Unum Group DEF 14A 2009
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
Notice of Annual Meeting
Annual Meeting of Stockholders
Friday, May 22, 2009
2211 Congress Street, Portland, Maine
April 8, 2009
Unum Group Stockholders:
On behalf of the board of directors and all of the employees of Unum, it is my pleasure to invite you to our 2009 Annual Meeting of Stockholders on Friday, May 22, 2009. This years meeting will be held at 10:00 a.m. Eastern Daylight Time at our corporate offices located at 2211 Congress Street in Portland, Maine.
The purpose of the meeting is to elect four directors for terms expiring in 2012 and ratify Ernst & Young LLP as the companys independent registered public accounting firm for 2009. We will also consider any other business that may properly come before the meeting.
The Board of Directors recommends that you vote in favor of Items 1 and 2, which are described in the attached Proxy Statement. For more information on attending the Annual Meeting, voting eligibility and how to cast a ballot on these measures, please review the section titled About the Proxy and Annual Meeting that begins on page 7.
We are again furnishing proxy materials to stockholders over the Internet, which allows us to lower our costs and reduce the environmental impact of our Annual Meeting. On April 8, 2009, we began mailing to certain stockholders a Notice Regarding the Availability of Proxy Materials. The notice contains instructions on accessing our 2009 Proxy Statement and Annual Report from our website, and how you can vote online. Some stockholders have requested or are required by law to receive the Proxy Statement and Annual Report by mail.
Thank you for your support of Unum Group. We look forward to seeing you at our Annual Meeting.
April 8, 2009
Notice of 2009 Annual Meeting of Stockholders
Susan N. Roth
Vice President, Transactions, SEC and Corporate Secretary
Table of Contents
About the Proxy and Annual Meeting
You are receiving these materials in connection with the solicitation of proxies on behalf of the Board of Directors of Unum Group to be voted at the Annual Meeting of Stockholders on Friday, May 22, 2009, or any adjournment or postponement of the Annual Meeting. The materials are being provided by Internet, by e-mail, or by mail if you have requested this method or it is required. This Proxy Statement and form of proxy are first being made available to stockholders on or about April 8, 2009.
The Annual Meeting will take place at 10 a.m. Eastern Daylight Time on May 22, 2009, at our corporate offices at 2211 Congress Street, Portland, Maine 04122.
What is included in these materials?
These materials include our Proxy Statement for the Annual Meeting and our 2008 Annual Report to stockholders, which includes audited consolidated financial statements. If you received a printed version of these materials by mail, in addition to the above you will also receive a proxy card or voting instruction card for the meeting.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full printed set?
This year we are pleased to again be using the Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to most of our stockholders a Notice Regarding the Availability of Proxy Materials on the Internet instead of a printed set of materials. All stockholders receiving the notice will have the ability to access our materials over the Internet and to request that current or future copies of these materials be sent by mail or e-mail. Instructions on how to access these materials over the Internet or to request a printed copy can be found on the meeting notice, which will also serve as an admission ticket for the Annual Meeting.
How can I get electronic access to the proxy materials?
Instructions on how to access electronic materials are included in the notice regarding the availability of our proxy materials and the proxy card or voting instruction card. These provide information on how to:
Our proxy materials are also available on our website at www.unum.com in the Investors area under Proxy Materials. Choosing to access your future proxy materials electronically is not only environmentally responsible, but will also reduce the cost of printing and distributing these documents. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions and website links to where those materials are available and to vote by proxy. Your choice to receive proxy materials by e-mail will remain in effect until you change it.
Where are Unums principal offices located?
Our principal executive offices are located at 1 Fountain Square, Chattanooga, Tennessee 37402. Our main telephone number is 423-294-1011.
How can I attend the Annual Meeting?
You will need an admission ticket or proof of ownership of the companys common stock as of March 25, 2009, and valid picture identification (such as a drivers license or passport) to enter the Annual Meeting. If you are a stockholder of record, the Notice Regarding the Availability of Proxy Materials will serve as an admission ticket, or if you received a printed set of proxy materials, an admission ticket is attached to your proxy card. Bring either the notice or detach and bring the ticket with you to the meeting.
If your shares are held beneficially in the name of a bank, broker or other holder of record and you plan to attend the meeting, you may present a recent brokerage statement or letter from a bank or broker as an example of proof of ownership. If you arrive at the meeting without an admission ticket, you will be admitted only after we can verify that you are a stockholder.
There will be signs on the corporate campus in Portland, Maine, directing you to parking and the meeting location. Directions to this location are provided in Appendix B of this Proxy Statement and are also available on our website at www.unum.com/directions. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the meeting. For your safety and that of other stockholders, we reserve the right to inspect all personal items prior to admission.
Can I listen to the Annual Meeting on the Internet?
Yes, you can access a live audio webcast of the Annual Meeting on our website at www.unum.com, in the Investors area. To register, access the webcast on the website and provide the information requested. The meeting will begin at 10:00 a.m. Eastern Daylight Time on Friday, May 22, 2009, and be archived on our website through June 5, 2009.
Who can vote at the Annual Meeting?
Holders of the companys common stock at the close of business on March 25, 2009, are entitled to receive this notice and to vote their shares at the Annual Meeting. On that date there were approximately 331,208,574 shares of our common stock outstanding. The common stock is the only class of equity securities entitled to be voted at the meeting. Each share of common stock is entitled to one vote on each matter properly brought before the meeting.
If your shares are registered directly in your name, you are the holder of record and these proxy materials have been sent directly to you by the company.
If you own your shares in a stock brokerage account or through a bank or other holder of record, you are the beneficial owner of shares held in street name. As a result, these proxy materials have been forwarded to you by your broker, bank or other holder of record. As the beneficial owner, you have the right to direct the holder of record how to vote your shares. You must follow the instructions provided to you by the holder of record to have your vote counted.
How do I vote?
You may cast your vote prior to the Annual Meeting by using one of three methods:
If you are a holder of record you may vote by Internet at www.envisionreports.com/unm. Internet voting is available 24 hours a day, although your vote by Internet must be received by 2:00 a.m. Eastern Daylight Time, May 22, 2009. You will need the control number included on the notice you received regarding the Internet availability of proxy materials or, if you are receiving a printed copy of these materials, on the enclosed proxy card. If you vote by Internet, do not return your proxy card or voting instruction card. If you hold your shares in street name, please refer to the voting instruction card provided to you by your broker, bank or other holder of record for Internet voting instructions.
If you are a holder of record, you may vote by calling 800-652-VOTE (8683). If you are receiving a printed copy of these proxy materials, this toll free number is also included on the proxy card. Telephone voting is available 24 hours a day, although your vote by phone must be received by 2:00 a.m. Eastern Daylight Time, May 22, 2009. You will need the control number included on the notice you received regarding the Internet availability of proxy materials or, if you are receiving a printed copy of these materials, on the enclosed proxy card. If you vote by telephone, do not return your proxy card or voting instruction card. If you hold your shares in street name, please refer to the voting instruction card or notice of Internet availability of proxy materials provided to you by your broker, bank or other holder of record for telephone voting instructions.
If you are a holder of record and received a printed copy of the proxy materials, complete, sign, and date the proxy card and return it in the accompanying pre-addressed, stamped envelope. Your vote by mail must be received by our tabulator, Computershare Investor Services, at the below address by the close of business on May 21, 2009.
c/o Computershare Investor Services
P.O. Box 43126
Providence, RI 02940-5138
If you hold your shares in street name and you received a printed copy of the proxy materials, please refer to the voting instruction card provided to you by your broker, bank or other holder of record for mailing instructions.
Note that the Internet and telephone voting procedures are designed to authenticate stockholders identities, allow stockholders to give their voting instructions and confirm that stockholders instructions have been recorded properly. We have been advised that the Internet and telephone voting procedures that have been made available to you are consistent with the requirements of applicable law. If you incur usage charges from Internet access providers and telephone companies or any other charges in connection with voting via the Internet or telephone, these charges must be paid by you.
You may also vote in person at the Annual Meeting. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank or other holder of record and present it to the inspectors of election with your ballot to be able to vote at the meeting. If you intend to vote in person, please notify the tellers prior to the beginning of the meeting.
How will votes be counted?
Proxies for shares that have been properly submitted, and not revoked, will be voted at the Annual Meeting in accordance with your instructions. If you vote by proxy card or voting instruction card and sign the card, without indicating how you want your shares to be voted, your shares will be voted in accordance with the following recommendations of the Board of Directors:
Directors are elected by a majority of the votes cast at the meeting. For this purpose, our bylaws provide that a majority of the votes cast means the number of votes for a director must exceed 50 percent of the votes cast with respect to that director. Each vote against a director will count as a vote cast with respect to that director, but an abstention will not count as a vote cast with respect to that director and thus will not impact the election of directors. If a director is not elected, our bylaws provide that the director must offer to tender his or her resignation to the Board. The Governance Committee will make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. If the director who tenders his or her resignation is a member of the Governance Committee, that director will not participate in the Governance Committees recommendation to the Board. The Board will act on the Governance Committees recommendation and publicly disclose its decisions and the rationale behind it within 90 days from the date of the certification of the election results.
