | | | 55,154 | 2,749,978 | (5) |
| 3/1/2017 | | | | 22,062 | 55,154 | 99,277 | | 2,970,043 | (6) |
Mr. McGarry (2) | | | | | | | | | |
| — | 155,769 | 623,077 | 1,168,269 | | | | | | |
| 3/1/2017 | | | | | | | 10,028 | 499,996 | (5) |
| 3/1/2017 | | | | 4,011 | 10,028 | 18,050 | | 540,008 | (6) |
| Mr. Simonds | | | | | | | | | |
| — | 137,596 | 550,385 | 1,031,972 | | | | | | |
| 3/1/2017 | | | | | | | 10,028 | 499,996 | (5) |
| 3/1/2017 | | | | 4,011 | 10,028 | 18,050 | | 540,008 | (6) |
| Ms. Farrell | | | | | | | | | |
| — | 137,516 | 550,062 | 1,031,366 | | | | | | |
| 3/1/2017 | | | | | | | 4,770 | 237,832 | (5) |
| 3/1/2017 | | | | 1,908 | 4,770 | 8,586 | | 256,865 | (6) |
| Ms. Iglesias | | | | | | | | | |
| — | 94,255 | 377,019 | 706,911 | | | | | | |
| 3/1/2017 | | | | | | | 6,205 | 309,381 | (5) |
| 3/1/2017 | | | | 2,482 | 6,205 | 11,169 | | 334,139 | (6) |
COMPENSATION TABLES
| (1) | These amounts reflect the threshold, target, and maximum award under the annual incentive plan. The threshold is the minimum level, which is 25% of the amount shown in the Target column.column and reflects the payout that would have been earned based on threshold achievement of each of the performance measures. Target amounts are based on the individuals’ earnings for 20142017 and their annual incentive target. The maximum award is 200%187.5% of such target.target (150% plan maximum multiplied by 125% individual maximum). |
| |
| (2) | Mr. Watjen’sMcGarry’s performance-based restricted stock units (PBRSUs) and performance share units (PSUs) are no longer subject to risk of forfeiture because he met the age and years of service requirements for retirement eligibility under the plans from which the awards were granted. His PBRSUs will continue to vest ratably over the three yearthree-year vesting period on each anniversary of the grant date. Mr. McCarthy’s unvested PBRSUs vested immediately upon his retirementThe actual amount of PSUs that will vest will be determined based on March 31, 2014 and were distributed six months later in accordance with Section 409Athe achievement of the Code.three-year performance goals, modified by relative TSR, as described in further detail in the Long-term Incentive Targets section beginning on page 61. |
| |
| (3) | The vesting of performance share units (PSUs)PSUs ranges from 40% to 180% of target based on the performance and market conditions noteddescribed beginning on page 50.61. The grant date fair value of each PSU was calculated in accordance with Accounting Standards Codification (ASC) 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest, and pairwise correlation coefficients. On May 19, 2014, the Committee approved Mr. Horn’s retirement status under the plans, effective upon his retirement on March 31, 2015. This means that Mr. Horn will be eligible to earn the full grant, including dividend equivalents. The actual amount that will vestbe issued will be determined based on the achievement of the three-year performance goals (2014-2016)(2017-2019), modified by relative TSR, as described in further detail in the Long-termLong-Term Incentive Targets section beginning on page 50.61. |
| |
| (4) | ThisThe grant of PBRSUs made on February 25, 2014March 1, 2017 for Messrs. Watjen, McKenney, McGarry, and Simonds Hornas well as Mses. Farrell and McCarthy and Ms. Farrell wasIglesias were based on the achievement of a threshold of statutory after-tax operating earnings and individual performance for 2013 and vests ratably over three years. These awards were granted under the Stock Incentive Plan of 2012. Details are provided in the Long-Term Incentive Granted in 2014 table on page 56. For Mr. Watjen, 50% of these shares will be stock settled and 50% will be cash settled upon vesting. On May 19, 2014, the Committee approved Mr. Horn’s retirement status allowing him to vest in all of his unvested PBRSUs upon his retirement on March 31, 2015. |
for 2016 and vests ratably over three years. These awards were granted under the Stock Incentive Plan of 2017. Details are provided in the Long-Term Incentive Awards Granted in 2017 Table and related footnotes beginning on page 68.
| |
| (5) | The grant date fair value of stock awards for performance-based restricted stock unitsthe PBRSUs granted on February 25, 2014March 1, 2017 was calculated as the number of units multiplied by the closing market price of $33.86$49.86 on the grant date. |
(6) | This award consists of 3,591 options representing the unvested options held by Mr. Horn from the February 20, 2013 grant that accelerated vesting as of the May 19, 2014 modification date, and 7,184 options held by Mr. Horn from the February 20, 2013 grant that were modified on May 19, 2014 due to an extension in the exercise term. The fair value of the options that accelerated vesting and the incremental fair value of the options with an extended exercise term were $16.231 and $8.132, respectively. These fair values on the modification date were estimated using the Black-Scholes valuation model. The following assumptions were used to value the modified grant: |
| (a) | Expected volatility of 51%, based on our historical daily stock prices; |
| (b) | Expected life of 5.9 years, which equals the maximum term; |
| (c) | Expected dividend yield of 1.76%, based on the dividend rate at the date of modification; and |
| (d) | Risk-free rate of 1.79%, based on the yield of treasury bonds at the date of modification. |
(7) | The incremental fair value of options granted on February 21, 2012, which were modified on May 19, 2014, was $7.554. The incremental fair value on the modification date was estimated using the Black-Scholes valuation model. The following assumptions were used to value the modified grant: |
| (a) | Expected volatility of 51%, based on our historical daily stock prices; |
| (b) | Expected life of 5.8 years, which equals the maximum term; |
| (c) | Expected dividend yield of 1.76%, based on the dividend rate at the date of modification; and |
| (d) | Risk-free rate of 1.76%, based on the yield of treasury bonds at the date of modification. |
(8) | The incremental fair value of options granted on February 22, 2011, which were modified on May 19, 2014, was $3.353. The incremental fair value on the modification date was estimated using the Black-Scholes valuation model. The following assumptions were used to value the modified grant: |
| (a) | Expected volatility of 28%, based on our historical daily stock prices; |
| (b) | Expected life of 4.8 years, which equals the maximum term; |
| (c) | Expected dividend yield of 1.76%, based on the dividend rate at the date of modification; and |
| (d) | Risk-free rate of 1.47%, based on the yield of treasury bonds at the date of modification. |
(9) | The incremental fair value of options granted on February 25, 2010, which were modified on May 19, 2014, was $0.851. The incremental fair value on the modification date was estimated using the Black-Scholes valuation model. The following assumptions were used to value the modified grant: |
| (a) | Expected volatility of 26%, based on our historical daily stock prices; |
| (b) | Expected life of 3.8 years, which equals the maximum term; |
| (c) | Expected dividend yield of 1.76%, based on the dividend rate at the date of modification; and |
| | |
| |
68(6) | | 2015 PROXY STATEMENT |
COMPENSATION TABLES
| (d) | Risk-free rate of 1.09%, based on the yield of treasury bonds at the date of modification. |
(10) | The incremental fair value of options granted on February 24, 2009, which were modified on May 19, 2014, was $0.000. The incremental fair value on the modification date was estimated using the Black-Scholes valuation model. The following assumptions were used to value the modified grant: |
| (a) | Expected volatility of 25%, based on our historical daily stock prices; |
| (b) | Expected life of 2.8 years, which equals the maximum term; |
| (c) | Expected dividend yield of 1.76%, based on the dividend rate at the date of modification; and |
| (d) | Risk-free rate of 0.69%, based on the yield of treasury bonds at the date of modification. |
(11) | The incremental fair value of options granted on February 21, 2008, which were modified on May 19, 2014, was $0.272. The incremental fair value on the modification date was estimated using the Black-Scholes valuation model. The following assumptions were used to value the modified grant: |
| (a) | Expected volatility of 21%, based on our historical daily stock prices; |
| (b) | Expected life of 1.8 years, which equals the maximum term; |
| (c) | Expected dividend yield of 1.76%, based on the dividend rate at the date of modification; and |
| (d) | Risk-free rate of 0.30%, based on the yield of treasury bonds at the date of modification. |
(12) | The amount shown is the closing market price on February 20, 2013, the day the options were originally granted. The award was modified on May 19, 2014 in connection with Mr. Horn’s retirement as described on page 56 in the 2015 Compensation Decisions section. The closing price on that date was $32.90. |
(13) | The amount shown is the closing market price on February 21, 2012, the day the options were originally granted. The award was modified on May 19, 2014 in connection with Mr. Horn’s retirement as described on page 56 in the 2015 Compensation Decisions section. The closing price on that date was $32.90. |
(14) | The amount shown is the closing market price on February 22, 2011, the day the options were originally granted. The award was modified on May 19, 2014 in connection with Mr. Horn’s retirement as described on page 56 in the 2015 Compensation Decisions section. The closing price on that date was $32.90. |
(15) | The amount shown is the closing market price on February 25, 2010, the day the options were originally granted. The award was modified on May 19, 2014 in connection with Mr. Horn’s retirement as described on page 56 in the 2015 Compensation Decisions section. The closing price on that date was $32.90. |
(16) | The amount shown is the closing market price on February 24, 2009, the day the options were originally granted. The award was modified on May 19, 2014 in connection with Mr. Horn’s retirement as described on page 56 in the 2015 Compensation Decisions section. The closing price on that date was $32.90. |
(17) | The amount shown is the closing market price on February 21, 2008, the day the options were originally granted. The award was modified on May 19, 2014 in connection with Mr. Horn’s retirement as described on page 56 in the 2015 Compensation Decisions section. The closing price on that date was $32.90. |
(18) | As noted above, the grant date fair value of performance share units (PSUs)PSUs granted on February 25, 2014, whichMarch 1, 2017 was calculated in accordance with ASC 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest, and pairwise correlation coefficients as of February 25, 2014.March 1, 2017. The Monte Carlo valuation per share was $34.84.$53.85. |
(19) | The amount shown represents the unvested restricted stock units held by Mr. Horn from the February 25, 2014 grant that accelerated vesting as of the May 19, 2014 modification date. These units were valued using a share price of $32.90, the closing price on May 19, 2014. |
(20) | The grant date fair value of the PSUs that were modified on May 19, 2014 in connection with Mr. Horn’s retirement were calculated in accordance with ASC 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest and pairwise correlation coefficients as of May 19, 2014. The Monte Carlo valuation per share was $32.92. |
(21) | The amount shown represents the unvested restricted stock units held by Mr. Horn from the February 20, 2013 grant that were modified on May 19, 2014. These units were valued at $32.90, the closing price on May 19, 2014. |
(22) | The incremental fair value was determined by taking the difference between the fair value of the options immediately prior to the modification and the fair value of the modified award. The post-modification assumptions used in the Black-Scholes valuation model were outlined in footnotes (6) through (11) above. The following assumptions were used in the Black-Scholes valuation model to calculate the fair value of each of these options immediately prior to the modification: |
| (a) | Expected volatility of 21%, based on our historical daily stock prices; |
| (b) | Expected life of 1.1 years, which equals the maximum term; |
| (c) | Expected dividend yield of 1.78%, based on the dividend rate; and |
| (d) | Risk-free rate of 0.12%, based on the yield of treasury bonds. |
(23) | These amounts represent Mr. Horn’s outstanding options as of the modification date multiplied by the fair value or incremental fair value associated with the grant modification, as disclosed in footnote (6) above. |
(24) | These amounts represent Mr. Horn’s outstanding options as of the modification date multiplied by the incremental fair value associated with the grant modification, as disclosed in the footnotes above. |
COMPENSATION TABLES
2017 Outstanding Equity Awards at Fiscal Year-End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | | Stock Awards | |
Number of Securities Underlying Unexercised Options | | Number of Securities Underlying Unexercised Options | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | | | Option Exercise Price | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(4) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5) | | | Equity
Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not Vested(6) | |
| (# Exercisable) | | (# Unexercisable) | | | (#) | | | ($) | | | | | | (#) | | | ($) | | | (#) | | | ($) | |
Mr. Watjen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- | | | - | | | | - | | | | - | | | | - | | | | 246,590 | | | | 8,601,059 | | | | 206,021 | | | | 7,186,012 | |
239,796 | | | - | | | | - | | | | 11.370 | | | | 2/24/17 | | | | - | | | | - | | | | - | | | | - | |
153,927 | | | - | | | | - | | | | 20.780 | | | | 2/25/18 | | | | - | | | | - | | | | - | | | | - | |
123,682 | | | - | | | | - | | | | 26.290 | | | | 2/22/19 | | | | - | | | | - | | | | - | | | | - | |
119,291 | | | 59,646 | (1) | | | | | | | 23.350 | | | | 2/21/20 | | | | - | | | | - | | | | - | | | | - | |
Mr. McKenney | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- | | | - | | | | - | | | | - | | | | - | | | | 86,139 | | | | 3,004,528 | | | | 12,579 | | | | 438,756 | |
26,048 | | | - | | | | - | | | | 26.290 | | | | 2/22/19 | | | | - | | | | - | | | | - | | | | - | |
22,846 | | | 11,424 | (1) | | | - | | | | 23.350 | | | | 2/21/20 | | | | - | | | | - | | | | - | | | | - | |
13,253 | | | 26,507 | (2) | | | - | | | | 24.250 | | | | 2/20/21 | | | | - | | | | - | | | | - | | | | - | |
Ms. Farrell | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- | | | - | | | | - | | | | - | | | | - | | | | 27,739 | | | | 967,536 | | | | 3,342 | | | | 116,569 | |
- | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
- | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
- | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Mr. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- | | | - | | | | - | | | | - | | | | - | | | | 28,030 | | | | 977,686 | | | | 4,548 | | | | 158,634 | |
- | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
- | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
- | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Mr. Horn | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- | | | - | | | | - | | | | - | | | | - | | | | 27,208 | | | | 949,015 | | | | 4,118 | | | | 143,636 | |
29,623 | | | - | | | | - | | | | 23.740 | | | | 2/21/16 | | | | - | | | | - | | | | - | | | | - | |
33,624 | | | - | | | | - | | | | 11.370 | | | | 2/24/17 | | | | - | | | | - | | | | - | | | | - | |
15,895 | | | - | | | | - | | | | 20.780 | | | | 2/25/18 | | | | - | | | | - | | | | - | | | | - | |
11,035 | | | - | | | | - | | | | 26.290 | | | | 2/22/19 | | | | - | | | | - | | | | - | | | | - | |
8,794 | | | 4,397 | (1) | | | - | | | | 23.350 | | | | 2/21/20 | | | | - | | | | - | | | | - | | | | - | |
3,591 | | | 7,184 | (3) | | | - | | | | 24.250 | | | | 3/31/20 | | | | - | | | | - | | | | - | | | | - | |
Mr. McCarthy | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 11,793 | | | | 411,340 | |
10,468 | | | - | | | | - | | | | 23.350 | | | | 3/31/19 | | | | - | | | | - | | | | - | | | | - | |
24,917 | | | - | | | | - | | | | 24.250 | | | | 3/31/19 | | | | - | | | | - | | | | - | | | | - | |
|
| | | | | | | | | | | | | | |
| Option Awards | Stock Awards |
Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) |
| (# Exercisable) | (# Unexercisable) | ($) | | (#) | ($) | (#) | ($) |
| Mr. McKenney | | | | | | |
| 39,760 | — |
| 24.25 |
| 2/20/2021 |
| 135,450 |
| 7,434,851 |
| 272,680 |
| 14,967,405 |
|
| Mr. McGarry | | | | | | |
| — | — |
| — |
| — |
| 24,649 |
| 1,352,984 |
| 48,614 |
| 2,668,422 |
|
| Mr. Simonds | | | | | | | |
| — | — |
| — |
| — |
| 26,847 |
| 1,473,632 |
| 49,991 |
| 2,744,006 |
|
| Ms. Farrell | | | | | | |
| — | — |
| — |
| — |
| 12,639 |
| 693,755 |
| 23,620 |
| 1,296,502 |
|
| Ms. Iglesias | | | | | | | |
| — | — |
| — |
| — |
| 26,216 |
| 1,438,996 |
| 32,585 |
| 1,788,591 |
|
COMPENSATION TABLES
| (1) | These options vested on February 21, 2015. |
(2) | These options will vest on February 20, 2016. |
(3) | These options vested on March 31, 2015, Mr. Horn’s retirement date. |
(4) | The amounts in this column represent the aggregate value of performance-based restricted stock units (including(PBRSUs), including dividend equivalents)equivalents, shown in the “Number"Number of Shares or Units of Stock That Have Not Vested”Vested" column based on the closing price of $34.88$54.89 on December 31, 2014,29, 2017, the last trading day of the year. |
(5) | |
| (2) | This column reflects the outstanding number of PSUs that would be received by each NEO at target for the 2013 and 2014 grants. These PSU awards that were granted on February 21, 2013 (to Mr. Watjen only)23, 2016 and February 25, 2014 (all NEOs), respectively.March 1, 2017. They vest onat the third anniversaryend of the grant date,respective performance period, subject to the level of achievement with respect to theof applicable performance targets. In accordance with Instruction 3 to Regulation S-K Item 402(f)(2), the values for this awardthese awards in the “Equity"Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested”Vested" and the “Equity"Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested”Vested" columns are reported at targetmaximum levels assince the company’s ranked average performance and relative total shareholder return for 20132016 and 2014 relative2017 awards exceeded the target. Actual shares to be issued under PSUs granted in connection with the applicable peer group exceed the threshold. The company’s ranked average performance for 2015 (for the 2013 grant)2016-2018 and for 2016 (for the 2013 grant and the 2014 grant) relative to the applicable index was not determinable as of the date of filing of this proxy statement. The ultimate payout under this PSU award is based on a final determination of performance during the complete 2013-2015 and 2014-20162017-2019 performance periods respectively, which isare not yet determinable and which may differ from the performance level required to be disclosed in this table. The PSUs that were granted in 2015 (for the 2015-2017 performance period) vested on December 31, 2017 and are shown in the "2017 Option Exercises and Stock Vested" table. |
(6) | |
| (3) | The amounts in this column represent the aggregate value of PSUs (including dividend equivalents) shown in the “Equity"Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested”Vested" column based on the closing price of $34.88$54.89 on December 31, 2014,29, 2017, the last trading day of the year. |
Vesting Schedule for Unvested
Performance Based Restricted Stock Units
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Number of Restricted Shares/Units Vesting(1) |
| Vesting Date | | Grant
Date | | | Mr. Watjen(2) | | | Mr. McKenney | | | Ms. Farrell | | | Mr. Simonds | | | Mr. Horn(3) | | | Mr. McCarthy(4) |
| | | | | | | | |
February 20, 2015 | | | 2/20/13 | | | | - | | | | 16,542 | | | | 6,022 | | | | 4,755 | | | | 4,483 | | | - |
| | | | | | | | |
February 21, 2015 | | | 2/21/12 | | | | 79,623 | | | | 15,247 | | | | 5,644 | | | | 4,853 | | | | 5,869 | | | - |
| | | | | | | | |
February 21, 2015 | | | 2/21/13 | | | | 39,307 | | | | - | | | | - | | | | - | | | | - | | | - |
| | | | | | | | |
February 25, 2015 | | | 2/25/14 | | | | 29,448 | | | | 12,579 | | | | 3,341 | | | | 4,548 | | | | 4,118 | | | - |
| | | | | | | | |
February 20, 2016 | | | 2/20/13 | | | | - | | | | 16,613 | | | | 6,048 | | | | 4,777 | | | | 4,502 | | | - |
| | | | | | | | |
February 21, 2016 | | | 2/21/13 | | | | 39,305 | | | | - | | | | - | | | | - | | | | - | | | - |
| | | | | | | | |
