UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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the Securities Exchange Act of 1934 (Amendment No. )
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Cigna Corporation
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NOTICE OF
2017
ANNUAL MEETING OF SHAREHOLDERS
AND20 1 8 PROXY STATEMENT
CIGNA®
April 26, 2017 at 8:00 a.m.
Sheraton Hartford Hotel (at Bradley Airport)
913017_Proxy_Statement_cover_v7-Single pgs.indd 1 Bradley International AirportPeople Purpose performance 2/28/18 10:38 AM
Windsor Locks, Connecticut 06096
45K+ employees who serve Customers around the globe 95M+ Customer relationships around the world 1M+ relationships with health Care providers, CliniCs and faCilities globally Cigna is a global health serviCe Company dediCated to helping people improve their health, well-being and sense of seCurity. $41.6B in revenues $61.8B in assets $13.7B in shareholders’ equity913017_Proxy_Statement_cover_v7-Single pgs.indd 2 2/28/18 10:38 AM
March 17, 2017[ ], 2018
900 Cottage Grove Road
Bloomfield, Connecticut 06002
Dear Cigna Shareholder:
On behalf of the Cigna Corporation Board of Directors, our Enterprise Leadership Team and our more than 40,000 colleagues around the globe, we are pleased to cordially invite you to attend our 20172018 Annual Meeting of Shareholders to be held on April 26, 2017.25, 2018. The attached Notice of 20172018 Annual Meeting of Shareholders and Proxy Statement contains important information about the business to be conducted at the Annual Meeting.
During2017 marked another consecutive year of delivering strong, differentiated results, while generating considerable momentum for 2018 and the past yearyears ahead. This exceptional performance reflects the efforts of an exceptionally talented Cigna team – individuals who are proud to serve as champions on behalf of our customers and communities around the world.
In support of Cigna’s belief that our communities play an essential role in meeting the health and wellness needs of individuals, we continuedcontinue to build on our numerous successes of the past seven years, including growing ourtake leadership roles to confront a number of customer relationshipssocietal challenges. Cigna is addressing the needs of our friends, families and neighbors through efforts such as combatting the opioid crisis in partnership with providers, empowering veterans to more than 94 million,address difficult health and delivering innovative toolslife circumstances and capabilitiesestablishing a multi-city health improvement tour to drive quality, affordability, personalization and differentiated value. bring free health screenings nationwide.
We continue to anticipatebe led by ourGo strategy, which we adopted in 2009 and meetevolved inmid-2017 toGo Deeper, Go Local andGo Beyond to further accelerate our customers’ emergingability to drive significant value creation for our customers, clients, partners, communities and shareholders. By consistently and effectively executing on ourGo strategy over this extended period of time, we have proven that we can actively align Cigna with the needs of our diverse stakeholders and succeed in an evolving, highly dynamic and disruptive global marketplace.
Enhancing this strategy is our continued commitment to innovation, a relentless focus on serving our customers, and a drive to be a convener for both organizations and individuals across an increasingly complex landscape. Taken together with solutions and partnerships that better connect individuals and health care professionalsour unwavering mission to improve theirthe health, well-being and well-being.sense of security of those we are privileged to serve, we are solidifying Cigna’s role as a partner of choice, and are creating value for stakeholders across the markets where we compete.
WhileOur ability to create and deliver this value is clearly reflected in our financial performance and in our ability to deliver competitively attractive top and bottom line growth, as well as earning the right to serve more than 95 million customer relationships around the world.
As we deliveredenter 2018, Cigna’s strong revenuecapital position and customer growth in the face of considerable market disruptions this year, earnings were pressured by uncharacteristic challenges in the first half of the year for two offlexibility further enable our historically well-performing businesses. Ultimately, Cigna concluded 2016 with strong momentum and remains in a solid positionorganization to drive attractive earnings and customer growth both in 20172018 and over the long-term.
Our journeyTo position us for continued strong performance, this year we named five tenured and proven leaders to create a more sustainable health care system originally motivated our proposed combination with Anthem as we soughtenterprise leadership, allowing us to further expand choice, improve affordabilityemphasize our focus on customer engagement, local markets and quality, and accelerate value-based care programs. In the second half of 2016, the Department of Justice sued to prevent our merger with Anthem; the federal district court has enjoined the proposed merger and litigation continues.
Throughout this process, we continued to invest in our businesses, and continued contingency planning for other potential paths if necessary — including a sovereign path. As we lead the healthcare industry in consumer engagement, continue supporting our customers through their diverse life and health stages, and contribute to building a sustainable health care system, we have a clear path ahead to create value in the marketplace, and eagerly and optimistically look to Cigna’s future.partnerships.
Our Board of Directors, comprised of individuals with diverse experiences and skills, isremains committed to strong corporate governance as a framework for financial integrity, shareholder transparency and competitively attractive performance. In consideration of the vote on the shareholder proposal regarding proxy access at the last annual meeting and following outreach to shareholders, in December 2017 the Board adopted proxy access, representing a significant enhancement of shareholder rights.
Your vote is very important. Whether or not you plan to attend the 20172018 Annual Meeting, we hope that you will cast your vote as soon as possible. Please review the instructions on each of your voting options described in the Important Notice Regarding the Availability of Proxy Materials. Additional instructions on how to vote can be found on pages 91 and 92 of the proxy statement.
We look forward to seeing you at the 2017 Annual Meeting. As always, thank you for your continued support of Cigna.
Sincerely,
| /s/ David | /s/ Isaiah Harris, Jr. | |
David M. Cordani
President and Chief Executive Officer | Isaiah Harris, Jr.
Chairman of the Board |
NOTICE OF
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| DATE AND TIME: | Wednesday, April
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1
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| ITEMS OF BUSINESS: | Proposal 1: Election of
Proposal 2: Advisory approval of executive compensation.
Proposal 3:
Proposal
Consideration of any other business properly brought before the meeting.
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| RECORD DATE: | You may vote on the matters presented at the Annual Meeting if you were a shareholder of record at the close of business on February
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| PROXY VOTING: | Your vote is very important, regardless of the number of shares you own. We urge you to promptly vote by telephone, by using the Internet, or, if you received a proxy card or instruction form, by completing, dating, signing and returning it by mail. |
| March | By order of the Board of Directors, | |||
/s/ Neil Boyden Tanner | ||||
Neil Boyden Tanner | ||||
| Corporate Secretary | ||||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on April
The Notice of Annual Meeting, Proxy Statement and Annual Report for the fiscal year ended December 31,
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| APPENDIX | Appendix-1 |
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We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the complete Proxy Statement and 20162017 Annual Report before you vote.
Mission and Strategy
Cigna’s mission is dedicated to improveimproving the health, well-being and sense of security of the peopleindividuals we serve inthrough our more than 9495 million customer relationships around the globe. OurSince 2009, our strategic focus is centered on delivering high quality, affordablein support of our mission has been toGo Deep, Go Global and personalized solutionsGo Individual.
To further accelerate the differentiated value we deliver for our customers, clients, partners and clients by leveraging our insights, focus, execution, brand, talentcommunities, we have evolved this strategy toGo Deeper, Go Local and localized approach.Go Beyond in order to expand avenues for growth and performance. Creating value for our customers, clients, partners, communities and in turn, our shareholders, is a direct result of the continued, effective execution of ourGo Deep, Go Global, Go Individual strategy that we implemented in 2010.this proven strategy.
Our Mission To improve the health, well-being and sense of security of the people we serve | ||
| Our Strategy | ||
| Go Deeper: | To expand and deepen our customer, client and partner relationships; depth in targeted sub-segments, geographies | |
| Go Local: | To ensure our solution suite and services meet customer, client and partner needs at a local market level | |
| Go Beyond: | To innovate and further differentiate our businesses, the experiences we deliver, and overall social impact | |
| How We Will Win | ||
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Cigna is a growth company with a proven track record of strongtop-line and bottom-line growth and a clear, focused strategy. We create value by delivering differentiated and innovative solutions to our customers, clients and partners. We have an attractive, long-term outlook, enabled by the significant opportunity in our existing businesses, our strong talent, capabilities and capital position.
We also believe that our corporation has a social responsibility, and that we can work to actively address gaps in health and well-being to help individuals in the markets where we operate around the world. Our perspective is that companies like Cigna can partner more with communities to contribute and make a difference.
 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
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Business Performance
In 2017, consolidated revenue increased 5% to $41.6 billion, as we continued to focus on our mission to improve the health, well-being and sense of security of the people we serve. Shareholders’ net income for 2017 was $2.2 billion, compared to $1.9 billion for 2016. Consolidated adjusted income from operations* for 2017 was $2.7 billion, compared to $2.1 billion in 2016, reflecting increased earnings contributions from each of our business segments. Our results included strong performance across each of our priority growth platforms – Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life. These results provide us with momentum for continued growth in 2018.
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Our proven
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Total Shareholder Return
The following chart shows our cumulative Total Shareholder Return (TSR) as of December 31, 2017, on aone-, three- and five-year basis. Cigna’s three-year annual compounded TSR was 25.5%, placing Cigna at the 78th percentile of its Strategic Performance Share (SPS) performance peer group for the 2015–2017 performance period. For more information regarding our SPS program, see “Long-Term Incentives – Strategic Performance Share Program” in the Compensation Discussion & Analysis (CD&A).
2 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
PROXY STATEMENT SUMMARY |
Board of Directors
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David M. Cordani
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Isaiah Harris, Jr.
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Jane E. Henney, M.D. | 70 | Former Senior Vice President, Provost and Professor of Medicine, University of Cincinnati College of Medicine | Corporate Governance (Chair) Audit Executive | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Roman Martinez IV | 70 | Private Investor | Audit (Chair) Executive Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John M. Partridge | 68 | Former President of Visa, Inc. | Finance (Chair) Executive People Resources | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James E. Rogers | 70 | Former Chairman, President and Chief Executive Officer of Duke Energy Corporation | Audit Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Eric C. Wiseman | 62 | Former Executive Chairman, President and Chief Executive Officer of VF Corporation | Finance People Resources | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Donna F. Zarcone | 60 | President and Chief Executive Officer of The Economic Club of Chicago | Audit Corporate Governance
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| Cigna 2018 Notice of Annual Meeting of Shareholders and |
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Corporate Governance
Cigna is committed to ensuring strong corporate governance practices on behalf of our shareholders. We believe that strong corporate governance provides the foundation for financial integrity and shareholder confidence. The Office of the Corporate Secretary engages with shareholders on issues related to corporate governance, executive compensation and social responsibility. In 2017, the Office of the Corporate Secretary engaged in extensive outreach with shareholders, particularly regarding proxy access, as further described on page 16. During these meetings, shareholders also expressed an interest in learning more about our board refreshment plans and our corporate responsibility efforts. As a result, we have included additional disclosure on these topics, which can be found on pages 9 and 23, respectively.
In 2017, the Board, after a full evaluation that included outreach to Cigna’s largest shareholders and consideration of the vote on the shareholder proposal regarding proxy access at the 2017 annual meeting of shareholders, implemented proxy access. As a result, a shareholder or a group of up to 20 shareholders owning 3% or more of Cigna’s outstanding common stock continuously for at least three years may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of 20% of the Board or two individuals, provided the shareholder(s) and the nominee(s) satisfy the requirements specified in theBy-Laws. The Board believes that this proxy access bylaw framework provides meaningful proxy access rights, reflects generally accepted governance practices around proxy access and is consistent with the overall feedback we received as part of our shareholder engagement.
In February 2018, the Board approved an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority vote provision, subject to shareholder approval at this Annual Meeting. Following shareholder approval, the Board will amend theBy-Laws to eliminate a similar supermajority voting requirement in ourBy-Laws. Thereafter, all supermajority voting provisions will have been removed and shareholders may amend all provisions of the Restated Certificate and theBy-Laws by the affirmative vote of a majority of the Company’s outstanding common stock.
At the 2016 annual meeting of shareholders, the phased implementation of the Board’s declassified structure began and, beginning with this Annual Meeting, all directors are elected toone-year terms and the classified structure is fully eliminated.
KEY GOVERNANCE PRACTICES | ||||||||||
• Independent board of directors with diversity in composition, skills and experience • Independent Chairman of the Board • Regular executive sessions of the Board and its committees, without management present • Directors elected by majority voting • Annual election of all directors • Proxy access right for shareholders | • Separate Code of Business Conduct and Ethics for the Board • Independent Audit, Corporate Governance, Finance and People Resources Committees • Annual self-evaluations of the Board, its committees and individual directors, including periodic independent third party assessments | |||||||||
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4 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
PROXY STATEMENT SUMMARY |
Executive Compensation
Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy. We focus on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.
In 2017, our shareholders cast advisory votes in favor of our executive compensation program, with approximately 93% of votes cast in favor.
| COMPENSATION GOVERNANCE AND CONTROLS |
• “Double trigger” requirement for change of control benefits
• No taxgross-up of severance pay upon a change of control
• Management of Long-Term Incentive Plan annual share usage (or burn rate) and total dilution by setting an annual share usage limit, which is below the maximum permitted under the plan • No excessive perquisites • Oversight by the People Resources Committee of people development, policies and processes, including consideration of assessments of executive officers and key senior management • CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the People Resources Committee • An annual assessment by the People Resources Committee of any potential risks and associated internal controls in our incentive compensation programs and policies | |||||
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Executive Compensation
Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy – focusing on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.
As a result of our 2016 financial performance, payouts under the 2016 Management Incentive Plan were lower than in recent years and below target levels, reflecting strongpay-for-performance alignment.
In 2016, our shareholders overwhelmingly cast advisory votes in favor of our executive compensation program, with approximately 93% of votes cast in favor.
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The target pay mix for the Chief Executive Officer and the other named executive officers during 2017 reflects our executive compensation philosophy that emphasizes performance-based compensation over fixed compensation. The percentages shown below are targets only and will not match the percentages calculable from the actual compensation paid as reflected in the Summary Compensation Table.
CEO TARGET PAY MIX OTHER NEO AVERAGE TARGET PAY MIX• No taxgross-up of severance pay upon a change of control
• Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes to existing programs or policies
| Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | 5 |
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The target pay mix for the Chief Executive Officer and the other named executive officers during 2016 reflects our executive compensation philosophy that emphasizes performance-based compensation over fixed compensation. The percentages shown below are targets only and will not match the percentages calculable from the compensation reflected in the Summary Compensation Table on page 54. PROXY STATEMENT SUMMARY
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Voting Matters and Board Recommendations
PROPOSALS
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Proposal 1. Election of Directors.
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Election of Directors (Proposal 1)
The Board of Directors is elected by Cigna’s shareholders. At the Annual Meeting, the Board is nominating seven directors forone-year terms expiring in 2018 for election by shareholders. The role of the Board, its leadership structure and governance practices are described below in the Corporate Governance Policies and Practices section beginning on page 16. This section describes the process for director elections and director nominations, identifies the director responsibilities and qualifications considered by the Board and the Corporate Governance Committee believe that the ten director nominees named in selecting and nominating directors and presents the biographies,this Proxy Statement bring a combination of diverse qualifications, skills and qualificationsexperiences that contribute to a well-rounded Board. As determined by the Board and Corporate Governance Committee as part of the most recent Board evaluation, each director nomineesnominee has proven leadership ability, good judgment and has been an active and valued participant on the Board during his or her tenure.
FOR
each of the nominees
Proposal 2. Advisory Approval of Executive Compensation.
The Board believes that Cigna’s executive compensation program design effectively aligns the interests of our executive officers with those directors continuingof our shareholders by tying a significant portion of their compensation to Cigna’s performance and rewarding our executive officers for the creation of long-term value for Cigna’s shareholders. Because your vote is advisory, it will not be binding upon the Board. However, the Board and People Resources Committee value your opinion and will review and consider the voting results when making future executive compensation decisions.
Proposal 3. Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2018.
The Audit Committee approved the appointment of PricewaterhouseCoopers LLP as Cigna’s independent registered public accounting firm for 2018. The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm is in office.the best interests of the Company and its shareholders. As a matter of good corporate governance, the Board is seeking shareholder ratification of the appointment.
Proposal 4. Approval of an Amendment to the Company’s Restated Certificate of Incorporation to Eliminate the Supermajority Voting Requirement.
The Board recognizes that the elimination of the supermajority vote required to amend Section 2 of Article III of the Company’sBy-Laws, which relates to the number, qualifications, election and term of office of the Board of Directors, aligns with best practices in corporate governance.
2018 Annual Meeting of Shareholders
Wednesday, April 25, 2018
8:00 a.m.
Delamar Hotel, Ballroom
1 Memorial Drive
West Hartford, Connecticut 06107
6 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Election of Directors (Proposal 1)
Beginning with this Annual Meeting, the entire Board of Directors is elected annually by Cigna’s shareholders. Based on input from shareholders, we began the phased implementation of the Board’s declassified structure at the 2016 annual meeting. The classified structure is now fully eliminated. At this Annual Meeting, the Board is nominating the ten directors named in this Proxy Statement forone-year terms to expire at the next annual meeting of shareholders. The role of the Board, its leadership structure and governance practices are described in “Corporate Governance Policies and Practices.” This section describes the process for director elections and director nominations, identifies the director expectations and qualifications considered by the Board and the Corporate Governance Committee in selecting and nominating directors, discusses our board refreshment activities and presents the biographies, skills and qualifications of the director nominees.
PROCESS FOR DIRECTOR ELECTIONS
Cigna has adopted a majority voting standard for the election of directors in uncontested elections. Under this standard, each director must receive a majority of the votes cast for him or her. This means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee for the director to be elected. Each director has agreed to tender, and not withdraw, his or her resignation if he or she does not receive a majority of the votes cast at the Annual Meeting. The Corporate Governance Committee will make a recommendation to the Board on whether to accept the resignation. The Board has discretion to accept or reject the resignation. A director whose resignation is under consideration will not participate in the decisions of the Corporate Governance Committee or the Board concerning his or her resignation. In a contested election, where the number of director nominees exceeds the number of directors to be elected, toone-year terms and the classified structure will be fully eliminated.
Cigna has adopted a majority voting standard for the election of directors in uncontested elections. Under this standard, each director must receive a majority of the votes cast with respect to that director. This means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee for the director to be elected. Each director has agreed to tender, and not withdraw, his or her resignation if he or she does not receive a majority of the votes cast at the Annual Meeting. The Corporate Governance Committee will make a recommendation to the Board on whether to accept the resignation. The Board has discretion to accept or reject the resignation. A director whose resignation is under consideration will not participate in the decisions of the Corporate Governance Committee or the Board concerning his or her resignation. In contested elections, the voting standard is a plurality of votes cast.
PROCESS FOR SELECTING AND NOMINATING DIRECTORS
Director Selection and Nomination Process
The Corporate Governance Committee assesses the Board’s composition as part of the annual self-evaluation
of the Board (described on page 18)in “Corporate Governance Policies and Practices — Board Evaluations and Board Effectiveness”). When considering whether to nominate current directors forre-election, the Corporate Governance Committee and the Board review the Board’s annual self-evaluation and the individual director’s performance against the expectations for Board membership (identified below under Director“Director Expectations and Qualifications)Qualifications”). The Board considers its composition as part of its annual evaluation. The Board may nominate for election, and appoint to fill vacant or new Board positions, only those persons who agree to adhere to the Company’s majority voting standard (described above under Process for Director Elections)above).
From time to time, the Corporate Governance Committee retains a third-party search firm to assist in identifying and evaluating candidates for Board membership. In 2017, the Corporate Governance Committee retained an outside firm to assist the Committee and the Board with its board refreshment plan, as further described on page 9. The Corporate Governance Committee also considers suggestions for Board nominees submitted by shareholders, which are evaluated using the same criteria as new director candidates and current director nominees.
Once a potential candidate has been identified, the Corporate Governance Committee reviews the background of the new director candidate and presents him or her to the Board for consideration. When considering director candidates and the current and future composition of the Board, the Corporate Governance Committee and the Board consider how each candidate’s background, experiences, skills and/or prior board and committee service will contribute to the diversity of the Board. In addition, the Corporate Governance Committee and the Board consider the Company’s business strategy and how each director candidate’s background complements that strategy. Candidates interview with the Chief Executive Officer, the Chair of the Corporate Governance Committee and the Chairman of the Board, as well as other members of the Board, as appropriate.
Shareholders that want to nominate directors for inclusion in our proxy statement or directly at an annual meeting in accordance with ourBy-Laws should follow the instructions described in “Annual Meeting Information.”