A New York Stock Exchange (NYSE) member broker who holds shares in street name for a customer has the authority to vote on certain items if the broker does not receive instructions from the customer. The NYSE rules permit member brokers who do not receive instructions to vote both on the election of directors and the proposal to ratify the appointment of our independent registered public accounting firm.
Representatives of our transfer agent, Computershare Investor Services, will tabulate the votes and act as inspectors of the election. Proxies that are not signed and returned or otherwise properly submitted, including those not returned by banks, brokers, or other holders of record, will not be counted for quorum or voting purposes.
We will include the voting results from the Annual Meeting in our Quarterly Report on Form 10-Q for the quarter ending June 30, 2009, which we expect to file with the SEC in August 2009.
What vote is required to approve a measure?
The affirmative vote of a majority of the votes cast at the Annual Meeting with respect to each director is required to elect that director to the Board.
The affirmative vote of a majority of the votes entitled to be cast by the stockholders represented and entitled to vote at the meeting is required to approve ratification of Ernst & Young LLP as our independent registered public accounting firm for 2009.
A quorum is required to transact business at the Annual Meeting and is reached if the holders of at least a majority of the shares entitled to vote are present, either in person or by proxy. Votes at the meeting are cast by stockholders present and by proxy ballots submitted prior to the meeting.
How can I revoke my proxy or change my vote?
If you are a holder of record, you can revoke your proxy before it is exercised by giving written notice of revocation to our Corporate Secretary. An earlier proxy is also revoked by a valid later proxy or later vote by telephone or by the Internet, or by appearing at the meeting and voting by ballot. If you are a beneficial owner of shares, you may submit new voting instructions by contacting your broker, bank or other holder of record. You may also vote in person at the meeting if you obtain a legal proxy from your broker, bank or other holder of record and present it to the inspectors of election with your ballot.
How can I access Unums Annual Report on Form 10-K on the Internet or obtain a written copy?
You can access our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, via the Internet by going to the Investors area section of our website at www.unum.com. The 2008 Annual Report on Form 10-K is not incorporated into this Proxy Statement and is not considered proxy soliciting material.
With a written request to the following address, or by calling toll-free 800-718-8824, we will provide to each person solicited a free copy of the 2008 Annual Report on Form 10-K, including the financial statements and financial statement schedules filed as part of the report.
Susan N. Roth
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee 37402
Who pays for the cost of this proxy solicitation?
We pay the cost of soliciting proxies from our stockholders. Proxies are solicited by mail and e-mail, and may also be solicited personally or by telephone by our directors, officers and employees. We have also retained the services of Innisfree M&A Incorporated, a proxy soliciting firm, to assist in distributing and soliciting the proxies for the Annual Meeting, and Computershare Investor Services, to provide certain administrative services in connection with distributing the proxies for the meeting. We pay Innisfree a fee of $15,000 and reasonable out-of-pocket expenses. We also makes appropriate
arrangements with brokerage houses, banks and other custodians, nominees and fiduciaries, to help solicit proxies from the beneficial owners of shares held of record by such persons.
Will other business be conducted at the Annual Meeting?
At the time this Proxy Statement was printed, there are no other matters that the Board of Directors intends to present, or has reason to believe others will present, at the Annual Meeting. If other matters come before the meeting, the persons named in the accompanying form of proxy will vote in accordance with their best judgment with respect to such matters.
How can stockholders include proposals for presentation at Unums 2010 Annual Meeting?
SEC rules and our bylaws allow for the submission of proposals by stockholders for presentation at the Annual Meeting, although they also make clear that simply submitting a proposal does not guarantee its inclusion. While it is too late for proposals to be submitted for presentation at this years meeting, if a stockholder wants to include a proposal in the Proxy Statement and form of proxy for presentation at our 2010 Annual Meeting, the proposal must be received at the below address by December 9, 2009.
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee 37402
Is Unum householding for stockholders sharing the same address?
The SECs rules for delivery of proxy materials to stockholders permit us to deliver a single copy of these documents to an address shared by two or more of our stockholders. This method of delivery is called householding, and its use can significantly reduce the volume of mail you receive. This year, we are delivering only one set of proxy materials to multiple stockholders sharing a single address unless we receive instructions to the contrary from one or more of those stockholders. We will still be required, however, to send you and each other stockholder at your address an individual proxy voting card. If you would like to receive more than one set of proxy materials, copies are available by writing the address below or calling toll-free 800-446-2617:
Computershare Investor Services
P.O. Box 43069
Providence, RI 02940-3069
The same phone number and address may be used to notify us that you wish to receive a separate set of proxy materials in the future, or to request delivery of a single copy our proxy materials if you are receiving multiple copies.
How often does the Board meet?
During 2008, our Board of Directors met eight times. With the exception of Kevin T. Kabat, who joined the Board on June 30, 2008, each incumbent director attended at least 75 percent of the total of full Board and Committee meetings held during the period for which each was a director and/or served on a committee. In addition to executive sessions of the standing committees, the independent directors met seven times in executive session during 2008. Jon S. Fossel, the Chairman of the Board and lead independent director, presides over the executive sessions of the independent directors.
As stated in our Corporate Governance Guidelines, all directors are expected to make every effort to attend the Annual Meeting and meetings of the Board and committees of which they are members. All members of our Board attended the Annual Meeting in 2008.
What are the standing Board committees?
The Board of Directors has five standing committees: Audit, Finance, Governance, Human Capital and Regulatory Compliance. In addition to the duties contained in their respective charters, each committee may be assigned additional tasks by the Board from time to time, and each is charged with reporting its activities to the Board. Each standing committee has a charter, all of which are available free of charge on our website at www.unum.com in the Investors area under Corporate Governance. Copies also are available from the following address or by calling toll-free 800-718-8824.
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee 37402
Which Board members serve on what committees?
Following is a list of current Board members and the respective committees each serves on. A C means the director is a committee chairperson.
The primary purpose of the Audit Committee is to oversee the companys financial reporting process on behalf of the Board of Directors. Under the charter, the Committees overall responsibilities include selecting the independent registered public accounting firm, and monitoring and oversight of the:
Members as of December 31, 2008, were: Michael J. Passarella (Chair), E. Michael Caulfield, Thomas Kinser and Gloria C. Larson.
The Audit Committee met 11 times during 2008. All members of the Audit Committee are independent according to the NYSE requirements, and as required by SEC rules and regulations, and otherwise satisfy the independence requirements of our Corporate Governance Guidelines. The Board has determined that two members of the Audit Committee, Michael J. Passarella and E. Michael Caulfield, are audit committee financial experts as defined by SEC regulations. Both Mr. Passarella and
Mr. Caulfield also have accounting or related financial management expertise within the meaning of the listing standards of the NYSE. All members of the Audit Committee have been determined by the Board to be financially literate as required by the NYSE.
The Finance Committee assists the Board in overseeing risk associated with the companys investments and related financial matters. Oversight of financial risk, however, is the responsibility of the Audit Committee. Under the charter, the Finance Committees overall responsibilities are to:
Members as of December 31, 2008, were: E. Michael Caulfield (Chair), Ronald E. Goldsberry, Kevin T. Kabat, Michael J. Passarella and William J. Ryan.
The Finance Committee met six times during 2008. All Committee members satisfy the independence requirements of our Corporate Governance Guidelines.
The Governance Committee has primary responsibility for developing, implementing and overseeing the companys corporate governance policies. Under the charter, the Committees primary responsibilities are to:
Members as of December 31, 2008, were: William J. Ryan (Chair), Pamela H. Godwin and Ronald E. Goldsberry.
The Governance Committee met six times during 2008. All members of the Governance Committee are independent according to the NYSE requirements and otherwise satisfy the independence requirements of our Corporate Governance Guidelines.
Human Capital Committee
The Human Capital Committee oversees the companys compensation and benefits. Under the charter, the Committees primary responsibilities are to review and:
Members as of December 31, 2008, were: A.S. (Pat) MacMillan, Jr. (Chair), Pamela H. Godwin, Thomas Kinser and Edward J. Muhl.
The Human Capital Committee met five times during 2008. All members of the Committee are independent according to NYSE requirements and otherwise satisfy the independence requirements of our Corporate Governance Guidelines to serve as members of the Committee and are non-employee directors for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and outside directors for purposes of Section 162(m) of the Internal Revenue Code.
The Executive Compensation group in our corporate human resources department supports the Human Capital Committee. The Committee has engaged Towers, Perrin, Forster & Crosby, Inc. (Towers Perrin) as its independent compensation consultant since 2003 for advice on executive compensation, including the competitiveness of program design and award values. Committee meetings are generally attended by Towers Perrin, which also participates in executive sessions without members of management in attendance and communicates with Committee members outside of meetings. Towers Perrin reports directly to the Committee, although the consultants may meet with members of management from time to time on proposals management may make to the Committee. The Committee evaluates the independence of its consultants in accordance with the policy it adopted in February 2009.
Regulatory Compliance Committee
The Regulatory Compliance Committee has responsibility for overseeing state and federal regulatory matters that arise in connection with our business that are not presently covered as part of the specifically delegated responsibility of one of the other standing Board committees. Under the charter, the Committees primary responsibilities are to monitor and oversee:
Members as of December 31, 2008, were: Gloria C. Larson (Chair), Kevin T. Kabat, A.S. (Pat) MacMillan, Jr. and Edward J. Muhl.