February 25, 2016 | | | 2/25/14 | | | | 29,448 | | | | 12,579 | | | | 3,342 | | | | 4,548 | | | | 4,118 | | | - |
| | | | | | | | |
February 25, 2017 | | | 2/25/14 | | | | 29,459 | | | | 12,579 | | | | 3,342 | | | | 4,549 | | | | 4,118 | | | - |
| | | | | | | |
Total | | | | | | | 246,590 | | | | 86,139 | | | | 27,739 | | | | 28,030 | | | | 27,208 | | | - |
|
| | | | | | | | | | | |
| | | Number of Restricted Shares/Units Vesting(1) |
| Vesting Date | Grant Date | Mr. McKenney | Mr. McGarry(2) | Mr. Simonds | Ms. Farrell | Ms. Iglesias |
| January 8, 2018 | 1/8/2015 | — |
| — |
| — |
| — |
| 8,909 |
|
| February 23, 2018 | 2/23/2016 | 31,544 |
| 5,559 |
| 5,811 |
| 2,735 |
| 3,898 |
|
| February 24, 2018 | 2/24/2015 | 15,505 |
| 3,199 |
| 4,884 |
| 2,252 |
| 3,102 |
|
| March 1, 2018 | 3/1/2017 | 18,446 |
| 3,354 |
| 3,354 |
| 1,595 |
| 2,075 |
|
| February 23, 2019 | 2/23/2016 | 32,500 |
| 5,727 |
| 5,988 |
| 2,818 |
| 4,017 |
|
| March 1, 2019 | 3/1/2017 | 18,448 |
| 3,354 |
| 3,354 |
| 1,595 |
| 2,076 |
|
| March 1, 2020 | 3/1/2017 | 19,007 |
| 3,456 |
| 3,456 |
| 1,644 |
| 2,139 |
|
| Total | | 135,450 |
| 24,649 |
| 26,847 |
| 12,639 |
| 26,216 |
|
| |
| (1) | These performance-based restricted stock units (PBRSUs) include dividend equivalents earned through December 31, 2014.2017. |
| |
| (2) | Mr. Watjen’s performance-based restricted stock units (PBRSUs)McGarry’s PBRSUs are no longer subject to the risk of forfeiture because he meets the age and years of service requirement for retirement eligibility. |
(3) | On May 19, 2014 the Committee determined that Mr. Horn’s retirement on March 31, 2015 would be a qualifying retirement for purposes of his outstanding PBRSUs. In accordance with Instruction 2 to Item 402(f)(2), the vesting pattern shown in this table is as of December 31, 2014. However, as a result of Mr. Horn’s retirement on March 31, 2015, all of the PBRSUs shown in this table vested as of that date and will be distributed to him in accordance with Section 409A of the Code. |
(4) | Mr. McCarthy’s performance-based restricted stock unit grants are no longer subject to the risk of forfeiture because he met the age and years of service requirement for retirement eligibility on March 31, 2014, the date of his retirement. These grants vested immediately upon his retirement. His performance-based restricted stock units were distributed to him in accordance with Section 409A of the Code. |
COMPENSATION TABLES
2017 Option Exercises and Stock Vested
| | | | | | | | | | | | |
| | | Option Awards | | Stock Awards(3) | |
Name | | Number of Shares
Acquired on Exercise(1) (#) | | Value Realized
on Exercise(2) ($) | |
| Number of Shares
Acquired on Vesting(4) (#) |
| |
| Value Realized
on Vesting(5) ($) |
|
| | | | | |
Mr. Watjen | | 331,519 | | 3,231,449 | | | 174,915 | | | | $5,868,400 | |
| | | | | |
Mr. McKenney | | 26,963 | | 352,054 | | | 43,482 | | | | 1,459,139 | |
| | | | | |
Ms. Farrell | | - | | - | | | 17,338 | | | | 577,772 | |
| | | | | |
Mr. Simonds | | - | | - | | | 12,018 | | | | 403,304 | |
| | | | | |
Mr. Horn | | - | | - | | | 15,365 | | | | 515,585 | |
| | | | | |
Mr. McCarthy(6) | | 31,130 | | 295,768 | | | 120,710 | | | | 4,116,627 | |
|
| | | | | | | | |
| | Option Awards | Stock Awards(3) |
| Name | Number of Shares Acquired on Exercise(1) (#) | Value Realized on Exercise(2) ($) | Number of Shares Acquired on Vesting(4) (#) | Value Realized on Vesting(5) ($) |
| Mr. McKenney | 60,318 |
| 1,439,210 |
| 124,111 |
| 6,435,747 |
|
| Mr. McGarry | — |
| — |
| 25,423 |
| 1,318,728 |
|
| Mr. Simonds | — |
| — |
| 35,638 |
| 1,858,978 |
|
| Ms. Farrell | — |
| — |
| 17,787 |
| 922,839 |
|
| Ms. Iglesias | — |
| — |
| 15,659 |
| 728,307 |
|
| |
| (1) | A portion of the underlying shares were withheld to cover taxes due upon exercise. |
| |
| (2) | The amount is calculated as the number of shares acquired multiplied by the market price at the pointtime of exercise less the option exercise/strike price. |
| |
| (3) | Reflects the performance-based restricted stock units (PBRSUs) and performance share units (PSUs) that vested during 2014.2017. |
| |
| (4) | Includes the total number of unrestricted shares acquired upon the vesting of performance-based restricted stock units.PBRSUs and PSUs. A portion of these shares were withheld to cover taxes due upon vesting. |
| |
| (5) | The amount is calculated includes performance-based restricted stock units acquiredas the number of vested PBRSUs and PSUs multiplied by the closing price on the vesting date. |
(6) | Mr. McCarthy’s vesting includes both normal, ratable, vestingdate (based on the closing stock price of $54.89 on December 29, 2017, the last trading day of the year). Included in Februarythe amounts for Messrs. McKenney, McGarry, and Simonds as well as accelerated vesting as a result of his retirement.Ms. Farrell are PSUs which were granted in 2015 (for the 2015-2017 performance period) and which vested on December 31, 2017 and were distributed on February 20, 2018 on which date the closing stock price was $52.34 per share. |
| | |
| |
72 | | 20152018 PROXY STATEMENT | 81 |
POST-EMPLOYMENT COMPENSATION
POST-EMPLOYMENT COMPENSATION
The Unum Group Pension Plan
and the Unum Group Supplemental Pension Plan
and the Unum Group Senior Executive Retirement Plan (SERP)(the Excess Plan) were frozen on December 31, 2013. Benefits earned under these plans have been determined based on service and eligible earnings through December 31, 2013. NEOs hired prior to this date participated in both the Unum Group Pension and Supplemental Pension
Plans, and Mr. Watjen also participated in the Unum Group SERP. Any benefitsPlans. Benefits earned before the freeze will be paid to executives under the terms of the plans as the employees terminate employment or retire.
| | |
|
| FROZEN DEFINED BENEFIT PLANS |
| |
| | Unum Group Pension Plan (Qualified Plan) |
| |
| | Provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Internal Revenue Code. The Qualified Plan was designed to provide tax-qualified pension benefits for most employees. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Qualified Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013.
|
| |
| | Unum Group Supplemental Pension Plan (Excess Plan) |
| |
| | Provides unfunded, non-qualified benefits for compensation that exceeds the Code limits inapplicable to the Qualified Plan. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Excess Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. |
| |
| | Unum Group Senior Executive Retirement Plan (SERP) |
| |
| | Mr. Watjen is the only active employee in the Senior Executive Retirement Plan (“SERP”). This plan provides unfunded, non-qualified benefits that are offset by benefits under the Qualified Plan and the Excess Plan. The SERP supplements the pension benefits that are provided under Qualified and Excess Plans (as outlined above), and in connection with the freezing of those plans, Mr. Watjen requested similar changes to his retirement benefit under the Unum Group SERP. On December 12, 2013 the Human Capital Committee approved amendments to Mr. Watjen’s employment agreement, including freezing the further accrual of his retirement benefit under the SERP on December 31, 2013.
|
Following are details of how each of the frozen plan benefits are calculated. These formulas incorporate base pay received in each plan year during which the employee accrued credited service through December 31, 2013, and payments received from the regular annual incentive plan and any field or sales compensation plans through that date. Not included are other bonuses, long-term incentive awards, commissions, prizes, awards, or allowances for incidentals.
POST-EMPLOYMENT COMPENSATION
In calculating the basic pension benefits in our Qualified Plan, three criteria are used: | | |
|
| FROZEN QUALIFIED PLAN CRITERIA |
| Credited service |
| | Credited service |
| |
| | A measureMeasures of the time individuals are employed at the company. One year of credited service is granted for each plan year in which 1,000 hours of employment are completed. No additional credited service will accrue to any participant after December 31, 2013. |
| |
| | Highest average earnings |
| |
| | The average of the highest 5 years of compensation (whether or not consecutive) during the earlier of the last 10 years of employment or as of the date the plan was frozen on December 31, 2013. |
| |
| | Social Security covered compensation |
| |
| | The average of the taxable wage bases in effect for each calendar year during the 35-year period ending when the plan was frozen on the last day of the calendar 2013 year. December 31, 2013. |
POST-EMPLOYMENT COMPENSATION
The basic benefit is provided as an annual single life annuity and is calculated as follows:
| |
| (1) | Can range from 3%, if the sum of an employee’s age and years of credited service is less than 30, to 8%, if the sum equals or exceeds 95. |
| |
| (2) | Equal to 9.0 for retirement at age 65 and increased by 0.2 for each whole year retirement occurs prior to age 65. |
All frozen pension benefits are indexed on the first day of each plan year
(January 1st) following December 31, 2013 using the National Average Wage rate of increase published by the Social Security Administration in the preceding year (minimum of 2.75% and maximum of 5%).
As of January 2017, the retirement benefits will be indexed using the Internal Revenue Service regulations.
Benefits provided under the frozen Qualified Plan are based on pensionable earnings through December 31, 2013 up to the 2013 compensation limit of $255,000 under the Internal Revenue Code. In addition, benefits may not exceed
$210,000$220,000 (payable as a single life annuity beginning at any age from 62 through Social Security Normal Retirement Age) under the Internal Revenue Code.
As described above in the Frozen Defined
Benefits Table,Benefit Plans table, the Excess Plan disregards the annual benefit limit under Section 415 of the Code. The Excess Plan takes into account pension benefits outside of the current Qualified Plan and is calculated as follows:
POST-EMPLOYMENT COMPENSATION
SERP
The SERP is provided as a single life annuity beginning on the first day of the month following retirement. The benefit is calculated as follows:
Mr. Watjen is the only NEO covered under the SERP.
Participants in the pension plans outlined above are eligible to retire as early as age 55. Under the Qualified and Excess Plans, participants may retire early at age 55 with 5 years of vesting service. However, if a participant begins receiving a benefit prior to the normal retirement age of 65, the normal retirement benefit will be reduced based on the applicable early reduction factors defined in the plan.
Under The benefit formula is shown under the SERP,Qualified and Excess plans beginning on page 82. Mr. WatjenMcGarry is the only NEO currently eligible for an unreduced pension at age 60, his current age,early retirement under the Qualified and the amount of his unreduced pension is shown in the Pension Benefits table on the following page.
Excess plans.
| | |
| |
20152018 PROXY STATEMENT | | 7583 |
POST-EMPLOYMENT COMPENSATION
Current Value of Pension Benefits
Pension benefits payable to each NEO are summarized in the following table:
PENSION BENEFITS
| | | | | | | | |
| Name | | Plan Name | | Number of Years of
Credited Service (#) | | Present Value of
Accumulated
Benefits ($)(2)(3) | | Payments During Last
Fiscal Year ($) |
Mr. Watjen(1) | | Qualified | | 19.50 | | 665,000 | | $ – |
| | | | | |
| | | Excess | | 19.50 | | 8,678,000 | | – |
| | | | | |
| | | SERP | | 19.50 | | 12,271,000 | | – |
| | | | | |
Mr. McKenney | | Qualified | | 4.42 | | 87,000 | | – |
| | | | | |
| | | Excess | | 4.42 | | 474,000 | | – |
| | | | | |
Ms. Farrell | | Qualified | | 3.00 | | 91,000 | | – |
| | | | | |
| | | Excess | | 3.00 | | 222,000 | | – |
| | | | | |
Mr. Simonds | | Qualified | | 16.25 | | 424,000 | | – |
| | | | | |
| | | Excess | | 16.25 | | 563,000 | | – |
| | | | | |
Mr. Horn | | Qualified | | 10.00 | | 341,000 | | – |
| | | | | |
| | | Excess | | 10.00 | | 939,000 | | – |
| | | | | |
Mr. McCarthy | | Qualified | | 35.00 | | 1,405,000 | | 61,252 |
| | | | | |
| | | Excess | | 35.00 | | 6,783,000 | | 307,104 |
|
| | | | | | | |
| PENSION BENEFITS |
| Name | Plan Name | Number of Years of Credited Service | Present Value of Accumulated Benefits(2) | Payments During Last Fiscal Year |
| | | (#) | ($) | ($) |
| Mr. McKenney | Qualified | 4.42 |
| 112,000 |
| — |
|
| Excess | 4.42 |
| 615,000 |
| — |
|
| Mr. McGarry | Qualified | 28.00 |
| 1,203,000 |
| — |
|
| Excess | 28.00 |
| 1,775,000 |
| — |
|
| Mr. Simonds | Qualified | 16.25 |
| 567,000 |
| — |
|
| Excess | 16.25 |
| 752,000 |
| — |
|
| Ms. Farrell | Qualified | 3.00 |
| 112,000 |
| — |
|
| Excess | 3.00 |
| 274,000 |
| — |
|
Ms. Iglesias(1) | Qualified | — |
| — |
| — |
|
| Excess | — |
| — |
| — |
|
| |
| (1) | Assumes retirement at unreduced retirement age of 65No amounts are shown for Ms. Iglesias because the Qualified and Excess plans and age 60 for Mr. Watjen under the SERP.were frozen to further accruals on December 31, 2013, before her employment began. |
| |
| (2) | The “Present"Present Value of Accumulated Benefits”Benefits" is based upon a measurement date of December 31, 2014,2017, which is the same measurement date used for financial statement reporting purposes for the Company’scompany’s audited financial statements as found in Note 9 to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report oncompany’s 2017 Form 10-K. |
(3) | The “Present Value of Accumulated Benefits” is based upon a measurement date of December 31, 2014. Accordingly, all All calculations utilize credited service and Pensionable Earningspensionable earnings as of the samepension freeze date, December 31, 2013, in addition to the following assumptions: |
| | | | |
| |
Retirement Age | | Age: Assumes age 65 except where noted for Mr. Watjen in footnote (1).65. |
| | Discount Rate | | 4.4%Rate: 3.80% |
| | Salary Increase Rate | | Rate: Not Applicableapplicable. |
| | Social Security Indexing Rate | | Rate: 3.5% to index the Qualified and Excess Plan benefits from the measurement date to commencement date. |
| | Pension Increase Rate | | Rate: Not Applicableapplicable. |
| | Pre-Retirement Decrements | | NoneDecrements: None. |
| | Post-Retirement Mortality Table | | Table: RP-2014 Mortality Tables projected using fully generational two-dimensional mortality table projected 5 years past the measurement date with Projection Scale BB.MP-2017. |
Lump sum distributions are available under the plan only to vested employees who have a present value of future pension benefits of $10,000 or less. None of the NEOs are eligible for lump sum distributions from the Qualified or Excess Plans, or the SERP. Based on current benefit levels, pension payouts for NEOs will be paid in the form of a monthly annuity.
| | |
| |
7684 | | 20152018 PROXY STATEMENT |
POST-EMPLOYMENT COMPENSATION
Nonqualified
Non-Qualified Deferred Compensation
We have
a nonqualifiedone active non-qualified defined contribution plan
(Non-Qualified Plan) that allows for deferrals of compensation by our NEOs.
TheWe also maintain one other
two nonqualified plansnon-qualified plan that allowed for deferrals of compensation
areand is an inactive
plansplan originally maintained by a predecessor company
and in which Mr.
McCarthyMcGarry is the only NEO participant. The last year that compensation deferrals occurred under
thesethis inactive
plansplan was 2000.
NONQUALIFIED DEFERRED COMPENSATION
| | | | | | | | | | | | |
| Name | | Plan | | Executive Contributions
in Last FY $(3) | | Registrant
Contributions
in Last FY $(4) | | Aggregate
Earnings
in Last FY $(5) | | Aggregate
Withdrawals/
Distributions
$(0) | | Aggregate
Balance
at Last FYE $(6) |
| | | | | | |
Mr. Watjen | | Nonqualified DC | | 742,999 | | 428,283 | | 43,912 | | – | | 1,215,193 |
| | | | | | |
Mr. McKenney | | Nonqualified DC | | 39,451 | | 99,839 | | 5,502 | | – | | 144,792 |
| | | | | | |
Ms. Farrell | | Nonqualified DC | | 32,199 | | 56,061 | | 3,510 | | – | | 91,769 |
| | | | | | |
Mr. Simonds | | Nonqualified DC | | 24,380 | | 52,371 | | 1,247 | | – | | 77,998 |
| | | | | | |
Mr. Horn | | Nonqualified DC | | – | | 82,779 | | 2,592 | | – | | 85,371 |
| | | | | | |
Mr. McCarthy(1) | | Inactive NQ Plans | | – | | – | | 7,970 | | – | | 182,963 |
| | | | | | |
| | Equity(2) | | – | | 2,803,519 | | -48,724 | | -2,754,795 | | — |
| | | | | | |
| | | Nonqualified DC | | 11,994 | | 106,555 | | 3,621 | | -23,336 | | 98,833 |
|
| | | | | | | | | | | |
| NON-QUALIFIED DEFERRED COMPENSATION |
| Name | Plan | Executive Contributions in Last FY(2) | Registrant Contributions in Last FY(3) | Aggregate Earnings in Last FY(4) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE(5) |
| | | $ | $ | $ | $ | $ |
| Mr. McKenney | Non-Qualified DC | 141,547 |
| 268,939 |
| 217,387 |
| — |
| 1,407,751 |
|
Mr. McGarry(1) | Inactive NQ Plan | — |
| — |
| 9,654 |
| — |
| 45,194 |
|
| | Non-Qualified DC | 109,748 |
| 187,184 |
| 153,940 |
| — |
| 1,033,584 |
|
| Mr. Simonds | Non-Qualified DC | 50,904 |
| 96,717 |
| 117,579 |
| — |
| 661,619 |
|
| Ms. Farrell | Non-Qualified DC | 55,095 |
| 74,772 |
| 86,454 |
| — |
| 568,285 |
|
| Ms. Iglesias | Non-Qualified DC | 98,646 |
| 62,476 |
| 35,591 |
| — |
| 313,241 |
|
| |
| (1) | Mr. McCarthyMcGarry has balancesa balance under twoone inactive deferred compensation plans. The first inactive plan (the former UNUM Corporation Deferred Compensation Plan) earned interest at a rate of 6.5%. The interest rate for thisplan. This plan is set once each year at the rate which is equivalent to the interest rate Unum receives on the Unum America Consolidated Portfolio (consisting of bonds, commercial mortgage loansa non-qualified defined contribution plan and preferred stocks). The amount of above-market interest that exceeds 120% of the rate prescribed under section 1274(d) of the Internal Revenue Code has been included in the Change in Pension Value & Nonqualified Deferred Compensation Earnings column of the Summary Compensation Table on page 64. The second inactive plan (a non-qualified 401(k) plan) includes 100% Unum stock to be paid out in cash. The change in market value and dividends earned is included in the Aggregate"Aggregate Earnings in Last Fiscal Year (FY)FY" amount. The value of the balance is includedshown in the Aggregate"Aggregate Balance at Last Fiscal Year End (FYE) amounts.FYE" column. |
| |
| (2) | These amounts represent Mr. McCarthy’s unvested RSUs at his March 31, 2014 retirement date, which were subject to Code Section 409A’s settlement restrictions, and the value of the unvested RSUs as of September 30, 2014, the conclusion of the 409A restricted period. The balance is subject to earnings (losses) through the movement of our stock, as well as dividends provided, during that period. These amounts are not reported in the Summary Compensation Table. |
(3) | These amounts are included in the Summary Compensation Table in the “Salary”"Salary" and “Non-Equity"Non-Equity Incentive Plan Compensation”Compensation" columns for 20142017 for each NEO. |
(4) | |
| (3) | These amounts represent nonqualified company contributions through our DCNon-Qualified Plan, as described in the Retirement and Transition Plans.Workplace Benefits section beginning on page 71. The amounts are included in the “All"All Other Compensation”Compensation" column of the Summary Compensation Table for 20142017 for each NEO. |
(5) | |
| (4) | These amounts were not included in the Summary Compensation Table because investment earnings were not preferential or above market. The investment options under the nonqualifiednon-qualified retirement plans are the same choices available to all employees that are eligible to participate in the qualified plan401(k) Plan and NEOs do not receive preferential earnings on their investments. |
(6) | As 2014 is the first year of the DC and Transition Plans, none of these |
| (5) | This column includes amounts that were includedreported in theprior year’s Summary Compensation Table in prior years.the "Salary," "Non-Equity Incentive Plan Compensation," or "All Other Compensation" columns, as applicable, to the extent that the NEO was an NEO at the time. These amounts are as follows: $686,925 for Mr. McKenney; $403,380 for Mr. McGarry; $329,239 for Mr. Simonds; $326,556 for Ms. Farrell; and $110,893 for Ms. Iglesias. |
| | |
| |
20152018 PROXY STATEMENT | | 7785 |
POST-EMPLOYMENT COMPENSATION
Other Post-Employment Payments
The discussion below outlines estimated benefits payable to our NEOs under various termination scenarios as of December 31,
2014.Some benefits changed in early 2015 based on the transition of leadership. Post-employment benefits after December 31, 2014 are described in the Compensation Contracts and Agreements section beginning on page 59.