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CORPORATE GOVERNANCE MATTERS
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Director Expectations and Qualifications
The Corporate Governance Committee, in consultation with the Board, has identified individual director expectations and qualifications, characteristics, skills and experience that it believes every member of the Board should have. In addition, the Corporate Governance Committee has identified areas of expertise that it believes support Cigna’s business strategy in the short- and long-term, enable the Board to exercise its oversight function and contribute to a well-rounded Board. These expectations and qualifications, as well as the identified areas of expertise, are considered and reviewed as part of the Board’s annual evaluation and as part of each individual Director’s evaluation. In developing these areas of expertise, the Board also considered the skills necessary to support the business strategy and the skills and experiences reflected on the boards of companies within Cigna’s peer group, as well as best practices among other large companies. The Board regularly reviews the identified areas to ensure they support changes in the Company’s strategy and the Board’s needs. The Corporate Governance Committee and the Board take into consideration these criteria and the mix of skills and experience as part of the director recruitment, selection, evaluation and nomination process.
Expectations of Every Director
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• Understand Cigna’s businesses and the importance of the creation of shareholder value
• Participate in an active, constructive and objective way at Board and committee meetings
• Review and understand advance briefing materials
• Contribute effectively to the Board’s evaluation of executive talent, compensation and succession | • Contribute effectively to the Board’s assessment of strategy and risk
• Share expertise, experience, knowledge and insights on matters before the Board
• Advance Cigna’s business objectives and reputation
• Demonstrate an ongoing commitment to consult and engage with the CEO and senior management outside of Board and committee meetings on matters | |||||||||
Qualifications, Characteristics, Skills and Experience of Every Director
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• Good judgment and strong commitment to ethics and integrity
• Ability to analyze complex business and public policy issues and provide relevant input concerning the Company’s business strategy
• Free | • Ability to assess different risks and impact on shareholder value
• Contribution to the Board’s overall diversity of thought
• High degree of achievement in their respective fields | |||||||||
While the Board does not have a formal policy with regard to diversity, the Board remains committed to diversity and the Corporate Governance Committee works to ensure that the Board is comprised of individuals with expertise in fields relevant to Cigna’s business, experience from different professions and industries, a diversity of age, ethnicity, gender and global experience and a range of tenures. The Board believes that a range of tenure allows both new perspective and continuity. This continuity has proven beneficial given the complexities of, the health care industry and the significant change and uncertainty in, the health care industry has faced over the past several years.
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The above tables show the diversity of our independent board members.
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CORPORATE GOVERNANCE MATTERS
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AREAS OF EXPERTISE REFLECTED ON CIGNA’S BOARD OF DIRECTORS Business Leader Directors who have served as a chief executive officer, aCEO-equivalent or a business unit leader of a large company bring a practical understanding of large organizations, processes, strategy and risk management. Finance An understanding of finance, capital markets and financial reporting processes is necessary for a well-rounded Board because of the importance we place on accurate financial reporting and robust financial controls and compliance. In addition, Cigna’s business involves complex financial transactions. Healthcare and Delivery Systems As we work to create a sustainable health care ecosystem, the Board values directors with experience on issues related to improving access to care and reducing health costs to patients through the provision of care management and the use of innovative delivery system solutions. Information Technology Effective information systems and the integrity and timeliness of data we use to serve our customers and health care professionals are integral to the operation of our business. For this reason, the Board benefits from directors with leadership experience related to the development, installation, implementation, security or maintenance of computer systems, applications and digital informatics. International/Global The Board values directors with leadership experience overseeingnon-U.S. operations and working in diverse cultures around the globe. Marketing and Consumer Insights Our customer-focused strategy benefits from inclusion of directors with leadership experience in marketing, advertising and consumer insight functions. These directors also have experience with product development and brand building, particularly as it focuses onend-user consumers. Regulated Industry/Public Policy Our business is highly regulated at the federal, state, local and international levels. For this reason, the Board benefits from directors with experience in regulated industries and public policy to help us identify, assess and respond to new trends in the legislative and regulatory environment. Board Refreshment and Succession Planning The Corporate Governance Committee is responsible for identifying new director candidates, reviewing the composition of the Board and its committees and for making recommendations to the full Board on these matters. On an ongoing basis, the Corporate Governance Committee engages in Board succession planning, taking into account input from Board discussions and from the Board and committee evaluation process regarding the specific backgrounds, skills and experience that would contribute to overall Board and committee effectiveness. In 2017, the Corporate Governance Committee began a long-term board refreshment plan. The Corporate Governance Guidelines require that directors retire no later than the annual meeting of shareholders coinciding with or following his or her 72nd birthday. As a result, within the next five years, five directors are expected to retire from the Board. To assist with board refreshment planning, the Corporate Governance Committee engaged Russell Reynolds Associates, Inc. to provide advisory services related to board succession planning and to assist with the recruitment of director candidates. The plan includes a needs assessment and an interview with each director to understand his or her perspective on Cigna’s strategy, the culture of the Board and the Board’s relationship with management, and to seek the Board’s views on the skills that may be relevant in the coming years and in light of upcoming retirements. The Corporate Governance Committee is focused on identifying candidates that possess skills and qualifications that will support the Company’s short- and long-term strategy, while being mindful of the skills that the retiring directors bring to the Board and the ongoing significant complexity and uncertainty within the health care industry. The goal of the refreshment plan is to balance the knowledge that results from long-term service on the Board with the new skills and experience that results from adding new directors to the Board, at a pace that allows the Board to maintain its high-performing and diverse culture.
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Other Practices and Policies Related to Director Service
In addition to working to ensure that the Board is comprised of diverse and qualified individuals, the Board has adopted the following governance policies and practices that contribute to a well-functioning Board.
Limits on Public Company Directorships | To ensure each director is able to devote sufficient time and attention to his or her responsibilities as a board member, the Board has established the following limits on outside directorships:
• Each director who also is a chief executive officer of a public company may not serve on more than one other public company board in addition to Cigna’s Board and the board of his or her employer (for a total of three public company directorships); and
• Each director who is not a chief executive officer of a public company may serve on no more than four boards of other public companies (for a total of five such directorships).
All of our directors are in compliance with these limits on outside directorships. | |
Change in Director’s Principal Position | If a director changes his or her principal employment position, that director is required to tender his or her resignation from the Board to the Corporate Governance Committee. The Committee will then recommend to the Board whether to accept or decline the resignation. | |
Mandatory Retirement Age | A director is required to retire no later than the annual meeting of shareholders coinciding with or following his or her 72nd birthday. | |
Continuing Education for Directors | The Board is regularly updated on Cigna’s businesses, strategies, customers, operations and employee matters, as well as external trends and issues that affect the Company. Directors also are encouraged to attend continuing education courses relevant to their service on Cigna’s |
Upon the recommendation of the Corporate Governance Committee, the Board is nominating the seventen directors listed below forre-election fortoone-year terms to expire in April 2018.at the next annual meeting of shareholders. All nominees have consented to serve, and the Board does not know of any reason why any nominee would be unable to serve. If a nominee becomes unavailable or unable to serve before the Annual Meeting, the Board may either reduce its size or designate another nominee. If the Board designates a nominee, your proxy will be voted for the substitute nominee.
Below are biographies, skills and qualifications for each of the nominees and for each of the directors continuing in office.nominees. Each of the director nominees currently serves on the Board. The Board believes that the combination of the various experiences, skills and qualifications represented contributes to an effective and well-functioning Board and that the nominees and directors continuing in office possess the qualifications, based on the criteria described above, to provide meaningful oversight of Cigna’s business and strategy.
The Board of Directors unanimously recommends that shareholders vote FOR the nominees listed below. | ||||||||
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CORPORATE GOVERNANCE MATTERS
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  | DAVID M. CORDANI President, Chief Executive Officer
AGE:
DIRECTOR SINCE: 2009
COMMITTEES: Executive |
Mr. Cordani has served as Cigna’s Chief Executive Officer since December 2009 and as President since June 2008. He served as Chief Operating Officer from June 2008 until December 2009; President, Cigna HealthCare from 2005 until 2008; and Senior Vice President, Customer Segments & Marketing, Cigna HealthCare from 2004 until 2005. He has been employed by Cigna since 1991. He is a member of the Business Roundtable and serves on the U.S.-India Business Council Board of Directors. In 2017, he was also named Chairman of the U.S. Chamber of Commerce’s U.S.-Korea Business Council. In 2016, Mr. Cordani received the Leadership in the Nation’s Interest award from the Committee for Economic Development, a nonprofit, nonpartisan,business-led public policy organization. Mr. Cordani was named one of Fortune Magazine’s Top Business Persons of the Year in 2015. Mr. Cordani received his Bachelor of Business Administration from Texas A&M University and his MBA from the University of Hartford. His current term as a Director of Cigna expires in 2017.
Other Public Company Directorships:
General Mills, Inc. (2014-Present)
Business Leader.Mr. Cordani has extensive executive leadership and management experience, including through his current role as President and Chief Executive Officer of Cigna. Mr. Cordani has spearheaded Cigna’s transformation into a leading global health service company, more than doubling the size of the business since 2009. His prior role as Chief Operating Officer also encompassed broad responsibility for Cigna’s global business and corporate functions.
Finance.Mr. Cordani served as Business Financial Officer for Cigna’s healthcare division and in senior roles in corporate accounting and planning. He was formerly a CPA with public accounting experience at Coopers & Lybrand.
Healthcare and Delivery Systems.Mr. Cordani isCordani’s long tenure with Cigna, as President and Chief Executive Officer of Cigna Corporation, a global health service company and previously served as President of the Cigna HealthCare business segment. His long tenure with Cignasegment provides Mr. Cordanihim with unique perspective of the evolution of the healthcare service sector and the innovation of health delivery models.
Information Technology.Mr. Cordani manages Cigna’s information technology investments in support of business and strategic objectives.
Marketing and Consumer Insights. As Chief Executive Officer, he leads the development and execution of Cigna’sGo Deep, Go Global, Go Individualstrategy to deliver value in more than 9495 million customer relationships around the world.
Regulated Industry/Public Policy. Mr. Cordani is actively engaged in public policy related to the highly regulated healthcare industry and other global business markets.
  | ERIC J. FOSS Chairman, President and Chief
AGE:
DIRECTOR SINCE: 2011
COMMITTEES: Corporate |
Mr. Foss has been Chairman of the Board of ARAMARK Corporation, a publicly traded provider of food services, facilities management and uniform services, since February 2015, and President and Chief Executive Officer since May 2012. He served as Chief Executive Officer of Pepsi Beverages Company, a beverage manufacturer, seller and distributor and a division of PepsiCo, Inc., from 2010 until December 2011. He was the Chairman and Chief Executive Officer of The Pepsi Bottling Group, Inc. from 2008 until 2010; President and Chief Executive Officer from 2006 until 2008; and Chief Operating Officer from 2005 until 2006. Mr. Foss received his Bachelor of Science degree from Ball State University. His current term as a Director of Cigna expires in 2017.
Other Public Company Directorships:
ARAMARK Corporation (2012-Present)
, UDR, Inc. (2003-2015)
, The Pepsi Bottling Company(2006-2010)
Business Leader.Mr. Foss has extensive leadership experience through his roles as Chairman, President and CEO of ARAMARK Corporation, combined with his30-year career at Pepsi Beverages Company and The Pepsi Bottling Group, including his role as Chairman and CEO.
Finance.As Chairman, President and CEO of ARAMARK and as CEO of Pepsi Beverages Company and The Pepsi Bottling Group, his experience includes oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. He led ARAMARK’s initial public offering in 2013 and was instrumental in The Pepsi Bottling Group’s initial public offering and oversaw its acquisition by PepsiCo.
International/Global.Mr. Foss’ responsibilities at ARAMARK, Pepsi Beverages Company and The Pepsi Bottling Group included international business leadership, managing the challenges of operating a global business and strategic planning. At ARAMARK, he has oversight of operations in 20 countries, and throughout his tenure at Pepsi Beverage Company and The Pepsi Bottling Group, had responsibilities for global operations including international assignments.
Marketing and Consumer Insights.Mr. Foss’ service as CEO of Pepsi Beverages Company and The Pepsi Bottling Group provided him experience as an executive officer of a consumer oriented company.
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  | ISAIAH HARRIS, JR. Former President and Chief
AGE:
DIRECTOR SINCE: 2005
COMMITTEES: Executive (Chair) |
Mr. Harris has served as Cigna’s Chairman of the Board since December 2009 and served as Vice-Chairman of the Board from July 2009 through December 2009. Mr. Harris served as President and Chief Executive Officer of AT&T Advertising & Publishing — East (formerly BellSouth Advertising & Publishing Group), a communications services company, from 2005 until his retirement in 2007; as President, BellSouth Enterprises, Inc. from 2004 until 2005 and as President, Consumer Services, BellSouth Corporation from 2000 until 2004. Mr. Harris has served as an Independent Trustee of Wells Fargo Advantage Funds, a provider of mutual funds, since 2008. Mr. Harris was nominated as NYSE 2014 Chairman of the Year. Mr. Harris received his Bachelor of Science degree from Iowa State University and his MBA from the University of Minnesota. His current term as a Director of Cigna expires in 2017.
Other Public Company Directorships:
Deluxe Corporation (2004-2011)
Business Leader. In his executive business leadership roles, including as CEO of AT&T Advertising and Publishing, Mr. Harris managed large organizations, developed and executed business strategies and led transformational change initiatives in both domestic and international operations.
Finance.Mr. Harris’ extensive finance experience includes 19 years of corporate finance and operational experience in multi-national organizations, including as Vice President of Finance, BellSouth Corporation, preceded by 13 years as a CPA with KPMG LLP. Through service on the board of directors of Deluxe Corporation, a provider of customized products and services including financial services and direct checks, and as a trustee of Wells Fargo Advantage Funds, he has insight into financial services-related issues.
Marketing and Consumer Insights.Throughout his career with AT&T Advertising & Publishing, and particularly asAs President, Consumer Services, BellSouth Corporation, (2000 to 2004), Mr. Harris focused on marketing communication services toend-user consumers.
Regulated Industry/Public Policy.Throughout his career at AT&T Advertising & Publishing, Mr. Harris navigated a heavily regulated and dynamic legal environment.
  | JANE E. HENNEY, M.D. Former Senior Vice President,
AGE:
DIRECTOR SINCE: 2004
COMMITTEES: Corporate |
Dr. Henney was appointed to the position of Home Secretary of the National Academy of Medicine, a division of The National Academies of Sciences designed to advise the nation on health issues, in April 2014. Dr. Henney served as a Professor of Medicine at the University of Cincinnati College of Medicine, an educational institution, from 2008 until 2012. She served as Senior Vice President and Provost, Health Affairs at the University of Cincinnati Academic Health Center from 2003 until 2008. Appointed by President Bill Clinton, Dr. Henney served as the first female U.S. Commissioner of Food and Drugs from 1998 to 2001. She has served as Lead Independent Director of AmerisourceBergen Corporation, a publicly tradedbio-pharmaceutical company, since March 2016. Dr. Henney has also served on the China Medical Board since 2004. She received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2012” member. Dr. Henney is also an NACD Board Leadership Fellow. Dr. Henney received her Bachelor of Science degree from Manchester College and her Doctor of Medicine from Indiana University. Her current term as a Director of Cigna expires in 2017.
Other Public Company Directorships:
AmerisourceBergen Corporation (2002-Present)
and Lead Independent Director (2016-Present), Cubist Pharmaceuticals, Inc. (2012-2015)
, AstraZeneca PLC (2001-2011)
Healthcare and Delivery Systems.Dr. Henney’s positions as Medical Doctor, Home Secretary of the National Academy of Medicine, Commissioner of Food and Drugs, and Executive of Academic Health Center provide her with direct experience regarding emerging health care issues and complex health delivery systems.
Regulated Industry/Public Policy. As former Commissioner of Food and Drugs and Home Secretary of the National Academy of Medicine, Dr. Henney has extensive insight into the highly regulated health industry in the U.S. and abroad.
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CORPORATE GOVERNANCE MATTERS
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  | ROMAN MARTINEZ IV Private Investor
AGE:
DIRECTOR SINCE: 2005
COMMITTEES: Audit (Chair), |
Mr. Martinez has been a private investor since 2003. In 2003, he retired as Managing Director of Lehman Brothers, an investment banking firm, following a31-year career with the firm. He has served on the Board of Trustees of New York Presbyterian Hospital since 1996. Mr. Martinez received his Bachelor of Science degree from Boston College and his MBA from the Wharton School of the University of Pennsylvania. His current term as a Director of Cigna expires in 2017.
Other Public Company Directorships:
Orbital ATK, Inc. (2015-Present)
, Alliant Techsystems, Inc.(2004-2015)
Finance.Mr. Martinez has over ten years of experience as a private investor and serves on the Investment Committees of severalnon-profit organizations. He previously served on the Investment Advisory Council of the State of Florida, which provides independent oversight of the Florida Retirement System funds and other state funds, which aggregated in excess of $150 billion. He has extensive experience in investment banking through his31-year tenure with Lehman Brothers where he was involved in a broad spectrum of U.S. and international investment banking activities covering financing, mergers and acquisitions and restructuring advisory assignments as well as financing transactions for governments and corporations.
Healthcare and Delivery Systems.Through his over 1520 years serving on the Board of Trustees of New York Presbyterian Hospital, Mr. Martinez developed insights into the issues facing health care systems in a rapidly changing environment, including the provision of care management and delivery systems.
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Ms. Zarcone has been the President and Chief Executive Officer of The Economic Club of Chicago, a civic and business leadership organization, since February 2012. She served as Interim President of The Economic Club of Chicago from October 2011 until February 2012 and as President and Chief Executive Officer of D. F. Zarcone & Associates LLC, a strategic advisory firm, from 2007 until February 2012. Ms. Zarcone served as the President and Chief Operating Officer of Harley-Davidson Financial Services, Inc., a provider of wholesale and retail financing, insurance and credit card programs and a wholly owned subsidiary of Harley-Davidson, Inc., from 1998 until 2006. She also served as Chairman of the Board of Eaglemark Savings Bank, a financial services provider, from 2002 to 2006. She received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2012” member. Ms. Zarcone is also an NACD Board Leadership Fellow. Ms. Zarcone received her Bachelor of Science degree from Illinois State University and her MBA from the University of Chicago Graduate School of Business. Her current term as a Director expires in 2017.
Other Public Company Directorships:
CDW Corporation (2011-Present)
The Jones Group (2007-2012)
Finance.As an executive at Harley-Davidson Financial Services and as the Chairman of the Board of Eaglemark Savings Bank, an FDIC-regulated entity, Ms. Zarcone oversawend-user consumer financial services matters. She is also a certified public accountant. As President and CEO of The Economic Club of Chicago, she monitors social and economic issues facing the U.S. and global markets.
Marketing and Consumer Insights. As President of Harley-Davidson Financial Services, Ms. Zarcone oversaw direct marketing initiatives toend-user consumers for a portfolio of financial products. As head of Enthusiast Services at Harley-Davidson, she oversaw brand loyalty initiatives. As a director of The Jones Group, a designer, marketer and wholesaler of branded clothing, she focused onend-user consumer-related issues.
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Mr. Zollars served from 1999 to 2011 as Chairman, President and Chief Executive Officer of YRC Worldwide, Inc., a holding company whose subsidiaries provide regional, national and international transportation and related services. Prior to that, Mr. Zollars was President of Yellow Transportation, Inc., from September 1996 through November 1999. From 1994 to 1996, he was Senior Vice President of Ryder Integrated Logistics. He also held various executive positions with Eastman Kodak. Mr. Zollars received his Bachelor of Arts degree from the University of Minnesota. His current term as a Director of Cigna expires in 2017.
Other Public Company Directorships:
Cerner Corporation (2005-Present)
ProLogis Trust (2001-2010; 2011-Present)
YRC Worldwide, Inc. (1999-2011)
Business Leader. Mr. Zollars’ role as Chairman, President and Chief Executive Officer of YRC Worldwide and various executive leadership positions with Yellow Transportation, Ryder Integrated Logistics and Eastman Kodak provided him extensive senior leadership experience.
Finance. As Chairman, President and CEO of YRC Worldwide, Mr. Zollars had oversight of financial operations, merger and acquisition activities and corporate restructurings and led YRC’s comprehensive recovery plan to reduce cost structure and improve operating results, cash flow from operations, liquidity and financial condition.
Healthcare and Delivery Systems. As a director of Cerner, a supplier of health care information technology, he focuses on issues facing the healthcare industry, particularly health information technology.
International/Global. As President and CEO of YRC, Mr. Zollars oversaw global operations and strategic planning and, throughout his YRC tenure, undertook international assignments.
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DIRECTORS WHO WILL CONTINUE IN OFFICE
  | JOHN M. PARTRIDGE Former President of Visa, Inc.