The Regulatory Compliance Committee met six times during 2008. All members of the Regulatory Compliance Committee are independent and satisfy the requirements of our Corporate Governance Guidelines.
Audit Committee Report
The primary purpose of the Audit Committee is to oversee our financial reporting process on behalf of the Board of Directors and is more fully described in the Committees charter, which is available on the companys website www.unum.com in the Investors area under Corporate Governance. The charter is also available by writing to the following address or by calling toll-free 800-718-8824.
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee, 37402
Management has the primary responsibility for our financial statements and the reporting process, including the establishment and effectiveness of our internal controls over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. Our independent registered public accounting firm (independent auditor) is responsible for performing an independent audit of the financial statements and expressing an opinion on whether they conform to generally accepted accounting principles. The firm also is responsible for auditing managements assessment of the effectiveness of financial reportings internal controls. The auditors report directly to the Committee, which is responsible for the appointment, compensation and oversight of the work performed by the auditors.
The Committee reviewed with the independent auditors their judgments of the quality and acceptability of our accounting principles and other matters required to be discussed with the Committee under generally accepted auditing standards, including Statement on Auditing Standards No. 61 (as amended). The Committee also received the written disclosures and the letter from the independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors communications with the Committee concerning independence, and discussed with the independent auditor the independent auditors independence.
The Committee and the companys internal and independent auditors discussed the overall scope and plans for their respective audits. The Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the companys internal controls, and the overall quality of the companys financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board approved) that our audited financial statements for 2008 be included in our Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
Michael J. Passarella, Chair
E. Michael Caulfield
Gloria C. Larson
Selection of Nominees for the Board
The Governance Committee considers candidates for Board membership suggested by Board members, management and stockholders. The Committee uses a national executive search firm to help it identify candidates for the Board, obtain information about prospective candidates backgrounds and experience, determine the candidates levels of interest in becoming a director of our company, and make arrangements for meetings with prospective candidates. A stockholder who wishes to recommend a prospective nominee for the Board should notify the companys Corporate Secretary in writing at:
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee 37402
The nominee recommendation should include information required by the companys bylaws regarding stockholder nominations. Those requirements can be found in this document under Election of Directors How are nominations for election to the Board made? or on our website at www.unum.com in the Investors area under Corporate Governance.
Once the Committee has identified a prospective nominee, a decision is made on whether to conduct a full evaluation of the candidate. This decision is based on information provided to the Committee as well as its own knowledge of the prospective candidate. This may be supplemented by information from the search firm assisting the Committee, or by inquiries to the person making the recommendation, or others. The preliminary determination to proceed further is based primarily on the need for additional Board members and the likelihood that the prospective nominee fulfills the Boards requirements. The Committee evaluates the prospective nominee against criteria in the companys Corporate Governance Guidelines, which include:
The Committee also considers the number of other public company boards and audit committees on which a prospective nominee serves. The Corporate Governance Guidelines limit the number of public company boards on which a director of the company serves to no more than three in addition to Unums Board. The Corporate Governance Guidelines further limit members of the Audit Committee of the Board to serving on no more than two other audit committees of public companies.
The Committee also considers other experience or qualifications from time to time, including:
The Committee then compares prospective nominees and determines whether to interview a nominee, either in person or by telephone. After completing the evaluation and interview, the Committee makes a recommendation to the full Board as to whom, if anyone, should be nominated. The Board determines whether to accept the nominee after considering the recommendation of the Committee. In accordance with regulatory requirements, the Board may counsel with, or obtain approval of, certain state insurance regulators in connection with the qualifications of individuals asked to become directors. In June 2008, the Committee nominated Kevin T. Kabat for election to the Board effective June 27, 2008. The Committees evaluation reflected that Mr. Kabats experience and expertise as a chief executive officer of a public company in the financial services industry, and competencies he would bring to the Board in the areas of finance, management and regulatory matters, would be beneficial to the Board.
As outlined in its charter and the Corporate Governance Guidelines, the Committee reviewed the continued service on the Board of those directors whose terms expire at this Annual Meeting. This review took into account each directors interest in continuing to serve, his or her contributions to the Board, and whether each director possessed special areas of experience or other traits or skills needed by the Board. Following this review, the Committee recommended the re-election of the four nominees identified in this Proxy Statement Pamela H. Godwin, Thomas Kinser, A.S. (Pat) MacMillan, Jr. and Edward J. Muhl.
Determination of Independence of Directors
In February 2004, the Board adopted Corporate Governance Guidelines, which were amended in May 2007. These guidelines meet or exceed the listing standards of the NYSE. The portion of the Corporate Governance Guidelines addressing director independence is included in this Proxy Statement under Corporate Governance Independence of Directors. The full text of the Corporate Governance Guidelines can be found on our website at www.unum.com in the Investors area under Corporate Governance. A copy of the Corporate Governance Guidelines is also available by writing to the below address or by calling toll-free 800-718-8824.
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee, 37402
Our Corporate Secretary gathers information provided by the directors about their respective relationships and entities with which they are affiliated that might affect their independence from the company. The Committee reviews this information and makes recommendations to the Board as to the independence of the directors. The Board reviews the Committees findings and recommendations and makes a determination as to the independence of directors.
Stockholder Communications with the Board
Stockholders may communicate with our lead independent director currently our Chairman of the Board, Jon S. Fossel or any Board members by writing to the below address:
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee, 37402
In March 2006, the Board approved a process for handling letters received by the company and addressed to non-management members of the Board. Under this process, our Corporate Secretary reviews all such correspondence and regularly provides a log and copies of the correspondence to the lead independent director, who determines whether further distribution of correspondence is appropriate and to whom it should be sent. Any director may at any time review this log and request copies of correspondence. Concerns relating to accounting, internal controls or auditing matters are promptly brought to the attention of the internal auditor and handled in accordance with procedures established by the Audit Committee. The Board has requested that certain items that are unrelated to the duties and responsibilities of the Board should be excluded from the process, including mass mailings, resumes and other forms of job inquiries, surveys, business solicitations or advertisements, and matters related to claims.
Code of Business Practices and Ethics
In May 2003, the Board adopted a code of business practices and ethics applicable to all or our directors, officers and employees. Separately, the Board adopted a code of ethics applicable to our CEO and certain of our senior financial officers. Both of these codes are available on our website at www.unum.com in the Investors area under Corporate Governance. Copies are also available without charge from the below address or by calling toll-free 800-718-8824.
Office of the Corporate Secretary
1 Fountain Square
Chattanooga, Tennessee, 37402
We will provide notice of any waivers of the code of business practices and ethics granted to executive officers or directors on our website and will report any waivers of the code of ethics granted to our CEO or certain of our senior financial officers to the SEC. No waivers have been granted to date, and no such waivers are anticipated.
Independence of Directors
The Board presently has one inside director, and the Board believes that there should not be more than two. Inside directors generally include current officers and any person who has been an officer within the past five years. All others are regarded as independent, outside or non-management directors. As required by the NYSE, a majority of the Board must have no material relationship with Unum and must otherwise meet the NYSEs criteria for independence. The Board has determined that the following current directors are independent: E. Michael Caulfield, Jon S. Fossel, Pamela H. Godwin, Ronald E. Goldsberry, Kevin T. Kabat, Thomas Kinser, Gloria C. Larson, A.S. (Pat) MacMillan, Jr., Edward J. Muhl, Michael J. Passarella, and William J. Ryan. There is only one member of our Board who is not independent, Thomas R. Watjen, because he is employed as our President and Chief Executive Officer. In reaching the determination that all other directors are independent, the Board applied the standards set forth below which are required by the Corporate Governance Guidelines and include certain categorical standards as to immateriality.
Under NYSE standards, a director is not independent if:
In accordance with listing standards of the NYSE, the Board has determined that the following categorical standards will be used to determine whether a relationship between a director and Unum is immaterial and requires no further analysis of the relationship in determining independence:
Our Related Party Transaction Policy
Our written policy concerning related party transactions, which was approved by the Board in May 2007, defines related party transaction as any transaction in which we were or are to be a participant and the amount involved exceeds $120,000, and in which any related party had or will have a direct or indirect material interest. Related party includes any director, director nominee, executive officer of the company, any person who beneficially owns more than 5 percent of the companys stock, and any member of any of their immediate families or any company or other entity in which they have at least a 10 percent interest or other material financial interest. Immediate family members covered under this policy include any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and any other person (other than a tenant or employee) sharing the household with the nominee, director, executive officer, or 5 percent beneficial owner.
Prior to entering into the transaction, the related party must notify our General Counsel of the facts and circumstances of the transaction. The General Counsel determines whether the proposed transaction is a related party transaction. If the transaction is determined to be a related party transaction, it is submitted to the disinterested members of the Audit Committee for consideration at the next Committee meeting (or to the chair of the Committee if it is not practical to wait until the next meeting and the chair is not a related party to the transaction). The Committee considers all relevant facts and circumstances, including the benefits to the company, benefits to the related party, and if the related party is an independent director or nominee, the potential effect on the directors or nominees independence of entering into the transaction, any improper conflict of interest that may exist, the availability of other sources for the products and services, the terms of the transaction, and the terms available from or to unrelated third parties generally. The transaction may be approved if it is determined in good faith not to be inconsistent with the best interests of the company and its stockholders. Certain types of transactions are deemed to be pre-approved by the Audit Committee, including executive officer and director compensation arrangements approved by the Board of Directors or the Human Capital Committee, any transaction between the company and any entity in which a related party has a relationship solely as a director, less than 10 percent equity holder, or an employee (other than an executive officer) or all of these relationships.