2017.
The following terminology will be used throughout the discussion of the various termination scenarios:
| | |
| | TERMINATION DEFINITIONS |
| |
| TERMINATION DEFINITIONS |
| Termination with cause |
| |
| | One or more of the following factors is present: the failure to substantially perform duties; the willful engagement in illegal conduct or gross misconduct harmful to the company; or the conviction of a felony (or plea of “guilty”"guilty" or “no contest”"no contest"). |
| |
| | Termination without cause |
| |
| | One or more of the following factors is present: poor performance, other than for misconduct or cause (as defined above); job elimination; job requalification; or the decision to fill the position with a different resource consistent with the direction of the company. |
| |
| | Resignation for good reason |
| |
| | One or more of the following events have preceded the resignation of the named executive officer:NEO: assignment to a position inconsistent with his or her existing position or any other action that diminishes such position; reduction of his or her base salary or annual incentive target; failure to continue any material employee benefit or compensation plan in which he or she participates; or relocation to an office more than 50 miles from his or her location, with the exception of Mr. Watjen whose contract stipulates more than 35 miles.location. |
| |
| | Change in control |
| |
| | A change in control occurs when one of the following situations exists: (a) the incumbent directors cease to be a majority for two years; (b) an entity acquires 20% of our voting stock (30% in some instances); (c) we consummate certain transactions such as a merger or disposition of substantially all of our assets; or (d) shareholders approve a plan of liquidation or distribution. |
In the event of any termination of employment, all named executive officers would receive benefits to which they are entitled, including unpaid base salary through the date of termination, accrued vacation, and accrued benefits under the retirement
plan.plans.
Terminations Related to a Change in Control
As outlined in the
Compensation ContractsSeverance and
AgreementsChange in Control Arrangements section
beginning on page
59,72, Mr.
WatjenMcKenney has
an employmenta severance agreement that specifically addresses post-employment payments, including
in the event of a termination of employment in connection with a change in control. The remaining NEOs are covered by
change- inchange-in control severance agreements. In the event of termination
uponwithin two years following the occurrence of a change in control, NEOs would receive the following benefits:
Three times the sum of his annual base salary and the average annual incentive paid to him in the three years prior to the date of termination for Mr. McKenney; two times the sum of annual base salary and annual incentive (the greater of the current year target or the prior year annual incentive paid) for the remaining NEOs;
Prorated annual incentive through the date of termination of employment;
Health and welfare benefits for up to three years for Mr. McKenney and up to two years for the remaining NEOs;
| — | | Three times the sum of his annual base salary and the average annual incentive paid to him in the three years prior to the date of termination for Mr. Watjen; two times base salary and annual incentive (the greater of the current year target or the prior year annual incentive paid) for the remaining NEOs; |
| — | | Prorated annual incentive through the date of termination of employment; |
| — | | Health and welfare benefits for up to three years for Mr. Watjen and up to two years for the remaining NEOs; |
| — | | Payment of all deferred compensation; |
| — | | Outplacement services (20% of base salary, maximum of $50,000); |
| — | | Vesting of equity awards as follows: |
| | |
| |
7886 | | 20152018 PROXY STATEMENT |
POST-EMPLOYMENT COMPENSATION
| ¡ | | Grants of performance-based restricted stock units and stock option awards made before December 14, 2011 would vest upon the occurrence of a change in control. A change in control would not trigger the vesting of grants made on or after this date unless a termination of employment for death, disability, involuntary (without cause), or good reason were to occur within two years of the change in control. Upon termination, the stock options would remain exercisable until the earlier of the expiration date or the 90th day after termination of employment. For Messrs. Watjen and McCarthy, who are retirement eligible under the plan, the options would remain exercisable until the earlier of the expiration date or the fifth anniversary of such termination; |
| — | | Grants of performance share units would be deemed earned at target performance and be settled at the earlier of the end of the performance period or a termination of employment due to death, disability, or retirement, by the company without cause or by the executive for good reason within two years after the change in control; and |
| — | | In the event of a change in control and termination, NEOs other than Messrs. Watjen and Simonds and Ms. Farrell may receive a reimbursement for any excise tax owed. If a reduction in the payments by no more than 10% would result in no excise tax being owed, the reduction will occur. |
| ¡ | | For Messrs. Watjen and Simonds and Ms. Farrell, the change in control payments would be reduced if such reduction would result in greater after-tax proceeds to the executive absent such a reduction. Otherwise, the executive officer receives payment of all change in control benefits and is responsible for paying any excise tax imposed on the payment. |
Payment of all deferred compensation;
Outplacement services (20% of base salary, maximum of $50,000);
Vesting of equity awards as follows: A change in control would not trigger the vesting of grants unless a termination of employment for death or, disability, by the company without cause, or by the executive for good reason were to occur within two years following the change in control. Upon termination, the stock options would remain exercisable until the earlier of the expiration date or the 90th day after termination of employment;
Grants of performance share units would be deemed earned at target performance and be settled at the earlier of the end of the performance period or a termination of employment due to death, disability, or retirement, by the company without cause or by the executive for good reason within two years after the change in control; and
In the event of a change in control and termination, the change in control payments would be reduced if such reduction would result in greater after-tax proceeds to the executive absent such a reduction. Otherwise, the executive officer receives payment of all change in control benefits and is responsible for paying any excise tax imposed on the payment.
Terminations Not Related to a Change in Control
There are instances in which an NEO’s employment may be terminated that do not involve a change in control. The company may terminate for cause or without cause. Additionally, termination of employment may occur upon an NEO’s voluntary resignation, retirement, death, or becoming disabled.
In the event of the death, disability or retirement (if eligible) of an NEO, all of the NEO’s unvested
performance-based restricted stock unitsPBRSUs and stock options would vest and the stock options would remain exercisable until the earlier of the expiration date or, as applicable, the third anniversary of the date of death or the fifth anniversary of the date of retirement.
At December 31, 2014,In the event of termination of employment as a result of job elimination or requalification (or, in the case of Mr.
Watjen’s unvested performance share unitsMcKenney, resignation for good reason), the NEOs would vest
in a pro-rata portion of earned PSUs and in the event of termination of employment as a result of death, disability, or retirement, the NEOs would vest in earned PSUs, in each case on
a prorated basis based upon the
actual performance at the end of the three-year performance cycle. Mr. Watjen was eligible for retirement under the terms of the Stock Incentive Plans of 2007 and 2012 and his award agreements.date that such awards would otherwise be settled. However, to the extent necessary to avoid the imposition of penalty taxes under Internal Revenue Code Section 409A, stock would not be distributed until at least six months after the date of termination.
POST-EMPLOYMENT COMPENSATION
NEOs receive additional benefits depending upon the termination scenario as outlined in the table below:following table:
POST-EMPLOYMENT COMPENSATION
TERMINATION BENEFITS RECEIVED BY CEO AND NEOs UNDER NON-CHANGE IN CONTROL SCENARIOS
| | | | | | | | | | |
Benefits Received | | Termination
for Cause or
Voluntary
Resignation | | Termination
Without Cause
or Resignation
with Good
Reason* | | Disability | | Death | | Retirement |
Severance(1)
| | | | CEO, NEOs | | | | | | |
| | | | | |
Prorated Annual Incentive(2)
TERMINATION BENEFITS AVAILABLE TO CEO AND OTHER NEOs UNDER NON-CHANGE IN CONTROL SCENARIOS |
| Benefits Received | Termination for Cause or Voluntary Resignation | Termination Without Cause or Resignation with Good Reason* | Disability | CEODeath | Retirement |
Severance (1) | | CEO, NEOs | | | |
Prorated Annual Incentive (2) | | CEO | CEO, NEOs | | CEO, NEOs |
| | | | | |
Early Vesting of Equity(3)
| | | | CEO | | CEO, NEOs | | CEO, NEOs | | If Retirement Eligible |
Early Vesting of Equity (3) | | | | | |
Benefit Continuation(4)
| | | | CEO | | | | | | |
| | | | | |
Outplacement Services(5)
| | | | CEO, NEOs | CEO, NEOs | | | | | If Retirement Eligible |
Benefit Continuation (4) | | CEO | | | |
Disability Benefits
Outplacement Services (6)(5) | | | | | | CEO, NEOs | | | | |
Disability Benefits (6) | | | CEO, NEOs | | |
Group Life Ins. Benefits(7) | | | | | | | | CEO, NEOs | | |
| | | | | |
Corporate Owned Life Ins.(7) | | | | | | | | CEO, NEOs | NEO | |
* Mr. McKenney is the only NEO entitled to benefits in the event of a resignation for good reason absent a change in control.
* | Mr. Watjen is the only NEO entitled to benefits in the event of a resignation for good reason absent a change in control. |
| (1) | If Mr. WatjenMcKenney is terminated without cause or resigns with good reason, he will receive severance of two times the sum of his annual base salary and the average annual incentive paid to him in the twothree years prior to the date of termination.termination, or if applicable, such lesser number of calendar years ending after April 1, 2015, with the bonus for the first calendar year annualized. Other NEOs who are terminated without cause will receive eighteen months of base salary. See the following table for termination benefits related to a change in control. |
| |
| (2) | Annual incentive will be prorated based on the date of termination of employment. For all NEOs other than Mr. Watjen,McKenney, the NEO will be eligible for prorated annual incentive in the event of death, disability, or retirement only if such termination occurs on or after the last business daypay period in March. |
| |
| (3) | If Mr. WatjenMcKenney is terminated without cause, or resigns with good reason,a prorated portion of his unvested equity awards, with the exception of his performance share units (PSUs) will accelerate vesting due to his eligibility for retirement under the terms of the award agreements. In the event of his death, disability, or retirement or if he is terminated without cause or resigns for good reason, Mr. WatjenMcKenney would be eligible to receive a prorated portion of the performance share unitsPSUs based on actual performance at the end of the three-year performance cycle. For the remaining NEOs, absent a change in control their unvested equity will accelerate only in the event of death, disability, or retirement (if eligible).; however, they will be eligible to continue to vest in outstanding PSUs upon such a termination. |
| |
| (4) | If Mr. WatjenMcKenney is terminated without cause or resigns with good reason, he will receive health and welfare benefits for up to 2 years. |
| |
| (5) | Outplacement services are equal to 20% of base salary (maximum of $50,000). |
| |
| (6) | Monthly benefits from the company’s long-term disability plan until the earlier of age 65 or death. |
| |
| (7) | Group life insurance benefits are $50,000 for each full-time employee; Corporate owned life insurance benefits as applicable (if Mr. WatjenMcGarry is an active employee on the date of his death, his beneficiaries as defined in the policy will receive $200,000). |
POST-EMPLOYMENT COMPENSATION
Termination payments are provided to NEOs as outlined in the following table and vary with the circumstances under which the termination occurs. In the event of termination as a result of death, payments will be made to the named executive officer’s beneficiary.
Consistent with SEC requirements, all termination scenarios in the table assume a termination date of December 31,
2014.2017. Accordingly, all calculations in the
table on the following
pagetable were made using the closing market price of our common stock as of
that dateDecember 29, 2017 ($
34.8854.89 per share).
Mr. McCarthy, who retired during 2014, has beenWe have excluded
from the table because he retired prior to December 31, 2014. Other exclusions are amounts received as an annuity under our retirement plans and the
“in-the-money”"in-the-money" value of vested unexercised stock options held by NEOs since these amounts are not impacted by a termination. The amounts shown in the table also do not include distributions of plan balances under a
nonqualifiednon-qualified deferred compensation plan. Those amounts are shown in the
NonqualifiedNon-Qualified Deferred Compensation table on page
14.
POST-EMPLOYMENT COMPENSATION
85.
The amounts in the following table are hypothetical based on the rules of the SEC. Actual payments depend on the circumstances and timing of any termination. The information provided in this table constitutes forward-looking statements for purposes of the Private Litigation Securities Reform Act of 1995.
TERMINATION TABLE
| | | | | | | | | | | | | | | | | | | | |
| Termination Scenario | | Mr. Watjen | | | Mr.
McKenney | | | Ms.
Farrell | | | Mr.
Simonds | | | Mr.
Horn(7) | |
Termination for Cause or Voluntary Resignation | |
Total | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | |
Termination Without Cause or Resignation with Good Reason (CEO) | |
Severance | | $ | 6,053,564 | | | $ | 1,072,500 | | | $ | 653,438 | | | $ | 787,500 | | | | | |
Prorated Annual Incentive | | | 1,876,782 | | | | - | | | | - | | | | - | | | | | |
Early Vesting of Equity(1) | | | 9,288,812 | | | | - | | | | - | | | | - | | | | | |
Benefit Continuation | | | 72,031 | | | | - | | | | - | | | | - | | | | | |
Outplacement Services | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | | |
DC Enhancement | | | - | | | | - | | | | - | | | | - | | | | | |
Total | | $ | 17,341,189 | | | $ | 1,122,500 | | | $ | 703,438 | | | $ | 837,500 | | | | | |
Disability | |
Prorated Annual Incentive | | $ | 1,876,782 | | | $ | 880,531 | | | $ | 520,543 | | | $ | 545,838 | | | | | |
Early Vesting of Equity(1)(2) | | | 9,288,812 | | | | 3,418,050 | | | | 967,501 | | | | 977,721 | | | | | |
Disability Benefits | | | 124,070 | | | | 387,331 | | | | 246,725 | | | | 447,848 | | | | | |
Total | | $ | 11,289,664 | | | $ | 4,685,912 | | | $ | 1,734,769 | | | $ | 1,971,407 | | | | | |
Death | |
Prorated Annual Incentive | | $ | 1,876,782 | | | $ | 880,531 | | | $ | 520,543 | | | $ | 545,838 | | | | | |
Early Vesting of Equity(1)(2) | | | 9,288,812 | | | | 3,418,050 | | | | 967,501 | | | | 977,721 | | | | | |
Group Life Ins. Benefits | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | | |
Corporate Owned Life Ins. | | | 200,000 | | | | - | | | | - | | | | - | | | | | |
Total | | $ | 11,415,594 | | | $ | 4,348,581 | | | $ | 1,538,044 | | | $ | 1,573,559 | | | | | |
Termination Related to a Change in Control | |
Severance | | $ | 9,080,346 | | | $ | 3,209,106 | | | $ | 1,993,094 | | | $ | 1,995,000 | | | | | |
Prorated Annual Incentive | | | 1,876,782 | | | | 715,000 | | | | 522,750 | | | | 472,500 | | | | | |
Early Vesting of Equity | | | 16,474,823 | | | | 3,856,817 | | | | 1,084,056 | | | | 1,136,369 | | | | | |
Benefit Continuation | | | 108,046 | | | | 68,750 | | | | 53,116 | | | | 74,035 | | | | | |
Outplacement Services | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | | |
DC Enhancement(3) | | | - | | | | 144,000 | | | | 90,000 | | | | 79,000 | | | | | |
Estimated Tax Gross Up(4) | | | - | | | | - | | | | - | | | | - | | | | | |
Total | | $ | 27,589,997 | | | $ | 8,043,673 | | | $ | 3,793,016 | | | $ | 3,806,904 | | | | | |
Retirement | |
Prorated Annual Incentive(5) | | $ | 1,876,782 | | | | - | | | | - | | | | - | | | $ | 525,112 | |
Early Vesting of Equity(1)(2)(6) | | | 9,288,812 | | | | - | | | | - | | | | - | | | | 1,076,113 | |
Total | | $ | 11,165,594 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 1,601,225 | |
| | |
| |
20152018 PROXY STATEMENT | 89 |
POST-EMPLOYMENT COMPENSATION
|
| | | | | | | | | | | | | | | |
| TERMINATION TABLE |
| Termination Scenario | Mr. McKenney | Mr. McGarry | Mr. Simonds | Ms. Farrell | Ms. Iglesias |
| | ($) | ($) | ($) | ($) | ($) |
| Termination for Cause or Voluntary Resignation |
| | — |
| — |
| — |
| — |
| — |
|
| Total | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| Termination Without Cause or Resignation with Good Reason (CEO) |
| Severance | 6,217,399 |
| 945,000 |
| 922,500 |
| 690,000 |
| 757,500 |
|
Prorated Annual Incentive(1) | 2,108,699 |
| — |
| — |
| — |
| — |
|
Early Vesting of Equity(2) | 19,126,786 |
| — |
| — |
| — |
| — |
|
| Benefit Continuation | 88,472 |
| — |
| — |
| — |
| — |
|
| Outplacement Services | 50,000 |
| 50,000 |
| 50,000 |
| 50,000 |
| 50,000 |
|
| Total | $ | 27,591,356 |
| $ | 995,000 |
| $ | 972,500 |
| $ | 740,000 |
| $ | 807,500 |
|
| Disability |
Prorated Annual Incentive(1) | 2,108,699 |
| 822,462 |
| 792,554 |
| 651,822 |
| 452,423 |
|
Early Vesting of Equity(2)(3) | 19,126,786 |
| 3,531,900 |
| 4,061,736 |
| 1,904,333 |
| 2,432,696 |
|
| Disability Benefits | 358,714 |
| 140,500 |
| 435,181 |
| 188,087 |
| 298,630 |
|
| Total | $ | 21,594,199 |
| $ | 4,494,862 |
| $ | 5,289,471 |
| $ | 2,744,242 |
| $ | 3,183,749 |
|
| Death |
Prorated Annual Incentive(1) | 2,108,699 |
| 822,462 |
| 792,554 |
| 651,822 |
| 452,423 |
|
Early Vesting of Equity(2)(3) | 19,126,786 |
| 3,531,900 |
| 4,061,736 |
| 1,904,333 |
| 2,432,696 |
|
| Group Life Ins. Benefits | 50,000 |
| 50,000 |
| 50,000 |
| 50,000 |
| 50,000 |
|
| Corporate Owned Life Ins. | — |
| 200,000 |
| — |
| — |
| — |
|
| Total | $ | 21,285,485 |
| $ | 4,604,362 |
| $ | 4,904,290 |
| $ | 2,606,155 |
| $ | 2,935,119 |
|
| Termination Related to a Change in Control |
| Severance | 9,326,098 |
| 2,748,808 |
| 2,583,064 |
| 2,117,378 |
| 1,859,892 |
|
Prorated Annual Incentive(1) | 2,108,699 |
| 630,000 |
| 553,500 |
| 552,000 |
| 378,750 |
|
| Early Vesting of Equity | 19,126,786 |
| 3,531,900 |
| 4,061,736 |
| 1,904,333 |
| 2,432,696 |
|
| Benefit Continuation | 132,708 |
| 80,299 |
| 97,331 |
| 70,616 |
| 93,722 |
|
| Outplacement Services | 50,000 |
| 50,000 |
| 50,000 |
| 50,000 |
| 50,000 |
|
DC Enhancement(4) | 279,000 |
| 310,000 |
| 116,000 |
| 95,000 |
| — |
|
| Total | $ | 31,023,291 |
| $ | 7,351,007 |
| $ | 7,461,631 |
| $ | 4,789,327 |
| $ | 4,815,060 |
|
| Retirement |
Prorated Annual Incentive(5) | — |
| — |
| — |
| — |
| — |
|
Early Vesting of Equity(2)(3)(6) | — |
| 3,531,900 |
| — |
| — |
| — |
|
| Total | $ | — |
| $ | 3,531,900 |
| $ | — |
| $ | — |
| $ | — |
|
POST-EMPLOYMENT COMPENSATION
| (1) | In these scenarios, per the terms of Mr. McKenney’s severance agreement, he would be entitled to a prorated annual incentive. The amount is to be calculated using the average annual bonuses paid for the three most-recent calendar years, or if applicable, such lesser number of calendar years ending after his promotion, with such bonus for the first calendar year annualized. |
| |
| (2) | In the event of job elimination, the prorated early vesting of equity awards would be as follows: Mr. McKenney $2,055,618,$4,881,093, Mr. Simonds $1,001,029, Ms. Farrell $656,093$469,858, and Mr. Simonds $685,392.Ms. Iglesias $1,124,751. These NEOs would also be eligible to receive a prorated portion of their unvested PSUs based in the event of job elimination.elimination or requalification. The prorated amount would be calculated based on their termination date and the vesting of those units would be based on achievement of the prospective 3 yearthree-year goals, modified by relative total shareholder return. Assuming a job elimination date of December 31, 2014,2017, the prorated number of units that each NEO would be eligible to receive would be as follows: Mr. McKenney 4,193.11,82,358.33, Mr. Simonds 15,127.31, Ms. Farrell 1,113.867,136.27, and Ms. Iglesias 9,972.67. Mr. Simonds 1,516.13.McGarry is eligible for retirement status under the |
(2) |
| |
| 90 | 2018 PROXY STATEMENT |
POST-EMPLOYMENT COMPENSATION
terms of the Stock Incentive Plan of 2012 and the Stock Incentive Plan of 2017. Therefore, he would receive full vesting of his unvested PBRSUs, as noted in the Retirement section of this table. He would also be eligible to earn the full amount of PSUs based on his retirement status. The PSUs would vest based on the achievement of the prospective three-year goals, modified by relative total shareholder return.