AGE:
DIRECTOR SINCE: 2009
COMMITTEES: Finance (Chair), |
Mr. Partridge served as President of Visa, Inc., a publicly traded consumer credit company, from 2009 until 2013 and as Chief Operating Officer from 2007 to 2009. He joined Visa USA in October 1999 and served as President and Chief Executive Officer of Inovant (a Visa subsidiary) from 2000 to 2007 and as Interim President of Visa USA in 2007. From 1998 until joining Visa USA, Mr. Partridge served as Senior Vice President and Chief Information Officer of Unum Provident Corp., a publicly traded disability insurance company. From 1989 to 1998, Mr. Partridge was Executive Vice President for Credicorp Inc., a commercial banking, insurance and investment banking company, where he was responsible for consumer banking, technology and operations. Prior to joining Credicorp Inc., Mr. Partridge held various management positions with Wells Fargo Bank. Since October 2015, Mr. Partridge has served as Chairman and Chief Executive Officer of Velo Payments, a global smart data network for business disbursements, since March 2017 and as an operating partner of Corsair Capital, a private equity firm focused on the financial services industry.industry, since October 2015. Mr. Partridge received his Bachelor of Science degree from the University of California. His current term as a Director of Cigna expires in 2018.
Other Public Company Directorships:
Global Payments, Inc. (2013-Present)
Business Leader.Mr. Partridge has extensive senior leadership experience through his positions with Visa, Inc., Visa USA, Inovant, Unum and Credicorp.
Finance. As President and CEO of Inovant, he had direct oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As President of Visa, he was involved with financial oversight and reporting and strategic transactions. His responsibilities at Credicorp provided significant financial services experience.
Information Technology. Mr. Partridge has experience managing and overseeing information technology investments in support of business objectives which he gained through each of his executive leadership positions, including as Chief Information Officer of Unum and as a director of Global Payments, a provider of electronic transaction processing services. As President of Inovant, he oversaw Visa’s electronic payment processing service.
International/Global. As President of Visa, Mr. Partridge’s responsibilities included international business leadership. He also serves as a director of a large public company with extensive international operations. His responsibilities with Credicorp included international assignments.
Marketing and Consumer Insights. Through his tenure with Visa, Mr. Partridge focused heavily on consumer credit and oversaw marketing, product, client service, support and processing services. As Executive Vice President of Credicorp, his responsibilities included consumer banking.
| Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | 13 |
CORPORATE GOVERNANCE MATTERS |
  | JAMES E. ROGERS Former Chairman, President and
AGE:
DIRECTOR SINCE: 2007
COMMITTEES: Audit, Finance |
Mr. Rogers served as Chairman of Duke Energy Corporation, a publicly traded electric power company, from 2007 until 2013 and as the President and Chief Executive Officer from 2006 until 2013. Since October 2016, Mr. Rogers has served as a senior operating partner of Stonepeak Infrastructure Partners, a private equity firm focused on infrastructure investments. Heco-founded and has served as Chairman of Brightlight Foundation, anon-profit provider of globally accessible and affordable energy solutions, since 2011. He was formerly the Chairman, President and Chief Executive Officer of CINERGY Corp. (which merged with Duke Energy Corporation in 2006) from 1994 until 2006. Mr. Rogers has served as a senior operating partner of Stonepeak Infrastructure Partners, a private equity firm focused on infrastructure investments since October 2016. Heco-founded and has served as Chairman of Brightlight Foundation, anon-profit provider of globally accessible and affordable energy solutions, since 2011. He has served as Chairman and Chief Executive Officer of Intrepid Energy Partners LLC, an advisory business that specializes in energy sector transactions, since 2014. Mr. Rogers received his Bachelor of Business Administration from Emory University and his juris doctor from the University of Kentucky. His current term as a Director of Cigna expires in 2018.
Other Public Company Directorships:
Duke Energy Corporation (2007-2013)
, Applied Materials, Inc. (2008-2015)
, CINERGY Corp. (2000-2005)
(1994-2005), Fifth Third Bancorp (1995-2009)
Business Leader. Mr. Rogers has extensive senior leadership experience through his positions with Duke Energy and in the utility industry for 25 years. Over the course of his career, he served on the boards of eight Fortune 500 companies.
Finance. As President and CEO of Duke Energy, he had oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As a director of Fifth Third Bancorp, a regional banking corporation, Mr. Rogers developed expertise ina deeper understanding of several facets of commercial and consumer financial services.
Regulated Industry/Public Policy. Throughout his career at Duke Energy and CINERGY, Mr. Rogers operated in a heavily regulated environment and oversaw and implemented strategic policy initiatives. Before his corporate career, he served as the Deputy General Counsel for the Federal Energy Regulatory Commission and as a partner in the law firm of Akin Gump Strauss Hauer & Feld in Washington, D.C.
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  | ERIC C. WISEMAN Former Executive Chairman,
AGE:
DIRECTOR SINCE: 2007
COMMITTEES: Finance, People |
Mr. Wiseman has served as Executive Chairman of VF Corporation, a publicly traded apparel and footwear company, sincefrom August 2008 and has served on its board since 2006.until October 2017. He served as Chief Executive Officer from January 2008 until December 2016 and President from 2006 until June 2015. He served as Chief Operating Officer of VF Corporation from 2006 to 2008; Executive Vice President, Global Brands from 2005 to 2006; and Vice President and Chairman, Sportswear and Outdoor Coalitions from 2004 until 2005; and Vice President and Chairman, Global Intimates and Sportswear Coalition from 2003 until 2004.2005. Mr. Wiseman received his Bachelor of Science degree and MBA from Wake Forest University. His current term as a Director of Cigna expires in 2018.
Other Public Company Directorships:
VF Corporation (2006-Present)
(2006-2017), Lowe’s Companies, Inc. (2011-Present)
Business Leader. Mr. Wiseman has extensive senior leadership experience through his positions with VF Corporation.
Finance.As Chairman and CEO of VF Corporation, he has had oversight of financial operations, merger and acquisition activities and corporate restructurings.
International/Global. Through leadership positions at VF Corporation, Mr. Wiseman oversaw operations and product sales in over 150 countries. Prior to joining VF Corporation, he held executive leadership roles at Sara Lee Corporation that included international business leadership and international assignments.
Marketing and Consumer Insights.Through leadership roles at VF Corporation, Mr. Wiseman oversaw marketing of a variety of brands through all channels of distribution, both domestically and internationally. As a director of Lowe’s, a retail home improvement and appliances company, he focuses onend-user consumer-related issues.
14 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
CORPORATE GOVERNANCE MATTERS |
 | DONNA F. ZARCONE President and Chief Executive Officer of The Economic Club of Chicago AGE: 60 DIRECTOR SINCE: 2005 COMMITTEES: Audit, Corporate Governance |
Ms. Zarcone has been the President and Chief Executive Officer of The Economic Club of Chicago, a civic and business leadership organization, since February 2012. She served as Interim President of The Economic Club of Chicago from October 2011 until February 2012 and as President and Chief Executive Officer of D. F. Zarcone & Associates LLC, a strategic advisory firm, from 2007 until February 2012. Ms. Zarcone served as the President and Chief Operating Officer of Harley-Davidson Financial Services, Inc., a provider of wholesale and retail financing, insurance and credit card programs and a wholly owned subsidiary of Harley-Davidson, Inc., from 1998 until 2006. She also served as Chairman of the Board of Eaglemark Savings Bank, a financial services provider, from 2002 to 2006. She received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2012” member. Ms. Zarcone is also an NACD Board Leadership Fellow. Ms. Zarcone received her Bachelor of Science degree from Illinois State University and her MBA from the University of Chicago Booth School of Business.
Other Public Company Directorships: CDW Corporation (2011-Present), The Jones Group (2007-2012)
Finance.As an executive at Harley-Davidson Financial Services and as the Chairman of the Board of Eaglemark Savings Bank, an FDIC-regulated entity, Ms. Zarcone oversawend-user consumer financial services matters. She is also a certified public accountant. As President and CEO of The Economic Club of Chicago, she monitors social and economic issues facing the U.S. and global markets.
Information Technology. As a director of CDW, a leading provider of integrated information technology solutions, Ms. Zarcone oversees issues facing the information technology industry.
Marketing and Consumer Insights. As President of Harley-Davidson Financial Services, Ms. Zarcone oversaw direct marketing initiatives toend-user consumers for a portfolio of financial products. As head of Enthusiast Services at Harley-Davidson, she oversaw brand loyalty initiatives. As a director of The Jones Group, a designer, marketer and wholesaler of branded clothing, she gained further insight intoend-user consumer-related issues.
 | WILLIAM D. ZOLLARS Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc. AGE: 70 DIRECTOR SINCE: 2005 COMMITTEES: People Resources (Chair), Executive, Corporate Governance |
Mr. Zollars served from 1999 to 2011 as Chairman, President and Chief Executive Officer of YRC Worldwide, Inc., a holding company whose subsidiaries provide regional, national and international transportation and related services. Prior to that, Mr. Zollars was President of Yellow Transportation, Inc., from September 1996 through November 1999. From 1994 to 1996, he was Senior Vice President of Ryder Integrated Logistics. He also held various executive positions with Eastman Kodak. Mr. Zollars received his Bachelor of Arts degree from the University of Minnesota.
Other Public Company Directorships: Cerner Corporation (2005-Present), ProLogis Trust (2001-2010; 2011-Present), YRC Worldwide, Inc. (1999-2011)
Business Leader. Mr. Zollars’ role as Chairman, President and Chief Executive Officer of YRC Worldwide and various executive leadership positions with Yellow Transportation, Ryder Integrated Logistics and Eastman Kodak provided him extensive senior leadership experience.
Finance. As Chairman, President and CEO of YRC Worldwide, Mr. Zollars had oversight of financial operations, merger and acquisition activities and corporate restructurings and led YRC’s comprehensive recovery plan to reduce cost structure and improve operating results, cash flow from operations, liquidity and financial condition.
Healthcare and Delivery Systems. As a director of Cerner, a supplier of health care information technology, he oversees issues facing the healthcare industry, particularly health information technology.
International/Global. As President and CEO of YRC, Mr. Zollars oversaw global operations and strategic planning, and he undertook international assignments at Kodak.
| Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | 15 |
CORPORATE GOVERNANCE MATTERS |
Corporate Governance Policies and Practices
Cigna is committed to ensuring strong corporate governance practices on behalf of our shareholders. We believe that strong corporate governance and an independent Board provide the foundation for financial integrity and shareholder confidence and attractive performance.confidence. The Corporate Governance Committee annually reviews Cigna’s governance program based on, among other things, developments in corporate governance, feedback received during shareholder engagement, legal or regulatory actions, proxy advisory firm positions, Securities and Exchange Commission (SEC) guidance and New York Stock Exchange (NYSE) requirements. In 2015, theThe Board and the Corporate Governance Committee conducted a thorough review of its governance practices and developed a set ofthe Board Corporate Governance Guidelines (the Guidelines). The Guidelines which set forth the key governance principles that guide the Board. The Guidelines, together with the charters of the Audit, Corporate Governance, Finance, People Resources and Executive Committees, provide a framework of policies and practices for our effective governance.
The Board and the Corporate Governance Committee review the Guidelines, and the committees review their respective charters, at least annually and update these governing documents as necessary to reflect changes in the regulatory environment, evolving practices and input from shareholders. The full text of the Guidelines and committee charters are available on our website atwww.cigna.com/about-us/corporate-governance/ and are available to any shareholder who requests a copy.1(1)
Corporate Governance Highlights
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• Independent board of directors with diversity in composition, skills and experience
• Independent Chairman of the Board
• Regular executive sessions of the Board and its committees without management present
• Director elections by majority voting
• Annual election of all directors
• Proxy access right for shareholders | • Separate Code of Business Conduct and Ethics for the Board | • Independent Audit, Corporate Governance, Finance and People Resources Committees
• Annual self-evaluations of the Board, its committees and individual directors, including periodic independent third party assessments
• Majority of director compensation delivered in Cigna common stock
• Meaningful stock ownership guidelines for directors | ||||||||||
At our 2017 Annual Meeting, shareholders voted on anon-binding shareholder proposal regarding shareholder proxy access. As we described in our 2017 proxy statement, the Cigna Board was not opposed to proxy access, but at that time, due to the merger agreement with Anthem, Inc. (Anthem), we were restricted in our ability to amend our bylaws or propose or commit to any bylaw amendment. The Board strongly believed that any proxy access framework should be thoughtfully and carefully considered. The Board committed to conducting a full evaluation of proxy access in 2017, with a goal of implementing a proxy access bylaw amendment on terms that reflected input from our shareholders and that the Board believed were in Cigna’s shareholders’ best interests in advance of the 2018 Annual Meeting.
In advance of the 2017 Annual Meeting, at the direction of the Board, Cigna’s Office of the Corporate Secretary reached out to discuss the shareholder proposal with our 50 largest shareholders (representing approximately 65%
of outstanding shares) and engaged with holders of approximately 40% of shares outstanding. During this engagement, shareholders provided feedback on their views of the shareholder proposal and proxy access generally. At the 2017 Annual Meeting, just over 50% of the votes cast supported the proxy access shareholder proposal.
Following the 2017 Annual Meeting and after the Company was no longer subject to the restrictions of the merger agreement with Anthem, the Board resumed its evaluation of proxy access. As part of this review, the Corporate Governance Committee evaluated and considered the terms of the bylaw proposed by the shareholder proponent as compared to current market practice, other bylaw features not specified by the shareholder proponent that are necessary to provide for a balanced and effective proxy access framework, the views of proxy advisory firms and the input of Cigna’s shareholders received in connection with Cigna’s outreach efforts. In the fall of 2017, at the direction of the Board, the Office of the Corporate Secretary engaged again with our largest shareholders to
1(1) Throughout this Proxy Statement, we reference information available on our website. The information on our website is not, and shall not be deemed to be, part of this Proxy Statement or incorporated herein or into any of our other filings with the SEC.
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further discuss proxy access and potential terms for a proxy access bylaw, as well as other areas of interest, such as board refreshment and corporate responsibility. The Office of the Corporate Secretary reached out to our top 20 shareholders (representing approximately 50% of outstanding shares) as well as the shareholders we had engaged with in the spring of 2017 that had requested further discussions in connection with the Board’s consideration of the implementation of a proxy access bylaw. Holders of approximately 33% of shares outstanding engaged with the Office of the Corporate Secretary as part of this shareholder outreach effort.
Shareholders indicated their support for a proposed proxy access bylaw incorporating a 3% ownership requirement, a three-year holding requirement, a cap of 20 shareholders that may form a group to meet the ownership requirement, and a right to nominate directors in an amount equal to the greater of two or 20% of the Board — terms that are consistent with current market practice. Several of the shareholders that had voted for the shareholder proposal at the 2017 Annual Meeting indicated that their vote was not intended as a vote on the specific terms proposed, but rather a vote in favor of the Company’s adoption of proxy access generally. Many shareholders also provided input regarding other terms of proxy access.
The Corporate Governance Committee discussed and carefully considered all feedback when constructing the proxy access bylaw and, following this review, the Corporate Governance Committee recommended and the Board approved amendments to ourBy-Laws to implement proxy access in December 2017. As a result, a shareholder or a group of up to 20 shareholders owning 3% or more of Cigna’s outstanding common stock continuously for at least three years may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of 20% of the Board or two individuals, provided the shareholder(s) and the nominee(s) satisfy the requirements specified in theBy-Laws. The Board believes that this proxy access bylaw framework provides meaningful proxy access rights, reflects generally accepted governance practices around proxy access and is consistent with the overall feedback received as part of our shareholder engagement.
Cigna believes in the importance of a board comprised largely of independent,non-employee directors. The current Board includes ninenon-employee directors. On an annual basis, the Board, through its Corporate Governance Committee, reviews relevant relationships between directors, their immediate family members and the Company, consistent with Cigna’s independence standards. Cigna’s independence standards, which are detailed in the Guidelines, are consistent with the independence requirements set forth in the NYSE’s listing standards.
To be independent under Cigna and NYSE standards, the Board must affirmatively determine that a director has no material relationships with the Company directly or as an officer, shareholder or partner of an organization that has a relationship with the Company. In making its assessment, the Board considers all relevant facts and circumstances, including the nature of transactions with such organizations and/or the amount of such transactions (in aggregate or as a percentage of the organization’s revenues or assets). The Board also considers that, in the ordinary course of its business, the Company may sell products and services to, and/or purchase products and services from, organizations affiliated with our directors and may hold investments (generally, debt securities) in organizations affiliated with our directors.
Based on its review of director relationships, the Board has affirmatively determined that there are no material relationships between thenon-employee directors and the Company and allnon-employee directors (Dr. Henney, Ms. Zarcone and Messrs. Foss, Harris, Martinez, Partridge, Rogers, Wiseman and Zollars, as well as former director Ms. Gass)Zollars) are independent as defined in both Cigna’s Guidelines and the NYSE listing standards. In addition, at the committee level, all committee members of the Audit, Corporate Governance, Finance and People Resources Committees are independent and the members of the Audit Committee and the People Resources Committee meet the NYSE’s heightened independence requirements for service on those committees.
The Board is committed to the long-term growth of the business and the successful execution of our mission to improve the health, well-being and sense of security of the people Cigna serves around the globe. To fulfill its responsibilities to our shareholders, Cigna’s Board, both directly and through its committees, regularly engages with management, ensures management accountability and reviews the most critical issues that face Cigna. The Board is committed to meeting the dynamic needs of the Company and focusing on the interests of its shareholders and, as a result, regularly evaluates and adapts its composition, role and relationship with management.
Independent Chairman of the Board
We currently separate the roles of the Chairman of the Board and CEO. Our CEO sets the strategic direction for the Company, working with the Board, and providesday-to-day leadership, while our Chairman leads the Board in the performance of its duties and serves as the principal liaison between the independent directors and the CEO. We believe that having an independent Chairman assists the Board in ensuring independent oversight of the Company and the management team. The Board regularly assesses the appropriateness of this leadership structure and has concluded that this structure best suits Cigna’s needs at this time.
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In February 2015,2018, the Boardre-elected Isaiah Harris, Jr. to serve as our independent Chairman. The Board elects the Chairman to a three-year term, expiring at the annual meeting occurring at the end of the third year. Mr. Harris’ current term as Chairman will expire in April 2018.2021, subject to his annual election to the Board by shareholders. The full Board evaluates the Chairman’s performance on an annual basis as part of the annual Board evaluation.
Chairman Responsibilities
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• Serve as principal representative of the Board
• Facilitate discussion among independent directors on key issues
• Advise the CEO on issues of concern for the Board
• Develop agenda for Board meetings, in consultation with the CEO and other directors | • Act as liaison between Board and management
• Lead the Board in CEO succession planning
• Preside over Board and shareholder meetings • Engage in the director recruitment process
• Represent the Company in interactions with external stakeholders, | |||||||||
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Access to Management and Advisors
A member of senior management is assigned to each committee to act as a staff officer. The Chief Financial Officer supportsserves as the staff officer for the Audit and Finance Committees; the General Counsel supportsserves as the staff officer for the Corporate Governance Committee; and the Executive Vice President –— Human Resources and Services supportsserves as the staff officer for the People Resources Committee. These executive officers attend committee and Board meetings and work with their respective committee chair to assist in setting and developing meeting agendas and materials.materials and attend meetings as appropriate. Committee chairs communicate frequently with staff officers, the other executive officers and other members of management between scheduled Board meetings with respect to committee issues and management is expected to update the Board on any significant Company matters or competitive developments between Board meetings.
The Board and its committees are able to access and retain independent advisors as, and to the extent, they deem necessary or appropriate.
BOARD EVALUATIONS AND BOARD EFFECTIVENESS
Evaluation Process
A meaningfully designed director evaluation process allows the Board to gain insights into the effectiveness of and challenges facing the Board, its committees and its individual members, with the goal of enhancing Board performance and, as a result, increasing shareholder value. Cigna’s Board is committed to ongoing improvement and the evaluation process is an important vehicle that fosters and supports effectiveness. Our board evaluations are designed to solicit input and perspective on various matters, including:
As set forth in its charter, the Corporate Governance Committee oversees the Board, committee and individual director evaluation process. Annually, the Corporate Governance Committee and the Chairman of the Board determine the appropriate form of evaluation and consider the design of the process to ensure it is both meaningful and effective. In 2016,2017, each director was interviewed by either the Chair of the Corporate Governance Committee or the Chairman of the Board. In response to feedback provided from directors regarding the Board evaluation process, the Chairman of the Board and the Chair of the Corporate Governance Committee also interviewed various members of management to better understand management’s perspective on the Board. In addition, each member of the Board was able to submit anonymous written feedback to the Corporate Secretary.
The Chair of the Corporate Governance Committee summarizessummarized the feedback from the individual director interviews in a report for the Chairman of the Board and each of the Committee Chairs. The Chair of the Corporate Governance Committee and the Chairman of the Board then presentpresented the report to the full Board for review, discussion and determination of action items. The chairs of each committee leadled a similar self-assessment discussion for their particular committee.
From time to time, the Board has engaged an independent third party to conduct the Board evaluation, most recently
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in 2014. The Corporate Governance Committee and Board have agreed to use an independent third party to facilitate the Board evaluation process approximately every three to five years, or on an as needed basis.
The results of the evaluation process have confirmedsupport the Board’s belief that the Board and committees are operating effectively.