Transactions with Related Persons
Liston Bishop III became an executive officer of the company on April 1, 2008, when he was appointed interim general counsel. Mr. Bishop was an equity member in the law firm of Miller & Martin PLLC until he became Executive Vice President and General Counsel of our company on October 1, 2008, at which time he withdrew from the law firm and became our full-time employee. During 2008, the firm received approximately $1.4 million from our company for services rendered by members and employees of the firm. Mr. Bishops compensation from the firm was based on a percentage interest he had in the firms revenues that was established at the beginning of 2008, and was not dependent upon amounts received by the firm from our company or any other client of the firm during the year. Pursuant to our Related Party Transactions Policy (as described above), the proposed transaction was reviewed by the General Counsel serving at the time Mr. Bishops engagement by our company was proposed and submitted by that General Counsel to the Audit Committee, which reviewed and approved the transaction.
Election of Directors
(Item 1 on the Proxy Card)
Our Board of Directors currently has 12 members, with directors divided into three classes. Generally, at each Annual Meeting, one class of directors, or approximately one-third of the total number of directors, will be elected with a term lasting three years. The term of the Class I directors expires with this Annual Meeting.
The Board of Directors proposes the election of Pamela H. Godwin, Thomas Kinser, A.S. (Pat) MacMillan, Jr. and Edward J. Muhl as Class I directors, each to hold office for a term of three years expiring at the Annual Meeting of Stockholders to be held in 2012, and until their successors are elected and qualified or until his or her earlier death, resignation or retirement. Each nominee is currently serving as a member of our Board of Directors.
We expect each nominee for election as a director to be able to serve if elected. If any nominee becomes unable to serve, the persons we have named as proxy holders will vote for a substitute nominee the Board of Directors recommends, if any.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THESE NOMINEES AS DIRECTORS.
Proxies solicited by the Board of Directors will be voted FOR this proposal unless you specify otherwise in your proxy.
Below are the individuals, along with their photographs, ages, positions, principal occupations, business experience and directorships, who are the four nominees for directors with terms expiring in 2012.
Below are the eight directors whose terms are continuing through 2009 and 2010.
How are nominations for election to the Board made?
Under our bylaws, nominations of persons for election to the Board of Directors may be made at a meeting of stockholders by or at the direction of the Board. Such a nomination may be made by any nominating committee or person appointed by the Board, or by any stockholder of Unum entitled to vote for the election of directors at the meeting. Our policy is to consider candidates recommended by stockholders in the same manner as other candidates.
Timeliness of Nomination
Notice of such nominations, other than those made by or at the direction of the Board, must be made in a timely manner in writing to our Corporate Secretary by a stockholder of Unum. To be timely, a stockholders notice must be delivered to, or mailed and received at, our principal executive offices no later than the close of business on the 75th day, nor earlier than the close of business on the 120th day, prior to the first anniversary of the preceding years Annual Meeting; provided, however, that in the event the date of the Annual Meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the stockholder must be so delivered, or mailed and received not earlier than the close of business on the 120th day prior to such Annual Meeting and not later than the close of business on the later of the 75th day prior to such Annual Meeting or the 10th day following the day on which we first make public announcement of the date of such meeting.
Such stockholders notice shall set forth the following information:
As to each person whom the stockholder proposes to nominate for election or re-election as a director:
As to the stockholder giving the notice:
No potential director nominated by a stockholder is eligible for election as a director unless nominated in accordance with these procedures.
Security Ownership of Directors and Officers
The following table shows the number of shares of the companys common stock beneficially owned as of March 25, 2009, by each director and each named executive and by all directors and executive officers as a group. The table also includes information about stock options, restricted stock and deferred share rights credited to the accounts of directors and executive officers under various compensation and benefit plans. Restricted stock units that represent a contingent right to receive shares of the companys common stock are also reported below, but are not included in the Total Shares Beneficially Owned column. No shares are pledged as security.
Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, our directors, executive officers, and 10 percent beneficial holders of our common stock are required to file with the Securities and Exchange Commission certain forms reporting their beneficial ownership of and transactions in Unum common stock. Based solely upon information provided by each such person, we believe each of our directors and executive officers and 10 percent beneficial owners filed all required reports on a timely basis during the last fiscal year. Due to an administrative error by the company, a Form 4 reporting grants to Robert C. Greving of 34,409 restricted stock units and 29,306 stock options, due on February 26, 2009, was filed on March 2, 2009.
Report of the Human Capital Committee
The Human Capital Committee has reviewed and discussed the following Compensation Discussion and Analysis section with Unums management. Based on this review and discussion, the Committee recommended to the Board of Directors that this Compensation Discussion and Analysis be included in both the Proxy Statement and in the companys Annual Report on Form 10-K for the year ended December 31, 2008.
A.S. (Pat) MacMillan, Jr., Chairman
Pamela H. Godwin
Edward J. Muhl
Compensation Discussion and Analysis
The detailed Compensation Discussion and Analysis that follows provides information on executive compensation philosophy, how and why compensation decisions are made, and how those decisions align with corporate and individual performance. The primary focus of the Human Capital Committee is to align compensation with corporate and individual performance.
In reviewing and analyzing executive compensation for 2008, the Committee highlights the following:
Our five highest paid executives in 2008, who are included in the Summary Compensation Table on page 70 and who are referred to as named executives throughout this section, were:
In many respects 2008 was one of the most difficult environments faced by companies in the financial services sector. The deepening recession, upheaval in the financial markets, extended credit crisis, and collapse of valuations for companies in our sector had a broad impact. Our company was no exception.
Against this backdrop, the company saw its shareholder return drop in 2008. However, as a result of solid financial and operating performance, total shareholder return for the year exceeded the Standard and Poors (S&P) 500 index, the S&P Life index and outperformed our Proxy Peer Group as shown in the bar graph below.
The following chart compares annual and five-year return for the company against certain key indices:
The Committee first considers company performance when making compensation decisions. Despite the difficult economic climate, 2008 was a successful year as all of our businesses delivered strong operating performance, our investment portfolio posted solid results, and we exceeded our targets for capital and liquidity.
Highlights for the year include:
Overall, the Committee was pleased with the performance of the company in 2008 and believes it is well-positioned for the future. The Committee also recognized, however, that the environment was difficult and as a result shareholder return was lower in 2008.
Chief Executive Officer Compensation
Mr. Watjens total compensation is linked directly to both company performance and individual performance. An overview of Mr. Watjens individual performance and compensation is located on page 46. In addition, the detailed analysis later in this document outlines each individual element of Mr. Watjens compensation.
The companys performance generally met or exceeded plan and the Committee considered Mr. Watjens individual performance to be excellent, but both the Committee and Mr. Watjen recognize that the overall environment was difficult. As noted earlier, the companys share price outperformed certain peer indices, although total shareholder return was negative.
The Committee therefore concluded that Mr. Watjens total compensation should be lower than that generated only by measuring company and individual performance.
In calculating and awarding compensation, the Committee also considers the various compensation components absent the accounting and actuarial considerations required in the Summary Compensation Table on page 70. On this more simplified basis, the Committee considered Mr. Watjens compensation for 2008 performance to be $7,781,862 compared to compensation for 2007 performance of $10,384,164. A complete description of these amounts may be found on pages 47 and 65.
Our executive compensation philosophy is based on two core goals: (1) to reward performance that helps us achieve our corporate objectives; and (2) to attract and retain talented individuals. In practice, this means that we:
Who is responsible for evaluating and administering executive compensation?
The Committee, which consists solely of independent directors, evaluates, designs and administers a compensation program for executive officers that appropriately links pay, company performance, individual performance and the creation of shareholder value.
The Committee, with input from the full Board, is directly responsible for evaluating the performance of the CEO as well as for determining the elements of his compensation. The Committee does consider the insights of the CEO regarding the environment and the companys performance, and the impact those have on the compensation decisions for the CEO and others participating in the plan.
In determining the compensation for the other named executives, the Committee receives a performance assessment and compensation recommendations from Mr. Watjen. All of the other named executives report to Mr. Watjen except Mr. Best, who reports to Mr. McCarthy. Recommendations for Mr. Best are provided by Mr. McCarthy to Mr. Watjen, who then discusses these recommendations with the Committee. While the Committee considers these recommendations, it also exercises its independent judgment in determining compensation for the named executives based on the financial results of the company as well as the Boards interactions with these individuals.
Does the Committee use an outside consultant for advice?
The Committee has engaged Towers Perrin as its compensation consultant. In this capacity, Towers Perrin provides the Committee with objective and expert analyses, independent advice and information with respect to executive and director compensation. Towers Perrin received $343,660 for services provided to the Committee in 2008.
To assure the independence of Towers Perrin in this capacity, compensation consultants from the firm report directly to the Committee. At each Committee meeting, an executive session is held without management present to discuss compensation issues with these consultants. Furthermore, management only interacts with the consultants when doing so on behalf of the Committee or as it relates to proposals the Committee will review for approval.
