2017
Director Compensation
The compensation committee makes recommendations to the Board with respect to the compensation level of directors, and the Board determines the directors’ compensation. During
2017
, the Company paid the non-employee directors the following cash compensation:
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Non-Executive Director Fee
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Non-executive directors received an annual cash retainer in the amount of $100,000.
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Non-Executive Chairman of the Board Fee
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Effective as of the date the non-executive chairman of the Board was appointed to such position on May 2, 2017, the non-executive chairman received an additional prorated cash fee, based on an annual fee of $175,000.
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Independent Lead Director Fee (until May 2, 2017)
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Until May 2, 2017, when the position of independent lead director was eliminated, the independent lead director received an additional cash fee prorated for the period January 1, 2017 to May 2, 2017, based on an annual fee of $30,000.
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Vice Chair of the Board Fee
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From May 2, 2017, when a vice-chair of the Board was appointed, to November 5, 2017, the vice-chair received an additional cash fee prorated for that period based on an annual fee of $60,000. Effective November 6, 2017, when the chief executive officer transition was completed, the vice-chair annual cash fee was reduced to $30,000.
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Audit Committee Fee
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The chairperson of the audit committee received an additional annual cash fee of $27,500, and each member received $15,000.
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Corporate Governance and Nominating Committee Fees
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The chairperson of the corporate governance and nominating committee received an additional cash fee of $22,500, and each member received $12,500.
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Compensation Committee Fees
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The chairperson of the compensation committee received an additional cash fee of $22,500, and each member received $12,500.
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Compliance and Quality Committee Fees
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The chairperson of the compliance and quality committee received an additional cash fee of $22,500, and each member received $12,500.
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Information Technology and Cybersecurity Committee Fees
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The chairperson of the information technology and cybersecurity committee received an additional cash fee of $11,250, and each member received $6,250.
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Acquisitions and Capital Management Committee Fees
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The chairperson of the acquisitions and capital management committee received an additional prorated cash fee based on an annual fee of $26,000, and each member received an additional prorated cash fee based on an annual fee of $24,000. Such amounts were prorated for the period January 1, 2017 to May 3, 2017, when the committee was disbanded.
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The Company also reimburses its Board members for travel, food, and lodging expenses incurred in attending Board and committee meetings or performing other services for the Company in their capacities as directors. The Company also compensates its non-employee Board members $1,000 per diem for non-ordinary course Board and committee activity, excluding any educational events.
Directors who are employees of the Company or its subsidiaries do not receive any compensation for their services as directors. From January 1, 2017 to May 2,
2017
, former director Dr. J. Mario Molina also served as our president and chief executive officer, and former director Mr. John C. Molina also served as our chief financial officer. Joseph M. Zubretsky, our current president and chief executive officer, was appointed as a director effective November 6, 2017.
In addition, to link the financial interests of the non-employee directors to the interests of the stockholders, encourage support of the Company’s long-term goals, and align director compensation to the Company’s performance, each non-employee director is granted an equity award with a total value of $220,000 for 2017-2018. One quarter of that amount, or $55,000 of restricted stock, was granted on the first day of each quarter (starting on July 1, 2017) based on the closing price of the Company’s stock on the grant date. The status of Dr. J. Mario Molina and Mr. John C. Molina changed from employee directors to non-employee directors on May 2, 2017, and as such, they each received a prorated equity grant on May 2, 2017, in addition to the quarterly grants thereafter. Such equity awards may be rounded up or down to account for fractional shares in the computation.
Molina Healthcare, Inc. 2018 Proxy Statement |
19
2017
Non-Employee Director Compensation
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Name
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Fees Earned
or Paid
in Cash
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Stock
Awards
(1)
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All Other
Compensation
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Total
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Garrey E. Carruthers, Ph.D.