Board Refreshment and Succession Planning
The Corporate Governance Committee is responsible for identifying new director candidates, reviewing the composition of the Board and its committees and for making recommendations to the full Board on these matters. On an ongoing basis,As further described on page 9, in 2017, the Corporate Governance Committee engages in Boardbegan a long-term board refreshment plan and engaged an outside firm to provide advisory services related to succession planning taking into account input from Board discussions and fromto assist with the Board and committee evaluation process regarding the specific backgrounds, skills and experiences that would contribute to overall Board and committee effectiveness. In addition, the Corporate Governance Committee identifies future needsrecruitment of the Board and its committees in light of the Company’s strategic direction, the Board’s tenure and the diversity, skills and qualifications of directors who are expected to retire in the future.director candidates.
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Board Oversight of Risk and Enterprise Risk Management
The Board of Directors has the ultimate responsibility for risk oversight under Cigna’s risk management framework. The Board executes its duty both directly and through its Audit, Corporate Governance, Finance and People
Resources Committees. The Audit Committee oversees Cigna’s enterprise risk management (ERM) framework. ERM is a Company-wide initiative that involves the Board, Cigna’s management, Cigna’s Chief Risk Officer and General Auditor (CRO) and internal audit function in an integrated effort to (1) identify, assess, prioritize and monitor a broad range of risks and (2) formulate and execute plans to monitor and, to the extent possible, mitigate the effect of those risks. The CRO meets with the
Audit Committee regularly during its executive sessions and reports to the Board at least annually.
Cigna has implemented practices so that the Board and its committees are regularly briefed on issues related to the Company’s risk profile. These reportsbriefings are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. These reportsbriefings address strategic, operational, financial reporting, succession and compensation, cyber-security, compliance, reputational, governance and other risks, as appropriate.
The Board, including its committees, oversees risks associated with their respective areas of responsibility, as summarized below. Each committee meets in executive session without management present and with key management personnel and representatives of outside advisors as necessary.
BOARD/COMMITTEE | PRIMARY AREAS OF RISK OVERSIGHT | |
Full Board | Strategic, financial and execution risks and exposures associated with Cigna’s business strategy, including impact of changes to laws and regulations, significant litigation and regulatory exposures and other current matters that may present material risk to financial performance, operations, infrastructure, plans, prospects, reputation, acquisitions and divestitures. | |
Audit
| In addition to overseeing Cigna’s ERM framework, oversees risks related to the Company’s financial statements, the financial reporting process, accounting, cyber-security and certain legal and compliance matters. The Audit Committee also oversees the internal audit function and the Company’s ethics and compliance program. | |
Corporate | Oversees risks and exposures associated with director succession and refreshment planning, corporate governance and overall Board effectiveness. Also oversees the Company’s risks related to political and charitable contributions. In exercising this oversight, the Corporate Governance Committee reviews and discusses financial contributions to such organizations. | |
Finance
| Oversees the Company’s deployment of capital, technology and investment-related initiatives. In exercising this oversight, the Finance Committee regularly reviews and discusses the technology, financial market and capital management risks that are monitored through the Company’s ERM process. | |
People Resources Committee | Oversees compensation related-risks and management succession planning. For additional information regarding the People Resources Committee’s role in evaluating the impact of risk on executive compensation, see | |
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Oversight of Business Strategy
Our directors provide unique insights into the strategic issues facing the Company, including changes in the regulatory environment, changing market dynamics and the competitive landscape. As part of its oversight of business strategy, the Board:
Management Succession Planning
At the direction of the Chairman, the Board oversees management succession planning, including for the CEO
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role. With the assistance of the People Resources Committee, the Board reviews and approves regular and emergency succession plans. The People Resources Committee is responsible for overseeing the Company’s policies and processes for people development in general. In fulfilling that responsibility, theThe People Resources Committee considers an annualalso ensures that management succession planning meets the Board’s expectations. Annually, the CEO presents to the Board a review of executive officers and key senior management, presented by the CEO, including a discussion of those employees who are considered to be potential successors to executive and senior level positions with regard to their readiness and development opportunities. This assessment is presentedIn 2017, succession planning related to the promotions of Brian C. Evanko, Christopher J. Hocevar, Alan M. Muney, Eric P. Palmer and reviewed byMichael W. Triplett to executive officer roles, and the full Board.retirements of Thomas A. McCarthy and Matthew G. Manders.
Shareholder Interests
The Board overseesand the Corporate Governance Committee oversee the Company’s shareholder engagement practice. Currently, senior management and
the Investor Relations team regularly meet with shareholders and respond to their questions and feedback throughout the year. The Office of the Corporate Secretary engages with shareholders on issues related to corporate governance, executive compensation and social responsibility. In 2017, the Office of the Corporate Secretary engaged in extensive outreach with shareholders, particularly regarding proxy access, as further described on page 16. During these meetings, shareholders also expressed an interest in learning more about our board refreshment plans and our corporate responsibility efforts. As a result, we have included additional disclosure on these topics, which can be found on pages 9 and 23, respectively.
Senior management and the Investor Relations team regularly meet with shareholders and respond to their questions and feedback throughout the year. In June 2017, Cigna hosted an Investor Day. During Investor Day, Cigna’s management discussed our track record of delivering value and our growth path moving forward. Investor Day was a highly interactive event, providing the investment community with many formal and informal opportunities to further understand Cigna’s strategy toGo Deeper, Go Local and Go Beyond, as well as the depth and breadth of Cigna’s management team.
In addition, the Board has adopted a number of practices that align the interests of the directors with those of the shareholders, including:
Information regarding how our executive compensation policies and practices align with the interests of shareholders can be found in the CD&A.
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In 2016,2017, the Board held eight11 meetings and the committees of the Board held a total of 2633 meetings. At all regular meetings held in 2016,2017, the independent members of the Board met in executive session.session without management present. As part of all regularly scheduled Board meetings, the Chairman presides over all executive sessions of the Board. Each committee also met in executive session without management on a regular basis in connection with their respective meetings.
Each director attended more than 75% of the aggregate of all meetings of the Board and committees on which he or she served during 2016.2017. During 2016,2017, Board and committee attendance averaged 94%93% for the Board as a whole. In addition to formal Board meetings, the Board engages with management regularly throughout the year.
The Board encouragesexpects directors to attend the annual meeting of shareholders. TenAll directors attended the 20162017 annual meeting: Dr. Henney, Ms. Gassmeeting and Ms. Zarcone and Messrs. Cordani, Foss, Martinez, Partridge, Wiseman, Zollars andMr. Harris who chaired the meeting. All directors are expected to attend the Annual Meeting in 2017.2018.
The Board has five committees: Executive, Audit, Corporate Governance, Finance and People Resources. Complete copies of the committee charters are available on Cigna’s website atwww.cigna.com/about-us/company-profile/corporate-governance/.
The composition of the Audit, Corporate Governance, Finance and People Resources Committees is set forth below.
Audit*
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Corporate Governance
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People Resources
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| Audit* | Corporate Governance | Finance | People Resources | |||||||||||||
Eric J. Foss | ✓ | ✓ | ✓
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Jane E. Henney, M.D. | Chair | ✓ | ✓
| Chair
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Roman Martinez IV | Chair # | ✓ | Chair #
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John M. Partridge | Chair | ✓ | Chair
| ✓
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James E. Rogers | ✓ # | ✓ | ✓ #
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Eric C. Wiseman | ✓ | ✓ | ✓
| ✓
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Donna F. Zarcone | ✓ # | ✓ | ✓ #
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William D. Zollars | ✓ | Chair | ✓
| Chair
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Meetings in 2016 | 9 | 5 | 5 | 7 | ||||||||||||
Meetings in 2017
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| 8
| 8
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| ✓ | Committee member |
| # | Designated “audit committee financial expert” as defined in the SEC rules. |
| * | All members of the Audit Committee are financially literate within the meaning of the NYSE listing standards. |
The Executive Committee may exercise the power and authority of the Board as specifically delegated by the Board when convening a meeting of the full Board of Directors is impracticable. Mr. Harris is Chairman of the Executive Committee and Dr. Henney and Messrs. Cordani, Martinez, Partridge and Zollars serve on the Executive Committee. In 2016,2017, the Board of Directors did not delegate any actions to the Executive Committee and, therefore, the Executive Committee did not meet in 2016.2017.
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Committee | Responsibilities | |||
Audit Committee | • Assesses the qualification and independence of, appoints, compensates, oversees the work of and removes, if appropriate, Cigna’s independent registered public accounting firm.
• Represents and assists the Board in fulfilling its oversight responsibilities regarding the adequacy and effectiveness of internal controls and the integrity of financial statements.
• Reviews annual and quarterly financial statements, earnings releases, earnings guidance and significant accounting policies with management and, if appropriate, the independent registered public accounting firm.
• Oversees compliance with material legal and regulatory requirements, including those that apply to federal and state health care programs.
• Oversees the Company’s enterprise risk management program and internal audit function and advises the Board on financial and enterprise risks, including risks related to the security of information technology systems.
• Maintains procedures for and reviews the receipt, retention and treatment of complaints and concerns regarding accounting, controls, auditing, reporting and disclosure matters.
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Corporate Governance Committee | • Reviews, advises and reports to the Board on the Board’s membership, structure, organization, governance practices and performance, as well as shareholder engagement activities.
• Assists the Board in
• Reviews committee assignments and director independence.
• Oversees director nomination and compensation and develops specific director recruitment criteria.
• Oversees communications with external stakeholders, including shareholders.
• Oversees corporate political and charitable
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Finance Committee | • Oversees the structure and use of Cigna’s capital.
• Oversees Cigna’s long-term financial objectives and progress against those objectives.
• Reviews Cigna’s strategic operating plan and budget.
• Oversees Cigna’s investment strategy and sets investment policies and guidelines.
• Oversees information technology strategy and execution.
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People Resources Committee | • Oversees the policies and processes for people development and
• Establishes company goals and objectives relevant to the CEO’s compensation, evaluates the CEO’s performance in light of those established goals and objectives, and based on this evaluation, recommends the CEO’s compensation to the independent members of the Board for approval.
• Reviews and approves compensation targets, base salaries, cash and equity-based incentive compensation payments and arrangements, severance, and other compensation and benefits arrangements for any current or prospective executive officers other than the CEO, subject to required Board or shareholder approvals.
• Establishes performance measures and goals and assesses whether these goals are met for awards under short-term and long-term cash-based and equity-based compensation plans.
• Reviews and monitors the Company’s diversity program.
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Cigna is committed to conducting business in accordance with the highest standards of integrity, legal compliance and ethical conduct. In 2015, at the recommendation of the Corporate Governance Committee, the Board adopted a Director Code of Business Conduct and Ethics, available on Cigna’s website atwww.cigna.com/about-us/corporate-governance/. The Board believes that having a separate code of conduct for the Board meaningfully enhances Cigna’s governance framework by making Board-specific policies clearer, while also addressing general shareholder concerns over transparency of company and board practices.
All directors and employees, including executive officers, must comply with the Company’s Code of Ethics, available on Cigna’s website atwww.cigna.com/about-us/corporate-governance/. Both the Director Code of Business Conduct and Ethics and the Company Code of Ethics, together with Cigna’s related policies and procedures, address major areas of professional conduct, including, among others, conflicts of interest, protection of private, sensitive or confidential information, insider trading and adherence to laws and regulations affecting the conduct of Cigna’s business. Directors and employees affirm their adherence to the Code of Ethics and the Director Code of Business Conduct and Ethics, as applicable, annually.
As a global health service company with the mission of helping improve the health, well-being and sense of security of the people we serve, Cigna believes that its success depends on earning trust through responsible business practices, corporate citizenship and providing superior services that meet our customers’ individual needs. Inspired by our mission, Cigna works to positively impact the health of people, communities and the environment.
As evidence of this, in 2015, Cigna was the first U.S. health insurance company to sign on to the United Nations Global Compact (UNGC), a policy initiative for companies committed to areas such as human rights, labor standards, environmental responsibility and business integrity in business operations. In 2017, Cigna became a member of the UNGC Health is Everyone’s Business action platform, which is a coalition working to develop a global business agenda to address goals related to good health and well-being.
In 2017, Cigna was named to the Dow Jones Sustainability Index, a benchmark for investors who integrate sustainability considerations into their portfolios. We achieved the leading spot among the Health Care Providers & Services industry sector. Cigna was recognized in both the Dow Jones Sustainability World Index and the Dow Jones Sustainability North America Index. Our
inclusion on the index was driven by our responsible business practices.
The Corporate Governance Committee is responsible for overseeing Cigna’s positions on, and policies with respect to, Cigna’s corporate responsibility efforts around the globe. To support the Corporate Governance Committee’s responsibility, Cigna has established the Cigna Connects Corporate Responsibility Governance Council to provide input on Cigna’s policies, initiatives and reporting relative to corporate responsibility. Led by Cigna’s Director of Corporate Responsibility & Civic Affairs, this Council is a cross-functional team of leaders from various areas of the Company, including ethics and compliance, global real estate, risk management, supply chain, human resources and the Cigna Foundation.
Cigna annually publishes a corporate responsibility report, Cigna Connects, highlighting our corporate responsibility goals and initiatives. Cigna Connects covers areas such as Cigna’s practices around ethics and governance, diversity, environmental sustainability, and our Cigna Foundation. It also provides more information about our recent recognitions, including being named to Corporate Responsibility Magazine’s 100 Best Corporate Citizens List, our listing on the MSCI Sustainability Index, and our “Innovation in Advancing Health Equity” award from the National Business Group on Health. Cigna Connects is presented to the Corporate Governance Committee, which reviews the report with the Board. We encourage our shareholders to review our most current report, which is available on Cigna’s website atwww.cigna.com/about-us/corporate-responsibility/report/.
Cigna’s corporate responsibility efforts are focused on the following areas:
Health and Well-Being. Cigna’s goal is to make health care better for all, by striving to build a sustainable health care system that lowers health risks, fosters health equality, improves health status and promotes preventative health interventions. For example, Cigna is committed to being a national leader on modernizing the approach to the prevention, treatment and communication of substance use disorders, and pledged to reduce opioid usage among our customers by 25% by 2019. Cigna is addressing the needs of our communities through efforts such as empowering veterans to address difficult health and life circumstances and establishing the free Cigna Health Improvement Tour. In 2017, we provided more than10,000 free Cigna Health Improvement Tour biometric screenings (blood pressure, cholesterol, blood sugar and body-mass index) and health coaching to participants in 100 locations.
Environment.As a health service company, Cigna takes a precautionary approach to its environmental sustainability efforts, recognizing that environmental stewardship can have a health impact and also make sound business sense. We currently have 16 LEED certified buildings and 25 sites
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are enrolled in the U.S. Environmental Protection Agency’s ENERGY STAR® program. In 2017, Cigna’s greenhouse gas emissions data was verified by an independent third party expert. Cigna considers managing the risks and opportunities associated with climate change and resource scarcity as a significant aspect of our corporate responsibility platform. Our Environmental Policy Statement, which is described in greater detail in the Corporate Responsibility section of www.cigna.com, outlines our environmental sustainability policies and practices.
Ethical and Inclusive Business Practices. We strive to foster relationships with various stakeholders to help us better understand their priorities and to further Cigna’s goal of bringing positive changes in areas such as human capital, diversity and inclusion, supply chain management, stakeholder engagement and human rights. Cigna seeks to partner with organizations that are guided by similar principles. Our Supplier Code of Ethics, with which all of our suppliers are expected to comply, explicitly prohibits the use of child or forced labor, and requests that our suppliers demonstrate ethics, compliance and integrity in human rights, business conduct and the environment. The Supplier Code of Ethics is an important part of the internal control structure and helps promote ethical business practices. As an example of our focus on inclusive business practices, in 2017, we welcomed the inaugural class of our diverse supplier Mentor Protégé Program. This program, consisting of certified minority, veteran and LGBT business enterprises, providesone-on-one mentoring with Cigna management, and insights into growth strategies and best practices to help grow their businesses.
The Cigna Foundation
The Cigna Foundation, established more than 50 years ago, carries out our corporate philanthropy goals of bringing Cigna’s mission and brand promise to life for individuals and communities around the globe. The Cigna Foundation accomplishes these goals through strategically focused charitable grants to nonprofit organizations whose work enhances the health of individuals and families and the well-being of their communities. Cigna’s World of Difference grants center around collaborations with nonprofits pursuing projects that help people overcome barriers to their health and well-being related to factors such as ethnicity, race, gender, age, education, economic status or place of residence. In 2017, we added a focus on community health workers. Cigna funded 27 Cigna Foundation Grants to address health disparities and advance community health navigation in 2017.
ANNUAL POLITICAL CONTRIBUTIONS AND LOBBYING ACTIVITY REPORT
Cigna is committed to transparency and strives to provide clarity about our goals and positions related to the Company’s federal and state lobbying and advocacy efforts as well as why we believe active engagement in the public
policy arena is important to our mission, business and customers. Cigna has regularly engaged with shareholders to gain feedback regarding desired political contribution disclosure and published its first annual political contributions and lobbying activity report in 2011. The initial report provided information about Cigna’s political contributions, lobbying activities, trade association affiliations and related matters. Since then, we have significantly enhanced this report to incorporate subsequent input from shareholders and to provide greater clarity on our overall lobbying framework, including the areas in which we focus our advocacy efforts and why we believe active engagement in the public policy arena is necessary to support the achievement of our mission, the success of our business and the well-being of our customers. The report also provides information about: (1) direct political contributions that Cigna makes at a corporate level; (2) contributions that Cigna makes through the Cigna Political Action Committee; and (3) the total amount of dues paid to any industry trade association to which Cigna pays $50,000 or more in annual dues, as
well as the portion of any such dues that such trade associations inform us are allocable to anynon-deductible lobbying expenses. The Corporate Governance Committee provides guidance and oversees Cigna’s political and lobbying activities. The Company updates the report annually and we encourage you to review our 20162017 report which is available on Cigna’s website atwww.cigna.com/about-us/corporate-governance/.
CORPORATE RESPONSIBILITY REPORT
As a global health service company with the mission of helping improve the health, well-being and sense of security of the people we serve, Cigna strongly believes that its success depends on earning trust through responsible business practices, corporate citizenship and providing superior services that meet our customers’ individual needs. Inspired by this mission, Cigna works to positively impact the health of people, communities and the environment. Cigna annually publishes a Corporate Responsibility Report highlighting our corporate responsibility goals and initiatives. The Corporate Responsibility Report is presented to the Corporate Governance Committee, which reviews the report with the Board. We encourage our shareholders to review our most current report which is available on Cigna’s website atwww.cigna.com/about-us/corporate-responsibility/report/.
Transactions with Related Persons
Cigna has not adopted a written policy concerning review, approval or ratification of related person transactions. Cigna compiles information about transactions between Cigna and Cigna’s directors, director nominees, and executive officers and any immediate family members and affiliated entities identified by directors, director nominees and executive officers as having any form of relationship with Cigna.Cigna, as well as shareholders that identified themselves during 2017 as holding 5% of Cigna’s common stock. Cigna’s Office of the Corporate Secretary analyzes the nature of any transaction to determine whether the transaction may require disclosure under SEC rules as a related person transaction. On an annual basis, the Corporate Governance Committee reviews the analysis prepared by the Company, and presents its assessment to the full Board of Directors.
Based on this review, there are no related person transactions requiring disclosure under SEC rules.
Compensation Committee Interlocks and Insider Participation
The People Resources Committee is comprised of the fivefour independent directors listed on page 20.directors: William D. Zollars (Chair), Eric J. Foss, John M. Partridge and Eric C. Wiseman. There are no compensation committee interlocks.
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CORPORATE GOVERNANCE MATTERS
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Non-Employee Director Compensation
Cigna’s director compensation program is designed to attract and retain highly qualified independent directors, by addressing the time, effort, expertise and accountability required of active board membership. The Board believes that the current director compensation program:
The Corporate Governance Committee’s charter provides that it will periodically review director compensation and assist the Board in the administration of director compensation plans. The Board approves the amount and form of director compensation. The Corporate Governance Committee may from time to time engage aan independent compensation consultant to assist in its review of director compensation.
The Corporate Governance Committee reviews Cigna’snon-employee director compensation program on an annual basis. In October 2011, theThe Corporate Governance Committee last engaged an independent compensation consultant in 2011 to assist in the Committee’s review of director compensation amount and pay mix. As a result of that review, the Board, upon recommendation from the Corporate Governance Committee, approved the current director compensation program, effective as of January 2012. The Board has not increased compensation since that time.
In 2016,2017, the Board and the Corporate Governance Committee reviewed the director compensation program and did not make any changes. As part of this review, the Corporate Governance Committee reviewed benchmarking data from the Company’s compensation peer group (as described on page 33)in “Executive Compensation Policies and Practices — 2017 Peer Groups” in the CD&A), as well as the top 200 companies of the S&P 500, to ensure that itsour pay practices were competitive and aligned with those companies against which we compete for talent.companies.