| |
| (3) | The amounts reported include PBRSUs and PSUs that would accelerate vesting in the event of disability, death or retirement. The PSUs granted in 2013 (Mr. Watjen only) would be prorated2016 and the PSUs granted in 2014 (all NEOs)2017 may be fully earned, in the event of disability, death or retirement, in each case as specified in the respective grant agreements based on the satisfaction of the performance goals. In each of these scenarios the awards would not be payable until the end of the applicable performance period and therefore, have not been included inperiod. In accordance with Regulation S-K, Item 402(j), the amountsPSUs reported in connection with the terminationPSU awards granted in 2016 and 2017 are reported at target levels since the company’s performance and relative shareholder return to date for these awards is not yet determinable. Actual shares to be issued under PSUs granted in connection with the 2016 and 2017 awards may differ from the performance level required to be disclosed in this table. |
(3) | |
| (4) | Defined Contribution (DC) enhancement is a lump sum payment representing the amount resulting from multiplying the Company’s core DC and transition contribution, if eligible, ratescompany’s non-contributory retirement plan contributions times two additional years of eligible earnings for Messrs.Mr. McKenney, Mr. McGarry, Mr. Simonds, and Ms. Farrell. |
(4) | In the event of termination following a change in control, Messrs. McKenney and Horn are eligible for a gross-up payment for any excise taxes due under sections 280G and 4999 of the Internal Revenue Code, as amended. For Messrs. Watjen and Simonds and Ms. Farrell, in the event that a change in control payments trigger an excise tax, the payments would be reduced to avoid such excise tax if such reduction would result in greater after-tax proceeds to the executive absent such a reduction. Otherwise, the executive officer receives payment of all change in control benefits and is responsible for paying any excise tax imposed on the payment. |
| (5) | Messrs. WatjenMcKenney, McGarry, and Horn are eligibleSimonds as well as Mses. Farrell and Iglesias did not meet the eligibility criteria for retirement status under the terms of Mr. Watjen’s employment agreement and the Annual Incentive Plan. Therefore, theyPlan as of December 31, 2017 and therefore would benot have been eligible for a prorated annual incentive payment in the event of retirement. Messrs. McKenney and Simonds as well as Ms. Farrell do not meet the eligibility criteria as of December 31, 2014. |
| |
| (6) | Mr. WatjenMcGarry has the age and service to be eligible for retirement under the terms of the Stock Incentive Plan of 20072012 and the Stock Incentive Plan of 20122017 and therefore would be entitled to the accelerated vesting of equity in the event of retirement. As described in our May 20, 2014 8-K filing, the Committee considered Mr. Horn’s contributions to the company and granted him retirement status, therefore was entitled to the accelerated vesting of equity at the time of his retirement, which occurred in the first quarter of 2015. Messrs. McKenney, andMr. Simonds, Ms. Farrell and Ms. FarrellIglesias did not meet the eligibility criteria as of December 31, 2014.2017. The amounts shown in the table represent the value of the shares at a market price of $34.88,$54.89, the closing price of our stock on the last trading day of the year. |
(7) | We are only including the retirement amounts for Mr. Horn due to his retirement on March 31, 2015. As previously noted the amounts in the table are as of December 31, 2014. As such, the actual early vesting of Mr. Horn’s equity at retirement differed from the amounts shown above. |
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer.
The 2017 annual total compensation of the median compensated of all our employees who were employed as of December 31, 2017, other than our chief executive officer, was [●]. The 2017 annual total compensation of Richard McKenney, our chief executive officer, was $9,683,946. The ratio of these amounts was 1-to-[●].
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records. For these purposes, we identified the median compensated employee using base salary or hourly wages earned during fiscal 2017 and cash bonus paid for fiscal 2017. We annualized base salary or hourly wages, as applicable, for employees who were not designated as temporary or seasonal employees but who did not work for the entire year. We did not exclude any employees based on the allowable "De Minimis Exemption" clause in the SEC regulations.
|
| |
201592 | 2018 PROXY STATEMENT |
OWNERSHIP OF COMPANY SECURITIES
OWNERSHIP OF COMPANY SECURITIES
The following table shows the number of shares of our common stock beneficially owned
as of March 15, 2015, by each
directorof our directors and
each named executive
officerofficers and by all directors and executive officers as a
group.group, as of March 15, 2018. The table and related footnotes also include information about stock options, deferred share rights and restricted stock units
(RSUs) credited to the accounts of directors and executive officers under various compensation and benefit plans. Based upon the representations made by each director and executive officer, we do not believe that any shares held by them are pledged as security. Except as otherwise indicated below, the beneficial owners have sole voting and investment power with respect to the shares beneficially owned.
|
| | | | | |
| BENEFICIAL OWNERSHIP OF COMMON STOCK | | (as of March 15, 2018) |
| Name | Shares of Common Stock(1) | Shares Subject to Exercisable Options(2) | Shares Subject to Settleable Rights or Units(3)(4)(5) | Total Shares Beneficially Owned | Percent of Class |
| Theodore H. Bunting, Jr. | 16 | — | 18,477 | 18,493 | * |
| E. Michael Caulfield | 3,890 | — | 31,830 | 35,719 | * |
| Susan D. DeVore | — | — | — | — | * |
| Joseph J. Echevarria | — | — | 11,034 | 11,034 | * |
| Cynthia L. Egan | 6,978 | — | — | 6,978 | * |
| Pamela H. Godwin | 32,737 | — | 9,613 | 42,351 | * |
| Kevin T. Kabat | 27,434 | — | 11,386 | 38,820 | * |
| Timothy F. Keaney | 23,477 | — | 3,349 | 26,826 | * |
| Gloria C. Larson | — | — | 72,847 | 72,847 | * |
| Ronald P. O'Hanley | 4,918 | — | 5,326 | 10,244 | * |
| Francis J. Shammo | 4,279 | — | 3,257 | 7,536 | * |
| Richard P. McKenney | 278,355 | 39,760 | — | 318,115 | * |
| John F. McGarry | 59,459 | — | 24,330 | 83,790 | * |
| Michael Q. Simonds | 52,943 | — | — | 52,943 | * |
| Breege A. Farrell | 49,371 | — | — | 49,371 | * |
| Lisa G. Iglesias | 25,362 | — | — | 25,362 | * |
All directors and executive officers as a group (20 persons) | 638,054 | 39,760 | 201,274 | 879,088 | * |
| | |
BENEFICIAL OWNERSHIP OF COMMON STOCK | | (as of March 15, 2015) |
| | | | | | | | | | | | | | | | | | |
| Name | | Shares of
Common
Stock(1) | | | Shares Subject
to Exercisable
Options(2) | | | Shares Subject
to Settleable
Rights or
Units(3)(4)(5) | | | Total Shares
Beneficially
Owned | | | Percent of Class |
Theodore H. Bunting, Jr. | | | 16 | | | | - | | | | 1,932 | | | | 1,949 | | | * |
| | | | | | |
E. Michael Caulfield | | | 13,767 | | | | - | | | | 31,151 | | | | 44,918 | | | * |
| | | | | | |
Cynthia L. Egan | | | - | | | | - | | | | - | | | | - | | | * |
| | | | | | |
Pamela H. Godwin | | | 17,056 | | | | - | | | | 12,445 | | | | 29,051 | | | * |
| | | | | | |
Ronald E. Goldsberry | | | 9,010 | | | | - | | | | 7,557 | | | | 16,567 | | | * |
| | | | | | |
Kevin T. Kabat | | | 21,038 | | | | - | | | | 5,678 | | | | 26,717 | | | * |
| | | | | | |
Timothy F. Keaney | | | 271 | | | | - | | | | 12,319 | | | | 12,591 | | | * |
| | | | | | |
Thomas Kinser | | | - | | | | - | | | | 49,792 | | | | 49,792 | | | * |
| | | | | | |
Gloria C. Larson | | | 589 | | | | - | | | | 63,256 | | | | 63,845 | | | * |
| | | | | | |
A.S. (Pat) MacMillan, Jr. | | | 2,832 | | | | - | | | | 15,100 | | | | 17,932 | | | * |
| | | | | | |
Edward J. Muhl | | | 29,975 | | | | - | | | | 4,319 | | | | 34,294 | | | * |
| | | | | | |
Ronald P. O’Hanley | | | - | | | | - | | | | 672 | | | | 672 | | | * |
| | | | | | |
William J. Ryan | | | 28,134 | | | | - | | | | 17,599 | | | | 45,733 | | | * |
| | | | | | |
Thomas R. Watjen | | | 302,047 | | | | 696,342 | | | | 93,358 | | | | 1,091,748 | | | * |
| | | | | | |
Richard P. McKenney | | | 105,971 | | | | 86,824 | | | | - | | | | 192,795 | | | * |
| | | | | | |
Breege A. Farrell | | | 35,054 | | | | - | | | | - | | | | 35,054 | | | * |
| | | | | | |
Michael Q. Simonds | | | 25,565 | | | | - | | | | - | | | | 25,565 | | | * |
| | | | | | |
Randall C. Horn | | | 71,707 | | | | 114,143 | | | | 12,822 | | | | 198,673 | | | * |
| | | | | | |
Kevin P. McCarthy | | | 140,822 | | | | 35,385 | | | | - | | | | 176,207 | | | * |
All directors and executive officers as a group (23 persons) | | | 736,852 | | | | 948,832 | | | | 332,858 | | | | 1,904,399 | | | * |
| (1) | Includes shares credited to the accounts of certain current and former executive officers, including Mr. WatjenMcGarry – 13,6203,098 shares, under the company’s 401(k) plan.Plan. Does not include shares credited to the accounts of certain executive officers under an inactive non-qualified 401(k)defined contribution plan because, though measured in share value, they will be settled only in cash. For Mr. Muhl, all 29,975 shares are held by a family trust for which he shares voting and investment power. |
| |
| (2) | Represents the number of shares underlying stock options that may be exercised within 60 days after March 15, 2015. For Mr. Watjen the amount includes shares underlying unvested stock options that would vest upon retirement because he meets certain age and years of service requirements.2018. |
| | |
| |
20152018 PROXY STATEMENT | | 8393 |
OWNERSHIP OF COMPANY SECURITIES
| |
| (3) | Represents the number of shares underlying deferred share rights and restricted stock unitsRSUs payable solely in shares (including dividend equivalent rights accrued on such rights or units) that may be settled within 60 days after March 15, 2015,2018, including deferred share rights and restricted stock unitsRSUs that may be settled upon the termination of a director’s service on the Board. For each non-employee director other than Ms. DeVore, Mr. Echevarria, Ms. Egan, Mr. O’Hanley and Messrs. Bunting, Keaney and O’Hanley,Mr. Shammo, the amount includes shares underlying unvested restricted stock unitsRSUs that would vest upon retirement because the director meets a certainthe years of service requirement. Does not include 9,280 shares credited to the account of Dr. Goldsberry in respect of deferred share rights under the UNUM Corporation Director Deferred Compensation Plan because, though measured in share value, they will be settled only in cash. Also does not include shares underlying restricted stock unitsRSUs (including dividend equivalent rights accrued thereon) that will not vest or cannot be settled within 60 days after March 15, 2015 or that are payable only in cash.2018. |
| |
| (4) | As of March 15, 2015,2018, the total number of shares underlying deferred share rights (including dividend equivalent rights accrued thereon) held by our non-employee directors, including those rights which cannot be settled in shares or within 60 days after March 15, 20152018 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: |
| | | | | | | | | | | | | | | | |
Mr. Bunting | | - | | | | Dr. Goldsberry(a) | | 12,518 | | | | Ms. Larson | | 38,284 | | |
Mr. Caulfield | | 13,508 | | | | Mr. Kabat | | 9,296 | | | | Mr. MacMillan | | - | | |
Ms. Egan | | - | | | | Mr. Keaney | | 3,238 | | | | Mr. Muhl | | - | | |
Ms. Godwin | | 13,804 | | | | Mr. Kinser | | 24,409 | | | | Mr. O’Hanley | | 672 | | |
| | | | | | | | | | | | Mr. Ryan | | 9,928 | | |
|
| | | | | | | | |
| Mr. Bunting | | — |
| | Mr. Kabat | | 8,978 |
|
| Mr. Caulfield | | 14,445 |
| | Mr. Keaney | | 2,292 |
|
| Ms. DeVore | | — |
| | Ms. Larson | | 43,316 |
|
| Mr. Echevarria | | 6,061 |
| | Mr. O'Hanley | | 5,326 |
|
| Ms. Egan | | — |
| | Mr. Shammo | | — |
|
| Ms. Godwin | | 10,585 |
| | | | |
| (a) | Includes 9,280 shares credited to the account of Dr. Goldsberry in respect of cash-settled deferred share rights, as described in footnote (3) above. |
| (5) | As of March 15, 2015,2018, the total number of shares underlying restricted stock unitsRSUs (including dividend equivalent rights accrued thereon) held by our directors and executive officers, including those units which will not vest, or be settleable in shares, within 60 days after March 15, 20152018 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: |
| | | | | | | | | | | | | | | | |
Mr. Bunting | | 6,251 | | | | Mr. Keaney | | 13,400 | | | | Mr. Watjen(a) | | 186,717 | | |
Mr. Caulfield | | 17,543 | | | | Mr. Kinser | | 28,324 | | | | Mr. McKenney | | 86,069 | | |
Ms. Egan | | 3,378 | | | | Ms. Larson | | 24,972 | | | | Ms. Farrell | | 19,214 | | |
Ms. Godwin | | 22,224 | | | | Mr. MacMillan | | 15,100 | | | | Mr. Simonds | | 27,829 | | |
Dr. Goldsberry | | 4,319 | | | | Mr. Muhl | | 4,319 | | | | Mr. Horn | | 12,822 | | |
Mr. Kabat | | 15,100 | | | | Mr. O’Hanley | | 1,041 | | | | Mr. McCarthy | | - | | |
| | | | | | Mr. Ryan | | 7,671 | | | | All directors and executive officers as a group(a) | | 588,183 | | |
| (a) | Includes 123,295 shares underlying unvested cash-settled restricted stock units (including dividend equivalent rights accrued thereon) that have been granted to Mr. Watjen. |
OWNERSHIP OF COMPANY SECURITIES
|
| | | | | | | | | | |
| Mr. Bunting | 18,477 |
| | Mr. Kabat | 22,275 |
| | Mr. McKenney | 137,186 |
|
| Mr. Caulfield | 17,384 |
| | Mr. Keaney | 3,349 |
| | Mr. McGarry | 24,330 |
|
| Ms. DeVore | 730 |
| | Ms. Larson | 29,531 |
| | Mr. Simonds | 24,328 |
|
| Mr. Echevarria | 8,321 |
| | Mr. O'Hanley | 3,349 |
| | Ms. Farrell | 11,215 |
|
| Ms. Egan | 8,361 |
| | Mr. Shammo | 6,606 |
| | Ms. Iglesias | 15,309 |
|
| Ms. Godwin | 10,472 |
| | | | | All directors and executive officers as a group | 383,939 |
|
Security Ownership of Certain Shareholders
Detailed information about the shareholders known to us to beneficially own more than 5% of our common stock can be found in the table below, including beneficial ownership based on sole and/or shared voting power and investment (dispositive) power. Information is given as of the dates noted in the footnotes below. BENEFICIAL OWNERSHIP
| | | | | | |
| Name and Address of Beneficial Owner | | | | Amount of Beneficial
Ownership | | Percent of Common
Stock Outstanding |
FMR LLC(1) 245 Summer Street Boston, MA 02210 | | | | 22,653,883 | | 8.99% |
The Vanguard Group, Inc.(2) 100 Vanguard Blvd. Malvern, PA 19355 | | | | 18,753,981 | | 7.44% |
BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10022 | | | | 14,749,026 | | 5.90% |
Hotchkis and Wiley Capital Management, LLC(4) 725 S. Figueroa Street 39th Floor Los Angeles, CA 90017 | | | | 13,227,968 | | 5.25% |
State Street Corporation(5) State Street Financial Center One Lincoln Street Boston, MA 02111 | | | | 12,719,499 | | 5.00% |
|
| | | |
| BENEFICIAL OWNERSHIP | | | |
| Name of Beneficial Owner | Address of Beneficial Owner | Amount of Beneficial Ownership | Percent of Common Stock Outstanding |
The Vanguard Group, Inc.(1) | 100 Vanguard Blvd. Malvern, PA 19355 | 24,734,732 | 11.02% |
FMR LLC(2) | 245 Summer Street Boston, MA 02210 | 19,504,945 | 8.69% |
BlackRock, Inc.(3) | 55 East 52nd Street New York, NY 10022 | 16,736,174 | 7.50% |
State Street Corporation(4) | One Lincoln Street Boston, MA 02111 | 11,606,825 | 5.17% |
| |
| (1) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by The Vanguard Group, Inc. on February 9, 2018, which reflects beneficial ownership as of December 31, 2017. The Vanguard Group, Inc. reported that, in its capacity as investment adviser, it had sole voting power with respect 319,032 shares of our common stock, shared voting power with respect to 42,265 shares of our common stock, sole dispositive power with respect to 24,384,527 shares of our common stock, and shared dispositive power with respect to 350,205 shares of our common stock. |
OWNERSHIP OF COMPANY SECURITIES
| |
| (2) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by FMR LLC on February 13, 2015,2018, which reflects beneficial ownership as of December 31, 2014.2017. FMR LLC reported that, in its capacity as a parent holding company, it had sole voting power with respect to 779,7552,527,816 shares of our common stock, sole dispositive power with respect to 22,653,88319,504,945 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. The Schedule 13G/A includes shares beneficially owned by subsidiaries controlled by or through FMR LLC, Edward C.Abigail P. Johnson, 3d,Director, Vice Chairman and Chief Executive Officer of FMR LLC, and/or members of the family of Edward C.Abigail P. Johnson, 3d.and Fidelity Low-Priced Stock Fund. |
(2) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by The Vanguard Group, Inc. on February 11, 2015, which reflects beneficial ownership as of December 31, 2014. The Vanguard Group, Inc. reported that, in its capacity as investment adviser, it had sole voting power with respect to 441,293 shares of our common stock, shared voting power with respect to none of our shares, sole dispositive power with respect to 18,337,288 shares of our common stock, and shared dispositive power with respect to 416,693 shares of our common stock. |
| (3) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. on February 6, 2015,January 23, 2018, which reflects beneficial ownership as of December 31, 2014.2017. BlackRock, Inc. reported that, in its capacity as the parent holding company or control person of the subsidiaries listed therein, it had sole voting power with respect to 12,404,08114,215,103 shares of our common stock, sole dispositive power with respect to 14,749,02616,736,174 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. |
| |
| (4) | This information is based on the Schedule 13G filed with the Securities and Exchange Commission by Hotchkis and Wiley Capital Management, LLC on February 13, 2015, which reflects beneficial ownership as of December 31, 2014. Hotchkis and Wiley Capital Management, LLC reported that, in its capacity as an investment adviser, it had sole voting power with respect to 8,711,492 shares of our common stock, sole dispositive power with respect to 13,227,968 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. |
(5) | This information is based on the Schedule 13G13G/A filed with the Securities and Exchange Commission by State Street Corporation on February 12, 2015,13, 2018, which reflects beneficial ownership as of December 31, 2014.2017. State Street Corporation reported that, in its capacity as the parent holding company or control person of the subsidiaries listed therein, it had shared voting andpower with respect to 11,606,825 shares of our common stock, shared dispositive power with respect to 12,719,49911,606,825 shares of our common stock, and sole voting and dispositive power with respect to none of our shares. |
OWNERSHIP OF COMPANY SECURITIES
Section 16(a) — Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, our directors, executive officers, and beneficial holders of more than 10% of our common stock are required to file with the Securities and Exchange Commission certain forms reporting their beneficial ownership of and transactions in our common stock. Based solely upon a review of those forms provided to us and any written representations that no other reports were required, we believe each of our directors and executive officers and 10% beneficial owners filed all required reports on a timely basis during the last fiscal year.
