This excerpt taken from the UNH DEF 14A filed Apr 23, 2009.
The Compensation Committee determines the overall compensation for the named executive officers based on its own evaluation, including internal pay equity considerations, tenure and performance of various executive officers, input from its independent consultant and benchmark data. The Compensation Committee believes that total compensation for named executive officers should be heavily weighted toward long-term performance-based compensation, but it does not target a specific mix of compensation between annual and long-term compensation or between equity and cash compensation. In 2008, long-term (cash and equity) compensation represented approximately 70% of the total mix of base salary, annual and long-term compensation granted to named executive officers other than the CEO because our CEO did not receive any equity awards in 2008.
In general, the Compensation Committees goal is to achieve total compensation for each named executive officer, as well as all executive officers as a group, that falls within a range of 50-75% of benchmark data if paid at target. In 2008, the Compensation Committee discontinued its previous practice of reviewing individual components of compensation against benchmark data because it felt this approach placed undue emphasis on the individual elements of compensation instead of its desired focus on the competitive positioning of total compensation.
In 2007, the Compensation Committee, with the advice of its independent compensation consultant, established the peer group below. In addition to reviewing data from peer group companies when considering annual cash incentive awards for 2008, long-term cash incentive awards for the 2006-2008 performance period and equity awards made in February 2009, the Compensation Committee also considered general industry data maintained by Towers Perrin, which includes approximately 800 companies, as well as a subset of the companies included in the general industry data, with revenues in excess of $50 billion.
The Compensation Committee reviewed the general industry data because it contains more companies and is more robust than the peer group and allows for adjustments to ensure comparability based on size or scope. For example, the Compensation Committee believes that the data derived from the peer group companies does not contain comparable roles for two of the Companys executive officers. In 2009, the Compensation Committee intends to conduct a best practices review of our peer group. The peer group companies are:
Companies highlighted in italics are the five largest publicly traded managed care companies with which we compete. The Company does not feel, however, that it is appropriate to benchmark its compensation practices only against other managed care companies because we are larger, more complex and more diverse than those companies, and we compete for talent and capital with other successful large companies without regard to industry. Companies marked with an asterisk were acquired during 2008.