AETNA INC. Hospital and medical service plans. For

Transcription

1 AETNA INC. Meeting Date: Fri, 30 May :30am Type: AGM Issue date: Thu, 15 May 2014 Meeting Location: The Ritz-Carlton, Denver in Denver, CO Current Indices: S&P500 Sector: Hospital and medical service plans 1a 1b 1c 1d 1e 1f 1g 1h 1i 1j 1k 1l PROPOSALS Elect Fernando Aguirre Elect Mark T. Bertolini Chairman, Chief Executive Officer and President. The roles of Chairman and CEO are combined which Triodos does not support. It is considered to be best practice for these positions to be separated with a Chief Executive responsible for the running of the business and the Chairman responsible for the functioning of the Elect Frank M. Clark Elect Betsy Z. Cohen Elect Molly J. Coye Non-Executive Director. Not considered independent as she has a business relationship with the company. She is an executive of UCLA Health System that sold services to the Company for an amount exceeding $1 million during the year under review. There is insufficient independent representation on the Elect Roger N. Farah Elect Barbara Hackman Franklin Elect Jeffrey E. Garten Non-Executive Director. Independent by the company, but not considered independent as he has Elect Ellen M. Hancock Elect Richard J. Harrington Elect Edward J. Ludwig Lead Director. Independent by the company, but not considered independent as he has been on the board for more than nine years. There is insufficient independent representation on the Elect Joseph P. Newhouse Non-Executive Director. Independent by the company, bur not considered independent as he has been on the Board for over nine years. There are insufficient independent directors on the ADVICE AETNA INC. 30 May 2014 AGM 1 of 5

2 2 Ratify the appointment of the auditors. KPMG LLP proposed. The total unacceptable non-audit fees were approximately 2.1% of audit and audit related fees during the year under review and the non-audit fees over a three-year period were also approximately 2.7% of audit and audit related fees. Acceptable proposal. 3 Board proposal to eliminate supermajority voting The Board is requesting that shareholders approve amendments to Article 11 of Aetna s Amended and Restated Articles of Incorporation and Section 5.02 of Aetna s Amended and Restated By-Laws that would eliminate the supermajority voting provisions contained in the Articles and the By-Laws. The elimination of supermajority provisions is supported as it increases shareholder rights regarding influence over company bylaws. Triodos supports this resolution. 4 Amend Articles: Provide holders of at least 25% of the voting power of all outstanding shares the right to call a special meeting of shareholders The Board is requesting shareholder approval to amend Article 8(a) of the Articles that would provide holders of at least 25% of the voting power of all of Aetna s outstanding shares the right to call a special meeting of shareholders. Currently, Article 8(a) of the Articles provides shareholders entitled to vote at least two-thirds of the voting power of Aetna s outstanding shares the right to call a special meeting of shareholders. The Board has approved and recommends shareholder approval of an amendment to Article 8(a) of the Articles to provide a shareholder or shareholders entitled to vote at least 25% of the voting power of Aetna s outstanding shares the right to call a special meeting of shareholders, subject to the procedures and other requirements set forth in the By-Laws. It is viewed that shareholders should have the right to convene special meetings. Whilst it is considered a lower threshold would be more reasonable, the proposed threshold is deemed to be acceptable. Triodos supports this resolution. 5 Approval of the Proposed Amendment to the Amended Aetna Inc Stock Incentive Plan The Board are seeking shareholder approval of an amendment to the Aetna Inc Stock Incentive Plan. The Amendment increases the number of shares authorized to be issued under the 2010 Stock Plan by 5,287,000, from 22,000,000 to 27,287,000. Aetna currently maintain two stock compensation plans under which future equity awards may be granted: the 2010 Stock Plan and the 2010 Non-Employee Director Compensation Plan (the 2010 Director Plan ), which together they refer to as the Current Plans. As of March 28, 2014, there were 10,032,289 shares available for future awards under the Current Plans. Of that number, 9,759,025 shares were available under the 2010 Stock Plan and 273,264 shares were available under the 2010 Director Plan. There is also a concern about the balance of performance and rewards under the Plan. It is noted that the performance period before the vesting of equity awards is only two-years, whereas best practice would be for three or more years. All the Performance Stock Units will vest for the achievement of a target corresponding to the median level of the peer group performance, which is not deemed appropriate. The Share Appreciation Rights grants, corresponding to 70% of the total award, do not have any performance criteria and are solely dependent on the share price. This is not considered to be an adequate method to ensure that executives remuneration is commensurate to performance. Due to these concerns, Triodos does not support this resolution. AETNA INC. 30 May 2014 AGM 2 of 5