Towers Perrin has also taken steps to separate its compensation consultants from other services provided to Unum by the firm. These consultants are not involved in developing proposals or soliciting the company to secure additional business from Unum, nor do they participate in other consulting assignments for the company. The firm has also confirmed that pay for these consultants is not directly impacted by the fees Towers Perrin collects from Unum for the other services it provides, all of which are unrelated to the design of executive compensation. Towers Perrin attests to these independence steps annually by letter to the Committee.
At its meeting in February 2009, the Committee adopted a policy reaffirming that its compensation consultant must be independent from the company. The policy specifies that the Committee has the sole authority to select, retain and terminate compensation consultants required to discharge its duties and responsibilities, and to approve the fees and other retention terms for such consultants. Additionally, the policy sets forth standards designed to ensure that consultants retained by the Committee are independent of the persons for whom compensation advice or recommendations are solicited.
Members of the companys finance, human resources and legal staffs also support the Committee in its work by providing information and responding to questions. Additionally, employees from these departments discuss various forms of executive compensation with Towers Perrin, including how the compensation plans fit with other programs and business objectives. While these staff members may make recommendations, the final decision on all executive compensation matters rests with the Committee.
What role do our named executive officers play in setting compensation?
Mr. Watjen does not participate in decisions related to the establishment of his own pay, nor does he have any decision-making authority with regard to his compensation or the compensation of any other named executive. These decisions are made by the Committee. However, as noted earlier the Committee does consider the insights of the CEO regarding the environment and the companys performance, and the impact those have on the compensation decisions for him and others participating in the plan. Mr. Watjen also provides a self-assessment to the Board.
Mr. Watjen provides a performance assessment and compensation recommendations to the Committee for those executives who report to him. This includes all of the named executives except Mr. Best, who reports to Mr. McCarthy. Mr. McCarthy provides a performance assessment and compensation recommendations for Mr. Best to Mr. Watjen. These recommendations are considered by the Committee along with its own judgment in determining the compensation for named executives.
Has the company taken steps to assess the risk associated with its compensation programs?
The companys chief risk officer, in consultation with the Committee, has undertaken a risk assessment of the companys short- and long-term incentive programs. Based on this assessment, the Committee does not believe the companys compensation programs currently encourage management to take unreasonable risks that could threaten the companys value.
To what extent does the Committee use external data to compare executive compensation?
When making compensation decisions, the Committee compares the compensation of our CEO and the other named executives to that of similarly-situated executives at peer companies. This process is often referred to as benchmarking. These comparisons are used as points of reference and do not take the place of internal analyses or consideration of the performance of the company and individual.
The Committee uses two sources for benchmarking executive compensation:
The Committee reviews the Proxy Peer Group annually, and companies are added and deleted from this list as either industry consolidation occurs or our corporate objectives change. The companies that make up the Proxy Peer Group did not change in 2008. However, as a result of the substantial changes taking place among many companies in the financial services sector, the Proxy Peer Group may differ in 2009.
The table below sets forth the companies that comprise the Proxy Peer Group and the firms included in the Towers Perrin Study.
Does the Committee set targets for how its executive compensation compares to other companies?
Yes. Each element of compensation is targeted at the approximate median of the market as defined by the Proxy Peer Group and the Towers Perrin Study, although this comparison is only one of a number of factors that guide the Committees determinations. The elements of our compensation program are: (1) base salary; (2) targeted total cash (base salary plus targeted annual incentive); and (3) total direct compensation (base salary plus both targeted annual and long-term incentives). The comparison of our total cash and total direct compensation elements to those at peer companies ensures that the balance among the elements of compensation is competitive. At the same time, company and individual performance determines substantial amounts of the actual pay received by our named executives.
With respect to the CEO, the Committee compares each of the compensation elements to the Proxy Peer Group using the same methodology described above. Additionally, the CEO pay is compared to the median of the compensation paid to executives in comparable roles at the companies in the Towers Perrin Study as an additional source of data.
Does the Committee rely solely on peer group data when making decisions?
While peer group data is important, it is secondary to the primary factors considered by the Committee when making compensation decisions, which include the following:
What are the elements of compensation for executives?
The elements of compensation for Unums named executives, each of which is described later in this section, are described in the table below.
What is the companys pay mix?
Consistent with our philosophy of tying compensation with the performance of the company, a majority of total compensation is allocated to annual and long-term incentives and as a result is considered at risk. We do not have a predetermined policy for allocating cash and non-cash, or short-term and long-term incentive compensation. Instead, the Committee annually reviews the Towers Perrin Study described earlier to ensure an appropriate level and mix of compensation based on competitive practices.
The following charts show the 2008 compensation mix for our CEO and the other named executives:
Note for 2008 All Other NEO Compensation Elements: Average chart includes Mr. McCarthy, Mr. Horn, Mr. Best and Mr. Greving.
Mr. Watjens compensation is determined by the Committee using the same principles applied to all senior executives. The Committee strives to make its assessment thorough and objective using performance standards directly tied to what is important for the companys success. The detailed discussion later in this analysis outlines each specific element of Mr. Watjens compensation. The Committee primarily considered the following factors in determining Mr. Watjens total compensation for the year ending December 31, 2008:
In evaluating Mr. Watjens individual performance, the Committee considered feedback from all members of the Board of Directors. They noted the following results:
Although company performance generally met or exceeded plan and the Committee considered Mr. Watjens individual performance to be excellent, both the Committee and Mr. Watjen recognize that the overall environment was difficult. With respect to shareholder return, the Committee notes the following:
The Committee therefore concluded that Mr. Watjens total compensation should be lower than that generated only by measuring company and individual performance.
In calculating and awarding compensation, the Committee also considers the various compensation components absent the accounting and actuarial considerations required in the Summary Compensation Table on page 70. On this more simplified basis, the Committee considers Mr. Watjens year over year compensation to be:
Please note that this comparison is not a substitute for the required Summary Compensation Table and a reconciliation of the required Summary Compensation Table and the 2008 and 2007 Total Compensation table is located on page 66.
Annual Base Salary
How often are base salaries reviewed?
The Committee reviews base salaries for named executives on an annual basis, as well as at the time of a promotion or other change in responsibilities. Increases in base salaries, if any, are determined after an evaluation of several factors, including company performance, individual performance, the individuals level of responsibility, and the budgeted amount for merit increases for the year. Base salaries are also compared to those within the appropriate peer group and to those of other executives in the company.
How is the base salary for the CEO determined?
The base salary for Mr. Watjen is determined primarily by his individual performance, his overall level of responsibility and the performance of the company. The Committee also considers comparisons with the Proxy Peer Group.
Mr. Watjens individual performance is evaluated annually by the Board of Directors based on two primary factors.
The first factor is a set of individual goals agreed upon by Mr. Watjen and the Board. His 2007 goals, which were considered by the Committee in setting his 2008 salary, included:
The second factor is an assessment by each Board member of Mr. Watjens performance, as well as Mr. Watjens evaluation of his own performance, taking into account the following criteria as established by the Committee:
As part of this process, each Board member provides Towers Perrin with his or her confidential performance evaluation of Mr. Watjen. Towers Perrin provides a summary of these evaluations to the Committee prior to its February meeting at which CEO compensation is determined.
On January 1, 2008, Mr. Watjen received an increase of $19,400 to his 2007 base salary of $1,050,000 to replace the value of perquisites that were eliminated as of that date. Effective March 1, 2008, the Committee raised Mr. Watjens base salary to $1,100,000 after considering all of the criteria listed above. They placed particular emphasis on the companys financial results, the positive impact of rating agency upgrades and Mr. Watjens leadership in successfully meeting the obligations of the California and multistate regulatory settlements. The total percentage increase in Mr. Watjens base salary from 2007 to 2008 was 4.8%.
At its February 2009 meeting, the Committee decided not to grant a base salary increase for 2009 to Mr. Watjen. This decision reflected input from Mr. Watjen regarding his views about compensation in this challenging environment.
How are the base salaries of other named executives determined?
The primary factors for determining base salaries for the named executives other than Mr. Watjen are individual performance, pay in relation to the market (using the Towers Perrin Study), pay in relation to peers, and responsibilities of their respective positions. Additionally, each named executive is evaluated by Board members, Mr. Watjen and Mr. McCarthy (in the case of Mr. Best), as well as by peers and colleagues based on the following general factors:
After taking these factors into consideration as well as the financial performance of the company during 2007, the accomplishments related to the California and multistate regulatory settlements, the successful rollout of our Simply Unum product and service platform, and Colonial Lifes sales and rebranding efforts, the Committee approved the following increases to the base salaries of the named executives other than Mr. Watjen, effective March 1, 2008: Mr. Grevings salary was increased from $390,000 to $420,000, or 7.7%; Mr. McCarthys salary was increased from $525,000 to $565,000, or 7.6%; Mr. Bests salary was increased from $480,000 to $515,000, or 7.3%; and Mr. Horns salary was increased from $440,000 to $475,000, or 8.0%. Base salary earnings of the named executives for 2008 are reflected in the Salary column of the Summary Compensation Table on page 70.