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$
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138,125
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$
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220,019
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$
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—
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$
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358,144
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Daniel Cooperman
(2)
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$
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151,751
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$
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222,019
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$
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—
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$
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373,770
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Charles Z. Fedak
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$
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127,500
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$
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222,019
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$
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—
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$
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349,519
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John C. Molina
(3)
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$
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74,688
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$
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146,035
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$
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—
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$
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220,723
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Joseph M. Molina
(4)
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$
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69,090
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$
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146,035
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$
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—
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$
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215,125
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Frank E. Murray
(5)
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$
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125,000
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$
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220,019
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$
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—
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$
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345,019
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Steven J. Orlando
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$
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154,360
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$
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220,019
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$
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—
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$
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374,379
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Ronna E. Romney
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$
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191,731
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$
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220,019
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$
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—
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$
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411,750
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Richard M. Schapiro
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$
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149,432
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$
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220,019
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$
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—
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$
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369,451
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Dale B. Wolf
(2)
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$
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249,456
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$
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220,019
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$
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—
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$
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469,475
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(1)
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The amounts reported as Stock Awards reflect the grant date fair value of restricted stock awards under the Company’s 2011 Equity Incentive Plan, in accordance with Accounting Standards Codification Topic 718, “Compensation - Stock Compensation.” Beginning on July 1, 2015, the non-employee directors compensation program described above provided for an annual equity award valued at $220,000 for each director, or $55,000 per quarter.
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The amounts shown (other than for Dr. Molina and Mr. Molina) represent the aggregate grant date fair value of the awards, using the closing price of our common stock on January 1, 2017 of $54.26, April 1, 2017 of $45.60, July 1, 2017 of $69.18, and October 1, 2017 of $68.76. For Dr. Molina and Mr. Molina, the amounts shown represent the aggregate grant date fair value of the awards, using the closing price of our common stock on May 2, 2017 (the date on which their status changed from employee directors to non-employee directors) of $59.75, July 1, 2017 of $69.18, and October 1, 2017 of $68.76.
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(2)
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Messrs. Cooperman and Wolf each have fully vested options to purchase 15,000 shares of our stock at an exercise price of $33.02 per share which expire on March 11, 2023.
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(3)
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Mr. Molina served as a non-employee director from May 2, 2017 to February 23, 2018.
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(4)
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Dr. Molina served as a non-employee director from May 2, 2017 to December 12, 2017.
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(5)
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Dr. Murray served as a director until his retirement on November 6, 2017. The fees reflected in the table include $19,022 of compensation for consulting services provided by Dr. Murray from his retirement date, November 6, 2017, through December 31, 2017.
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2018
Director Compensation
The compensation committee periodically reviews benchmarking assessments of director compensation at comparable companies. The compensation committee engaged Exequity as its compensation consultant to undertake the 2018 benchmarking assessment of director compensation. Exequity is the same compensation consultant that the committee engaged to perform the 2017 director and named executive officers compensation studies and the 2018 compensation study for the named executive officers.
The peer group used in the director compensation study was the same peer group used for the executive compensation study and consists of the following companies:
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1. Acadia Healthcare Company, Inc.
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8. Humana Inc.
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2. Aetna, Inc.
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9. Magellan Health, Inc.
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3. Anthem, Inc.
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10. Tenet Healthcare Corporation
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4. Centene Corporation
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11. Triple-S Management Corporation
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5. Cigna Corporation
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12. Universal Health Services, Inc.
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6. Community Health Systems, Inc.
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13. WellCare Health Plans, Inc.
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7. DaVita Inc.
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The director compensation study concluded that the total fees for the directors were moderately above the peer group median. The compensation committee decided to leave the directors’ 2018 compensation unchanged from the 2017 levels.
Molina Healthcare, Inc. 2018 Proxy Statement |
20
Compensation Consultant Independence
The compensation committee used Exequity as its compensation consultant for the 2018 named executive officers’ and directors’ compensation studies. Exequity is the same compensation consultant that the compensation committee previously used for the 2017 named executive officers’ and directors’ compensation studies. The Company paid Exequity $157,814 for advisory compensation services provided to the Company during 2017. Other than the services provided to the Company by the consulting firm in connection with the compensation studies for the named executive officers and directors, the consulting firm does not provide any other services to the Company.