The following chart summarizes the retainer compensation provided to directors for their service on Cigna’s Board and each committee on which they serve.its committees. A director who also is an employee of the Company does not receive payment for service as a director. The CEO is the only employee who currently serves as a director. There is no retainer for service on the Executive Committee. In addition to the BoardAll retainer the Chairman of the Board receives $225,000 in cash for his service as Chairman. Paymentspayments are made in equal, quarterly installments.
RETAINER TYPE | ANNUAL AMOUNT | METHOD OF PAYMENT | ||||
Board | $ | 275,000 | Cigna common stock ($180,000)
Cash ($95,000) | |||
Committee chair | $ | 15,000 | Cash | |||
Committee member | $ | 10,000 | Cash | |||
RETAINER TYPE |
|
|
|
| ||||
Board | $275,000 | Cigna common stock ($180,000) Cash ($95,000) | ||
Chairman of the Board | $225,000 | Cash | ||
Committee chair | $ 15,000 | Cash | ||
Committee member | $ 10,000 | Cash | ||
Deferral of Payments
Under the Deferred Compensation Plan of 2005 for Directors of Cigna Corporation (Deferral Plan), directors may elect to defer the payment of the cash and/or common stock portion of their annual retainers. Deferred common stock compensation is credited to a director’s deferred compensation account as a number of shares of hypothetical common stock and ultimately paid in shares. Deferred cash compensation is ultimately paid in cash, and directors have a choice of hypothetical investment funds whose rates of return are credited to that account. These funds include a Cigna stock fund and several other funds selected from those offered to all Cigna employees under the Cigna 401(k) Plan. Directors may elect to receive payments under the Deferral Plan in a lump sum or installments. Lump sum payments are made, or payment installments begin, in January of the year following a director’s separation from service.
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CORPORATE GOVERNANCE MATTERS |
Stock Ownership Guidelines
Cigna requires directors to maintain a stock ownership level of at least $500,000 in value of Cigna common stock, which is more than five times the annual Board cash retainer. Under the guidelines, directors have five years from their election to the Board to satisfy this ownership obligation. Common stock, deferred common stock, restricted stock units and hypothetical shares of Cigna common stock held by a director count toward the stock ownership guidelines for directors whose service started before February 2014. Directors whose service started after February 2014 may only count common stock and deferred common stock for compliance.compliance with stock ownership guidelines. As of December 31, 2016,2017, all of the directors are in compliance with the stock ownership guidelines.guidelines and met or exceeded their ownership requirement.
Financial Planning and Matching Charitable Gift Programs
Directors may participate in the same financial planning and tax preparation program available to Cigna executive officers. Under this program, Cigna will make direct payments or reimburse directors for financial planning services that are provided by firms designated by Cigna
and for tax preparation services in the amount of up to $6,500 annually. Each director whose service started before 2006 and has at least nine years of board service upon separation from service also is eligible for direct payments or reimbursement in the amount of up to $5,000 for financial planning and tax preparation services during theone-year period following separation from service.
Directors also may participate in the matching charitable gift program available to Cigna employees, under which
Cigna will make a matching charitable gift of up to $5,000 annually. In addition, upon a director’s retirement, in recognition of the retiring director’s service, the Board may make a donation in the amount of $10,000 to a charitable organization of the director’s choice.
Insurance Coverage
Cigna provides each director, on the same basis as employees and at no cost to the director, group term life insurance coverage equal to the annual Board retainer ($275,000 during 2016)2017), and business travel accident insurance coverage equal to three times the annual Board retainer ($825,000 during 2016)2017).
Directors also may purchase or participate in, by paying premiums on anafter-tax basis, additional life insurance, medical care, long-term care, property/casualty personal lines and various other insurance programs available on a broad basis to Cigna employees. Directors also may elect to purchase worldwide emergency assistance coverage. This program, which provides international emergency medical, personal, travel and security assistance, also is available to Cigna executive officers and certain other Cigna employees who frequently travel abroad for business.
In addition, Cigna provides each retired director whose service started before 2006 and who has at least nine years of Board service upon separation from service with $10,000 of group term life insurance coverage, with premiums paid by Cigna. TheseIn addition, these directors may also participate for two years following separation from service in the medical care programs currently offered by Cigna to retired employees, with premiums paid by the director on anafter-tax basis.
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Cigna |
CORPORATE GOVERNANCE MATTERS
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DIRECTOR COMPENSATION TABLE FOR 20162017
The table below includes information about the compensation paid tonon-employee directors in 2016.2017. Mr. Cordani, the only Company employee on the Board of Directors, does not receive any director compensation for his Board service.
| FEES EARNED OR PAID IN CASH | STOCK AWARDS | ALL OTHER COMPENSATION | TOTAL COMPENSATION | |||||||||||||||||||||||||||||||||
| NAME | ($) | ($) | ($) | ($) |
FEES EARNED OR PAID IN CASH ($) | STOCK AWARDS ($) |
ALL OTHER ($) |
TOTAL ($) | ||||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (b)
| (c)
| (d)
| (e)
| ||||||||||||||||||||||||||||
Eric J. Foss | 115,000 | 180,000 | 365 | 295,365 |
| 115,000
|
|
| 180,000
|
|
| 365
|
|
| 295,365
|
| ||||||||||||||||||||
Michelle D. Gass(1) | 115,000 | 180,000 | 365 | 295,365 |
| 28,750
|
|
| 45,000
|
|
| 61
|
|
| 73,811
|
| ||||||||||||||||||||
Isaiah Harris, Jr. | 320,000 | 180,000 | 918 | 500,918 |
| 320,000
|
|
| 180,000
|
|
| 918
|
|
| 500,918
|
| ||||||||||||||||||||
Jane E. Henney, M.D. | 120,000 | 180,000 | 6,157 | 306,157 |
| 120,000
|
|
| 180,000
|
|
| 6,157
|
|
| 306,157
|
| ||||||||||||||||||||
Roman Martinez IV | 120,000 | 180,000 | 1,320 | 301,320 |
| 120,000
|
|
| 180,000
|
|
| 1,373
|
|
| 301,373
|
| ||||||||||||||||||||
John M. Partridge | 120,000 | 180,000 | 5,365 | 305,365 |
| 120,000
|
|
| 180,000
|
|
| 5,365
|
|
| 305,365
|
| ||||||||||||||||||||
James E. Rogers | 115,000 | 180,000 | 766 | 295,766 |
| 115,000
|
|
| 180,000 ��
|
|
| 820
|
|
| 295,820
|
| ||||||||||||||||||||
Eric C. Wiseman | 115,000 | 180,000 | 766 | 295,766 |
| 115,000
|
|
| 180,000
|
|
| 820
|
|
| 295,820
|
| ||||||||||||||||||||
Donna F. Zarcone | 115,000 | 180,000 | 6,263 | 301,263 |
| 115,000
|
|
| 180,000
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| 6,316
|
|
| 301,316
|
| ||||||||||||||||||||
William D. Zollars | 120,000 | 180,000 | 1,017 | 301,017 |
| 120,000
|
|
| 180,000
|
|
| 1,017
|
|
| 301,017
|
| ||||||||||||||||||||
(1) Ms. Gass resigned from the Board of Directors on February 21, 2017.
Fees Earned or Paid in Cash (Column (b))
Stock Awards (Column (c))
Column (c) lists the aggregate grant date fair value of Cigna common stock awarded to directors as part of their Board retainer, computed in accordance with FASB Accounting Standards Codification (ASC) Topic 718, applying the same model and assumptions that Cigna applies for financial statement reporting purposes as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 20162017 (disregarding any estimates for forfeitures). Common stock awards listed in this column may be deferred by directors under the Deferral Plan. See Director Ownership“Director Ownership” below for amounts and a description of equity-based awards outstanding as of December 31, 2016.2017.
All Other Compensation (Column (d))
Column (d) includes:
There were no perquisites or personal benefits provided tonon-employee directors that exceeded $10,000, as permitted by SEC rules.
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Cigna |
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CORPORATE GOVERNANCE MATTERS
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The table shows Cigna securities held by eachnon-employee director as of December 31, 2016.2017. The value of these securities was calculated using $133.39,$203.09, which was Cigna’s closing stock price on December 30, 2016.29, 2017, the last business day of the year.
| NAME | COMMON STOCK (a) | DEFERRED COMMON STOCK (b) | RESTRICTED STOCK UNITS (c) | HYPOTHETICAL SHARES OF COMMON STOCK (d) | TOTAL OWNERSHIP (e) | TOTAL OWNERSHIP VALUE (f) | COMMON STOCK (a)
| DEFERRED COMMON STOCK (b)
| RESTRICTED STOCK UNITS (c)
|
HYPOTHETICAL SHARES OF COMMON STOCK (d)
| TOTAL OWNERSHIP (e)
| TOTAL OWNERSHIP VALUE (f)
| ||||||||||||||||||||||||||||||||||||||||||
Eric J. Foss | 12,373 | — | — | — | 12,373 | $ | 1,650,434 |
| 13,413
|
|
| —
|
|
| —
|
|
| —
|
|
| 13,413
|
| $
| 2,724,046
|
| |||||||||||||||||||||||||||||
Michelle D. Gass | 4,109 | — | — | — | 4,109 | $ | 548,100 | |||||||||||||||||||||||||||||||||||||||||||||||
Isaiah Harris, Jr. | 1,356 | — | 13,500 | 23,249 | 38,105 | $ | 5,082,826 |
| 1,937
|
|
| —
|
|
| 13,500
|
|
| 23,255
|
|
| 38,692
|
| $
| 7,857,958
|
| |||||||||||||||||||||||||||||
Jane E. Henney, M.D. | 2,596 | — | 13,500 | 19,024 | 35,120 | $ | 4,684,657 |
| 1,836
|
|
| —
|
|
| 13,500
|
|
| 19,024
|
|
| 34,360
|
| $
| 6,978,172
|
| |||||||||||||||||||||||||||||
Roman Martinez IV | 9,496 | 21,740 | 13,500 | 15,419 | 60,155 | $ | 8,024,075 |
| 9,496
|
|
| 22,780
|
|
| 13,500
|
|
| 15,423
|
|
| 61,199
|
| $
| 12,428,905
|
| |||||||||||||||||||||||||||||
John M. Partridge | 32,227 | — | — | — | 32,227 | $ | 4,298,760 |
| 33,267
|
|
| —
|
|
| —
|
|
| —
|
|
| 33,267
|
| $
| 6,756,195
|
| |||||||||||||||||||||||||||||
James E. Rogers | — | 36,480 | — | 10,632 | 47,112 | $ | 6,284,270 |
| —
|
|
| 37,520
|
|
| —
|
|
| 11,299
|
|
| 48,819
|
| $
| 9,914,651
|
| |||||||||||||||||||||||||||||
Eric C. Wiseman | 4,200 | 11,077 | — | 2,987 | 18,264 | $ | 2,436,235 |
| 4,200
|
|
| 12,117
|
|
| —
|
|
| 3,652
|
|
| 19,969
|
| $
| 4,055,504
|
| |||||||||||||||||||||||||||||
Donna F. Zarcone | 5,971 | 7,190 | 13,500 | 2,796 | 29,457 | $ | 3,929,269 |
| 5,971
|
|
| 8,230
|
|
| 13,500
|
|
| 2,797
|
|
| 30,498
|
| $
| 6,193,839
|
| |||||||||||||||||||||||||||||
William D. Zollars | 2,327 | — | 13,500 | 9,782 | 25,609 | $ | 3,415,985 |
| 212
|
|
| —
|
|
| 13,500
|
|
| 9,784
|
|
| 23,496
|
| $
| 4,771,803
|
| |||||||||||||||||||||||||||||
Deferred Common Stock (Column (b))
Column (b) includes the equity portion of the 20162017 and any previous year’s Board retainer granted in Cigna common stock or deferred stock units that have been deferred under the Deferral Plan.
Restricted Stock Units (Column (c))
Column (c) includes restricted stock units that were issued in April 2014 upon the cancellation and exchange of 13,500 restricted share equivalents held by each of Dr. Henney, Ms. Zarcone and Messrs. Harris, Martinez and Zollars. The restricted share equivalents were originally granted pursuant to the terms of the compensation program in place at the times of the directors’ election to the Board between 2004 and 2006. The restricted share equivalents and the restricted stock units have the same terms and conditions, except that, upon separation of service, the restricted share equivalents would have settled in cash and the restricted stock units will settle in shares of Cigna common stock. The restricted stock units vest after nine years of service or upon reaching age 65. All of these restricted stock units are vested.
Hypothetical Shares of Common Stock (Column (d))
Column (d) includes (1) share equivalents resulting from voluntary deferrals of cash compensation hypothetically invested in the Cigna stock fund; (2) hypothetical shares of Cigna common stock credited to directors’ restricted deferred compensation accounts under the terms of the retirement plan in effect between 1997 and 2005; and (3) hypothetical shares of Cigna common stock acquired pursuant to apre-2006 requirement that directors invest or defer a portion of their Board retainer in shares of hypothetical Cigna common stock. Although these securities are not common stock, the value of the hypothetical shares of Cigna common stock credited to a director’s deferred compensation account is tied directly to the value of Cigna common stock.
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Cigna |
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Advisory Approval of Executive Compensation (Proposal 2)
Our Board is committed to strong governance and recognizes that Cigna shareholders have an interest in our executive compensation policies and practices. Section 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires that we provide our shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers (NEOs). In recognition of the preference of shareholders expressed at our 2011 annual meeting and reaffirmed at our 2017 annual meeting, the Board has held “say on pay” advisory votes on an annual basis. Consistent with this practice and SEC rules, we are asking you to approve the following advisory resolution:
Resolved, that the shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 20172018 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, Executive Compensation Tables and accompanying narrative disclosure.
We believe that our executive compensation program design effectively aligns the interests of our executive officers with those of our shareholders by tying a significant portion of their compensation to Cigna’s performance and rewarding our executive officers for the creation of long-term value for Cigna’s shareholders.shareholder value. In considering your vote, we encourage you to review the Proxy Statement Summary, beginning on page 1, the Compensation Discussion and Analysis beginning on page 29 and the Executive Compensation Tables beginning on page 54.Tables.
This advisory vote is intended to address our overall compensation policies and practices related to the NEOs rather than any specific element of compensation. Because your vote is advisory, it will not be binding upon the Board. However, the Board and People Resources Committee value your opinion and will review and consider the voting results when making future executive compensation decisions.
The Board of Directors unanimously recommends that shareholders vote FOR the advisory approval of the Company’s executive compensation. | ||||||||
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Cigna |
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COMPENSATION MATTERS
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Advisory Approval of the Frequency of Future Advisory Votes on Executive Compensation (Proposal 3)
Section 14A of the Exchange Act provides that shareholders can indicate their preference, at least once every six years, as to how frequently we should seek a“say-on-pay” advisory vote on executive compensation. By voting on this proposal, you may indicate whether you would prefer that we seek future advisory votes on executive compensation once every one, two or three years.
The Board believes that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for Cigna and therefore recommends that you vote for aone-year interval for the advisory vote on executive compensation. In formulating its recommendation, the Board considered that an annual advisory vote on executive compensation will enable shareholders to provide direct input to the Company regarding our compensation philosophy, policies and practices as disclosed in the proxy statement each year. Setting aone-year period for holding this shareholder vote enhances shareholder communication by providing a clear, simple means for our Board to ascertain general investor sentiment regarding our executive compensation program.
Shareholders may cast a vote on the preferred voting frequency by selecting the option ofone-year,two-years or three-years when voting in response to the resolution set forth below:
RESOLVED, that the option of everyone-year,two-years or three-years which receives the highest number of votes cast for this resolution will be the preferred frequency with which the Company is to provide shareholders with the opportunity to vote to approve the compensation of named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission.
The option of everyone-year,two-years or three-years that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by shareholders. Because the required vote is advisory, it will not be binding upon the Board. The Board and the People Resources Committee will, however, take into account the outcome of the vote when considering the frequency with which the Company will provide shareholders the opportunity to vote to approve the compensation of named executive officers.
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis (CD&A) describes the compensation policies, programs and decisions regarding our named executive officers (NEOs) for 2016,2017, who include our Chief Executive Officer, Chief Financial Officer, the three most highly-compensated executive officers as of the end of 2016,2017, as well as our former Chief Financial Officer and one other executive officer who retired during 2016.2017. The People Resources Committee (the Committee) is charged with oversight of the Company’s executive compensation policy and plans and makes all compensation decisions for our executive officers with the exception of our CEO, for whom the Committee makes recommendations to the Board of Directors. This section also describes why the Committee has chosen each element of compensation and how it made compensation decisions. For 2016,2017, our NEOs are:
NAME | TITLE | |
David M. Cordani | President and Chief Executive Officer | |
| Executive Vice President and Chief Financial Officer | |
Christopher J. Hocevar(2) | President, Strategy, Segments and Solutions | |
Nicole S. Jones | Executive Vice President and General Counsel | |
Jason D. Sadler(3) | President, International Markets | |
Thomas A. McCarthy(4) | Retired Executive Vice President and Chief Financial Officer | |
Matthew G. Manders | Retired President, Government & Individual Programs and Group Insurance | |
| ||
| ||
| (1) |
| (2) |
| (3) | Mr. |
| (4) | Mr. McCarthy retired from the Company effective June 16, 2017. |
| (5) | Mr. Manders retired from the Company effective November |
This CD&A is organized as follows:
Executive Summary provides an overview of our compensation philosophy and ourpay-for-performance alignment. | Pages | |||
Executive Compensation Policies and Practicesdescribes our compensation objectives and practices, as well as how we set target total direct compensation and target pay mix. | Pages | |||
Elements of Compensationdescribes each form of compensation we pay and how our executive compensation program is tied strongly to performance. | Pages | |||
Employment Arrangements and Post-Termination Paymentssummarizes any employment agreements, our severance and other post-termination arrangements as well as our change of control arrangements. | Pages | |||
Processes and Procedures for Determining Executive Compensationprovides an overview of the Committee’s role in executive compensation, the process for determining executive officer compensation and the compensation consultant’s role. | Pages | |||
Other Practicesdescribes our stock ownership guidelines, our hedging and pledging restrictions, our clawback policy and the impact of tax and accounting | Pages 51 | |||
30 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS |
Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy — focusingstrategy. We focus on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.
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The primary principles underlying our compensation philosophy are to:
Motivate superior | Align the interests of
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Emphasize
| Reward the
| Provide retain highly
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Pay-for-Performance Alignment
Cigna’s compensation program is heavily weighted to emphasize performance-based pay over fixed compensation. Our Management Incentive Plan (MIP) is a cash-based program designed to reward the achievement of annual enterprise results. Long-term performance is awardedrewarded through annual long-term incentive (LTI) awards, including Strategic Performance Shares (SPSs), the payout of which is based upon performance over a three-year period. Financial measures within the MIP and SPS program, such as adjusted income from operations,1(1) revenuesrevenue and operating expense ratio improvement, are tied to the performance of Cigna’s three ongoing business segments –— Global Health Care, Global Supplemental Benefits and Group Disability and Life. Our MIP and SPS plans are designed to reward our NEOs for the Company’s performance relative topre-established enterprise goals.
Short- and Long-Term Performance
For 2016,2017, adjusted income from operations1(1) for Cigna’s ongoing business segments was $2.3$2.8 billion, compared to $2.4$2.3 billion in 2015,2016, reflecting strong performance in Cigna’s Commercial Healthcare andsignificantly increased earnings contributions across each of Global Health Care, Global Supplemental Benefits businesses and challenges during the year related to the Seniors andGroup Disability and Life businesses.Life. Revenue for the three ongoing business segments grew to $39.0$40.9 billion, reflecting continued growth in Cigna’s targeted customer segments. We made notable progress in the second halfOur results included strong performance across each of 2016 addressing the challenges in our priority growth platforms — Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life and Seniors business. Specifically, we gained tractionLife. These results provide us with momentum for continued growth in our Group Disability business as the claims process modifications made earlier in 2016 continued to mature, we experienced more stable claims in our Life business and, within Seniors, we made progress with our remediation efforts and are in the later stages of our audit response work. However, these challenges did impact full year adjusted income from operations.12018.
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Cigna | 31 |
COMPENSATION MATTERS
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20162017 Management Incentive Plan
As a result of our 2016 financial performance, payoutsPayouts under the 20162017 Management Incentive Plan were significantly lower thanrewarded our NEOs for our strong performance in prior years and below target levels,2017, reflecting strongpay-for-performance alignment. Mr. Cordani’s MIP award was 50%awards reward the achievement of target for 2016, comparedannual enterprise results relative to 130% of target for 2015pre-established goals, as well as individual performance, accomplishments and on average, the MIP award paid to each of the other NEOs who received a MIP award was 75% of target for 2016, compared to 124% of target for 2015.contributions.