Two transactions relating to the gift of shares by Edward J. Muhl to a family trust on September 5, 2014 were not timely reported on Form 5 and were subsequently reported on a Form 4 filed on February 24, 2015.
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86 | | 20152018 PROXY STATEMENT | 95 |
(Item 1 on the Proxy Card)
Our Board of Directors currently has
15 members equally divided among three classes. Prior to 2014, we had a classified Board with the directors in each class standing for election every third year for three-year terms of office. In 2013, our shareholders approved a proposal to declassify the Board over a three-year period beginning in 2014, without changing the terms of office of12 members. One current
directors. At the 2014 annual meeting of shareholders, when the three-year terms of the Class III directors ended, four Class III nominees were elected to one-year terms of office. At this year’s Annual Meeting, five Class I nominees and five Class III nominees will stand for election to one-year terms of office and until their respective successors are duly elected and qualified or until their earlier death, resignation, disqualification or removal from office. All directors will stand for annual election beginning with the 2016 annual meeting of shareholders. Before the Board is fully declassified in 2016 (see the table below), directors appointed or elected to fill newly created directorships or vacancies in a class will hold office for a term that coincides with the remaining term of that class. Pursuant to the company’s director retirement policy, Ronald E. Goldsberrymember, Pamela H. Godwin, will retire from the Board
effective at the
2018 Annual Meeting. Accordingly, the Board has reduced the number of Board members to
1411 effective as of the
2018 Annual Meeting.
DIRECTORS STANDING FOR ELECTION TO ONE-YEAR TERMS
| | |
2015 Annual Meeting
|
| |
Class I
Class III
| | Cynthia L. Egan, Pamela H. Godwin, Thomas Kinser, A.S. MacMillan, Jr., Edward J. Muhl
Timothy F. Keaney, Gloria C. Larson, Richard P. McKenney, William J. Ryan, Thomas R. Watjen
|
|
2016 Annual Meeting
|
|
Class I, Class II and Class III – All directors
|
All nominees will stand for election to one-year terms of office.
Upon the recommendation of the Governance Committee, the Board of Directors has nominated
Theodore H. Bunting, Jr., E. Michael Caulfield, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan,
Pamela H. Godwin,Kevin T. Kabat, Timothy F. Keaney,
Thomas Kinser, Gloria C. Larson,
A.S. (Pat) MacMillan, Jr., Richard P. McKenney,
EdwardRonald P. O’Hanley and Francis J.
Muhl, William J. Ryan and Thomas R. WatjenShammo for election to one-year terms expiring at the
2016 annual meeting of shareholders.2019 Annual Meeting. Each nominee currently serves on the Board and has agreed to continue to serve if elected.
Ms. Egan was recommended for the Governance Committee’s consideration by its third-party search firm. The Board has no reason to believe that any nominee will be unable to serve if elected. However, if any nominee becomes unable or unwilling to serve before the
2018 Annual Meeting, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors. Information concerning these nominees is provided under the section titled
“Nominees for Election as Directors with Terms Expiring in 2016”"Director Nominees" beginning on page
12.19.
The Board of Directors unanimously recommends that you vote
FOR the election of each of the nominees for director:
Theodore H. Bunting, Jr., E. Michael Caulfield, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan,
Pamela H. Godwin,Kevin T. Kabat, Timothy F. Keaney,
Thomas Kinser, Gloria C. Larson,
A.S. (Pat) MacMillan, Jr., Richard P. McKenney,
EdwardRonald P. O’Hanley and Francis J.
Muhl, William J. Ryan and Thomas R. Watjen.
ITEMS TO BE VOTED ON
Shammo.
Advisory Vote to Approve Executive Compensation
("Say-on-Pay")
(Item 2 on the Proxy Card)
As required by Section 14A of the Securities Exchange Act of 1934
("Exchange Act"), we are asking you to approve an advisory resolution on the compensation of our named executive officers as described in this proxy statement. This proposal, commonly known as a
“say-on-pay”"Say-on-Pay" proposal, gives you the opportunity to endorse or not endorse our
20142017 executive compensation programs and policies for the named executive officers through the following resolution:
RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the company’s proxy statement for the
2015 annual meeting2018 Annual Meeting of
shareholders,Shareholders, including the Compensation Discussion and Analysis, the compensation tables and related narrative discussion.
For additional detail concerning the compensation of our named executive officers, please refer to the Compensation Discussion and Analysis beginning on page
35.44 and the compensation tables that follow.
We currently hold a Say-on-Pay vote every year. Although your vote is not binding on the Board of Directors or the Human Capital Committee, the Human Capital Committee will review the voting results and seek to understand the factors that influenced the vote. As it did last year, the Human Capital Committee will consider constructive feedback obtained through this process in making future decisions about our executive compensation programs and policies.
We currently hold a say on pay vote every year. Therefore, shareholders Shareholders will next have an opportunity to cast a say-on-paySay-on-Pay vote in 2016.
2019.
The Board unanimously recommends that you vote
FOR approval of named executive officer compensation, as provided in the resolution above.
Ratification of Appointment
of Independent Registered Public Accounting Firm
(Item 3 on the Proxy Card)
The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm (independent auditor) retained to audit our financial statements. The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm (independent auditor)auditor for 2015. 2018. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young LLP to serve as our independent auditor is in the best interests of the company and its shareholders.
The Board is seeking shareholder ratification of the appointment even though it is not legally required, as a matter of good corporate governance. If the appointment is not ratified, the Audit Committee will consider the shareholders’ views in the future selection of the company’s independent auditor.
Representatives of Ernst & Young LLP are expected to be present at the
2018 Annual Meeting. They will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
The Board unanimously recommends that you vote
FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for
2015.
ITEMS TO BE VOTED ON
2018.
The Audit Committee is responsible for the audit fee negotiations associated with the company’s retention of Ernst & Young LLP. Aggregate fees billed for audit and other services rendered by Ernst & Young LLP for our fiscal years ended December 31,
20142017 and
20132016 are presented in the table below.
| | | | | | | | | | |
| Types of Fees | | 2014 | | | | | 2013 | |
Audit Fees | | $ | 8,936,000 | | | | | $ | 9,506,000 * | |
Audit-Related Fees | | | 524,000 | | | | | | 446,000 | |
Tax Fees | | | - | | | | | | 35,000 | |
All Other Fees | | | - | | | | | | - | |
Total | | $ | 9,460,000 | | | | | $ | 9,987,000 | |
| * | Includes $250,000 in audit fees for 2013 services that were billed after the filing of our 2014 proxy statement. |
|
| | |
| Types of Fees | 2017 | 2016 |
| Audit Fees | $7,864,000 | $7,932,000 |
| Audit-Related Fees | 407,000 | 424,000 |
Tax Fees1 | 615,000 | 127,000 |
| All Other Fees | — | — |
| Total | $8,886,000 | $8,483,000 |
1The year-over-year increase in Tax Fees was primarily due to work related to tax reform, a foreign earnings project, and the addition of tax return preparation services in 2017.
Audit Fees. This category includes fees associated with the audit of our annual financial statements, the review of financial statements included in our Quarterly Reports on Form 10-Q, the audit of internal control over financial reporting, and services provided in connection with statutory and regulatory filings.
Audit-Related Fees.Fees. This category consists of fees for assurance and related services that are reasonably related to the performance of the audit or review of financial statements or internal control over financial reporting. These services principally include accounting consultations, control reviews, and audit-related services for our employee benefit plans.
Tax Fees.Fees. This category consists of fees for tax compliance and advisory services.
All Other Fees.Fees. This category consists of fees for services not included in any of the above categories. Policy for Pre-Approval of Audit and Non-Audit Services
The Audit Committee has a policy requiring advance approval of all audit and permissible non-audit services performed by the independent auditor. Under this policy, the Audit Committee sets pre-approved limits for specifically defined audit and non-audit services. The Committee considers whether such services are consistent with SEC rules on auditor independence. Specific approval by the Committee is required if fees for any particular service or aggregate fees for services of a similar nature exceed the pre-approved limits. The Committee has delegated to its chair the authority to approve permitted services, and the chair must report any such decisions to the Committee at its next scheduled meeting.
Approval of an Amended and Restated Certificate of Incorporation, Including the Elimination of Supermajority Voting Requirements
(Item 4 on the Proxy Card)
Our certificate of incorporation contains provisions requiring the affirmative vote of at least 80% of outstanding shares to remove a director, amend our bylaws, approve business combinations with interested shareholders, or amend any provisions containing these voting requirements. Our Board is committed to good governance and recognizes that such supermajority voting requirements are no longer viewed as a good governance practice because of the restrictions they impose on shareholders. The elimination of these supermajority voting requirements would reinforce the Board's accountability to shareholders, provide shareholders with greater ability to participate in the corporate governance of the company, and demonstrate the Board's commitment to continued strong governance.
As detailed below, the Board is requesting that shareholders approve amendments to the certificate of incorporation to eliminate supermajority voting requirements in favor of a simple majority voting standard requiring the affirmative vote of the holders of the majority of the votes entitled to be cast.
Removal of Directors. Currently, Article Fifth of the certificate of incorporation provides that a director may be removed from office only by a supermajority vote of shareholders. The Board proposes to amend this section to provide for a simple majority voting standard.
Amendments to Bylaws. Currently, Article Sixth of the certificate of incorporation requires a supermajority vote for shareholders to amend the bylaws of the company. The Board proposes to amend this section to provide for a simple majority voting standard.
Certain Business Combinations. Currently, Article Seventh of our certificate of incorporation provides that approval of certain business combinations requires a supermajority vote. The Board proposes to eliminate this section to provide for simple majority voting standard.
Amendments to the Certificate of Incorporation. Currently, Article Ninth of our certificate of incorporation requires a supermajority vote for shareholders to amend any section of the certificate of incorporation that requires a supermajority vote. The Board proposes to eliminate this section and provide for simple majority voting standard for any amendments to the certificate of incorporation.
In addition to eliminating supermajority voting requirements, the Board also proposes to eliminate historical references to a classified board structure that no longer exists, as well as other technical, non-material changes.
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201598 | 2018 PROXY STATEMENT |
The Board has unanimously adopted and declared the advisability of, and is submitting for shareholder approval a new Amended and Restated Certificate of Incorporation that would include the elimination of supermajority voting requirements in the above referenced sections, the elimination of historical references to a classified board structure that no longer exists, and other technical, non-material changes. The text of the proposed Amended and Restated Certificate of Incorporation, marked to show the amendments, is included in this Proxy Statement as Appendix B. We ask that our shareholders vote to approve this Amended and Restated Certificate of Incorporation. If approved, we would promptly file the Amended and Restated Certificate of Incorporation with the Secretary of Delaware, at which time it will become effective. If approved, the Board also expects to adopt conforming amendments to the company's bylaws following the 2018 Annual Meeting.
The Board unanimously recommends that you vote FOR the approval of the Amended and Restated Certificate of Incorporation.
ABOUT THE
2018 ANNUAL MEETING
AND VOTING
ABOUT THE
2018 ANNUAL MEETING
AND VOTINGWe are soliciting proxies on behalf of the Board of Directors in connection with the
2018 Annual Meeting. This means we are asking you to sign a proxy designating individuals (known as proxies) to vote on your behalf at the
2018 Annual Meeting and at any later meeting to which the
Annual Meetingmeeting may be adjourned or postponed. By use of a proxy, you can vote whether or not you attend the
2018 Annual Meeting.
Because we are soliciting your proxy, we are required to send you either our proxy materials or a Notice of Internet Availability of proxy materials (described in the next section). Our proxy materials include this proxy statement and our annual report to shareholders, which contains audited consolidated financial statements for our fiscal year ended December 31,
2014.2017. If you received a printed copy of our proxy materials by mail, you also received a proxy card or voting instruction form for the
2018 Annual Meeting.
Internet availability of proxy materials
We are furnishing proxy materials to our shareholders primarily over the Internet. In most cases, we are mailing only a brief Notice of Internet Availability of proxy materials, rather than a full set of printed materials. The Notice of Internet Availability contains instructions on how to access our proxy materials and vote online. It also includes instructions on how to request paper or email delivery of our proxy materials. If you previously chose to receive our proxy materials electronically, you will continue to receive access to these materials via email until you elect otherwise. Our proxy materials may also be viewed on our investor relations website under the
“SEC Filings” header"SEC Filings" heading at
www.investors.unum.com. www.investors.unum.com.
Attending the
2018 Annual Meeting in person
If you attend the
2018 Annual Meeting in person, you must present valid, government issued photo identification, such as a driver’s license, and an admission ticket or proof of ownership of our shares as of the close of business on March 26,
2015,2018, the record date. If you are a shareholder of record, your Notice of Internet Availability or the top half of your proxy card is your admission ticket. If you are a beneficial owner, you will need proof of ownership to enter the meeting. Examples of proof of ownership include your Notice of Internet Availability,
or a recent brokerage statement or letter from the holder of record (your broker, bank or other nominee) confirming your beneficial ownership on the record date. For your safety and that of other shareholders, we reserve the right to inspect all personal items prior to admission. If you arrive at the
2018 Annual Meeting without proper documentation or refuse to comply with our security procedures, you may not be admitted. Each shareholder may appoint only one proxy holder or representative to attend the
2018 Annual Meeting on his or her behalf and we reserve the right to restrict admission to a single individual representing a shareholder.
You are a
“shareholder"shareholder of
record”record" if your shares are registered directly in your name with our registrar and transfer agent, Computershare Trust Company, N.A.
You are a
“beneficial owner”"beneficial owner" if your shares are held through a broker, bank or other nominee (i.e., held in street name). In this case, the broker, bank or nominee is the shareholder of record.
ABOUT THE 2018 ANNUAL MEETING
Directions to the location of the
2018 Annual Meeting in Chattanooga, Tennessee are provided in
Appendix BC and are also available on our website at www.unum.com/directions.
ABOUT THE ANNUAL MEETING AND VOTING
directions.
A live webcast of the
2018 Annual Meeting will be available on our investor relations website at
www.investors.unum.com. www.investors.unum.com. To register, access the webcast on the website and provide the information requested. The webcast will begin at 10:00 a.m. Eastern Daylight Time on Thursday, May
21, 2015,24, 2018, and will be archived on the website through June
4, 2015.7, 2018.
Persons entitled to vote at the
2018 Annual Meeting
Shareholders of record as of the close of business on
the March 26,
20152018, the record date, are entitled to vote their shares at the
2018 Annual Meeting. There were approximately
249,481,644221,171,524 shares of our common stock outstanding on the record date. Each of those shares is entitled to one vote on each item of business to be voted on at the
2018 Annual Meeting.
If you are a beneficial owner, you are not entitled to vote in person at the
2018 Annual Meeting without a legal proxy from the broker, bank or other nominee that is the shareholder of record of your shares. You must ask your broker, bank or other nominee to furnish you with the legal proxy before the
2018 Annual Meeting. You must then bring that document with you to the
2018 Annual Meeting and submit it with a signed ballot that will be provided to you there.
Voting items and Board recommendations; Vote required; Abstentions and broker non-votes
You may either vote for, against or abstain on each of the voting items to be acted on at the
2018 Annual Meeting. The table below summarizes, for each voting item, the voting recommendation of the Board of Directors, the vote threshold required for approval, and the effect of abstentions and broker non-votes (i.e., shares held in street name that cannot be voted on certain matters by the shareholder of record
becauseif the beneficial owner has not provided voting instructions).
VOTING ITEMS
ABOUT THE 2018 ANNUAL MEETING
| |
| | | | |
VOTING ITEMS | | | | |
| Items to be Voted on | | Board Voting Recommendation | | Vote Required
| Effect of Abstention | Abstentions | | Effect of Broker Non-Votes
Non-Vote |
Item 1: Election for 10of 11 directors for terms expiring in 2016 | 2019 | FOR each nominee | | Majority of votes
cast with respect
to the nominee | | No effect because not counted as vote cast | | Not voted/
No effect because not counted as vote cast |
Item 2: Advisory vote to approve executive compensation | | FOR | | Majority of shares
represented and
entitled to vote | | Same effect as
AGAINST because is entitled to vote | | Not voted/
No effect because not entitled to vote |
Item 3: Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2015 | 2018 | FOR | | Majority of shares
represented and
entitled to vote | | Same effect as
AGAINST because is entitled to vote | | Discretionary
vote Not applicable; may be discretionarily voted by
broker |
Majority voting standard for election of directors
Our bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected (an “uncontested election”), each nominee must receive a majority of the votes cast with respect to that nominee to be elected as a director. If an incumbent director is not re-elected under this majority voting standard, the director must submit an irrevocable letter of resignation to the Board of Directors, which shall become effective upon acceptance by the Board. The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be
| | |
Item 4: Approval of an Amended and Restated Certificate of Incorporation, including the elimination of supermajority voting requirements | |
2015 PROXY STATEMENT FOR | Majority of outstanding shares entitled to vote | 91Same effect as AGAINST because is entitled to vote | Same effect as AGAINST because is entitled to vote |
ABOUT THE ANNUAL MEETING AND VOTING
taken. If the director submitting the resignation is a member of the Governance Committee, that director will not participate in the Governance Committee’s recommendation to the Board. The Board will act on the Governance Committee’s recommendation and publicly disclose its decision and rationale within 90 days from the date of the certification of the election results.
If you are a shareholder of record, you may vote your shares using any of the following methods:
| — | | In person – Attend the Annual Meeting and vote in person. |
| — | | Mail – If you received a paper copy of our proxy materials, mark, date and sign the proxy card and mail it to Proxy Services, c/o Computershare Investor Services, P.O. Box 43126, Providence, Rhode Island 02940-5138, using the accompanying pre-addressed, stamped envelope, so that it is received no later than the close of business on May 20, 2015. |
| — | | Internet or telephone – Visit www.envisionreports.com/unm to vote over the Internet or call toll free 1-800-652-VOTE (8683) to vote using a touchtone telephone, in either case no later than 2:00 a.m. Eastern Daylight Time, May 21, 2015. You will need the control number found on the Notice of Internet Availability or the proxy card. |
In person – Attend the 2018 Annual Meeting and vote in person.