The compensation committee reviewed the independence of its compensation consultant in light of SEC rules and NYSE listing standards, including taking into account the following factors: (1) no other services being provided to the Company by the consulting firm; (2) fees paid by the Company as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the consulting firm and a member of the compensation committee; (5) any Company stock owned by the consulting firm; and (6) any business or personal relationships between the Company’s executive officers and the senior advisor. In light of these considerations, the compensation committee concluded that Exequity’s work for the committee was rendered on a fully independent basis, and involved no conflict of interest.
Information About the Executive Officers of the Company
The following persons were our executive officers at
December 31, 2017
. One of our directors, Mr. Joseph M. Zubretsky, was also also our chief executive officer during the year ended December 31, 2017. See above on page 7. Executive officers are appointed annually by the Board, subject to the terms of their employment agreements. Subsequent to December 31, 2017, Ms. Bayer retired as chief operating officer of the Company and Ms. Rubino was terminated by the Company without cause.
Mr. Joseph W. White, 59,
has served as our chief financial officer since May 2017. He also served as our interim president and chief executive officer from May 2017 to November 2017. He had formerly served as our chief accounting officer and vice president of accounting since 2007 and 2003, respectively. In his role as chief financial officer, Mr. White is responsible for oversight of the Company’s accounting, reporting, forecasting, budgeting, actuarial, and treasury functions. Mr. White has over 30 years of financial management experience in the health care industry. Prior to joining the Company in 2003, Mr. White worked for Maxicare Health Plans, Inc. from 1987 through 2002. Mr. White holds a Master’s degree in Business Administration and a Bachelor’s degree in Commerce from the University of Virginia. Mr. White is a Certified Public Accountant.
Mr. Jeff D. Barlow, 55
, has served as our chief legal officer and secretary since 2010. Prior to that, Mr. Barlow had served as vice-president, assistant corporate secretary, and associate general counsel of Molina Healthcare since 2004. As chief legal officer, Mr. Barlow is responsible for setting the overall legal strategy for the Company and its subsidiaries, and for providing legal counsel to senior management and the board of directors. Mr. Barlow has over 25 years of legal experience, including counseling clients regarding federal securities laws, corporate governance, mergers and acquisitions, and litigation. Mr. Barlow graduated from the University of Utah with a Bachelor of Arts degree in 1987 with a minor in Latin. Additionally, Mr. Barlow received his Juris Doctorate degree,
cum laude
, from the University of Pittsburgh School of Law in 1990, and his Master of Public Health degree from the University of California, Berkeley in 1995. Mr. Barlow is a member of the American Bar Association, California State Bar Association, Arizona State Bar Association, the American Health Lawyers Association, and the American Academy for the Advancement of Science.
Former
Executive
Officers
Ms. Terry P. Bayer, 67
, served as our chief operating officer from November 2005 to February 2018. She had formerly served as our executive vice president, health plan operations since January 2005. Ms. Bayer has over 30 years of healthcare management experience, including staff model clinic administration, provider contracting, managed care operations, disease management, and home care. Since
March 2014, Ms. Bayer has served as a director and member of the compensation and organization committee and since 2015 of the nominating and governance committee of California Water Service Group, the third largest investor-owned water utility in the United States.
From 2006 to 2008 Ms. Bayer served on the board of Apria Healthcare Group Inc., a provider of home respiratory services and certain medical equipment. She holds a Juris Doctorate degree from Stanford University, a Master of Public Health degree from the University of California, Berkeley, and a Bachelor’s degree in Communications from Northwestern University.