At its February 2009 meeting, the Committee decided not to grant base salary increases for 2009 to the named executives and certain other key senior officers. This decision reflected input from the CEO regarding his views about compensation in this challenging environment. As a result, the base salaries of these executives will be maintained at current levels in 2009.
Annual Incentive Awards
The purpose of the annual incentive is to reward performance based on the achievement of both company and individual goals. The Management Incentive Compensation Plan (MICP) of 2008, which became effective January 1, 2008, is our principal vehicle for annual incentive compensation. Our named executives participate in the Executive Officer Incentive Plan (EOIP), which is part of the 2008 MICP.
Under the EOIP, the Committee establishes objective performance measures in the beginning of the year. If this goal is achieved, each named executive is eligible to receive the maximum award provided for in the plan for that performance year. By designing the program in this way, the company believes it increases the likelihood these awards will be deductible under the performance-based compensation exception to Section 162(m) of the Internal Revenue Code (the $1 million cap on deductibility), while maximizing flexibility to pay appropriate bonuses. For 2008, the goal established by the Committee for this purpose was two times the amount of operating earnings needed to pay dividends and cover interest on our debt. That amount was $360.2 million and the goal was exceeded.
How does the plan work?
First, the company must meet the corporate performance threshold as described above. Once that threshold is met, company and business unit performance as a percentage of target is calculated. That percentage is agreed upon by the Committee. Individual performance for each named executive is then established by the Committee and a percentage assigned.
As shown in the table below, the corporate performance percentage is multiplied by the individual performance percentage to reach an overall percentage of the annual incentive target.
What were the performance targets for 2008?
In February of each year, the Committee sets targets for several performance measures with the levels or ranges of payment for each target. Performance measures and their respective targets are established for the company as a whole (Unum Group) as well as for each of our business operations (Unum US, Colonial Life, and Unum UK), and weightings are assigned to each performance measure based on its relative importance to the company or business unit as well as on its potential impact on stockholder returns. At the end of each year, the Committee evaluates performance against each measure, comparing the actual results to the targets established for each.
The 2008 performance measures and their weightings in determining the annual incentive awards are as follows:
NOTE: For purposes of the annual incentive plan, pre-tax operating income is net income adjusted to exclude income tax and net realized investment gains and losses. Return on equity is calculated by taking operating income after tax, which is net income adjusted to exclude after-tax realized investment gains and losses and dividing it by stockholders equity adjusted to exclude the net unrealized gain or loss on securities and the net gain on cash flow hedges. Revenue is calculated by taking total revenue and excluding net realized investment gains or losses.
How are these performance measures and their respective targets selected?
We believe these performance targets represent long-term drivers of shareholder value. Company performance is measured from several perspectives with these targets. The growth and competitiveness of the company are measured using sales, earned premium and revenue targets. Profitability achievement is measured using pre-tax operating income. Capital management effectiveness is measured using return on equity. Effective and efficient customer service is measured using the service and operating expense ratio targets. Each measure is weighted based on its relative importance to the achievement of the companys business plan and shareholder value.
How are the annual incentive awards of the named executives related to the performance of Unum Group and the performance of its individual business operations?
The portion of each named executives annual incentive award that is tied to Unum Groups performance and the performance of the companys business operations differ. Mr. Watjens and Mr. Grevings incentive awards for results achieved in 2008 were based entirely (100%) on the results of Unum Group for each of its performance measures as described above. For Mr. McCarthy and Mr. Best, 25% of their award was based on Unum Group performance and 75% on Unum US performance. For Mr. Horn, 25% of his award was based on Unum Group performance, and the remaining 75% was based on Colonial Life performance.
For Mr. McCarthy, Mr. Best and Mr. Horn, we believe basing a portion of annual incentive awards on the performance of Unum Group best reflects the contribution each makes to the effective management of the total company.
Does the Committee take into consideration any exceptions when determining Unums performance?
When the Committee set the performance measures and weightings for 2008, it established a list of items that would be excluded from the calculation of the companys performance for purposes of the annual and long-term incentive plans. Among these items were:
In measuring financial results for 2008, the Committee excluded only the fluctuating currency exchange rates from their calculation, since the net effect of the other items resulted in an adjustment which was found to be immaterial.
If the corporate performance threshold is met, how does the Committee exercise its discretion with respect to the amount of actual incentive paid?
The Committee is authorized by the plan to exercise its discretion to reduce, but not to increase, the size of awards to named executives. In exercising this discretion, the Committee considers the achievement by each individual of the performance targets listed in the table titled 2008 Annual Incentive Award Performance Targets on page 52. Also considered are the target amounts payable to each executive once the performance targets are achieved. Other factors may also be taken into consideration by the Committee, including, but not limited to: achievement of non-financial goals; economic and relative performance considerations; and assessments of individual performance.
The actual incentive payout to each named executive is currently and has historically been much less than the maximum award allowed by the plan.
What are the annual incentive targets and how are they determined?
The Committee sets individual annual incentive targets for each named executive. These targets are stated as a percentage of each individuals base salary, and are established based on a number of factors, including the approximate median of the Proxy Peer Group for the CEO and the Towers Perrin Study for other named executives as previously discussed on page 43. The Committee also considered each individuals target relative to other named executives, given their respective levels of responsibility. For 2008, the annual incentive targets (as a percentage of base salary) for the named executives were: 150% for Mr. Watjen; 65% for Mr. Greving; 100% for Mr. McCarthy; 90% for Mr. Best; and 80% for Mr. Horn.
What was the total annual incentive cash payment made to each named executive for 2008?
Based on the companys performance against targets, each named executive received the amounts shown in the table below. These amounts can also be found in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 70.
How did the Committee arrive at these payout amounts?
As described in this section, the Committee considers company and individual performance when determining annual incentive award amounts for named executives.
Company and Business Performance
In determining company and business unit performance the Committee considers the factors outlined on page 38. The Committee also compared the company and business unit performance to the annual incentive targets outlined on page 52. The Committee concluded that the performance of Unum Group exceeded all the targets and was above plan at 110%. With respect to the three business units, each of them met or exceeded all goals with the exception of sales. The Committee concluded that each business unit was at plan on an overall basis.
The Committee evaluates individual performance by considering company and business unit results, individual contributions to those results, performance against individual performance plans, input from the companys 360 degree review process, and a formal evaluation by the Board of Directors. A detailed description of Mr. Watjens performance is outlined on page 46. In the case of named executives, Mr. Watjens recommendation is also considered.
Mr. Watjen recommended to the Committee that his 2008 annual incentive award be lower than that received in 2007. This recommendation reflected his views regarding the environment and the companys stock performance. The Committee considered this feedback but felt that in light of Mr. Watjens performance, a higher payout was appropriate. After considering all of these factors, the Committee concluded that Mr. Watjens individual performance metric was 125%.
Therefore, Mr. Watjens overall annual incentive as a percentage of target is 138%, which is arrived at by multiplying the company performance factor (110%) by his individual performance factor (125%).
A similar process was followed for each of the other named executive officers.
Long-Term Incentive Awards
As outlined in our compensation philosophy above, our goal is to align the long-term interests of management and stockholders. The long-term incentive program creates this alignment by tying a substantial portion of the executives compensation directly to the companys stock price. The awards, which are a combination of stock options and restricted stock units, are granted under the Stock Incentive Plan of 2007.
How are long-term incentive awards paid to named executives?
We currently provide a mix of stock options and restricted stock units as part of our long-term incentive program for named executives. Seventy-five percent of the award is granted as restricted stock units and 25% is granted as stock options as described below. This mix was based on a review of peer practices and ensures that a portion of each executives compensation is tied to the increase of our stock price over the long term.
Is there a company performance threshold established for the long-term incentive awards similar to that in place for the annual incentive?
As is the case with the EOIP, for 2008, the company performance threshold established by the Committee for the long-term incentive program was two times the amount of operating earnings needed to pay dividends and cover interest on our debt. That threshold was $360.2 million and was exceeded.
If the threshold associated with the long-term incentive is achieved, each named executive is eligible to receive the maximum award, set by the Committee, for that performance year. By designing the program in this way, the company believes this increases the likelihood that these long-term incentive awards will be deductible under the performance-based compensation exception to Section 162(m), while maximizing flexibility to grant appropriately sized awards.
If the company threshold is met, how does the Committee exercise its discretion with respect to awards for each named executive?
The Stock Incentive Plan authorizes the Committee to exercise its discretion to reduce, but not to increase, the size of awards to named executives. The Committee considers the individuals long-term incentive target along with the performance targets listed in the table on page 52. Other factors may also be taken into consideration by the Committee, including, but not limited to: achievement of non-financial goals; economic and relative performance considerations; and assessments of individual performance.
The long-term incentive award granted to each named executive has historically been much less than the maximum award.
What are restricted stock units?
Restricted stock units, granted on the basis of the performance of the company and the individual, are valued in terms of company stock but no actual stock is issued at the time of grant. Instead, company stock is only issued when the grant actually vests. Restricted stock units differ from restricted stock in two ways:
We believe that the process of dividend reinvestment associated with restricted stock units helps achieve our objective of closely aligning named executives compensation with stockholder interests.
What are the performance targets for long-term incentive awards?