Mail – If you received a paper copy of our proxy materials, mark, date and sign the proxy card and mail it to Proxy Services, c/o Computershare Investor Services, P.O. Box 43126, Providence, Rhode Island 02940-5138, using the accompanying pre-addressed, stamped envelope, so that it is received no later than the close of business on May 24, 2018.
Internet or telephone – Visit www.envisionreports.com/unm to vote over the Internet or call toll free 1-800-652-VOTE (8683) to vote using a touchtone telephone, in either case no later than 2:00 a.m. Eastern Daylight Time, May 25, 2018. You will need the control number found on the Notice of Internet Availability or the proxy card.
For shareholders of record, votes submitted by mail, over the Internet or by telephone will be voted at the
2018 Annual Meeting by the proxies named in the proxy card in the manner you indicate. If you sign and return a proxy card without marking specific voting instructions, the proxies will vote your shares FOR each director nominee and FOR each other voting item, as recommended by the Board of Directors.
If you are a beneficial owner, please refer to the Notice of Internet Availability or voting instruction form provided to you by your broker, bank or other nominee for details on how to provide voting instructions to such person. If your broker, bank or other nominee does not receive voting instructions from you, whether your shares can be voted by such person depends on the type of item being considered for vote. The only item of business at the 2018 Annual Meeting for which your broker, bank or other nominee has discretion to vote your shares without your voting instructions is the ratification of the appointment of our independent registered public accounting firm (Item 3). Unless it receives your voting instructions, your broker, bank or other nominee will not have discretion to vote your shares (a “broker non-vote”(resulting in a "broker non-vote") on any other item of business at the 2018 Annual Meeting (Items 1, 2 and 2)4), including the election of directors. To ensure that your shares are
ABOUT THE 2018 ANNUAL MEETING
voted on each of the important matters being voted on at the
2018 Annual Meeting, we encourage you to provide instructions to your broker, bank or nominee on how to vote your shares. As noted above, beneficial owners may vote in person at the
2018 Annual Meeting only if they bring a legal proxy obtained from their broker, bank or other nominee.
Changing your vote and revoking your proxy
If you are a shareholder of record and wish to change your vote after submitting a proxy, you may revoke that proxy by submitting a new proxy (either by mailing a new proxy card or by providing new voting instructions over the Internet or by telephone, in each case by the deadlines under
“Voting"Voting your
shares”shares" above), by giving written notice of revocation to our Corporate Secretary, or by attending the
2018 Annual Meeting and voting in person.
If you are a beneficial owner, you may revoke a previously submitted proxy by submitting new voting instructions in the manner specified by your broker, bank or other nominee. If you obtain a legal proxy from your broker, bank or other nominee, you may also revoke a previously submitted proxy by voting in person at the
2018 Annual Meeting and submitting it with a signed ballot that will be provided to you there.
ABOUT THE ANNUAL MEETING AND VOTING
A quorum is required to transact business at the
2018 Annual Meeting and is reached if the holders of a majority of the shares issued and outstanding and entitled to vote at the meeting are present in person or represented by proxies. Abstentions, broker non-votes and signed but unmarked proxy cards will count for purposes of determining whether a quorum is present at the
2018 Annual Meeting.
Representatives of our transfer agent, Computershare Trust Company, N.A., will tabulate the votes and act as inspectors of the election.
We are not aware of any business to be conducted at the
2018 Annual Meeting, other than as described in this proxy statement. If you submit a proxy, the individuals named on the proxy card will use their own judgment to determine how to vote your shares on any business not described in this proxy statement that is properly brought before the
2018 Annual Meeting.
We will report the final voting results of the
2018 Annual Meeting on a Form 8-K to be filed with the SEC within four business days after the
Annual Meeting.meeting. The Form 8-K will be available on our investor relations website under the
“SEC Filings” header"SEC Filings" heading at
www.investors.unum.com or on the SEC’s website at
www.sec.gov. www.sec.gov.
| | |
| |
20152018 PROXY STATEMENT | | 93103 |
Cost of proxy solicitation
We pay the cost of soliciting proxies from our shareholders. Proxies are solicited by mail, and may also be solicited personally, electronically or by telephone by our directors, officers or employees, though none will receive additional compensation for doing this. We have retained Innisfree M&A Incorporated to assist in the solicitation of proxies for the
2018 Annual Meeting. We will pay Innisfree a fee of $20,000 and reasonable out-of-pocket expenses for its services. We also reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.
Shareholder proposals and nominations for our
2016 annual meeting2019 Annual Meeting
If you intend to submit a proposal for inclusion in the proxy statement for our
2016 annual meeting2019 Annual Meeting pursuant to SEC Rule 14a-8, it must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no later than the close of business on December
11, 2015.13, 2018. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement if the proposal does not satisfy the requirements of SEC Rule 14a-8.
Our bylaws include a proxy access right, permitting a shareholder, or a group of up to 20 shareholders, who has maintained continuous qualifying ownership of at least 3% of our outstanding shares of capital stock entitled to vote in the election of directors for at least three years to nominate and include in our proxy materials director nominees constituting up to the greater of 20% of the Board or two directors, provided that the shareholder(s) and the nominee(s) satisfy the requirements in our bylaws. Notice of proxy access director nominees must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no earlier than November 13, 2018 and no later than the close of business on December 13, 2018. However, in the event that that the 2019 Annual Meeting is to be held on a date that is more than 30 days before or after May 24, 2019 (the anniversary date of the 2018 Annual Meeting), then such notice must be received no later than the close of business on the 180th day prior to the date of the 2019 Annual Meeting or the 10th day following the day on which public announcement of the date of the 2019 Annual Meeting is first made.
Our bylaws also establish advance notice procedures with respect to proposals and director nominations submitted by a shareholder for presentation directly at an annual meeting,Annual Meeting, rather than for inclusion in our proxy statement. To be properly brought before our 2016 annual meeting,2019 Annual Meeting, a notice of the business matterproposal or the shareholder wishes to present at the meeting other than pursuant to SEC Rule 14a-8 or nomination the shareholder wishes to present at the meeting other than pursuant to SEC Rule 14a-8our proxy access bylaw must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no earlier than the close of business on January 22, 201624, 2019 and no later than the close of business on February 21, 2016.25, 2019. However, in the event that that the 2016 annual meeting2019 Annual Meeting is to be held on a date that is more than 30 days before or more than 70 days after May 21, 201624, 2019 (the anniversary date of this year’sthe 2018 Annual Meeting), then such notice must be received notno earlier than the close of business on the 120th day prior to the date of the 2016 annual meeting2019 Annual Meeting and notno later than the close of business on the later of the 90th day prior to the date of the 2016 annual meeting2019 Annual Meeting or the 10th day following the day on which public announcement of the date of the 2016 annual meeting2019 Annual Meeting is first made.
All such proposals and director nominations must satisfy the requirements set forth in our bylaws, a copy of which is available on our investor relations website under the “Corporate Governance” header"Corporate Governance" heading atwww.investors.unum.com and may also be obtained at no cost from the Office of the Corporate Secretary. The
chairman of the meeting may refuse to acknowledge or introduce any shareholder proposal or nomination if notice thereof is not received within the applicable deadlines or does not comply with the bylaws. If a shareholder fails to meet these deadlines,
or fails to satisfy the requirements of SEC Rule 14a-8, the persons named as proxies will be allowed to use their discretionary voting authority to vote on any such proposal or nomination as they determine appropriate if and when the matter is raised at the Annual Meeting.
Communications with the Board of Directors
Shareholders and interested parties may communicate with our Chairman of the Board,
Lead Independent Director, or any other director by contacting the Office of the Corporate Secretary as described
on the following page.below.
In accordance with a process approved by our Board of Directors, the Corporate Secretary reviews all correspondence received by the company and addressed to non-management directors. A log and copies of the correspondence are provided to the Chairman,
or Lead Independent Director, who determines whether further distribution is appropriate and to whom it should be sent. Any director may at any time review this log and request copies of correspondence. Concerns relating to accounting, internal controls or auditing matters are promptly brought to the attention of our internal auditors and handled in accordance with procedures established by the Audit Committee. Copies of correspondence relating to corporate governance matters are also provided to the chair of the Governance Committee.
ADDITIONAL INFORMATION
The Board has instructed that certain items unrelated to the duties and responsibilities of the Board be excluded from the process, including mass mailings, resumes and other forms of job inquiries, surveys, business solicitations or advertisements, and matters related to claims or employment.
Eliminating duplicate proxy materials
A single proxy statement and annual report to shareholders, along with individual proxy cards, or individual Notices of Internet Availability will be delivered in one envelope to multiple shareholders having the same last name and address and to shareholders with multiple accounts registered at our transfer agent with the same address, unless contrary instructions have been received from an affected shareholder. This is known as
“householding”"householding" and it enables us to reduce the costs and environmental impact of the
2018 Annual Meeting. We will deliver promptly upon written or oral request a separate copy of the proxy statement, annual report to shareholders or Notice of Internet Availability to any shareholder residing at a shared address to which only one copy was delivered. If you are a shareholder of record and would like to receive separate copies of our proxy materials, whether for this year or future years, please contact Computershare Investor Services by calling toll-free 800-446-2617 or by writing to them at P.O. Box 43069, Providence, Rhode Island 02940-3069. The same phone number and address may be used to request delivery of a single copy of our proxy materials if you share an address with another shareholder and are receiving multiple copies. If you are a beneficial owner, you should contact your broker, bank or other nominee.
Contacting the Office of the Corporate Secretary
You may contact the Office of the Corporate Secretary by calling toll-free 800-718-8824 or by writing to:
Office of the Corporate Secretary
Chattanooga, Tennessee 37402
Principal executive offices
Our principal executive offices are located at 1 Fountain Square, Chattanooga, Tennessee 37402. Our main telephone number is 423-294-1011.
Annual Report on Form 10-K
Upon request, we will provide to you by mail a free copy of our Annual Report on Form 10-K (including financial statements and financial statement schedules) for the fiscal year ended December 31,
2014.2017. Please direct your request to the Office of the Secretary at the address provided above. The Annual Report on Form 10-K may also be accessed on our investor relations website under the “SEC Filings” header"SEC Filings" heading at
www.investors.unum.com or on the SEC’s website at www.sec.gov.
Incorporation by reference
To the extent that this proxy statement has been or will be specifically incorporated by reference into any of our other filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the sections of this proxy statement entitled
“Report"Report of the Audit
Committee”Committee" (to the extent permitted by the rules of the SEC) and
“Report"Report of the Human Capital
Committee”Committee" shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.
| | |
| |
2015106 | 2018 PROXY STATEMENT | | 95 |
APPENDIX A
APPENDIX A: RECONCILIATION OF NON-GAAP FINANCIAL MEASURESReconciliation of Non-GAAP Financial Measures
We analyze our performance using non-GAAP financial measures which exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We believe the following non-GAAP financial measures are better performance measures and better indicators of the revenue and profitability and underlying trends in our business:
| — | | Operating revenue, which excludes realized investment gains or losses; |
| — | | Before-tax operating income or loss, which excludes realized investment gains or losses, non-operating retirement-related gains or losses, income tax, and certain other items which are discussed in “Executive Summary” in Part II Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2014, as applicable, and after-tax operating income or loss which includes income tax; |
| — | | Operating return on equity, which is calculated using after-tax operating income or loss and excludes from equity the unrealized gain or loss on securities and net gain on cash flow hedges; and |
| — | | Book value per common share, which is calculated excluding AOCI. |
After-tax adjusted operating income or loss and adjusted operating earnings per share, which excludes realized investment gains or losses, and certain other items, which are discussed in "Executive Summary" in Part II Item 7 of our Annual Report on Form 10-K for the respective years ended December 31, 2017 and 2016, as applicable;
Adjusted operating return on equity, which is calculated using after-tax adjusted operating income or loss and excludes from equity the unrealized gain or loss on securities and net gain on cash flow hedges; and
Book value per common share, which is calculated excluding accumulated other comprehensive income (AOCI).
Effective December 31, 2017, to more clearly differentiate between the GAAP and non-GAAP financial measures, we changed the naming convention for our non-GAAP financial measures from "operating" measures to "adjusted operating" measures, which includes a change from "after-tax operating income" to "after-tax adjusted operating income", and "operating return on equity" to "adjusted operating return on equity". The definition of these labels remains unchanged.
Realized investment gains or
losses; non-operating retirement-related gains or losses;losses and unrealized gains or losses on securities and net gains on cash flow hedges depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our company. Book value per common share excluding certain components of AOCI, certain of which tend to fluctuate depending on market conditions and general economic trends, are important measures. We also exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur and does not replace the comparable GAAP measures in the determination of overall profitability. For a reconciliation of
these non-GAAP financial measures to the most directly comparable GAAP measures
to these non-GAAP financial measures, refer to this Appendix.
| | | | | | | | |
| | | Year Ended December 31 | |
| | | 2014 | | | 2013 | |
| | | (in millions) | |
Before-tax Operating Income (Loss) | | | | | | | | |
Unum US | | $ | 856.3 | | | $ | 859.0 | |
Unum UK | | | 147.8 | | | | 132.0 | |
Colonial Life | | | 300.2 | | | | 284.9 | |
Closed Block | | | 122.6 | | | | 109.4 | |
Corporate | | | (134.4) | | | | (143.5) | |
| | | | | | | | |
Total | | | 1,292.5 | | | | 1,241.8 | |
Net Realized Investment Gain | | | 16.1 | | | | 6.8 | |
Non-operating Retirement-related Loss | | | (70.0) | | | | (32.9) | |
Costs Related to Early Retirement of Debt | | | (13.2) | | | | - | |
Long-term Care Reserve Increase | | | (698.2) | | | | - | |
Unclaimed Death Benefits Reserve Increase | | | - | | | | (95.5) | |
Group Life Waiver of Premium Benefit Reserve Reduction | | | - | | | | 85.0 | |
Income Tax | | | (113.8) | | | | (347.1) | |
| | | | | | | | |
Net Income | | $ | 413.4 | | | $ | 858.1 | |
| | | | | | | | |
| | |
| |
962018 PROXY STATEMENT | 107 |
|
| | | | | | | | | |
| | | After-Tax Adjusted Operating Income (Loss) | Average Allocated Equity(1) | Adjusted Operating Return on Equity |
| |
| |
| | Year Ended December 31, 2017 | | | |
| | Unum US | $ | 656.2 |
| $ | 4,130.2 |
| 15.9 | % |
| | Unum UK | 92.1 |
| 607.3 |
| 15.2 | % |
| | Colonial Life | 211.2 |
| 1,308.1 |
| 16.2 | % |
| | Core Operating Segments | 959.5 |
| 6,045.6 |
| 15.9 | % |
| | Closed Block | 86.4 |
| 3,290.1 |
| |
| | Corporate | (69.7 | ) | (893.3 | ) | |
| | Total | $ | 976.2 |
| $ | 8,442.4 |
| 11.6 | % |
| | | | | |
| | Year Ended December 31, 2016 | $ | 915.6 |
| $ | 8,140.8 |
| 11.2 | % |
| | Year Ended December 31, 2015 | $ | 893.2 |
| $ | 7,961.1 |
| 11.2 | % |
(1) Excludes unrealized gain on securities and net gain on cash flow hedges and is calculated using the stockholders' equity balances presented below.