Molina Healthcare, Inc. 2018 Proxy Statement |
21
Ms. Lisa A. Rubino,
60, served as our senior vice president, Medicare & Duals Integration from 2013 to March 2018. In her role, Ms. Rubino was responsible for the overall strategic direction and implementation enterprise wide of Medicare. Previously, from 2012 to 2013, Ms. Rubino served as senior vice president of health plans - western region. From 2007 to 2012, Ms. Rubino was the president of the Company’s wholly-owned subsidiary, Molina Healthcare of California. Prior to joining the Company in 2007, Ms. Rubino was a member of the Blue Shield of California (formerly CareAmerica Health Plans) executive leadership team from 1997 to 2006. Ms. Rubino received her Master’s degree in Criminology from California State University, Long Beach, from where she also received her Bachelor’s degree in Criminology.
Executive Compensation
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) describes and explains the elements of the compensation paid to our named executive officers for 2017. In addition, this CD&A describes the objectives of the Company’s compensation programs, including what each program is designed to reward, and why the Company chose to pay or not to pay a particular compensation element.
The compensation committee of the Board of Directors has primary responsibility for overseeing and reviewing the design and structure of the Company’s compensation programs. The compensation committee is directly responsible for evaluating the performance of, and determining the compensation paid to, our chief executive officer. In addition, prior to the termination of our former chief financial officer in May 2017, because he is the sibling of our former president and chief executive officer, the compensation committee was also directly responsible for evaluating the performance of, and determining the compensation paid to, our former chief financial officer. The compensation committee also reviews and approves the compensation paid to our other senior executive officers as recommended by the chief executive officer, taking into consideration: (a) pre-established performance goals and objectives, (b) the Company’s performance, (c) strategic leadership in furtherance of the Company’s long term strategies, (d) market comparables of an appropriate peer group, and (e) the Company’s overall compensation objectives and policy.
After considering feedback received last year from our stockholders about our compensation program, we responded by making several changes for 2018 to: (i) simplify the compensation program by reducing the number of performance metrics in our incentive plans, (ii) recalibrate target total compensation opportunities for our executives such that these are positioned more closely to median target total compensation opportunities among relevant peer executives (see
“The Company’s Compensation Philosophy”
below), and (iii) make our disclosure more transparent by more clearly delineating the difference between compensation opportunities and the amounts actually paid to our named executive officers.
This CD&A is focused on the compensation paid for 2017 to our current president and chief executive officer, our former interim president and chief executive officer and current chief financial officer, and our chief legal officer and secretary, as follows:
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Joseph M. Zubretsky, president and chief executive officer;
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•
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Joseph W. White, chief financial officer, and former interim president and chief executive officer; and
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•
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Jeff D. Barlow, chief legal officer and secretary.
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This CD&A also separately describes the compensation and severance benefits paid to four additional executive officers who are no longer employed by the Company, as follows:
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•
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Dr. J. Mario Molina, former president and chief executive officer;
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•
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John C. Molina, former chief financial officer;
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•
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Terry P. Bayer, former chief operating officer; and
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•
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Lisa A. Rubino, former senior vice president of Medicare & Duals Integration.
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Collectively, these seven executive officers were our “named executive officers” in 2017. The employment of Ms. Bayer and Ms. Rubino terminated after December 31, 2017. The three named executive officers who are currently employed by the Company are referred to herein as our “current named executive officers,” and the four named executive officers who are no longer employed by the Company are referred to herein as our “former named executive officers.” Because the principal compensation paid to the former named executive officer founders relates to their severance benefits, we discuss their compensation herein separately.
Molina Healthcare, Inc. 2018 Proxy Statement |
22
Termination of Named Executive Officer Founders
On May 2, 2017, after several disappointing quarters in which the Company underperformed relative to internal financial metrics and to the managed care sector as a whole, the Board terminated the employment of Dr. J. Mario Molina, former president and chief executive officer, and John C. Molina, former chief financial officer. These terminations were without “cause” as such term is defined in their employment agreements. Our former chief accounting officer, Joseph W. White, was promoted to chief financial officer and interim president and chief executive officer, while the Board launched a search for a permanent president and chief executive officer. Effective as of November 6, 2017, Joseph M. Zubretsky was named president and chief executive officer of the Company. Since May 2017, the executive management team has been significantly restructured, with the employment of three of the five named executive officers having been terminated by the Company without cause, the retirement of one of the named executive officers, and the appointment of a new president and chief executive officer.