3 6 Approve Pay Structure The Company has submitted a proposal for shareholder ratification of its executive compensation policy and practices. The voting outcome for this resolution reflects the balance of our opinion on the adequacy of disclosure, the balance of performance and reward and the terms of executive employment. The compensation rating is: BDC (for 2013 it was also BDC) Disclosure rating: B - The specific performance targets attached to the annual bonus are disclosed for the year under review, but not for the forthcoming year. Balance rating: D - There is a concern over Executive Compensation Committee having a discretion in awarding additional bonuses, and stock options and share awards vesting in less than three years. Contracts rating: C - The Company has suitable clawback and double-trigger policies in place. Based upon the ability to grant discretionary bonuses and the short vesting periods, Triodos does not support this resolution. 7a The 2013 say-on-pay vote received an oppose vote of approximately 11.5%. Shareholder Resolution: Introduce an independent chairman rule Proposed by: The Comptroller of the City of New York, John C. Liu, as the custodian and a trustee of the New York City Employees Retirement System, the New York City Fire Department Pension Fund, the New York City Teachers Retirement System, and the New York City Police Pension Fund, and custodian of the New York City Board of Education Retirement System. The proponents request that the Board of Directors adopt a policy that the Chair of the Board shall be an independent director who is not a current or former employee of the company, and whose only nontrivial professional, familial or financial connection to the corporation or its CEO is the directorship. The policy should be implemented so as not to violate existing agreements and should allow for departure under extraordinary circumstances such as the unexpected resignation of the chair. The Board believes that the decision of who should serve as Chairman is the responsibility of the Board and that the Board should not be constrained by a requirement that the positions of CEO and Chairman be separated. The Company s existing governance structure allows for a Lead Director and the role of Presiding Director has been expanded and changed to Lead Director. The separation of roles is considered to be best practice in corporate governance, on the basis that an independent Chairman can provide independent oversight of management and facilitates clearer lines of accountability with respect to corporate decisions. It is also considered that all board meetings (not just those of independent directors) should be led by an independent director, and judge that in practice this means that there should be an independent Chairman. Triodos supports this resolution. AETNA INC. 30 May 2014 AGM 3 of 5

4 7b 7c Shareholder Resolution: Political Contribution - Board Oversight Proposed by: The Unitarian Universalist Association of Congregations The proponents request that the Board of Directors amend Aetna s Political Contributions Policy to include the following provisions regarding Board oversight of Aetna s political expenditures: (1) Assign to the Board responsibility for (a) formulating and revising the Policy and (b) establishing the parameters of Aetna s commitment to publicly disclose political expenditures (in addition to legal disclosure requirements); (2) Assign to the Audit Committee responsibility for analyzing and reporting to the full Board annually on (a) compliance with the Policy; and (b) the risks associated with Aetna s political activities, including those undertaken through politically active intermediaries such as trade associations and social welfare organizations; and, (3) Establish specific criteria tailored to analyzing whether to make payments to Intermediaries for political purposes, requiring articulation of the business rationale for each payment and consideration of the use(s) to which the funds will be put by the Intermediary. The supporting statement hightlights that strong board oversight is particularly important at Aetna, which disclosed that it gave $4,000,000 to the US Chamber of Commerce for unspecified voter education initiatives and $3,000,000 to the American Action Network, a social welfare organization that sponsors ads regarding political candidates, in It is not clear how such efforts, which attracted significant controversy, are in Aetna s best interests. The Board are against this proposal and state that they believe the Company already complies with much of what has been requested in the proposal and that the additional activities requested are not warranted at this time. It is viewed that not all political contributions activity by the company, as defined by the proponent, has been disclosed and that all shareholder funds should be accounted for. The amounts of shareholder funds mentioned are considered to be material. This figure may exclude grassroots lobbying to directly influence legislation by mobilizing public support or opposition. Therefore, the reporting upon and monitoring of these matters is considered be a reasonable request for disclosure. Triodos supports this resolution. Shareholder Resolution: Political Contribution Disclosure Proposed by: Thomas P. DiNapoli, the Comptroller of the State of New York The Proponent is requesting that the Board amend Aetna s Political Contributions Policy to provide that Aetna will disclose annually all payments it made in the previous calendar year to tax-exempt organizations (other than charitable organizations not permitted to engage in lobbying as a substantial part of their activities) that were used, or that Aetna had reasonable grounds to believe were used, for a political purpose, including the recipient and amount of the payment. The proponent uses the same examples as the proponent in shareholder resolution 7b. The Board repeats its opposition to the proposal of political contributions disclosure, and again states that they believe the Company complies fully with all state and federal laws concerning the disclosure of its political and lobbying activity. As with proposal 7b, it is viewed that not all political contributions activity by the company, as defined by the proponent, has been disclosed and that all shareholder funds should be accounted for. The amounts of shareholder funds mentioned are considered to be material and that this figure may not include grassroots lobbying to directly influence legislation by mobilizing public support or opposition. Therefore, the reporting upon and monitoring of these matters is considered be a reasonable request for disclosure. Triodos supports this resolution. * = Special resolution AETNA INC. 30 May 2014 AGM 4 of 5

5 Private Circulation only c Copyright 2014 PIRC Ltd Researcher: Luke Jones pircresearch@pirc.co.uk Information is believed to be correct but cannot be guaranteed. Opinions and recommendations constitute our judgement as of this date and are subject to change without notice. The document is not intended as an offer, solicitation or advice to buy or sell securities. Clients of Pensions & Investment Research Consultants Ltd may have a position or engage in transaction in any of the securities mentioned. Pensions & Investment Research Consultants Limited 6th Floor 9 Prescot Street London E1 8AZ Tel: Fax: Regulated by the Financial Conduct Authority Version 2 AETNA INC. 30 May 2014 AGM 5 of 5