Measure | Result | Award | ||
Adjusted income from operations | 24.5% growth was | Individual payouts ranged from
| ||
Revenue | 4.9% growth was within target range | |||
Operating expense ratio improvement | 2.3% improvement was | |||
Strategic Priorities | Above target performance reflects: • Strong progress in community health and client retention • A higher NPS score • Strong employee engagement results • Advancement of enterprise compliance initiatives | |||
2014–2016
2015—2017 Strategic Performance Share Program
Long-term performance was rewarded through the payout of our 2014–20162015—2017 SPSs. Our TSR over this three-year period, which accounts for 50% of the SPS payout, was 15.1%25.5%, placing Cigna at the 6778th percentile relative to the SPS performance peer group. While 2016 performance impactedgroup for the payout percentage of the 2014–2016 SPSs, overperiod. Over the three-year performance period, each of adjusted income from operations,1, 2(1)(2) and revenuewhich accounts for 50% of the SPS payout, grew as described in the following table.above.
Measure | Result ($ in | Award | ||
Relative TSR | 78th percentile |
at | ||
Adjusted income from operations | $ | |||
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| We encourage you to review our Annual Report on Form10-K for the year ended December 31, |
| Reflects results for Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life. |
| The peer group used to measure relative TSR is the |
20162017 Long-Term Incentive Award
In February 2016,2017, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) approved the annual LTI award for each NEO, 50% of which was awarded in stock options and 50% of which was awarded in an SPS award with a 2016–20182017—2019 performance period. The exercise price of the stock options awarded was $139.22,$149.135, which means our stock must trade above that price for the NEOs to realize value from these awards. The payout of the 2016–20182017—2019 SPS award will be based on the Company’s performance over the three-year period.period ending December 31, 2019. In determining the annual LTI award, the Committee primarily evaluates individual contributions, but also may consider the other factors described on page 42. The LTI awards granted in February 2016 ranged from 70% to 125%“Elements of each NEO’s target.Compensation — Long-Term Incentives.”
32 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS |
Shareholders Continue to Support our Executive Compensation Program
The Committee and the Board consider the results of the annual shareholder executive compensation“say-on-pay” vote, as well as other compensation-related shareholder votes, in determining the ongoing design and administration of the Company’s executive compensation programs. Shareholders have expressed their overwhelmingstrong support for our executive compensation program, with approximately 93% of votes cast at the 20162017 annual meeting in favor of the advisory vote on executive compensation.
Also, in 2017, shareholders recommended that Cigna hold an annual advisory vote on executive compensation. In light of and consistent with the vote of Cigna shareholders, the Board determined that Cigna will continue to hold future“say-on-pay” votes on an annual basis until the next required vote on the frequency of shareholder votes for this purpose (which will occur no later than 2023).
The Committee also considers feedback on our executive compensation program received as part of our ongoing communications with shareholders.
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EXECUTIVE COMPENSATION POLICIES AND PRACTICES
Compensation Objectives and Practices
Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. By emphasizing performance-based awards over fixed compensation, we strive to motivate superior enterprise results that we believe will result in the creation of meaningful and sustained long-term value for our shareholders.shareholders and exceptional service for our customers.
To further our compensation philosophy, the Committee uses the following compensation practices, processes and instruments:
For information on the oversight of the executive compensation program, see Processes“Processes and Procedures for Determining Executive Compensation beginning on page 48.Compensation” in this CD&A.
| Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | 33 |
COMPENSATION MATTERS |
Strong Compensation Governance and Controls
What We Do | •
• “Double trigger” requirement for change of control benefits.
• Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes to existing programs or policies.
• Robust stock ownership guidelines and
• A disgorgement of awards (clawback) policy beyond the mandates of Sarbanes-Oxley.
• Management of LTIP annual share usage (or burn rate) and total dilution by setting an annual share usage limit, which is below the maximum permitted under the plan.
• Oversight of people development policies
• CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the Committee.
• An annual assessment by the Committee of any potential risks and associated internal controls in our incentive compensation programs and policies.
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What We Don’t Do | • No taxgross-up of severance pay upon a change of control.
• No excessive perquisites.
• No hedging of Cigna stock by
• No discounting, reloading or repricing of stock options without shareholder approval.
• No payment of dividends on unvested shares. |
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Compensation Data
The Committee establishes target compensation levels based on a variety of factors, including a rigorous analysis of relevant published information regarding the pay practicesmarket compensation data of the Company’s compensation peer group and a general industry peer group.
20162017 Peer Groups
Compensation Peer Group. The Committee periodically requests that its independent compensation consultant conduct a review of the composition of the Company’s compensation peer group and offer suggested modifications for benchmarking future executive pay decisions. The Committee’s consultant utilizes multiple sources to develop and recommend potential peer companies for the Committee to consider. Sources for possible peers include companies screened by industry and business focus, peer groups developed by proxy advisory firms, peers identified in various analyst reports, and peers of companies in Cigna’s compensation peer group.
34 | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS |
The table below lists the companies included in the 20162017 compensation peer group, as in effect for the December 2015 determination of 2016 target total direct compensation and total target pay mix.group.
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Aetna, Inc. | ||
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The Hartford Financial Services Group, Inc. | ||
Aflac Incorporated | ||
American International Group, Inc. | Manulife Financial Corporation | |
Anthem, Inc. | MetLife, Inc. | |
Centene Corp. | Prudential Financial, Inc. | |
Chubb Limited | Unum Group | |
A broader cut of survey data, representingsize-adjusted health and life insurance companies, was used to benchmark Mr. Sadler’s compensation because peer group data waswere insufficient or unavailable for his specific role. A list of the companies used to determine Mr. Sadler’s 20162017 target total direct compensation and target total pay mix is included on Annex B.
General Industry Peer Group.The Committee also recognizes that Cigna often competes for talent from companies beyond that of its compensation peer group. As an additional reference to provide a broader perspective on market practices, particularly for those executive officers with job functions that could apply to a variety of industries, the Committee developedutilizes a general industry peer group, beginninggroup. For 2017, the Committee, with the assistance of its independent compensation consultant, reviewed the companies included in 2015. Theits general industry peer group was developed by screening publicly traded, U.S.-based companies within relevantcertain industry classifications.classifications, including insurance, banking and financial services, healthcare equipment and services, pharmaceutical, biotechnology and life sciences, household and personal products, software services and telecommunications. The list was then narrowed to companies whose revenues were within the range of 0.4 to 2.5 times that of Cigna and whose market capitalization was within the range of 0.20.25 to 104 times that of Cigna. The screening process resulted in a group of 4335 companies, that the Committee approved as a general industry peer group. A list of the general industry peer companies is includedwhich are listed on Annex C.
SPS Performance Peer Group. Before 2015, Cigna’s compensation peer group was used to track relative TSR for our long-term incentive program. In consultation with its compensation consultant, the Committee also created a performance peer group to be used exclusively to track relative TSR within the SPS program, effective beginning with the 2015–2015—2017 performance period. The Committee recognized that certain of our competitors were not included in the compensation peer group due to their relative size. While size is a relevant factor in determining a compensation peer group, it is less relevant when measuring relative performance. Other companies were included in the compensation peer group because Cigna competes with them for talent; however, because of significant differences in business focus, these companies do not make optimal comparators for performance purposes. For these reasons, the Committee created an SPS performance peer group comprising the same companies in its compensation peer group, but adding UnitedHealth Group Incorporated and removing Chubb Limited and Prudential Financial, Inc. Beginning with the 2017—2019 performance period, the Committee added Centene, Inc. to the SPS performance peer group.
Updates to Peer Groups for 2017.2018.The Committee removed MetLife, Inc. from the SPS performance peer group beginning in 2018. The Committee determined that, due to a major divestiture and changes in the business focus at MetLife, Inc., it was no longer an optimal comparator for performance purposes given industry differences and differences in business models. In 2016,order to keep the SPS performance peer group robust, the Committee added Prudential Financial Inc., which has overlap with the assistanceCompany’s businesses and is of its compensation consultant, conducted a review of each of the Company’s peer groups. As a result of this analysis, American International Group, Inc.similar scope and Centene, Inc. were addedcomplexity. The Committee did not make changes to the compensation peer group for benchmarking 2017 compensation decisions, and Centene, Inc. was added to the SPS Performance Peer Group for the 2017–2019 performance period. The Committee also reviewed the companies included in itsor general industry peer group by screening publicly traded, U.S.-based companies within relevant industry classifications. The list was then narrowed to companies whose revenues were within the range of 0.4 to 2.5 times that of Cigna and whose market capitalization was within the range of 0.25 to 4 times that of Cigna. The screening process resulted in a group of 35 companies, which are identified on Annex C.for 2018.
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Tally Sheets
The Committee reviews tally sheets for all of its executive officers first when total compensation targets are being reviewed in December and again beforeas part of its annual compensation award decisions are made in February.determination process. The tally sheets summarize historical actual compensation and current target compensation for each officer. The Committee believes that tally sheets are a useful reference tool when considering whether compensation decisions reflect Cigna’s compensation philosophy and performance, but are not a determining factor when making executive compensation decisions.
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Target Total Direct Compensation and Target Pay Mix Emphasizes Performance-Based Compensation
The Committee’s decisions regarding target total direct compensation and target pay mix are consistent with its principles that (1) performance-based compensation should be emphasized over fixed compensation; and (2) long-term incentives should be more heavily weighted than annual incentives. Actual compensation, however, is driven by Company performance.
Target total direct compensation consists of base salary, the annual incentive target and the long-term incentive
target. On an annual basis, theThe Committee approves each of these amounts for each NEO and seekson an annual basis, seeking to target an executive officer’s total direct compensation in a “competitive range” of within 15% of the 50th percentile of the relevant market data.data for the compensation peer group and the general industry peer group. When setting total target direct compensation, the Committee evaluates survey data and other public information, such as proxy data, available for both peer groups.
While the Committee targets total direct compensation in the competitive range, there may be variation in the target pay mix such that target amounts for individual compensation elements may be above or below the competitive range for the individual element. Target total direct compensation for a NEO also may vary outside of the competitive range of the 50th percentile of the survey data for the compensation peer group or general industry peer group due to factors such as performance, tenure in role, range of data available and market and economic conditions. In general, compensation levels for an executive officer who is newer to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance are typically positioned at the higher end of the competitive range. Internal pay comparisons among the NEOs are not generally considered by the Committee for purposes of the Committee’s determination ofdetermining target pay mix and target total direct compensation.
The table below presents each primary element of compensation for the NEOs subject to annual review by the Committee and the positioning of For 2017, target total direct compensation relative to Cigna’sof our NEOs as a group resulted in a target compensation opportunity in the aggregate of within 15% of the 50th percentile of both our compensation peer group and our general industry peer groups. Target total direct compensation reflects the sum of annual base salary and the 2016 targets for the MIP and LTI programs.
| NEO | 2016 ANNUAL BASE SALARY ($) | 2016 MIP TARGET ($) | 2016 LTI TARGET ($) | TARGET TOTAL DIRECT COMPENSATION ($) | TARGET TOTAL DIRECT COMPENSATION POSITION TO COMPENSATION PEER GROUP(1) | TARGET TOTAL DIRECT COMPENSATION POSITION TO GENERAL INDUSTRY PEER GROUP(2) | ||||||
David M. Cordani | 1,200,000 | 2,200,000 | 9,600,000 | 13,000,000 | Within competitive range | Within competitive range | ||||||
Thomas A. McCarthy | 740,000 | 800,000 | 2,400,000 | 3,940,000 | Below competitive range | Below competitive range | ||||||
Nicole S. Jones | 581,138 | 560,000 | 1,424,500 | 2,565,638 | Within competitive range | Within competitive range | ||||||
Matthew G. Manders | 750,000 | 900,000 | 2,600,000 | 4,250,000 | Within competitive range | Within competitive range | ||||||
Jason D. Sadler(3) | 589,463 | 499,745 | 1,000,000 | 2,089,532 | Within competitive range | Below competitive range | ||||||
Herbert A. Fritch(4) | 1,000,000 | 1,000,000 | 2,000,000 | 4,000,000 | Above competitive range | Above competitive range |
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As illustrated in the charts below, performance-based compensation represents approximately 91%90% of Mr. Cordani’s target total direct compensation, including 74%70% in long-term incentives and 17%20% in annual incentives. On average, performance-based compensation represents 78%79% of target total direct compensation for the other NEOs, including an average of 56%57% in long-term incentives and 22% in annual incentives. These percentages are targets only and will not match the percentages calculable from the actual compensation amountspaid reflected in the Summary Compensation Table on page 54.Table.
CEO TARGET PAY MIX | OTHER NEO AVERAGE TARGET PAY MIX |
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Cigna |
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COMPENSATION MATTERS
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Cigna’s 20162017 executive compensation program consists of the following elements:
ELEMENT | PURPOSE | |||
Base salary | Fixed portion of total direct compensation, set with reference to competitive market data and designed to attract and retain key talent. | |||
Management Incentive Plan (MIP) | Performance-based cash compensation designed to reward the achievement of annual enterprise results relative topre-established goals, as well as individual performance, accomplishments and contributions. | |||
Long-Term | Stock Options | Performance-based compensation, the potential realized value of which is determined by stock price appreciation from the date of grant through the date of exercise. | ||
Strategic Performance Shares | Performance-based compensation, the payout of which is based upon the achievement ofpre-determined enterprise goals and the Company’s relative TSR over a three-year performance period. | |||
Retirement and Deferred Compensation |
Savings-based component that is aligned to competitive market practice | |||
Limited Perquisites and Other Benefits | Limited perquisites that are designed to attract and retain key talent or to provide for the safety and security of executive officers. | |||
The
Actions Impacting 2017 Compensation
Promotions. In connection with Mr. Palmer’s promotion to Executive Vice President, Chief Financial Officer in June 2017, the Committee reviewed and approved certain changes to compensation programs affectinghis base salary, 2017 compensation. The Committee approved a new performance measureMIP target and LTI target. In addition, Mr. Palmer was awarded transitional SPSs for the 2017 MIP as described on page 42, approved changes to its various peer groups as described on page 33, and approved an alternative ranking methodology should the number of companies in the relevant SPS peer group fall below 10,2017-2019 performance period, as further described on page 45.44. In connection with Mr. Hocevar’s promotion to President, Strategy, Segments and Solutions in February 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. The Committee approved the base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar following a review of the market data for both the compensation peer group and the general industry peer group. The base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar are reflected in the tables on pages 38, 41 and 44, respectively.
Market-Based Adjustments. Due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation, the Committee and, with respect to Mr. Cordani, the Board, had not approved increases to MIP targets since December 2014 or base salaries since March 2015 for most executive officers. In July 2017, following termination of the merger agreement, the Committee and, with respect to Mr. Cordani, the Board reviewed and approved adjustments to the base salary and 2017 MIP targets for Mr. Cordani, Ms. Jones and Mr. Sadler. The Committee believed that these adjustments were necessary to maintain the competitive positioning of target total direct
compensation. The base salary increases were effective July 31, 2017 and are reflected in the table on page 38. The 2017 MIP targets are reflected in the table on page 41.
Base Salary
Base salary | ||||||||
Base salary representsis the only fixed portion of a NEO’s total target direct compensation and, consistent with the Committee’s philosophy that executive pay should strongly align with the interests of our shareholders, represents a small portion of total target direct compensation.
Base salary levels are set with reference to both competitive market data and individual performance. Base salaries are reviewed annually and may be adjusted as a result of updated market datainformation and an assessment of an executive’s role and performance contributions, including the executive’s demonstration of Cigna’s core values and the achievement of the expectations associated
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COMPENSATION MATTERS |
with his or her role. The overall salary budget also is a factor in determiningAs further described above, the extent ofCommittee, and with respect to Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. Sadler’s base salary adjustments.to maintain the competitive positioning of their target total direct compensation. The average base salary increase for these NEOs was 12%. Base salaries for these executive officers had not been increased since March 2015 due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation.
The table below shows base salaries for each of the NEOs. The base salaries for Mr. Cordani, Ms. Jones and Mr. Sadler reflect the increases approved in July 2017. The base salaries for Mr. Palmer and Mr. Hocevar reflect the base salary levels approved in connection with their promotions.
| NEO | BASE SALARY ($) | |
David M. Cordani | ||
Eric P. Palmer | 675,000 | |
Christopher J. Hocevar | 550,000 | |
Nicole S. Jones | 630,000 | |
Jason D. Sadler | 648,837 | |
Thomas A. McCarthy | 740,000 | |
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Matthew G. Manders | 750,000 | |
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Annual Incentives
Because profitability is critical to the long-term success of the business, no annual incentive award payments are made to executive officers unless the Company achieves a pre-defined minimum level of adjusted income from operations. | ||||||||
Management Incentive Plan (MIP) Overview
Annual incentives are paid primarily under the MIP. The MIP is designed to reward executives for the achievement of short-term, or annual, performance goals. On an annual basis, the Committee approves:
Subject to certain limits described below, the actual annual incentive can range from 0% to 200% of the individual’s target, allowing the Committee to differentiate awards based on an individual’s contributions and how those contributions impacted the attainment of enterprise goals. This includes factors such as the extent to which an executive delivers results that provide improved financial performance, customer service or employee engagement
and an executive’s level of innovation and thoughtful risk-taking. At times, the Committee may also use this flexibility to aid in the retention of select key talent and to encourage management to make decisions that could yield lesser results in the short-term, but are in the best interests of the Company’s shareholders over the long-term.talent. For 2016,2017, MIP awards ranged from 50%130% to 80%155% of target for the NEOs serving as executive officers at the end of 2017, based on Company results and individual contributions.
MIP Performance Measures and Goals
Each year, the Committee sets enterprise performance measures, weightings and goals for annual incentive awards based on Cigna’s business priorities and annual operating plan. The operating plan aligns with our strategy, long-term commitment to shareholders and expected performance in the industry. The Committee works with its independent compensation consultant to evaluate the appropriateness of these measures and weightings and the degree of challenge in the MIP performance goals. The measures are designed to align with and drive execution of the Company’s business strategy. For 2016,2017, performance measures included adjusted income from operations, revenue, operating expense ratio improvement and net promoter score (NPS).strategic priorities. More detailed information on these measures is included in the table2017 Performance Goals, Measures and Actual Results table.
In past years, we have included net promoter score (NPS) as a performance measure in the MIP. In 2017, we replaced the former NPS measure with a “strategic priorities” measure to emphasize the importance of incentivizing and recognizing progress in certain areas beyond financial results that support our business strategy. The strategic priorities measure, weighted 20% of the overall MIP value, measures the Company’s progress in three key strategic categories: (1) customer, client and reputational focus (which includes NPS); (2) employee engagement; and (3) enterprise focus on page 39.compliance. The operating expense improvement ratio measure is now weighted 10%. The weightings for the adjusted income from operations and revenue measures, 50% and 20%, respectively, remain unchanged.
For each MIP goal other than NPS,strategic priorities, the Committee specifies certain below target, target and
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above target levels of performance. For NPS,the strategic priorities measure, the Committee considers whether our score remainedevaluates the same, improved or decreased overCompany’s progress among the three key strategic categories against the Company’s performance in the prior year’s score.year. To aid the Committee in setting the financial performance targets, and to assess the reasonableness and rigor of those targets, the Committee’s compensation consultant annually presents a comprehensive report to
the Committee that evaluates Cigna’s historical relationship between pay and performance in comparison with Cigna’s compensation peer group. The compensation consultant also reviews performance goals determined by the Committee in the context of historical performance and analyst expectations of future performance for Cigna and Cigna’s SPS performance peer group.
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Executive Officer MIP Funding and Award Determination Process
The key considerations to funding the MIP and determining individual award amounts are discussed below.
STEP 1 Achieve Earnings Minimum The Committee believes that achieving Cigna’s profitability goals is critically important to the long-term success of the business. In recognition of this importance, the Committee establishes a
STEP 2 Company Performance Drives Funding Level If the Company achieves the earnings minimum, the Committee may fund the executive officer MIP pool from 0% to 200% of
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Measure | Performance | Funding Range | |||||||
Adjusted income from | Above target range | Above 120% to 200% | |||||||
Revenue | Within target range | 80% to 120% | |||||||
Operating expense ratio | Below target range | Less than 80% | |||||||
Strategic Priorities | The Committee evaluates progress in the three key strategic | ||||||||
Adjusted Income from Operations
Revenue
Operating Expense Ratio Improvement
NPS
applies for purposes of that measure. However, the prior year’s score
STEP 3 Award Amounts Based on Individual Contributions to Company Performance Once MIP funding has been determined, the Committee (and for Mr. Cordani, the Board of Directors upon the recommendation of the Committee) assesses each named executive officer’s individual contributions and how such contributions impacted the achievement of the MIP goals to determine the actual award amounts for each NEO. Actual awards can range from 0% to 200% of a NEO’s MIP target, allowing the Committee to differentiate payouts based on each individual’s contributions.
COMPENSATION MATTERS
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2016 Individual MIP Targets and Awards
MIP target levels for the 2016 performance year for the NEOs are set forth in the table below.