|
| | | | | | | | | | | | | | | |
| | 12/31/2017 | | 12/31/2016 | | 12/31/2015 | | 12/31/2014 |
| Total Stockholders' Equity | $ | 9,574.9 |
| | $ | 8,968.0 |
| | $ | 8,663.9 |
| | $ | 8,521.9 |
|
| Excluding: | | | | | | | |
| Net Unrealized Gain on Securities | 607.8 |
| | 440.6 |
| | 204.3 |
| | 290.3 |
|
| Net Gain on Cash Flow Hedges | 282.3 |
| | 327.5 |
| | 378.0 |
| | 391.0 |
|
| Total Adjusted Stockholders' Equity | $ | 8,684.8 |
| | $ | 8,199.9 |
| | $ | 8,081.6 |
| | $ | 7,840.6 |
|
| | | | | | | | |
| | Twelve Months Ended | | Twelve Months Ended | | Twelve Months Ended | | |
| | 12/31/2017 | | 12/31/2016 | | 12/31/2015 | | |
| Average Stockholders' Equity Excluding Net Unrealized Gain on Securities and Net Gain on Cash Flow Hedges | $ | 8,442.4 |
| | $ | 8,140.8 |
| | $ | 7,961.1 |
| |
|
|
| |
2015108 | 2018 PROXY STATEMENT |
APPENDIX A
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31 | |
| | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
| | | (in millions) | |
After-tax Operating Income | | $ | 910.4 | | | $ | 882.5 | | | $ | 887.5 | | | $ | 905.4 | | | $ | 894.3 | |
Net Realized Investment Gain (Loss), Net of Tax | | | 12.8 | | | | 3.9 | | | | 37.1 | | | | (3.6) | | | | 15.7 | |
Non-operating Retirement-related Loss, Net of Tax | | | (45.6) | | | | (21.4) | | | | (30.2) | | | | (20.7) | | | | (21.1) | |
Costs Related to Early Retirement of Debt, Net of Tax | | | (10.4) | | | | - | | | | - | | | | - | | | | - | |
Long-term Care Reserve Increase, Net of Tax | | | (453.8) | | | | - | | | | - | | | | - | | | | - | |
Unclaimed Death Benefits Reserve Increase, Net of Tax | | | - | | | | (62.1) | | | | - | | | | - | | | | - | |
Group Life Waiver of Premium Benefit Reserve Reduction, Net of Tax | | | - | | | | 55.2 | | | | - | | | | - | | | | - | |
Deferred Acquisition Costs Impairment and Reserve Charges for Long-term Care Closed Block, Net of Tax | | | - | | | | - | | | | - | | | | (500.3) | | | | - | |
Reserve Charge for Individual Disability Closed Block, Net of Tax | | | - | | | | - | | | | - | | | | (119.3) | | | | - | |
Tax Reduction from IRS Settlement | | | - | | | | - | | | | - | | | | 41.3 | | | | - | |
Tax Related to U.K. Repatriation | | | - | | | | - | | | | - | | | | (18.6) | | | | - | |
Tax Related to Healthcare Reform Legislation | | | - | | | | - | | | | - | | | | - | | | | (10.2) | |
| | | | | | | | | | | | | | | | | | | | |
Net Income | | $ | 413.4 | | | $ | 858.1 | | | $ | 894.4 | | | $ | 284.2 | | | $ | 878.7 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | Year Ended
December 31 | | | | | | | | | | | | | |
| | | 2014 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | (in millions) | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Operating Revenue | | $ | 10,493.6 | | | | | | | | | | | | | | | | | |
Net Realized Investment Gain | | | 16.1 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Revenue | | $ | 10,509.7 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31 | |
| | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007* | | | 2006* | | | 2005* | |
| | | (per diluted common share) | |
After-tax Operating Income | | | $ 3.55 | | | | $ 3.32 | | | | $ 3.15 | | | | $ 2.98 | | | | $ 2.73 | | | | $ 2.64 | | | | $ 2.54 | | | | $ 2.25 | | | | $ 1.85 | | | | $ 1.69 | |
Net Realized Investment Gain (Loss), Net of Tax | | | 0.05 | | | | 0.02 | | | | 0.13 | | | | (0.01) | | | | 0.05 | | | | - | | | | (0.89) | | | | (0.12) | | | | 0.01 | | | | (0.02) | |
Non-operating Retirement-related Loss, Net of Tax | | | (0.18) | | | | (0.08) | | | | (0.11) | | | | (0.07) | | | | (0.06) | | | | (0.09) | | | | (0.03) | | | | (0.04) | | | | (0.05) | | | | (0.05) | |
Costs Related to Early Retirement of Debt, Net of Tax | | | (0.04) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Long-term Care Reserve Increase, Net of Tax | | | (1.77) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Unclaimed Death Benefits Reserve Increase, Net of Tax | | | - | | | | (0.24) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Group Life Waiver of Premium Benefit Reserve Reduction, Net of Tax | | | - | | | | 0.21 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Deferred Acquisition Costs Impairment and Reserve Charges for Long-term Care Closed Block, Net of Tax | | | - | | | | - | | | | - | | | | (1.65) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Reserve Charge for Individual Disability Closed Block, Net of Tax | | | - | | | | - | | | | - | | | | (0.39) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Regulatory Reassessment Charges, Net of Tax | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (0.10) | | | | (0.79) | | | | (0.16) | |
Special Tax Items and Debt Extinguishment Costs | | | - | | | | - | | | | - | | | | 0.08 | | | | (0.03) | | | | - | | | | - | | | | (0.10) | | | | 0.23 | | | | 0.14 | |
Other, Net of Tax | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (0.04) | | | | 0.01 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income from Continuing Operations | | | 1.61 | | | | 3.23 | | | | 3.17 | | | | 0.94 | | | | 2.69 | | | | 2.55 | | | | 1.62 | | | | 1.89 | | | | 1.21 | | | | 1.61 | |
Income from Discontinued Operations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 0.02 | | | | 0.02 | | | | 0.03 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Income | | $ | 1.61 | | | $ | 3.23 | | | $ | 3.17 | | | $ | 0.94 | | | $ | 2.69 | | | $ | 2.55 | | | $ | 1.62 | | | $ | 1.91 | | | $ | 1.23 | | | $ | 1.64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31 |
| | | 2017 | | 2016 | | 2015 |
| | | (in millions) | | per share * | | (in millions) | | per share * | | (in millions) | | per share * |
| Net Income | | $ | 994.2 |
| | $ | 4.37 |
| | $ | 931.4 |
| | $ | 3.95 |
| | $ | 867.1 |
| | $ | 3.50 |
|
| Excluding: | | | | | | | | | | | | |
| Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $15.0; $8.4; $(17.7)) | | 25.3 |
| | 0.11 |
| | 15.8 |
| | 0.07 |
| | (26.1 | ) | | (0.11 | ) |
| Loss from Guaranty Fund Assessment (net of tax benefit of $7.2; $-; $-) | | (13.4 | ) | | (0.06 | ) | | — |
| | — |
| | — |
| | — |
|
| Unclaimed Death Benefits Reserve Increase (net of tax benefit $13.6; $-; $-) | | (25.4 | ) | | (0.11 | ) | | — |
| | — |
| | — |
| | — |
|
| Net Tax Benefit from Impacts of TCJA | | 31.5 |
| | 0.14 |
| | — |
| | — |
| | — |
| | — |
|
| After-tax Adjusted Operating Income | | $ | 976.2 |
| | $ | 4.29 |
| | $ | 915.6 |
| | $ | 3.88 |
| | $ | 893.2 |
| | $ | 3.61 |
|
| | | | | | | | | | | | | |
| | | Year Ended December 31 |
| | | 2014 | | 2013 | | 2012 |
| | | (in millions) | | per share * | | (in millions) | | per share * | | (in millions) | | per share * |
| Net Income | | $ | 402.1 |
| | $ | 1.57 |
| | $ | 847.0 |
| | $ | 3.19 |
| | $ | 888.1 |
| | $ | 3.15 |
|
| Excluding: | | | | | | | | | | | | |
| Net Realized Investment Gain (net of tax expense of $3.3; $2.9; $19.1) | | 12.8 |
| | 0.05 |
| | 3.9 |
| | 0.02 |
| | 37.1 |
| | 0.13 |
|
| Costs Related to Early Retirement of Debt (net of tax benefit of $2.8; $-; $-) | | (10.4 | ) | | (0.04 | ) | | — |
| | — |
| | — |
| | — |
|
| Reserve Charges for Closed Block (net of tax benefit of $244.4; $-; $-) | | (453.8 | ) | | (1.77 | ) | | — |
| | — |
| | — |
| | — |
|
| Pension Settlement Loss (net of tax benefit of $22.5; $-; $-) | | (41.9 | ) | | (0.16 | ) | | — |
| | — |
| | — |
| | — |
|
| Unclaimed Death Benefits Reserve Increase (net of tax benefit of $-; $33.4; $-) | | — |
| | — |
| | (62.1 | ) | | (0.24 | ) | | — |
| | — |
|
| Group Life Waiver of Premium Benefit Reserve Reduction (net of tax expense of $-; $29.8; $-) | | — |
| | — |
| | 55.2 |
| | 0.21 |
| | — |
| | — |
|
| After-tax Adjusted Operating Income | | $ | 895.4 |
| | $ | 3.49 |
| | $ | 850.0 |
| | $ | 3.20 |
| | $ | 851.0 |
| | $ | 3.02 |
|
*Assuming Dilution.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31 |
| | | 2011 | | 2010 | | 2009 |
| | | (in millions) | | per share * | | (in millions) | | per share * | | (in millions) | | per share * |
| Net Income | | $ | 283.6 |
| | $ | 0.94 |
| | $ | 877.6 |
| | $ | 2.69 |
| | $ | 847.3 |
| | $ | 2.55 |
|
| Excluding: | | | | | | | | | | | | |
| Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(1.3); $9.0; $11.5) | | (3.6 | ) | | (0.01 | ) | | 15.7 |
| | 0.05 |
| | 0.2 |
| | — |
|
| Reserve Charges for Closed Block (net of tax benefit of $265.0; $-; $-) | | (492.1 | ) | | (1.62 | ) | | — |
| | — |
| | — |
| | — |
|
| Deferred Acquisition Costs for Closed Block (net of tax benefit of $68.5; $-; $-) | | (127.5 | ) | | (0.42 | ) | | — |
| | — |
| | — |
| | — |
|
| Special Tax Items | | 22.7 |
| | 0.08 |
| | (10.2 | ) | | (0.03 | ) | | — |
| | — |
|
| After-tax Adjusted Operating Income | | $ | 884.1 |
| | $ | 2.91 |
| | $ | 872.1 |
| | $ | 2.67 |
| | $ | 847.1 |
| | $ | 2.55 |
|
| | | | | | | | | | | | | |
| | | Year Ended December 31 |
| | | 2008 | | 2007** | | 2006** |
| | | (in millions) | | per share * | | (in millions) | | per share * | | (in millions) | | per share * |
| Net Income | | $ | 553.4 |
| | $ | 1.62 |
| | $ | 679.3 |
| | $ | 1.91 |
| | $ | 411.0 |
| | $ | 1.23 |
|
| Excluding: | | | | | | | | | | | | |
| Income from Discontinued Operations | | — |
| | — |
| | 6.9 |
| | 0.02 |
| | 7.4 |
| | 0.02 |
|
| Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(161.8); $(22.0); $0.7) | | (304.1 | ) | | (0.89 | ) | | (43.2 | ) | | (0.12 | ) | | 1.5 |
| | 0.01 |
|
| Regulatory Reassessment Charges (net of tax benefit of $-; $31.3; $129.0) | | — |
| | — |
| | (34.5 | ) | | (0.10 | ) | | (267.4 | ) | | (0.79 | ) |
| Debt Extinguishment Costs (net of tax benefit of $-; $20.5; $8.9) | | — |
| | — |
| | (38.3 | ) | | (0.11 | ) | | (16.9 | ) | | (0.05 | ) |
| Other (net of tax expense (benefit) of $-; $-; $(5.8)) | | — |
| | — |
| | — |
| | — |
| | (12.7 | ) | | (0.04 | ) |
| Special Tax Items | | — |
| | — |
| | 2.2 |
| | 0.01 |
| | 95.8 |
| | 0.28 |
|
| After-tax Adjusted Operating Income | | $ | 857.5 |
| | $ | 2.51 |
| | $ | 786.2 |
| | $ | 2.21 |
| | $ | 603.3 |
| | $ | 1.80 |
|
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31 | | | | | | | | |
| | | 2005** | | | | | | | | |
| | | (in millions) | | per share * | | | | | | | | |
| Net Income | | $ | 513.6 |
| | $ | 1.64 |
| | | | | | | | |
| Excluding: | | | | | | | | | | | | |
| Income from Discontinued Operations | | 9.6 |
| | 0.03 |
| | | | | | | | |
| Net Realized Investment Loss (net of tax benefit of $2.4) | | (4.3 | ) | | (0.02 | ) | | | | | | | | |
| Regulatory Reassessment Charges (net of tax benefit of $1.1) | | (51.6 | ) | | (0.16 | ) | | | | | | | | |
| Other (net of tax expense of $1.7) | | 4.0 |
| | 0.01 |
| | | | | | | | |
| Special Tax Items | | 42.8 |
| | 0.14 |
| | | | | | | | |
| After-tax Adjusted Operating Income | | $ | 513.1 |
| | $ | 1.64 |
| | | | | | | | |
*Assuming Dilution.
**Does not reflect the impact of ASU 2010-26.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 12/31/2017 | | 12/31/2016 | | 12/31/2015 |
| | (in millions) | | per share | | (in millions) | | per share | | (in millions) | | per share |
| Total Stockholders' Equity (Book Value) | $ | 9,574.9 |
| | $ | 43.02 |
| | $ | 8,968.0 |
| | $ | 39.02 |
| | $ | 8,663.9 |
| | $ | 35.96 |
|
| Excluding: | | | | | | | | | | | |
| Net Unrealized Gain on Securities | 607.8 |
| | 2.73 |
| | 440.6 |
| | 1.92 |
| | 204.3 |
| | 0.84 |
|
| Net Gain on Cash Flow Hedges | 282.3 |
| | 1.27 |
| | 327.5 |
| | 1.42 |
| | 378.0 |
| | 1.57 |
|
| Subtotal | 8,684.8 |
| | 39.02 |
| | 8,199.9 |
| | 35.68 |
| | 8,081.6 |
| | 33.55 |
|
| Excluding: | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | (254.5 | ) | | (1.15 | ) | | (354.0 | ) | | (1.54 | ) | | (173.6 | ) | | (0.72 | ) |
| Subtotal | 8,939.3 |
| | 40.17 |
| | 8,553.9 |
| | 37.22 |
| | 8,255.2 |
| | 34.27 |
|
| Excluding: | | | | | | | | | | | |
| Unrecognized Pension and Postretirement Benefit Costs | (508.1 | ) | | (2.28 | ) | | (465.1 | ) | | (2.02 | ) | | (392.6 | ) | | (1.63 | ) |
| Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 9,447.4 |
| | $ | 42.45 |
| | $ | 9,019.0 |
| | $ | 39.24 |
| | $ | 8,647.8 |
| | $ | 35.90 |
|
| | |
| |
20152018 PROXY STATEMENT | | 97111 |
APPENDIX A
| | | | | | | | | | | | |
| | | After-tax
Operating
Income (Loss) | | | Average
Allocated
Equity | | | Operating
Return
on Equity | |
| | | (in millions) | | |
Year Ended December 31, 2014 | | | | | | | | | | | | |
Unum US | | $ | 562.3 | | | $ | 4,157.4 | | | | 13.5% | |
Unum UK | | | 116.4 | | | | 635.3 | | | | 18.3% | |
Colonial Life | | | 195.2 | | | | 1,163.1 | | | | 16.8% | |
| | | | | | | | | | | | |
Total Primary Operating Businesses | | | 873.9 | | | | 5,955.8 | | | | 14.7% | |
Closed Block | | | 80.9 | | | | 2,756.3 | | | | | |
Corporate | | | (44.4) | | | | (713.0) | | | | | |
| | | | | | | | | | | | |
Total | | $ | 910.4 | | | $ | 7,999.1 | | | | 11.4% | |
| | | | | | | | | | | | |
| | | |
| | | After-tax
Operating
Income | | | Average
Allocated
Equity | | | Operating
Return
On Equity | |
| | | (in millions) | | |
Year Ended December 31, 2013 | | $ | 882.5 | | | $ | 7,732.3 | | | | 11.4% | |
Year Ended December 31, 2012 | | | 887.5 | | | | 7,241.8 | | | | 12.3% | |
Year Ended December 31, 2011 | | | 905.4 | | | | 7,427.0 | | | | 12.2% | |
Year Ended December 31, 2010 | | | 894.3 | | | | 7,499.7 | | | | 11.9% | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31 | | | | |
| | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | | | 2009 | | | | |
| | | (in millions) | | | | |
Total Stockholders’ Equity, As Reported | | $ | 8,552.4 | | | $ | 8,659.1 | | | $ | 8,612.6 | | | $ | 8,169.7 | | | $ | 8,484.9 | | | $ | 8,045.0 | | | | | |
Net Unrealized Gain on Securities | | | 290.3 | | | | 135.7 | | | | 873.5 | | | | 614.8 | | | | 416.1 | | | | 382.7 | | | | | |
Net Gain on Cash Flow Hedges | | | 391.0 | | | | 396.3 | | | | 401.6 | | | | 408.7 | | | | 361.0 | | | | 370.8 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Stockholders’ Equity, As Adjusted | | $ | 7,871.1 | | | $ | 8,127.1 | | | $ | 7,337.5 | | | $ | 7,146.2 | | | $ | 7,707.8 | | | $ | 7,291.5 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average Equity, As Adjusted | | $ | 7,999.1 | | | $ | 7,732.3 | | | $ | 7,241.8 | | | $ | 7,427.0 | | | $ | 7,499.7 | | | | | | | | | |
| |
| | | December 31 | |
| | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | | | 2009 | | | 2008 | |
| | | (per share) | |
Total Stockholders’ Equity (Book Value) | | $ | 33.90 | | | $ | 33.30 | | | $ | 31.87 | | | $ | 27.91 | | | $ | 26.80 | | | $ | 24.25 | | | $ | 17.94 | |
Net Unrealized Gain on Securities | | | 1.15 | | | | 0.52 | | | | 3.23 | | | | 2.11 | | | | 1.31 | | | | 1.16 | | | | (2.53 | ) |
Net Gain on Cash Flow Hedges | | | 1.55 | | | | 1.52 | | | | 1.48 | | | | 1.39 | | | | 1.14 | | | | 1.12 | | | | 1.38 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 31.20 | | | | 31.26 | | | | 27.16 | | | | 24.41 | | | | 24.35 | | | | 21.97 | | | | 19.09 | |
Foreign Currency Translation Adjustment | | | (0.45 | ) | | | (0.18 | ) | | | (0.26 | ) | | | (0.41 | ) | | | (0.34 | ) | | | (0.23 | ) | | | (0.52 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | | | 31.65 | | | | 31.44 | | | | 27.42 | | | | 24.82 | | | | 24.69 | | | | 22.20 | | | | 19.61 | |
Unrecognized Pension and Postretirement Benefit Costs | | | (1.59 | ) | | | (0.88 | ) | | | (2.13 | ) | | | (1.51 | ) | | | (1.00 | ) | | | (1.00 | ) | | | (1.23 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Stockholders’ Equity, Excluding Accumulated Other Comprehensive Income | | $ | 33.24 | | | $ | 32.32 | | | $ | 29.55 | | | $ | 26.33 | | | $ | 25.69 | | | $ | 23.20 | | | $ | 20.84 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 12/31/2014 | | 12/31/2013 | | 12/31/2012 |
| | (in millions) | | per share | | (in millions) | | per share | | (in millions) | | per share |
| Total Stockholders' Equity (Book Value) | $ | 8,521.9 |
| | $ | 33.78 |
| | $ | 8,639.9 |
| | $ | 33.23 |
| | $ | 8,604.6 |
| | $ | 31.84 |
|
| Excluding: | | | | | | | | | | | |
| Net Unrealized Gain on Securities | 290.3 |
| | 1.15 |
| | 135.7 |
| | 0.52 |
| | 873.5 |
| | 3.23 |
|
| Net Gain on Cash Flow Hedges | 391.0 |
| | 1.55 |
| | 396.3 |
| | 1.52 |
| | 401.6 |
| | 1.48 |
|
| Subtotal | 7,840.6 |
| | 31.08 |
| | 8,107.9 |
| | 31.19 |
| | 7,329.5 |
| | 27.13 |
|
| Excluding: | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | (113.4 | ) | | (0.45 | ) | | (47.1 | ) | | (0.18 | ) | | (72.6 | ) | | (0.26 | ) |
| Subtotal | 7,954.0 |
| | 31.53 |
| | 8,155.0 |
| | 31.37 |
| | 7,402.1 |
| | 27.39 |
|
| Excluding: | | | | | | | | | | | |
| Unrecognized Pension and Postretirement Benefit Costs | (401.5 | ) | | (1.59 | ) | | (229.9 | ) | | (0.88 | ) | | (574.5 | ) | | (2.13 | ) |
| Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | $ | 8,355.5 |
| | $ | 33.12 |
| | $ | 8,384.9 |
| | $ | 32.25 |
| | $ | 7,976.6 |
| | $ | 29.52 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 12/31/2011 | | 12/31/2010 | | 12/31/2009 |
| | (in millions) | | per share | | (in millions) | | per share | | (in millions) | | per share |
| Total Stockholders' Equity (Book Value) | $ | 8,168.0 |
| | $ | 27.91 |
| | $ | 8,483.9 |
| | $ | 26.80 |
| | $ | 8,045.0 |
| | $ | 24.25 |
|
| Excluding: | | | | | | | | | | | |
| Net Unrealized Gain on Securities | 614.8 |
| | 2.11 |
| | 416.1 |
| | 1.31 |
| | 382.7 |
| | 1.16 |
|
| Net Gain on Cash Flow Hedges | 408.7 |
| | 1.39 |
| | 361.0 |
| | 1.14 |
| | 370.8 |
| | 1.12 |
|
| Subtotal | 7,144.5 |
| | 24.41 |
| | 7,706.8 |
| | 24.35 |
| | 7,291.5 |
| | 21.97 |
|
| Excluding: | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | (117.6 | ) | | (0.41 | ) | | (107.1 | ) | | (0.34 | ) | | (75.3 | ) | | (0.23 | ) |
| Subtotal | 7,262.1 |
| | 24.82 |
| | 7,813.9 |
| | 24.69 |
| | 7,366.8 |
| | 22.20 |
|
| Excluding: | | | | | | | | | | | |
| Unrecognized Pension and Postretirement Benefit Costs | (444.1 | ) | | (1.51 | ) | | (318.6 | ) | | (1.00 | ) | | (330.7 | ) | | (1.00 | ) |
| Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | $ | 7,706.2 |
| | $ | 26.33 |
| | $ | 8,132.5 |
| | $ | 25.69 |
| | $ | 7,697.5 |
| | $ | 23.20 |
|
| | | | | | | | | | | | |
| | 12/31/2008 | | | | | | | | |
| | (in millions) | | per share | | | | | | | | |
| Total Stockholders' Equity (Book Value) | $ | 5,941.5 |
| | $ | 17.94 |
| | | | | | | | |
| Excluding: | | | | | | | | | | | |
| Net Unrealized Loss on Securities | (837.4 | ) | | (2.53 | ) | | | | | | | | |
| Net Gain on Cash Flow Hedges | 458.5 |
| | 1.38 |
| | | | | | | | |
| Subtotal | 6,320.4 |
| | 19.09 |
| | | | | | | | |
| Excluding: | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | (172.8 | ) | | (0.52 | ) | | | | | | | | |
| Subtotal | 6,493.2 |
| | 19.61 |
| | | | | | | | |
| Excluding: | | | | | | | | | | | |
| Unrecognized Pension and Postretirement Benefit Costs | (406.5 | ) | | (1.23 | ) | | | | | | | | |
| Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Loss | $ | 6,899.7 |
| | $ | 20.84 |
| | | | | | | | |
| | |
| |
98112 | | 20152018 PROXY STATEMENT |
APPENDIX B
APPENDIX B: DIRECTIONS TO THE ANNUAL MEETING
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
UNUM GROUP
The present name of the corporation is Unum Group. The corporation was incorporated under the name "Provident Companies, Inc." by the filing of its original certificate of incorporation with the Secretary of State of the State of Delaware on March 22, 1995. This year’s Annual Meeting will be heldAmended and Restated Certificate of Incorporation of the corporation restates and integrates and further amends the provisions of the corporation's amended and restatedrestated certificate of incorporation as heretofore amended (the “Existing Certificate of Incorporation”). This Amended and Restated Certificate of Incorporation was duly adopted in Chattanooga, Tennessee, ataccordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. The Existing Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:
FIRST: The name of the corporation is Unum
Group’s headquarters, located at 1 Fountain Square downtown.