Each year at its February meeting, the Committee establishes corporate performance measures for the long-term incentive award program. Much like the annual incentive plan, each factor is then weighted based on its relative importance to the company or business unit as well as on its potential impact on stockholder returns. Awards are then granted to each named executive based on these performance measures, and the awards vest based on the executives continued service over a three-year period.
This structure serves both objectives of our compensation philosophy, including the retention of key executives and linking compensation to performance. The one-year performance goals that determine the awards to be granted give our named executives strong incentives to meet corporate performance objectives. At the same time, the three-year vesting requirement both helps us retain the named executive and links the value of the award to the performance of the company during that period.
The corporate performance factors for 2007 (for grants awarded in February 2008) were:
How are individual long-term incentive grants determined?
At its February meeting, in addition to establishing corporate performance measures, the Committee sets an individual target for each named executive. These targets are set as a percentage of base salary for each named executive.
After the end of each year, the Committee assesses the companys performance and compares the actual corporate results to the targets established for each measure. The Committee first determines an award amount expressed in U.S. dollars. Then, 75% of the award is converted to a number of restricted stock units using the closing price of the stock on the grant date. The remaining 25% is converted to stock options based on the Black-Scholes value of the stock options on the grant date.
In February 2008, based on 2007 performance, the Committee approved the following grants of restricted stock units and stock options for the named executives as outlined in the following table:
In February 2008, based on a review of the median of market data, (i.e. the Proxy Peer Group for the CEO and the Towers Perrin Study for the other named executives), as well as each individuals target relative to other named executives given their respective levels of responsibility, the Committee set the individual targets for each of our named executives as shown in the table below. Based on this review, the Committee increased Mr. Watjens long-term incentive target from 350% to 400%, Mr. McCarthys long-term incentive target from 90% to 150%, Mr. Bests long-term incentive target from 90% to 125%, and Mr. Horns long-term incentive target from 90% to 100%.
As is the case with the annual incentive award, the Committee considers both corporate and business unit performance as well as individual performance in determining long-term incentive awards.
Corporate and Business Unit Performance
The corporate performance factors and weightings for 2008 (for grants awarded in 2009) were unchanged from 2007 and were as follows:
The Committee determined that based upon achievement against the factors noted above as well as the overall performance of Unum Group and the business units, the corporate performance was above plan at 120%.
The Committee evaluates individual performance by considering company and business unit results, individual contributions to those results, performance against individual performance plans, input from the companys 360 degree review process, and a formal evaluation by the Board of Directors. In the case of other named executives, Mr. Watjens recommendation is also considered.
As is the case for calculating the annual incentive awards outlined on page 55, the Committee takes the individual performance factor for each named executive and multiplies it by the corporate performance factor (120%) to arrive at the long-term incentive payment as a percentage of target.
With respect to Mr. Watjen, this calculation would have produced a higher long-term incentive award than was paid. Mr. Watjens award was capped at 97% of target due to a specific provision in the plan which limits the overall number of shares which may be awarded. The Committee specifically noted that this lower long-term incentive award was not the result of individual performance but rather a function of the plan cap on total shares.
Why are these performance targets selected?
These performance targets represent what we believe to be long-term drivers of shareholder value. Value creation is measured on the basis of growth, profitability and effective capital management. Long-term growth is measured using overall company revenue as the target. Profitability achievement is measured using pre-tax operating income. Capital management effectiveness is measured using return on equity. Consistent with our annual incentive plan, each measure is weighted based on its relative importance to the achievement of the companys long-term business plan.
Does the company have a policy for recouping performance-based compensation in the event of an earnings restatement?
In February 2009, the Committee adopted a policy on the recoupment of performance-based compensation. If the company makes a material restatement of its financial results, then the Board will, to the extent permitted by applicable law, seek recoupment of performance-based compensation paid to any senior officer. The Board will take this action if it determines that: (1) the senior officer has committed or engaged in fraud or willful misconduct that resulted, either directly or indirectly, in the need to make such restatement; and (2) such performance-based compensation paid or awarded to the senior officer would have been a lesser amount if calculated using the restated financial results. The amount of performance-based compensation to be recouped will be determined by the Board after taking into account the relevant facts and circumstances. Performance-based compensation includes annual cash incentive awards, bonuses and all forms of equity compensation. The companys right to recoup compensation is in addition to other remedies that may be available to us under applicable law.
Retirement and Workplace Benefits
What employee benefits does Unum provide its named executives and other employees?
We provide a benefits package for employees and their dependents, portions of which are paid for, in whole or in part, by the employee. Benefits include: life, health, dental, vision, and disability insurance; pension; 401(k); dependent and healthcare reimbursement accounts; tuition reimbursement; an employee stock purchase plan; paid time off; holidays; and a matching gifts program for charitable contributions. Named executives have the same benefits package as other employees.
In April 2000, the company purchased corporate owned life insurance (COLI) on all officers who gave their approval. In the event of death while still employed, the company provides a death benefit to the executives beneficiary in the amount of $200,000 (this amount is shown in the appropriate column of the Termination table on page 84). Of the named executives, Mr. Horn was the only one who was not an employee of the company at that time, and therefore he is not covered under a COLI policy.
What types of retirement plans does Unum offer?
We sponsor a tax-qualified, defined benefit pension plan. We also provide a non-qualified pension plan for employees whose benefits under the tax-qualified plans are limited by the Internal Revenue Code. Base pay and regular annual incentive awards are counted toward the defined benefit pension plans; long-term incentives are not. In addition to the qualified and non-qualified pension plans, Mr. Watjen also has a supplemental executive retirement plan under the terms of his employment agreement.
For a complete description of pension benefits for the named executives, please see the 2008 Pension Benefits section beginning on page 77. Pension benefits are calculated using base pay and annual incentive awards.
Perquisites and Other Personal Benefits
With approval of the Committee, Unum replaced the majority of the perquisites offered to named executives with a salary increase of equivalent value effective January 1, 2008. Mr. Watjen received a salary increase of $19,400 and the other named executives each received an increase of $12,400. Because this amount is considered salary, we place no requirements or restrictions on its use.
The company does continue to provide the following limited perquisites:
A detailed table of executive perquisites is included as footnote (7) to the Summary Compensation Table on page 70.
Mr. Watjen is the only named executive covered under an employment agreement. Under the terms of his agreement, Mr. Watjen is entitled to the following compensation:
Mr. Watjens employment agreement, which was originally effective January 1, 2002, and amended on December 16, 2005, currently extends through December 16, 2010, and is subject to automatic one-year extensions unless either party gives notice of its intention not to renew at least 60 days prior to the extension date. Mr. Watjens amended and restated employment agreement was modified in 2008 to comply with the Internal Revenue Code Section 409A.
Mr. Watjens agreement prohibits him from using or divulging confidential information and from competing with us or soliciting our employees for a period of 18 months after his employment terminates. These non-competition and non-solicitation covenants would be terminated upon a change in control.
In 2007, the company entered into an aircraft time-sharing agreement with Mr. Watjen. Under this agreement, Mr. Watjen will reimburse the costs incurred by us beyond the first 40 hours of personal use by him of the corporate aircraft. In 2008, Mr. Watjen did not exceed 40 hours of personal use and therefore did not trigger the time-sharing arrangement.
Change in Control Agreements
Each of the named executives, other than Mr. Watjen, is covered by a change in control agreement with the company. Please refer to the Terminations Related to a Change in Control section on page 90 for more information.
Severance and Change in Control Benefits
The company provides severance benefits to all employees in the event of involuntary termination, other than for death, disability or cause. Mr. Watjens severance benefits are provided under his Amended and Restated Employment Agreement and are described in detail on page 88. The remaining named executives are generally covered under our Separation Pay Plan for Executive Vice Presidents. In general, we provide severance in order to give our employees competitive benefits with respect to the possibility of an involuntary termination of their employment.
In the event of a termination following a change in control, we provide a more generous severance benefit to Mr. Watjen and the other named executives. This is to ensure that stockholders have the benefit of our named executives undivided attention during the critical time before and after a major corporate transaction, even though the transaction may result in uncertainty with respect to the executives employment. These benefits are defined for Mr. Watjen under his employment agreement, and for the other named executives in Change in Control Severance Agreements. We describe these agreements in further detail in the section entitled Terminations Related to a Change in Control on page 90.
What was the total compensation earned in 2008 by each named executive?
The Summary Compensation Table on page 70 provides an overview of executive compensation. However, because the Summary Compensation Table takes into consideration items such as the actuarial increase of the present value of pension benefits and the accounting cost of equity grants (versus their fair value at grant), we have included below a supplemental table that provides an overview of the primary elements of executive pay as the Committee considers it when making compensation decisions. Please note that the following table is not a substitute for the required Summary Compensation Table.
Why do we provide the 2008 and 2007 Total Compensation table in addition to the Summary Compensation Table on page 70?
The company provides the 2008 and 2007 Total Compensation table in addition to the Summary Compensation Table on page 70 because when making compensation decisions, the Committee primarily focuses on the value of awards at the date they are given to an executive versus the accounting treatment and timing of the award as reported in the companys financial statements and required by the SEC rules applicable to the Summary Compensation Table.