In determining actual MIP awards, the Committee (and
Strategy Execution. During 2017, following termination of the merger with Anthem, Mr. Cordani led the evolution of Cigna’sGo strategy toGo Deeper, Go Local and Go Beyond and effectively communicated this evolved strategy to investors, clients, customers and partners. Highlights of the execution of the Company’sGostrategy, include:
Enterprise Leadership. The Board recognized Mr. Cordani’s leadership during a year of significant change and uncertainty, focusing on talent retention, employee development and engagement initiatives. Despite two key retirements, he ensured a strong leadership team remained in place through a number of internal promotions. Throughout 2017, Cigna continued the implementation and execution of the operating model announced in early 2017, which is designed to ensure the executional focus necessary to deliver greater choice, quality, affordability and personalization to Cigna’s customers and clients. In addition, the results of employee engagement efforts were positive and turnover, particularly among key employees, remained low. Cigna also delivered meaningful results on diversity and inclusion efforts.
Regulatory Environment and Compliance. Mr. Cordani represented Cigna and the health care industry in a number of forums in Washington, D.C. and across the country to reinforce the needs of the Company’s customers and clients. In 2017, Cigna restructured the Enterprise Compliance team to further align with Cigna’s strategic plan and operating model. In June 2017, the CMS audit work was completed and Cigna resumed marketing its Medicare Advantage-Prescription Drug and Medicare Part D Plans and enrolling beneficiaries. Cigna’s Seniors business emerged from the audit with a strong operating model and a continued commitment to customer centricity and compliance.
Based on these factors, and in particular given the Company’s strong 2017 financial performance, the positive momentum going into 2018 and Mr. Cordani’s continued focus on execution of the Company’s strategy and leading the organization during a challenging year, the Board awarded Mr. Cordani the Board of Directors upon the recommendation of the Committee) takes an integrated approach, assessing enterprise results together with each named executive officer’s individual contributions during 2016. For the 2016 performance year, the Committee and the Board made annual incentive awards to the NEOs ranging from 50% to 80% of the target award value, as reflected in the following table.
| NEO | 2016 MIP TARGET ($) | MIP MAXIMUM AWARD ($) | ACTUAL MIP PAYOUT ($) | PAYOUT OF TARGET (%) | ||||||||||||
David M. Cordani | 2,200,000 | 4,400,000 | 1,100,000 | 50% | ||||||||||||
Thomas A. McCarthy | 800,000 | 1,600,000 | 536,000 | 67% | ||||||||||||
Nicole S. Jones | 560,000 | 1,120,000 | 431,200 | 77% | ||||||||||||
Matthew G. Manders | 900,000 | 1,800,000 | 675,000 | 75% | ||||||||||||
Jason D. Sadler | 499,745 | 999,490 | 399,796 | 80% | ||||||||||||
Herbert A. Fritch(1) | 1,000,000 | 2,000,000 | 0 | 0% | ||||||||||||
Mr. Cordani
In early2017 of $4,000,000, or 143% of his 2017 the Committee, together with the independent Chairman of the Board, assessed the performance of Mr. Cordani in the context of the overall Company performance. This assessment included a review of the Company’s financial performance in 2016 as well as Mr. Cordani’s individual contributions. Following this review, the Committee made certain recommendations to the Board relating to Mr. Cordani’s MIP award for 2016. The Board considered these recommendations as part of its own independent review of Mr. Cordani’s performance. More specifically, the Board considered the following factors:
Enterprise Performance. Consolidated revenue increased 5% to $39.7 billion. Consolidated adjusted income from operations for 2016 was $2.1 billion, compared to $2.3 billion in 2015. These results reflect strong performance in Cigna’s Commercial Healthcare and Global Supplemental Benefits businesses as well as challenges during the year related to the Group Disability and Life and Seniors businesses.
During the second half of the year, however, the Company made notable progress addressing the challenges in the Group Disability and Life and Seniors businesses. Specifically, we gained traction in the Group Disability business as the claims process modifications made earlier in 2016 continued to mature, we experienced more stable claims in the Life business and, within Seniors, we made progress with our remediation efforts and are in the latter stages of our audit response work. The Board recognized that, as a result of these efforts, the Company concluded 2016 with strong momentum that positions Cigna for attractive earnings and customer growth in 2017.
Strategy Execution. During 2016, Mr. Cordani oversaw development of our sovereign strategy to ensure that Cigna is well positioned for both a combination with Anthem or continuing as a sovereign company. Mr. Cordani also continued the advancement of the Company’sGo Deep, Go Global, Go Individualstrategy, highlighted by:
Enterprise Leadership. The Board recognized Mr. Cordani’s leadership during a year of significant change and uncertainty, focusing on talent retention, employee development and engagement initiatives. Cigna developed operating
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model changes, which were announced in early 2017 and are designed to ensure the executional focus necessary to deliver greater choice, quality, affordability and personalization to Cigna’s customers and clients. As evidence of Cigna’s strategic succession planning efforts, three leaders were appointed to the Enterprise Leadership Team. Cigna also delivered solid results on diversity and inclusion efforts.
Customer, Client and Partner Initiatives. Mr. Cordani continued Cigna’s customer-centric efforts to define and deliver value for targeted customer segments. While the Company did experience a decrease in its 2016 NPS score, NPS results within the Group Disability and Life and Seniors business were solid despite the challenges those businesses faced, indicating continued strong customer value and experience. In addition, Mr. Cordani represented Cigna and the health care industry in a number of forums in Washington, D.C. and across the country to ensure focus on the needs of the Company’s customers and clients.
Proposed Merger with Anthem. Cigna committed its full support – which included work by hundreds of associates and hundreds of millions of dollars in expenditures – to the regulatory approval process led by Anthem. Cigna deployed a significant number of key leaders and talent across the organization to address Department of Justice information requests in a timely and thorough manner, and to advance integration planning and “Day 1” readiness work in collaboration with Anthem.
Based on these factors, and in particular given the Company’s 2016 financial performance, the positive momentum going into 2017 and Mr. Cordani’s continued focus on executing the Company’s strategy and leading the organization during a challenging year, the Board awarded Mr. Cordani a MIP payout for 2016 of $1,100,000, or 50% of his 2016 MIP target.
Other NEOsRetirement and Deferred Compensation
For all other NEOs, Mr. Cordani makes recommendationsSavings-based component that is aligned to the Committee regarding MIP awards based on his evaluation of each NEO’s performancecompetitive market practice and contributions to enterprise goals. The Committee considers Mr. Cordani’s recommendations when determining MIP awards. While not exhaustive, below are certain key factors the Committee considered when making award determinations.
Mr. McCarthy.As Cigna’s Chief Financial Officer, Mr. McCarthy has continued to lead productive engagement between business teams and their financial counterparts. While financial results varied across the Company’s businesses, Mr. McCarthy’s leadership in the management and development of reporting and financial processes and systems helped to deliver strong results in the U.S. Commercial and Global Supplemental Benefits businesses and to drive improvements in the Group Disability and Life and Seniors businesses in the second half of the year. Mr. McCarthy was critical in executing the Company’s investment strategy to deliver investment income and achieving Cigna’s capital management objectives. Under his leadership, Cigna has maintained its improved and favorable credit agency ratings, which will continue to provide Cigna with financial flexibility. In addition, Mr. McCarthy has actively supported the development of the Company’s strategic framework and the development and expansion of the Company’s delivery systems partnershipsincludes 401(k) plans and a new supply chain management model throughout the enterprise. As a result of Mr. McCarthy’s contributions in 2016, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment of $536,000, or 67% of his target.voluntarynon-qualified
Ms. Jones.As Executive Vice President and General Counsel, Ms. Jones continued to lead Cigna’s legal, compliance and government affairs functions in 2016 and continued to strengthen the partnership across these functions and between them and the Company’s business leaders. During the past year, Ms. Jones led a centralization and reorganization of the Company’s compliance function and developed and staffed compliance initiatives to advance the HealthSpring remediation process and audit response efforts and to improve compliance communications throughout the enterprise. In addition, with respect to the proposed merger with Anthem, Ms. Jones provided key strategic legal counsel, directed critical regulatory support and participated in integration planning efforts. As a result of Ms. Jones’ contributions in 2016, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment of $431,200, or 77% of her target.
Mr. Manders.Mr. Manders continued to lead the U.S. Commercial and Group insurance operations in 2016. Under his leadership, the U.S. Commercial business delivered strong results, exceeding aggressive revenue and earnings targets in a challenging environment. While the Group business did deferred compensation program that does not meet earnings targets for the full year, earnings improved markedly in the second half of the year. Mr. Manders continued to make meaningful progress advancing strategic initiatives, including the localization strategy and the development of critical technology and business process capabilities. Mr. Manders also led a restructuring of Cigna’s disability model, with a focushave any Company contributions. U.S.-based NEOs hired before July 1, 2009 have accrued benefits from defined benefit pension plans that were frozen on enhancing the model’s short-term disability and long-term disability transition process. In addition to these contributions, Mr. Manders was key in the development of Cigna’s strategy and in the integration planning efforts related to the proposed merger with Anthem. As a result of his contributions, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment to Mr. Manders of $675,000, or 75% of his target.
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Mr. Sadler.Mr. Sadler continued to serve as President of Cigna’s International Markets business in 2016, delivering strong performance, particularly in the Global Supplemental Benefits business. Mr. Sadler was critical to the development and execution of our international strategy, leading acquisitions of innovative technologies, initiating product launches and significantly increasing brand equity and customer satisfaction throughout international markets. As a result of Mr. Sadler’s contributions in 2016, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment of $399,796, or 80% of his target.
2017 MIP Changes
For 2017, the Committee has added a new performance measure to the MIP plan — strategic priorities. This measure will evaluate Company performance in the following areas: (1) customer, client and reputation focus (which includes NPS), (2) employee engagement and (3) enterprise focus on compliance. NPS will be removed as a separate measure.
Adjusted income from operations and revenue will remain in the plan, with continued weightings of 50% and 20%, respectively, The operating expense improvement ratio measure will remain as well, with a new weighting of 10%. Strategic priorities will be weighted 20%.
Long-Term Incentives
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LTI Overview
Long-term incentivesLimited Perquisites and Other Benefits
Limited perquisites that are administered underdesigned to attract and retain key talent or to provide for the Cigna Long-Term Incentive Plansafety and are delivered annually through a mixsecurity of strategic performance shares (SPSs) executive officers.
Actions Impacting 2017 Compensation
Promotions. In connection with Mr. Palmer’s promotion to Executive Vice President, Chief Financial Officer in June 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. In addition, Mr. Palmer was awarded transitional SPSs for the 2017-2019 performance period, as further described on page 44. In connection with Mr. Hocevar’s promotion to President, Strategy, Segments and Solutions in February 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. The Committee approved the base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar following a review of the market data for both the compensation peer group and the general industry peer group. The base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar are reflected in the tables on pages 38, 41 and 44, respectively.
Market-Based Adjustments. Due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation, the Committee and, with respect to Mr. Cordani, the Board, had not approved increases to MIP targets since December 2014 or base salaries since March 2015 for most executive officers. In July 2017, following termination of the merger agreement, the Committee and, with respect to Mr. Cordani, the Board reviewed and approved adjustments to the base salary and 2017 MIP targets for Mr. Cordani, Ms. Jones and Mr. Sadler. The Committee believed that these adjustments were necessary to maintain the competitive positioning of target total direct
compensation. The base salary increases were effective July 31, 2017 and are reflected in the table on page 38. The 2017 MIP targets are reflected in the table on page 41.
Base Salary
Base salary | ||||||||
Base salary is the only fixed portion of a NEO’s total target direct compensation and, consistent with the Committee’s philosophy that executive pay should strongly align with the interests of our shareholders, represents a small portion of total target direct compensation.
Base salary levels are set with reference to both competitive market data and individual performance. Base salaries are reviewed annually and may be adjusted as a result of updated market information and an assessment of an executive’s role and performance contributions, including the executive’s demonstration of Cigna’s core values and the achievement of the expectations associated
| Cigna 2018 Notice of Annual Meeting of Shareholders and | 37 |
COMPENSATION MATTERS |
with his or her role. As further described above, the Committee, and with respect to Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. Sadler’s base salary to maintain the competitive positioning of their target total direct compensation. The average base salary increase for these NEOs was 12%. Base salaries for these executive officers had not been increased since March 2015 due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation.
The table below shows base salaries for each of the NEOs. The base salaries for Mr. Cordani, Ms. Jones and Mr. Sadler reflect the increases approved in July 2017. The base salaries for Mr. Palmer and Mr. Hocevar reflect the base salary levels approved in connection with their promotions.
| NEO | 2017 ANNUAL BASE SALARY ($) | |
David M. Cordani | 1,400,000 | |
Eric P. Palmer | 675,000 | |
Christopher J. Hocevar | 550,000 | |
Nicole S. Jones | 630,000 | |
Jason D. Sadler | 648,837 | |
Thomas A. McCarthy | 740,000 | |
Matthew G. Manders | 750,000 |
Annual Incentives
Because profitability is critical to the success of the annual incentive award payments are made to executive officers unless the Company achieves a pre-defined minimum level of
| ||||||||
Management Incentive Plan (MIP) Overview
Annual incentives are paid under the MIP. The MIP is designed to reward executives for the achievement of short-term, or annual, performance goals. On an annual basis, the Committee approves:
Subject to certain limits described below, the actual annual incentive can range from 0% to 200% of the individual’s target, allowing the Committee to differentiate awards based on an individual’s contributions and how those contributions impacted the attainment of enterprise goals. This includes factors such as the extent to which an executive delivers results that provide improved financial performance, customer service or employee engagement and an executive’s level of innovation and thoughtful risk-taking. At times, the Committee may also use this flexibility to aid in the retention of select key talent. For 2017, MIP awards ranged from 130% to 155% of target for the NEOs serving as executive officers at the end of 2017, based on Company results and individual contributions.
MIP Performance Measures and Goals
Each year, the Committee sets enterprise performance measures, weightings and goals for annual incentive awards based on Cigna’s business priorities and annual operating plan. The operating plan aligns with our strategy, long-term commitment to shareholders and expected performance in the industry. The Committee works with its independent compensation consultant to evaluate the appropriateness of these measures and weightings and the degree of challenge in the MIP performance goals. The measures are designed to align with and drive execution of the Company’s business strategy. For 2017, performance measures included adjusted income from operations, revenue, operating expense ratio improvement and strategic priorities. More detailed information on these measures is included in the 2017 Performance Goals, Measures and Actual Results table.
In past years, we have included net promoter score (NPS) as a performance measure in the MIP. In 2017, we replaced the former NPS measure with a “strategic priorities” measure to emphasize the importance of incentivizing and recognizing progress in certain areas beyond financial results that support our business strategy. The strategic priorities measure, weighted 20% of the overall MIP value, measures the Company’s progress in three key strategic categories: (1) customer, client and reputational focus (which includes NPS); (2) employee engagement; and (3) enterprise focus on compliance. The operating expense improvement ratio measure is now weighted 10%. The weightings for the adjusted income from operations and revenue measures, 50% and 20%, respectively, remain unchanged.
For each MIP goal other than strategic priorities, the Committee specifies certain below target, target and
38 | Cigna 2018 Notice of
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above target levels of the market median, the Committee increased Mr. Manders’ 2016 LTI target by $400,000.
2016 LTI awards ranged from 70% to 125% of each NEO’s target. These awards were delivered 50% in stock options and 50% in SPS awards having a 2016–2018 performance period. The Committee believes this mix provides an appropriate balance between emphasizing stock price appreciation and enterprise performance. For the strategic priorities measure, the Committee evaluates the Company’s progress among the three key strategic categories against the Company’s performance in the prior year. To aid the Committee in setting the financial performance targets, and to assess the reasonableness and rigor of those targets, the Committee’s compensation consultant annually presents a comprehensive report to
the Committee that evaluates Cigna’s historical relationship between pay and performance in comparison with Cigna’s compensation peer group. The compensation consultant also reviews performance goals determined by the Committee in the context of historical performance and analyst expectations of future performance for Cigna and Cigna’s SPS performance peer group.
Executive Officer MIP Funding and Award Determination Process The key considerations to funding the MIP and determining individual award amounts are discussed below.
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STEP 1 Achieve Earnings Minimum The Committee believes that achieving Cigna’s profitability goals is critically important to the long-term success of the business. In recognition of this importance, the Committee establishes a minimum level of adjusted income from operations that must be achieved for the year in order for any MIP award to be earned. If the Company does not meet thatpre-defined minimum level, then no annual incentives will be paid to executive officers. STEP 2 Company Performance Drives Funding Level If the Company achieves the earnings minimum, the Committee may fund the executive officer MIP pool from 0% to 200% of the aggregate targets based upon whether each performance measure is below target, at target, or above target. The following table sets forth the ranges between which the MIP pool may be funded for each performance measure, in each case, assuming the earnings minimum has been achieved:
Measure Performance Funding Range Above target Above 120% to Revenue Within target range 2016 LTI TARGET ($) LTI MAXIMUM AWARD ($) ACTUAL LTI GRANT ($) LTI AWARD OF TARGET (%) David M. Cordani Thomas A. McCarthy Nicole S. Jones Matthew G. Manders Jason D. Sadler Herbert A. Fritch Operating expense ratio Below target range Less than 80% Strategic Priorities The Committee evaluates progress in the three key strategic | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company’s actual performance relative to each measure determines which funding range applies for purposes of that measure. However, the Committee maintains the discretion to determine at which point within that range the actual funding of the MIP pool will be set. In setting the actual funding percentage for each measure, the Committee considers Cigna’s performance as a whole (both in absolute terms and relative to competitors), as well as Cigna’s achievement of the goals within the performance measure. The MIP funding mechanisms ensure that a minimum level of performance is achieved and that NEOs’ MIP awards reflect the Company’s performance.
STEP 3
Award Amounts Based on Individual Contributions to Company Performance
Once MIP funding has been determined, the Committee (and for Mr. Cordani, the Board of Directors upon the recommendation of the Committee) assesses each named executive officer’s individual contributions and how such contributions impacted the achievement of the MIP goals to determine the actual award amounts for each NEO. Actual awards can range from 0% to 200% of a NEO’s MIP target, allowing the Committee to differentiate payouts based on each individual’s contributions.
| Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | 39 |
COMPENSATION MATTERS |
2017 Performance Goals, Measures and Actual Results
The Committee considers the appropriate measures for the MIP program for the upcoming year at its October and December meetings, and then considers and approves the actual performance targets at its meetings in January and February. For 2017, the Committee established the performance measures, weightings and target performance goals below, which were used to determine the range of potential aggregate funding for MIP awards.