Group (the "Corporation").
Directions fromSECOND: The address of the Chattanooga AirportTake Highway 153 South fromregistered office of the airport and then travel south on I-75. AtCorporation in the intersection with I-24, take I-24 West. As you approachstate of Delaware is 2711 Centerville Road, Suite 400251 Little Falls Drive, in the city bear rightof Wilmington, county of New Castle, 19808. The name of the Corporation's registered agent at that address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: A. The total number of shares of capital stock which the Corporation shall have authority to issue is 750,000,000 shares, consisting of 725,000,000 shares of Common Stock par value $.10 per share (the "Common Stock") and merge onto US-27 North25,000,000 shares of Preferred Stock, par value $.10 per share (the "Preferred Stock").
B. Shares of Preferred Stock may be issued from time to downtown. Taketime in one or more classes or series as may be determined from time to time by the Fourth Street exitBoard of Directors of the Corporation (the "Board of Directors"), each such class or series to be distinctly designated. Except in respect of the particulars fixed by the Board of Directors for classes or series provided for by the Board of Directors as permitted hereby, all shares of Preferred Stock shall be of equal rank and turn rightshall be identical. All shares of any one series of Preferred Stock so designated by the Board of Directors shall be alike in every particular, except that shares of any one series issued at different times may differ as to the fifth traffic light onto Walnut Street. Follow the posted signs to visitor parkingdates from which dividends thereon shall be cumulative. The voting rights, if any, of each such class or series and the meeting location.Directions from Atlantapreferences and Knoxville
Travel on I-75 to Chattanooga. At the intersection with I-24, take I-24 West. As you approach the city, bear rightrelative, participating, optional and merge onto US-27 North to downtown. Take the Fourth Street exit and turn right at the fifth traffic light onto Walnut Street. Follow the posted signs to visitor parkingother special rights of each such
class or series and the meeting location.Directionsqualifications, limitations and restrictions thereof, if any, may differ from Birmingham
Travel on I-59 North toward Chattanooga. At the intersection with I-24, take I-24 East. As you approach the city, bear rightthose of any and merge onto US-27 North to downtown. Take the Fourth Street exit and turn rightall other
classes or series at the fifth traffic light onto Walnut Street. Follow the posted signs to visitor parkingany time outstanding; and the meeting location.Directions from Nashville
Travel on I-24 EastBoard of Directors of the Corporation is hereby expressly granted authority to Chattanooga. As you approachfix, by resolutions duly adopted prior to the city, bear right and merge onto US-27 North to downtown. Take the Fourth Street exit and turn right at the fifth traffic light onto Walnut Street. Follow the posted signs to visitor parking and the meeting location.
issuance of any shares of a particular class or
| | |
| |
20152018 PROXY STATEMENT | | 99113 |
series of Preferred Stock so designated by the Board of Directors, the voting powers of stock of such class or series, if any, and the designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations and restrictions of such class or series, including, but without limiting the generality of the foregoing, the following:
(1)The distinctive designation of, and the number of shares of Preferred Stock which shall constitute, such class or series, and such number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors;
(2)The rate and time at which, and the terms and conditions upon which, dividends, if any, on Preferred Stock of such class or series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other classes of stock and whether such dividends shall be cumulative or non-cumulative;
(3)The right, if any, of the holders of Preferred Stock of such class or series to convert the same into, or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock and the terms and conditions of such conversion or exchange;
(4)Whether or not Preferred Stock of such class or series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions upon which, Preferred Stock of such class or series may be redeemed;
(5)The rights, if any, of the holders of Preferred Stock of such class or series upon the voluntary or involuntary liquidation of the Corporation;
(6)The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such class or series; and
(7)The voting powers, if any, of the holders of such class or series of Preferred Stock.
C. Except as otherwise provided in this Certificate of Incorporation, the Board of Directors shall have authority to authorize the issuance (or delegate the power to authorize the issuance of shares in accordance with applicable law), from time to time, without any vote or other action by the stockholders, of any or all shares of stock of the Corporation of any class or series at any time authorized, and any securities convertible into or exchangeable for any such shares, and any options, rights or warrants to purchase or acquire any such shares, in each case to such persons and on such terms (including as a dividend or distribution on or with respect to, or in connection with a split or combination of, the outstanding shares of stock of the same or any other class) as the Board of Directors from time to time in its discretion lawfully may determine; provided, however, that the consideration for the issuance of shares of stock of the Corporation having par value (unless issued as such a dividend or distribution or in connection with such a split or combination) shall not be less than such par value. Shares so issued shall be fully paid stock, and the holders of such stock shall not be liable to any further call or assessments thereon.
D. Except as provided in this Certificate of Incorporation, each holder of Common Stock shall be entitled to one vote for each share of Common Stock held by such holder.
FIFTH: A. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
| | | | | | |
| | | |  |
| | | Electronic Voting Instructions
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| | | Available 24 hours a day, 7 days a week!
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| | | Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
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| | | VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
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| | | Proxies submitted by the Internet or telephone must be received by 2:00 a.m. Eastern Daylight Time, on May 21, 2015.
|
| | |  | | Vote by Internet |
| | | | • Go towww.envisionreports.com/unm
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| | | | • Or scan the QR code with your smartphone
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| | | | • Follow the steps outlined on the secure website
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| | | Vote by telephone
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| | | • Call toll free 1-800-652-VOTE (8683) within the USA, US
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| | | • Follow the instructions provided by the recorded message
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Using ablack inkpen, mark your votes with anX as shown in
this example. Please do not write outside the designated areas.
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A | | Proposals — You must sign the card on the reverse side for your vote to be counted.
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The Board of Directors recommends a voteFOR each of the nominees listed. | |
1. Election of Directors: | | For | | Against
| | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | |
| | | | | | | | | | | | |
01 - Cynthia L. Egan | | ¨ | | ¨ | | ¨ | | 02 - Pamela H. Godwin | | ¨ | | ¨ | | ¨ | | 03 - Timothy F. Keaney | | ¨ | | ¨ | | ¨ | | |
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04 - Thomas Kinser114 | 2018 PROXY STATEMENT | ¨ | | ¨ | | ¨ | | 05 - Gloria C. Larson | | ¨ | | ¨ | | ¨ | | 06 - A.S. MacMillan, Jr. | | ¨ | | ¨ | | ¨ | |
B. The Board of Directors shall consist of not less than three nor more than fifteen directors. The exact number of directors shall be determined from time to time by resolution adopted by the affirmative vote of a majority of the Board of Directors, subject to Article III, Section 11 of the By-Laws of the Corporation.
C. Subject to the rights of the holders of any Preferred Stock to elect directors:
(1)Until the election of directors at the 2016 annual meeting of stockholders (each annual meeting of stockholders, an “Annual Meeting”), the Board of Directors shall be divided into three classes of directors, designated as Class I, Class II and Class III, each of which shall consist, as nearly as possible, of one-third of the total number of directors constituting the entire Board of Directors. Subject to Sections C(2), C(3) and D of this Article FIFTH, each class of directors shall be elected for a three-year term, and the terms of each class shall be staggered so that only one class of directors will be elected at each Annual Meeting.
(2)At each Annual Meeting commencing with the 2014 Annual Meeting, successors to the class of directors whose terms expire at that Annual Meeting shall be elected for a one-year term.
(3)From and after the election of directors at the 2016 Annual Meeting, the Board of Directors shall cease to be classified.
D. If prior to the 2016 Annual Meeting the number of directors is increased in accordance with the terms of this Certificate of Incorporation or the By-Laws, then, except to the extent that an increase in the authorized number of directors occurs in connection with the rights of the holders of Preferred Stock to elect additional directors, any newly created directorship resulting from such increase shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director elected to fill such newly created directorship shall hold office for a term that shall coincide with the remaining term of the class of directors into which such director was elected. From and after the 2016 Annual Meeting, any additional director elected to fill a newly created directorship resulting from an increase in the number of directors shall hold office for a term expiring at the next Annual Meeting. In no case will a decrease in the number of directors shorten the term of any incumbent director.
C. A director shall hold office until the Annual Meeting for the year in which his or her term expiresnext annual meeting of stockholders and until his or her successor shall be elected and shall qualify, subject, however, to the director's prior death, resignation, disqualification or removal from office. In no case will a decrease in the number of directors shorten the term of any incumbent director.
D. The stockholders shall have the right to remove any or all of the directors at any time, but only by the affirmative vote of the holders of eighty percent (80%)a majority of the votes entitled to be cast by the holdersat an election of all outstanding shares of Voting Stock (as hereinafter defined)directors voting together as a single class; provided, however, that until the 2016 Annual Meeting, directors may be removed only for cause.
E. Any vacancy on the Board of Directors that results from a newly created directorship or for any other reason shall be filled only by the affirmative vote of a majority of the Board of Directors then in office, although less than a quorum, or by a sole remaining director, and may not be filled by any other person or persons. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessoror newly created directorship shall hold office for a term expiring at the next annual meeting of stockholders.
F. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of 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
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07 - Richard P. McKenney2018 PROXY STATEMENT | 115 | ¨ | | ¨ | | ¨ | | 08 - Edward J. Muhl | | ¨ | | ¨ | | ¨ | | 09 - William J. Ryan | | ¨ | | ¨ | | ¨ | |
of such directorships shall be governed by the terms of this Certificate of Incorporation applicable thereto (including the resolutions adopted by the Board of Directors pursuant to Section B of Article FOURTH), and such directors so elected shall not be divided into classes pursuant to Section C of this Article FIFTH unless expressly provided by such terms. Election of directors need not be by written ballot unless the By-Laws so provide.
G. The Board of Directors may from time to time determine whether, to what extent, at what times and places and under what conditions and regulations the accounts, books and papers of the Corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account, book or document of the Corporation, except as and to the extent expressly provided by law with reference to the right of stockholders to examine the original or duplicate stock ledger, or otherwise expressly provided by law, or except as expressly authorized by resolution of the Board of Directors.
H. 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 statutes of Delaware, this Certificate of Incorporation, and the By-Laws.
I. Except as may be otherwise determined by the Board of Directors in fixing the terms of any class or series of Preferred Stock pursuant to Article FOURTH hereof, no action shall be taken by stockholders of the Corporation except at an annual or special meeting of stockholders of the Corporation and the right of stockholders to act by written consent in lieu of a meeting is specifically denied.
SIXTH: A. The Board of Directors shall have concurrent power with the stockholders as set forth in this Certificate of Incorporation to make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
B. Subject to Article III, Section 11 of the By-Laws, theThe Board of Directors may amend the By-Laws of the Corporation upon the affirmative vote of the number of directors which shall constitute, under the terms of the By-Laws, the action of the Board of Directors. Stockholders may not amend the By-Laws of the Corporation except upon the affirmative vote of at least eighty percent (80%)a majority of the votes entitled to be cast byon the holders of all outstanding shares of Voting Stockmatter, voting together as a single class.
SEVENTH: A. In addition to any affirmative vote required by law, this Certificate of Incorporation, the By-Laws of the Corporation or otherwise, except as otherwise expressly provided in Section B of this Article SEVENTH, the Corporation shall not engage, directly or indirectly, in any Business Combination (as hereinafter defined) with an Interested Stockholder (as hereinafter defined) without the affirmative vote of (i) not less than eighty percent (80%) of the votes entitled to be cast by the holders of all outstanding shares of Voting Stock voting together as a single class, and (ii) not less than a majority of the votes entitled to be cast by the holders of all outstanding shares of Voting Stock which are beneficially owned by persons other than such Interested Stockholder voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article SEVENTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law, this Certificate of Incorporation, the By-Laws or the Corporation, or otherwise, if such Business Combination shall have been approved by a majority (whether such approval is made prior to or subsequent to the acquisition of beneficial ownership of Voting Stock that caused the Interested Stockholder to become an Interested Stockholder) of the Continuing Directors (as hereinafter defined).
C. For the purposes of this Certificate of Incorporation:
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10 - Thomas R. Watjen116 | 2018 PROXY STATEMENT | ¨ | | ¨ | | ¨ | | | | | | | | | | | | | | | | | |
1.The term "Business Combination" shall mean:
(a)any merger or consolidation of this Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii) any other corporation (whether or not itself an Interested Stockholder) which is or after such merger or consolidation would be an Affiliate or Associate of an Interested Stockholder; or
(b)any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) between the Corporation or any Subsidiary and any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets or securities of the Corporation, any Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder the value of which would constitute, immediately prior to such transaction, a Substantial Part (as hereinafter defined) of the assets of the Corporation; or
(c)the adoption of any plan or proposal for the liquidation or dissolution of, or similar transaction involving, the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(d)any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(e)any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (a) to (d).
2.The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article FOURTH of this Certificate of Incorporation, and the term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally.
3.The term "person" shall mean any individual, firm, corporation or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock.
4.The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan or any trust or any other entity formed for the purposes of holding Voting Stock for the purpose of funding any such plan or funding other employee benefits for employees of the Corporation or any Subsidiary, in each case when acting in such capacity) who (a) is the beneficial owner of Voting Stock representing fifteen percent (15%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock representing fifteen percent (15%) or more of the votes entitled to be cast by the holders of all then outstanding share of Voting Stock.
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The Board of Directors recommends a voteFOR Proposals 2 and 3.
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5.A person shall be a "beneficial owner" of any Capital Stock (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 4 of this Section C, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of Paragraph 5 of this Section C, but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
6.The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Act"), (the term "registrant" in Rule 12b-2 meaning in this case the Corporation).
7.The term "Subsidiary" means any corporation of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is beneficially owned by the Corporation.
8.The term "Continuing Director" means any member of the Board of Directors, while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director, while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed the Continuing Director by a majority of Continuing Directors. In order for a Business Combination or other action to be approved, or a fact or other matter to be determined, "by a majority of the Continuing Directors" hereunder, there must be one or more Continuing Directors then serving on the Board of Directors.
9.The term "Substantial Part" means assets having an aggregate Fair Market Value (as hereinafter defined) in excess of ten percent (10%) of the book value of the total consolidated assets of the Corporation and its Subsidiaries as of the end of the Corporation's most recent fiscal year ending prior to the time the stockholders of the Corporation would be required to approve or authorize the Business Combination involving assets constituting any such Substantial Part.
10.The term "Fair Market Value" means (a) in the case of cash, the amount of such cash; (b) in the case of stock, the highest closing sale price, during the 30-day period immediately preceding the date in question, of a share of such stock on the Composite Tape for New York Stock Exchange, Inc. Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, Inc., or , if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock, during the 30-day period preceding the date in question, on the National Association of Securities Dealers, Inc. Automated Quotation System or any similar system then in use, or if no such quotations are available, the fair market value on the
date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Continuing Directors.
D. A majority of the Continuing Directors shall have the power and duty to determine for the purposes of this Article SEVENTH, on the basis of information known to them after reasonable inquiry, (a) whether a person is an Interested Stockholder, (b) the number of shares of Capital Stock or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another and (d) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by this Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value in excess of the amount set forth in Paragraph 1(b) of Section C of this Article SEVENTH. Any such determination made in good faith shall be binding and conclusive on all parties.
E. Nothing contained in this Article SEVENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law.
SEVENTH: When considering a merger, consolidation, Business CombinationWhen considering a merger; consolidation; sale; lease or exchange of all or substantially all of its assets or property; or similar transaction, the Board of Directors, committees of the Board of Directors, individual directors and individual officers may, in considering the best interests of the Corporation and its stockholders, consider the effects of any such transaction upon the employees, customers and suppliers of the Corporation, and upon communities in which offices of the Corporation are located.
NINTH: Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), (i) the affirmative vote of the holders of not less than eighty percent (80%) of the votes entitled to be cast by the holders of all outstanding shares of Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, Articles FIFTH and SIXTH, and (ii) the affirmative vote of the holders of (x) not less than eighty percent (80%) of the votes entitled to be cast by the holders of all outstanding shares of Voting Stock voting together as a single class, and (y) not less than a majority of the votes entitled to be cast by the holders of all outstanding shares of Voting Stock which are beneficially owned by persons other than Interested Stockholders, if any, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with Articles SEVENTH and NINTH; provided, however, that, with respect to Articles FIFTH, SIXTH, SEVENTH, and NINTH such special voting requirements shall not apply to, and such special votes shall not be required for, any amendment, repeal or adoption recommended by the Board of Directors if a majority of the directors then in office are persons who would be eligible to serve as Continuing Directors.
EIGHTH: No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal of modification of this Article TENTHEIGHTH by the stockholders of the Corporation shall not adversely affect any right of 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.
NINTH: Subject to the provisions of this Certificate of Incorporation, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now
or thereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has caused this Amended and Restated Certificate of Incorporation to be executed by its duly authorized officer on this 23rd[●] day of May, 20132018.
UNUM GROUP
By: ___________________________
Name:
Office:
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| 120 | 2018 PROXY STATEMENT |
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2.2018 PROXY STATEMENT | | To approve, on an advisory basis, the compensation of the company’s named executive officers. | | ¨ | | ¨ | | ¨ | | 3. To ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2015.
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B 2018 PROXY STATEMENT | | Non-Voting Items |
Change of Address— Please print new address below. |
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
Admission Ticket
UNUM GROUP
ANNUAL MEETING OF SHAREHOLDERS
May 21, 2015
10:00 a.m. Eastern Daylight Time
1 Fountain Square
Chattanooga, Tennessee 37402
This admission ticket admits only the named shareholder.
If you plan on attending the Annual Meeting in person, please bring this Admission Ticket or proof of ownership of the company’s common stockand valid government-issued photo identification (such as a driver’s license or passport).
If your shares are held beneficially in the name of a bank, broker or other holder of record and you plan to attend the Annual Meeting, a recent brokerage statement or letter from a bank or broker is an example of proof of ownership. If you arrive at the Annual Meeting without an admission ticket, we will admit you only if we are able to verify that you are a company shareholder.
For your safety, we reserve the right to inspect all personal items prior to admission to the Annual Meeting.
Your compliance is appreciated.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Annual Meeting of Shareholders
May 21, 2015
10:00 a.m., Eastern Daylight Time
1 Fountain Square, Chattanooga, Tennessee 37402
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNUM GROUP
The undersigned hereby appoints John F. McGarry and Lisa J. Iglesias, or either of them, proxies, each with full power of substitution, acting jointly or by either of them if only one be present and acting, to vote and act with respect to all of the shares of common stock of the undersigned in Unum Group, at the Annual Meeting, upon all matters that may properly come before the meeting, including the matters described in the Proxy Statement furnished herewith, subject to the directions indicated on the reverse side of this card or through the telephone or Internet proxy procedures, and at the discretion of the proxies on any other matters that may properly come before the meeting.If specific voting instructions are not given with respect to the matters to be acted upon and the signed card is returned, the proxies will vote in accordance with the Board of Directors’ recommendations provided on the reverse side of this card, and at their discretion on any other matters that may properly come before the meeting.
This proxy card, when signed and returned, will also constitute voting instructions to the trustee for shares held in the Unum Group 401(k) Retirement Plan or to the broker-dealer for shares held in the Employee Stock Purchase Plan. If voting instructions representing shares in the foregoing employee benefit plans are not received, those shares will not be voted.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” PROPOSALS 1, 2, and 3. IF OTHER BUSINESS IS PROPERLY BROUGHT BEFORE THE MEETING, THE PROXIES WILL VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT.
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C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign |
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PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME OR NAMES APPEARS HEREON. IF STOCK IS HELD JOINTLY, SIGNATURES SHOULD APPEAR FOR BOTH NAMES. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR CUSTODIAN, PLEASE INDICATE THE CAPACITY IN WHICH YOU ARE ACTING.
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Date (mm/dd/yyyy) — Please print date below.
| | | | Signature 1 — Please keep signature within the box. | | | | Signature 2 — Please keep signature within the box. |
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