The 2007 and 2008 Total Compensation table reflects salary received in the year, annual incentive awarded for that years performance, long-term incentive awarded for that years performance, and all other compensation as outlined on page 72. Inclusion of this table is not designed to replace the Summary Compensation Table, but rather to reflect the Committees decisions about compensation awarded to the named executive officers as a result of that years performance.
How does the above compensation relate to the Summary Compensation Table?
The following table shows the reconciliation between the 2007 and 2008 Total Compensation table above and the total in the Summary Compensation Table (page 70). In order to reconcile the two tables, the following adjustments should be made to the Summary Compensation Table:
It is important to note that the substantial increase in the 2008 accounting expense for Mr. Watjens unvested grants is primarily the result of his reaching age 55 during the grant period. Please see page 69 for a discussion of the accounting treatment under SFAS 123(R) which accelerates this expense.
Equity Grant Practices
Equity grants awarded under the long-term incentive program are approved at a regularly scheduled meeting of the Committee, and the date of this meeting is typically set a year in advance. The date the equity grant is approved is considered the grant date, and as a result it is also the date upon which the stock price is based. This date is typically 2-3 weeks after the companys earnings are released to the public.
For employees who are not required by Section 16 of the Securities Exchange Act of 1934 to report their trades of Unum stock, the CEO is authorized to make equity and deferred cash grants collectively totaling up to $300,000 per year (based on grant date value), and these grants are reported to the Committee annually. In 2008, Mr. Watjen made equity and deferred cash grants totaling $152,398. All other equity grants must be approved by the Committee in advance of the grant.
Stock Ownership, Retention and Sale
In order to align the long-term interests of management and stockholders and to promote a culture of ownership, we believe our senior executives should have a significant ownership stake in the company. With this in mind, certain senior executives including each named executive are required to retain a fixed percentage of the net shares (shares after tax withholding) received as compensation for a specified period of time. Both the percentage and time period are determined by the individuals position with the company. Exceptions to this requirement may only be made by the Board of Directors.
Below is a table that shows, by position, Unums stock ownership guidelines as a multiple of salary as well as the retention guidelines for percentage of stock and time required to be held. Shares of common stock and restricted stock units count toward ownership, but stock options do not. Newly-promoted or newly-hired executives have five years to achieve the guideline, while current executives have three. Our management provides a report annually to the Committee that shows how each named executives ownership compares to the guidelines. Not meeting the guidelines may impact future equity grants. All of our named executives met the guidelines as of December 31, 2008.
Are there policies in place that prohibit the sale or purchase of stock by named executives?
No named executive may purchase or sell options, puts, calls, straddles, equity swaps or other derivatives that are directly linked to Unums common shares. In addition, these individuals may not engage in transactions involving short sales of Unum stock or in any hedging transactions on Unum stock. These restrictions also apply to all of our executive officers, directors and members of their families sharing their households.
Our current policy imposes limits on the timing and types of transactions in Unum stock permitted by named executives and certain other officers. Among other restrictions, the policy allows officers to trade Unum common shares only during pre-determined window periods following earnings announcements, and only after they have pre-cleared transactions with our General Counsel or his designee.
Tax and Accounting Considerations
Does the company take Section 162(m) of the Internal Revenue Code into account in designing its compensation programs?
Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 per year on the amount of deductible compensation paid to the CEO and the other named executives, unless the compensation satisfies the performance-based compensation exception to Section 162(m). We have designed elements of our executive compensation program, including the annual incentives under the Executive Officer Incentive section of the Management Incentive Compensation Plan of 2008 and the long-term incentive awards under the Stock Incentive Plan of 2007, to increase the likelihood that these are deductible for federal income tax purposes. However, the Committee may from time to time pay compensation that is not deductible under Section 162(m) if it determines that paying such compensation is needed in order to attract, retain or provide incentive to our named executive officers.
What assumptions does Unum make in accounting for stock awards?
We account for stock-based payments under the requirements of SFAS 123(R). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008. Additionally, the footnotes to the Summary Compensation Table and the Grants of Plan Based Awards table detail the assumptions for awards listed in those tables.
Did the companys accounting for equity awards granted to named executives under SFAS 123(R) have any impact on the compensation reports in the Summary Compensation Table?
Yes. Because two of our named executives will become retirement-eligible in 2009 under our stock plan, accounting rules require us to recognize the expense of the full value of their awards by the time they reach retirement eligibility, thereby increasing the results reported under Stock Awards, Option Awards and Total shown in the Summary Compensation Table. This treatment is required whether or not we expect the named executive to retire, and whether or not they actually do.
Under our stock plan, if a participant retires from the company at age 55 with at least 15 years of service, he or she is eligible for vesting of certain unvested equity awards. As a result, SFAS 123(R) requires that we expense the full value of grants to retirement-eligible individuals by the time the participant reaches this combination of age and service.
During 2009, two of our named executives (Mr. Watjen and Mr. Best) will reach this combination of age and service. This means that we have recognized expenses during 2008 for awards granted to Mr. Watjen and Mr. Best, in 2008, over the time period from the date of grant to the date at which retirement eligibility is reached, which is less than the typical three year vesting period, thereby causing an acceleration of expense recognition for the awards granted to these named executives.
We maintain three defined benefit plans in the United States.
Benefits payable to each named executive pursuant to our pension benefit plans are summarized in the following table.
How are benefits determined under the Qualified Plan?
Under the Qualified Plan, retirement benefits include: a basic benefit based upon retirement age, years of credited service, highest average earnings and Social Security covered compensation. The definitions of these terms are:
As an annual single life annuity, the basic benefit for participants is equal to:
All benefits are indexed on the first day of each plan year following the participants date of termination using the National Average Wage rate of increase published by the Social Security Administration in the preceding year (minimum of 2.75% and maximum of 5.0%).
Benefits provided under the Qualified Plan are based on pensionable earnings (which are described below) up to a compensation limit of $230,000 under the Internal Revenue Code. In addition, benefits provided under the Qualified Plan may not exceed $185,000 (payable as a single life annuity beginning at any age from 62 through Social Security Normal Retirement Age) under the Internal Revenue Code.
What additional provisions are included in the Excess Plan and SERP?
The Excess Plan provides a benefit equal to the payment that would be provided under the Qualified Plan if the IRS compensation and benefit limits outlined above did not exist, minus the payment actually provided under the Qualified Plan. This plan takes into account pension benefits outside of the current Unum Qualified Plan. Mr. McCarthy was a member of prior Unum pension plans and accrues an additional benefit for his 21 years of service prior to 2000. Mr. Best was a member of the Colonial Pension Plan under which he has a deferred vested monthly single life annuity benefit of $4,896 payable at age 66 and an additional 22 years of vesting service.
The benefit provided under the SERP is payable as an annuity beginning on the first day of the month following retirement. The SERP benefit for Mr. Watjen, expressed as an annual single life annuity, is equal to: 2.5% of Highest Average Earnings times years of service up to 20, minus the annual single life annuity provided under the Qualified Plan and the Excess Plan beginning on benefit commencement.
Mr. Watjen is presently the only named executive covered under the SERP benefit.
Are named executives eligible for pensions before normal retirement age?
Under the Qualified and Excess plans, participants may retire early at age 55 with five years of vesting service. However, pension benefits under those plans are reduced for commencement prior to normal retirement age (age 65 except for the Colonial Pension Plan portion of Mr. Bests benefit which is reduced from age 66).
Under the SERP, Mr. Watjen is eligible for an unreduced pension at age 60, and the amount of his unreduced pension is shown in the Pension Benefits table above. If he terminates employment prior to age 60, the single life annuity will be reduced by 5% per year.
What types of compensation are used in the payment and benefit formula?
The payment and benefit formula incorporates: base pay received in each plan year during which the employee accrues credited service; and payments received from the regular annual incentive plan and any field or sales compensation plan.
Not included in the formula are other bonuses, long-term incentive awards, commissions, prize awards or allowances for incidentals.
Are additional years of credited service granted to participants?
Additional years of credited service are generally not granted to participants in any of the three plans, and no extra years of service have been granted to the named executives other than service granted under prior plans. Their respective years of credited service are included in the Pension Benefits table.
Are lump sum distributions available under the plan?
Lump sum distributions are only available under the plan to vested employees who have a present value of future pension benefits of $10,000 or less. None of the named executives are eligible for lump sum distributions from the qualified or excess plans, or the SERP. Based on current benefit levels, pension payouts for the named executives will be paid in the form of a monthly annuity.
Does Unum have any nonqualified programs that allow named executives to defer compensation?
We do not have an active nonqualified program that allows for deferrals of compensation by our named executives. However, Mr. McCarthy does have a balance under an inactive plan, and his amounts are shown in the table below. This plan gave executives the opportunity to elect deferral amounts of their base salary and/or annual incentive and the time and form of the distribution of those amounts. The last year compensation deferral occurred under the plan was 2000.
Other Post-Employment Payments
The amounts in the table below outline estimated payments to named executives under various termination scenarios. The table excludes amounts received as an annuity under our retirement plans and the intrinsic value of vested options, since these amounts are not impacted by a termination. The pension information is shown in the previous Pension Benefits table.
Termination of named executives can occur:
What would be paid to executives under various termination scenarios?
Payments, or termination benefits, are provided to the named executives as outlined in the following table. In the event of termination as a result of death, payments will be made to the named executives beneficiary.