MEASURE ALIGNMENT WITH WEIGHTING TARGET PERFORMANCE GOALS ACTUAL RESULT Adjusted income from operations* growth 24.5% growth was above target range The target was set as a year-over-year growth goal for Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments. Revenue growth 4.9% growth was within target range The target was set as a year-over-year growth goal for Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments. Operating expense ratio improvement improvement 2.3% improvement was within target range The target was set as a composite objective, which measures operating expense improvement in Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments versus 2016. Operating expenses are expressed as a percent of revenue for each segment. Strategic Priorities Above target performance reflects: • Strong progress in community health and client retention • A higher NPS score relative to 2016 • Strong employee engagement results • Advancement of enterprise compliance initiatives The categories for the strategic priorities measure for 2017 include (1) customer, client and reputational focus; (2) employee engagement; and (3) enterprise focus on compliance. In setting the target performance goals for each measure in February 2017, the Committee considered Cigna’s publicly disclosed earnings estimates, historical Company and SPS performance peer company results, analyst commentary and the Company’s then-current expectations for the industry and economic environment. The Committee considered 40 Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement COMPENSATION MATTERS various market forces impacting the Company and related uncertainties, including the expectation that the industry would continue to face significant market changes and disruption in 2017 and initial reactions to the 2016 U.S. election, as well as uncertainty regarding the proposed merger with Anthem. The Committee believed that the target performance goals represented competitively attractive goals that would be challenging to achieve in light of the circumstances facing the Company in 2017. 2017 Individual MIP Targets and Awards MIP target levels for the 2017 performance year for the NEOs are set forth in the table below. As further described on page 37, the Committee, and with respect to Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. Sadler’s 2017 MIP targets to maintain the competitive positioning of their target total direct compensation. The average MIP target increase was 26%. MIP targets for these executive officers had not been increased since December 2014 due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation. The 2017 MIP targets in the table below reflect the approved increases. The 2017 MIP targets for Mr. Palmer and Mr. Hocevar reflect the targets approved in connection with their promotions. In determining actual MIP awards, the Committee (and for Mr. Cordani, the Board of Directors upon the recommendation of the Committee) takes an integrated approach, assessing enterprise results together with each named executive officer’s individual contributions during 2017. Payouts under the 2017 Management Incentive Plan rewarded our NEOs for our strong performance in 2017, reflectingpay-for-performance alignment. NEO 2017 MIP TARGET ($) ACTUAL MIP PAYOUT ($) PAYOUT OF TARGET (%) David M. Cordani Eric P. Palmer Christopher J. Hocevar Nicole S. Jones Jason D. Sadler Thomas A. McCarthy(1) Matthew G. Manders(2) Mr. Cordani In early 2018, the Committee, together with the independent Chairman of the Board, assessed the performance of Mr. Cordani in the context of the overall Company performance. This assessment included a review of the Company’s financial performance in 2017 as well as Mr. Cordani’s individual contributions. Following this review, the Committee made certain recommendations to the Board relating to Mr. Cordani’s MIP award for 2017. The Board considered these recommendations as part of its own independent review of Mr. Cordani’s performance. More specifically, the Board considered the following factors: Enterprise Performance. Cigna’s 2017 results included strong performance across each of our priority growth platforms – Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life, providing Cigna with momentum for continued growth in 2018. Specifically, 2017 enterprise performance included: Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement 41 COMPENSATION MATTERS Strategy Execution. During 2017, following termination of the merger with Anthem, Mr. Cordani led the evolution of Cigna’sGo strategy toGo Deeper, Go Local and Go Beyond and effectively communicated this evolved strategy to investors, clients, customers and partners. Highlights of the execution of the Company’sGostrategy, include: Enterprise Leadership. The Board recognized Mr. Cordani’s leadership during a year of significant change and uncertainty, focusing on talent retention, employee development and engagement initiatives. Despite two key retirements, he ensured a strong leadership team remained in place through a number of internal promotions. Throughout 2017, Cigna continued the implementation and execution of the operating model announced in early 2017, which is designed to ensure the executional focus necessary to deliver greater choice, quality, affordability and personalization to Cigna’s customers and clients. In addition, the results of employee engagement efforts were positive and turnover, particularly among key employees, remained low. Cigna also delivered meaningful results on diversity and inclusion efforts. Regulatory Environment and Compliance. Mr. Cordani represented Cigna and the health care industry in a number of forums in Washington, D.C. and across the country to reinforce the needs of the Company’s customers and clients. In 2017, Cigna restructured the Enterprise Compliance team to further align with Cigna’s strategic plan and operating model. In June 2017, the CMS audit work was completed and Cigna resumed marketing its Medicare Advantage-Prescription Drug and Medicare Part D Plans and enrolling beneficiaries. Cigna’s Seniors business emerged from the audit with a strong operating model and a continued commitment to customer centricity and compliance. Based on these factors, and in particular given the Company’s strong 2017 financial performance, the positive momentum going into 2018 and Mr. Cordani’s continued focus on execution of the Company’s strategy and leading the organization during a challenging year, the Board awarded Mr. Cordani a MIP payout for 2017 of $4,000,000, or 143% of his 2017 MIP target. Retirement and Deferred Compensation Savings-based component that is aligned to competitive market practice and includes 401(k) Limited Perquisites and Other Benefits Limited perquisites Actions Impacting 2017 Compensation Promotions. In connection with Mr. Palmer’s promotion to Executive Vice President, Chief Financial Officer in June 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. In addition, Mr. Palmer was awarded transitional SPSs for the 2017-2019 performance period, as further described on page 44. In connection with Mr. Hocevar’s promotion to President, Strategy, Segments and Solutions in February 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. The Committee approved the base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar following a review of the market data for both the compensation peer group and the general industry peer group. The base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar are reflected in the tables on pages 38, 41 and 44, respectively. Market-Based Adjustments. Due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation, the Committee and, with respect to Mr. Cordani, the Board, had not approved increases to MIP targets since December 2014 or base salaries since March 2015 for most executive officers. In July 2017, following termination of the merger agreement, the Committee and, with respect to Mr. Cordani, the Board reviewed and approved adjustments to the base salary and 2017 MIP targets for Mr. Cordani, Ms. Jones and Mr. Sadler. The Committee believed that these adjustments were necessary to maintain the competitive positioning of target total direct compensation. The base salary increases were effective July 31, 2017 and are reflected in the table on page 38. The 2017 MIP targets are reflected in the table on page 41. Base Salary Base salary Base salary is the only fixed portion of a NEO’s total target direct compensation and, consistent with the Committee’s philosophy that executive pay should strongly align with the interests of our shareholders, represents a small portion of total target direct compensation. Base salary levels are set with reference to both competitive market data and individual performance. Base salaries are reviewed annually and may be adjusted as a result of updated market information and an assessment of an executive’s role and performance contributions, including the executive’s demonstration of Cigna’s core values and the achievement of the expectations associated Cigna 2018 Notice of Annual Meeting of Shareholders and 37COMPENSATION MATTERS
BUSINESS STRATEGYReinforces the importance
of profitable growth
across the enterprise.50% 10.5% to 19.5% Focuses on enterprise
growth, encourages
business decisions that
optimize results for the
enterprise, promotes
collaboration across
business units and drives
customer focus.20% 0.0% to 6.0% Drives continued focus on
delivering ongoing
expense efficiency while
furthering investment
capacity for ongoing
innovation.10% 1.0% to 5.5% Emphasizes the
importance of recognizing
progress in areas beyond
financial results and of
aligning our goals,
contributions and rewards
with our business
strategy.20% The Committee evaluates
progress in each category
compared to 2016.Strategic Performance Shares ProgramOur SPS program is designed to incent and reward superior results achieved through sustained long-term financial discipline and strategic accomplishments that benefit * Cigna and its shareholders over the long-term.GrantsAt the time of grant, a total LTI dollar value is approved for each executive officer. The SPS portion ofthe award (50% of the total LTI value) is converted into a specific number of SPSs on the grant date based onCigna’s stock price on that date.VestingSPSs vest in the first quarter of the year following the end of the three-year performance period.Payout DeterminationThe Committee determines payouts based on Company performance ofpre-established measures during the performance period.Measure: Relative TSR, compounded over the three-year performance periodWeighting: 50%Alignment with Business Strategy: Rewards NEOs for stock performance relative to Cigna’s applicable peer group at the time of the awardComparator:Beginning with the 2015–2017 SPS program, the Committee adopted the SPS performance peer group to measure relative TSR. For the 2014–2016 SPS program, relative TSR is measured against Cigna’s compensation peer group at the time of the awardMeasure: Adjusted income from operationsWeighting: 50%Alignment with Business Strategy: Reinforces the importance of sustained profitable growth across the enterpriseSegments Included: Global Health Care, Global Supplemental Benefits and Group Disability and LifeThreshold Performance: Performance that would result in funding of less than 35% of target yields no payment for this measureFinal Payout is 0 – 200% of the SPSs GrantedSPS awards are ultimately settled in Cigna stock, so the actual value of the earned awards is based onCigna’s stock price at the time of payment.The SPS programs are designed to pay at the competitive median for performance results against stretch targets. Each year, when the Committee approves the performance measures and goals for the SPS performance period, the Committee sets the goals with the expectation that performance resulting in a number of shares paid between 80% and 120% of target would be challenging and not certain, while performance resulting in a number of shares paid over 120% of target would be difficult, but not unattainable.SPS awards with a performance period that began prior to 2015 included revenue as a performance measure. For the2014–2016 program, TSR was weighted 50% anduses adjusted income from operations as the principal financial measure for operating performance because management believes it presents the underlying results of our business operations and permits analysis of trends in underlying revenue, wereexpenses and profitability. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each weighted 25%. In 2014,of the three businesses, see Annex A to this Proxy Statement. As appropriate, adjustments are made for SPS programs with performance periods beginning in 2015,acquisitions, dispositions and the Committee adjusted the performance measuresimplementation of accounting changes to focus on earnings-basedensure comparability of actual results and shareholder return-based metrics and to exclude revenue, which is consistent with current market practices and trends. The Committee believes that these two measures are more effective to evaluate the Company’s long-term success and value created for shareholders. In addition, the removal of revenue as a performance measure in the SPS program helps to mitigate the use of duplicate measures within Cigna’s short-term and long-term incentive plans.targets. 44Cigna 2017 Notice of Annual Meeting of Shareholders and Proxy StatementThe following table shows the performance period for our SPS programs outstanding as of the end of 2016, the grant date, the potential payment date and the performance measures used for each cycle.PERFORMANCEPERIODGRANT DATEPAYMENTDATE(IF EARNED)PERFORMANCE MEASURES(WEIGHTINGS IN %)2014–2016February 20142017Relative TSR1, 3(50%)Adjusted income from operations (25%)Revenue(25%)2015–2017February 20152018Relative TSR2, 3(50%)Adjusted income from operations (50%)2016–2018March 20162019Relative TSR2, 3(50%)Adjusted income from operations (50%)1.The peer group used to measure relative TSR is the compensation peer group in place at the time of award and includes: Aetna, Inc., Aflac Incorporated, Anthem, Inc., Chubb Limited, The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc. and Unum Group.2.The SPS performance peer group, which includes Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc., UnitedHealth Group Incorporated and Unum Group, is used to measure relative TSR.3.In the event the number of companies in the peer group falls below ten during the three-year performance period, the Company’s TSR will be ranked against the remaining companies.2014–2016 SPS ProgramThe performance goals for the 2014–2016 SPSs are presented in the table below, along with actual results for the three-year performance period.MEASUREWEIGHTINGTARGET PERFORMANCE GOALS(DOLLARS IN MILLIONS)ACTUAL RESULT(DOLLARS IN MILLIONS)Relative TSR50% 50th Percentile67th Percentile(151% of target)Adjusted incomefrom operations1, 225% Cumulative adjusted income from operations of $6,584 to $7,379, calculated assuming a compound annual growth rate of 5%–11%$6,724(87.0% of target)Revenue225% Cumulative revenue of $102,881 to $115,384, calculated assuming a compound annual growth rate of 4%–10%$110,641(104.8% of target)1.Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it best reflects the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. Effective January 1, 2015, adjusted income from operations is defined as shareholders’ net income (loss) excluding the followingafter-tax adjustments: net realized investment results, net amortization of other acquired intangible assets and special items. Prior to 2015, and at the time that the Committee approved the 2014–2016 SPS program, Cigna did not exclude net amortization of other acquired intangible assets in the calculation of adjusted income from operations. For this reason, net amortization of other acquired intangible assets is not excluded from the calculation of adjusted income from operations for the 2014–2016 SPS program. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each of the three businesses, see Annex A to this Proxy Statement. As appropriate, adjustments are made for acquisitions, dispositions and the implementation of accounting changes to ensure comparability of actual results and targets.2.Reflects results for Cigna’s three ongoing business segments—Global Health Care, Global Supplemental Benefits and Group Disability and Life.Over the three-year period from 2014 to 2016, three-year annual compounded TSR was 15.1%, which ranked at the 67th percentile relative
AS A PERCENT 2,800,000 4,000,000 143 750,000 975,000 130 500,000 775,000 155 680,000 1,054,000 155 648,837 908,371 140 800,000 400,000 50 900,000 900,000 100 (1) Mr. McCarthy’s Agreement and Release provided that he would receive a 2017 MIP payment of $400,000, or 50% of his target, subject to the applicable peer group companiesCompany’s attainment of 2017 MIP targets.(2) Mr. Manders’ Agreement and was 151%Release provided that he would receive a 2017 MIP payment of target.Based on$900,000, or 100% of his target, subject to the results in the table above, in FebruaryCompany’s attainment of 2017 the Committee approved payout of the 2014–2016 SPSs at 123.5% of target. The calculations utilized to determine the payout were reviewed for accuracy by PricewaterhouseCoopers LLP. See the Outstanding Equity Awards table on page 58 for actual share amounts issued to each NEO and associated market values.MIP targets. Cigna 2017 Notice of Annual Meeting of Shareholders and Proxy Statement45COMPENSATION MATTERS2013–2015 SPS ProgramThe shares earned under the 2013–2015 SPS Program were measured using performance through December 31, 2015 and were delivered to each executive officer in February 2016. The total share value realized by each NEO on the payment date is reflected in the Option Exercises and Stock Vested table on page 60. The performance measures, targets, results and payout for the 2013–2015 SPS program are discussed in greater detail in our definitive proxy statement for our 2016 annual meeting of shareholders, filed with the SEC on March 18, 2016.Consolidated revenue of $41.6 billion, an increase of 5% over 2016;Consolidated adjusted income from operations of $2.7 billion, compared to $2.1 billion in 2016, reflecting increased earnings contributions from each of our business segments;Global medical customer growth of 700,000 customers during the year, totaling 15.9 million customers at year end, driven by strong growth across our Commercial market segments; andAn industry leading medical cost trend, reflecting benefits from increased alignment for our customers and clients, deeper collaborative relationships with providers and differentiated specialty integration models.Strategic investments through the acquisitions of Zurich Middle East, which enabled Cigna to provide more personalized products to individuals, employers and government entities in the Middle East, and Brighter, an innovative technology company working with leading health service and dental organizations to engage patients and providers in personalized and seamlessly integrated experiences to more efficiently deliver higher-value healthcare;The increase in number of members using Cigna One Guide, a personalized multi-modal service experience that supports consumers consultatively at the point they choose a plan, find care and other “moments that matter,” to more than two million Cigna customers; andTargeted initiatives and increased investments that benefit our customers and communities and further promote Cigna’s mission and global brand, including the TV Doctors of America campaign for preventive care, the creation of the Health Improvement Tours featuring health screening, opioid reduction initiatives and veterans support.Retirement Planplans and Supplemental 401(k) PlanAll U.S. full-time employees are eligible for the tax qualified 401(k) Plan, which provides for employee contributions as well as Company matching contributions of up to 4.5% of eligible pay. Certain employees, including the U.S.-based NEOs, are eligible for the Cigna Supplemental 401(k) Plan.The Supplemental 401(k) Plan is a voluntarynon-qualified deferred compensation planprogram that provides an annual credit to employees equal to 1.5% of earnings that cannot be treated as eligible earnings under the regular 401(k) Plan due to Internal Revenue Code limits and cannot be the basis for employee or Company matching contributions under the regular 401(k) Plan. Earnings eligible for the credit are salary and bonus amounts that exceed the IRS annual limit on eligible earnings ($265,000 in 2016) or that an employee defers under the Cigna Deferred Compensation Plan. Credits accumulate with hypothetical interest equal to the rate of return under the 401(k) Plan’s Fixed Income Fund (3.35% as of January 1, 2016 and 3.0% as of January 1, 2017). The account will vest under the same rules that apply to the regular 401(k) Plan. The account balance will be paid after termination of employment in accordance with the plan.Nonqualified Deferred Compensation PlanCigna provides the NEOs and certain other employees with the opportunity to defer base salary and annual incentive awards under the Cigna Deferred Compensation Plan. Cigna does not makehave any contributions to this plan on behalf of employees. This plan provides eligible employees an opportunity to postpone both the receipt of compensation and the income tax onCompany contributions. U.S.-based NEOs hired before July 1, 2009 have accrued benefits from defined benefit pension plans that compensation — typically until after termination of employment with Cigna. Participants elect when to receive payment and can choose either a single lump sum or annual installments. For amounts deferred before 2005, participants can request an accelerated payment of all or part of their account balance subject to a 10% penalty. Otherwise, earlywithdrawals are permitted only under financial hardship circumstances.Additional information about deferred compensation can be found in the Nonqualified Deferred Compensation Table and narrative on page 64.Defined Benefit Pension PlansThe Cigna Pension Plan and the Cigna Supplemental Pension Plan were frozen on July 1, 2009. Benefits earned under these plans have been determined based on eligible earnings through July 1, 2009. The freeze did not affect benefits earned before July 1, 2009. The Company’s NEOs hired before July 1, 2009 participated in the Pension Plan and the Supplemental Pension Plan.Additional information about pension benefits can be found in the Pension Benefits Table on page 61.Retirement Plans forNon-U.S.-based EmployeesMr. Sadler participates in the Mandatory Provident Fund program for Hong Kong employees. Local law requires employees to contribute 5% of their monthly salary up to a maximum amount ($1,500 KHD or approximately $200 USD per month). Employers also are required to contribute 5% of the employee’s monthly salary up to the same maximum amount. Employer contributions vest at a rate of 10% per year and are fully vested after 10 years of service. Participants may withdraw their lump sum benefit upon attaining the normal retirement age of 60.As a citizen of the United Kingdom working in Hong Kong, Mr. Sadler also participates in Cigna’s Third Country National Pension Plan. At the end of each calendar quarter, Cigna allocates a hypothetical contribution equivalent to 9% of eligible base and bonus earnings for the period. The hypothetical balance earns interest based on investment elections. Employees are vested in plan benefits after five years of service. At the time of separation of service from Cigna, Mr. Sadler will receive a lump sum payment of his vested plan benefit.46Cigna 2017 Notice of Annual Meeting of Shareholders and Proxy StatementCOMPENSATION MATTERSCigna’s executive compensation program provides limitedto executive officers, offered primarilythat are designed to attract and retain key talent or to provide for an executive officer’sthe safety and security. Perquisites generally have includedsecurity of executive officers.
represents only 10%
of CEO target pay
and an annual allowance under our executive financial services program (as described below), paymentsaverage of 21% for residential security system monitoring
all other NEOs, with the
balance of target
compensation being
performance-based.maintenance and relocation benefits when a moveProxy Statement
COMPENSATION MATTERS |
with his or her role. As further described above, the Committee, and with respect to Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. Sadler’s base salary to maintain the competitive positioning of their target total direct compensation. The average base salary increase for these NEOs was 12%. Base salaries for these executive officers had not been increased since March 2015 due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation.
The table below shows base salaries for each of the NEOs. The base salaries for Mr. Cordani, Ms. Jones and Mr. Sadler reflect the increases approved in July 2017. The base salaries for Mr. Palmer and Mr. Hocevar reflect the base salary levels approved in connection with their promotions.
| NEO | 2017 ANNUAL BASE SALARY ($) | |
David M. Cordani | 1,400,000 | |
Eric P. Palmer | 675,000 | |
Christopher J. Hocevar | 550,000 | |
Nicole S. Jones | 630,000 | |
Jason D. Sadler | 648,837 | |
Thomas A. McCarthy | 740,000 | |
Matthew G. Manders | 750,000 |
Annual Incentives
Management Incentive Plan (MIP) Overview
Annual incentives are paid under the MIP. The MIP is designed to reward executives for the achievement of short-term, or annual, performance goals. On an annual basis, the Committee approves:
Subject to certain limits described below, the actual annual incentive can range from 0% to 200% of the individual’s target, allowing the Committee to differentiate awards based on an individual’s contributions and how those contributions impacted the attainment of enterprise goals. This includes factors such as the extent to which an executive delivers results that provide improved financial performance, customer service or employee engagement and an executive’s level of innovation and thoughtful risk-taking. At times, the Committee may also use this flexibility to aid in the retention of select key talent. For 2017, MIP awards ranged from 130% to 155% of target for the NEOs serving as executive officers at the end of 2017, based on Company results and individual contributions.
MIP Performance Measures and Goals
Each year, the Committee sets enterprise performance measures, weightings and goals for annual incentive awards based on Cigna’s business priorities and annual operating plan. The operating plan aligns with our strategy, long-term commitment to shareholders and expected performance in the industry. The Committee works with its independent compensation consultant to evaluate the appropriateness of these measures and weightings and the degree of challenge in the MIP performance goals. The measures are designed to align with and drive execution of the Company’s business strategy. For 2017, performance measures included adjusted income from operations, revenue, operating expense ratio improvement and strategic priorities. More detailed information on these measures is included in the 2017 Performance Goals, Measures and Actual Results table.
In past years, we have included net promoter score (NPS) as a performance measure in the MIP. In 2017, we replaced the former NPS measure with a “strategic priorities” measure to emphasize the importance of incentivizing and recognizing progress in certain areas beyond financial results that support our business strategy. The strategic priorities measure, weighted 20% of the overall MIP value, measures the Company’s progress in three key strategic categories: (1) customer, client and reputational focus (which includes NPS); (2) employee engagement; and (3) enterprise focus on compliance. The operating expense improvement ratio measure is now weighted 10%. The weightings for the adjusted income from operations and revenue measures, 50% and 20%, respectively, remain unchanged.
For each MIP goal other than strategic priorities, the Committee specifies certain below target, target and
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COMPENSATION MATTERS
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above target levels of performance. For the strategic priorities measure, the Committee evaluates the Company’s progress among the three key strategic categories against the Company’s performance in the prior year. To aid the Committee in setting the financial performance targets, and to assess the reasonableness and rigor of those targets, the Committee’s compensation consultant annually presents a comprehensive report to
the Committee that evaluates Cigna’s historical relationship between pay and performance in comparison with Cigna’s compensation peer group. The compensation consultant also reviews performance goals determined by the Committee in the context of historical performance and analyst expectations of future performance for Cigna and Cigna’s SPS performance peer group.