Dr. J. Mario Molina and John C. Molina are the sons of the Company’s founder, Dr. C. David Molina, and had served in their executive officer positions since before the time of the Company’s initial public offering in July 2003 (the “IPO”). Dr. Molina and Mr. Molina entered into their agreements with the Company in January 2002. Among other things, their employment agreements contained favorable severance provisions, including providing for the acceleration of all equity compensation in the event of their termination without cause. These employment agreements were amended and restated in December 2009 to address certain technical rules pertaining to deferred compensation under Section 409A of the Internal Revenue Code. Their employment agreements were again amended and restated in March 2016 in order to remove the tax gross-up provisions in the event of their termination without cause. However, as a condition to the relinquishment of their tax gross-up rights, Dr. Molina and Mr. Molina required that the base salary multiplier upon their termination without cause be increased to a multiple factor of 4X, and that the favorable equity compensation acceleration benefits as established in January 2002 remain in place until the time of their termination.
Upon the Board’s termination of Dr. Molina’s and John C. Molina’s employment on May 2, 2017, these severance provisions were triggered. Pursuant to the terms of Dr. Molina’s employment agreement, Dr. Molina received as severance: (i) $5,000,000, representing the amount equal to 400% of Dr. Molina’s base salary of $1,250,000 in effect as of his termination date, (ii) $625,000, representing Dr. Molina’s pro rata bonus, and (iii) $65,000, representing 18 months of health and welfare benefits. In addition, Dr. Molina received 100% vesting of all outstanding equity compensation previously granted to him, including all performance-based equity compensation awards, despite the non-achievement of most of those performance-based awards.
Pursuant to the terms of John C. Molina’s employment agreement, Mr. Molina received as severance: (i) $3,600,000, representing the amount equal to 400% of $900,000, which was Mr. Molina’s base salary in effect as of his termination date, (ii) $375,000, representing Mr. Molina’s pro rata bonus, and (iii) $65,000, representing 18 months of health and welfare benefits. In addition, Mr. Molina received 100% vesting of all outstanding equity compensation previously granted to him, including all performance-based equity compensation awards, despite the non-achievement of most of those performance-based awards.
The total value of the severance payments made in 2017 were: (i) in the case of Dr. J. Mario Molina, $22,962,073, and (ii) in the case of John C. Molina, $10,675,462.
Retirement
of Chief
Operating
Officer
On February 2, 2018, Terry P. Bayer retired from her position as the Company’s chief operating officer. In consideration of her years of service on behalf of the Company and her execution of a release of claims and covenant not to sue, Ms. Bayer’s retirement was deemed by the compensation committee to constitute a termination without cause for purposes of determining her eligibility to receive severance benefits pursuant to her employment agreement dated as of June 14, 2013. Accordingly, Ms. Bayer’s received as severance a cash payment equal to $808,333, subject to applicable withholding, which is the sum of (i) $700,000, representing an amount equal to 100% of $700,000, which was Ms. Bayer’s base salary in effect as of February 2, 2018, the date of her retirement, (ii) $58,333, representing Ms. Bayer’s pro rata termination bonus for one month, and (iii) $50,000 for health and welfare benefits. In addition, Ms. Bayer received 100% vesting of all outstanding time-based equity compensation previously granted to her (29,208 shares) and 100% vesting of the performance-based equity compensation previously granted to her where the performance conditions had actually been satisfied (10,596 shares). Pursuant to the terms of her employment agreement, all outstanding non-vested performance-based equity compensation previously granted to Ms. Bayer for which the relevant performance conditions had not been satisfied were forfeited.
Molina Healthcare, Inc. 2018 Proxy Statement |
23
Termination of Senior Vice President of Medicare & Duals Integration
On March 2, 2018, the Company terminated without cause the employment of Lisa A. Rubino, our former Senior Vice President of Medicare & Duals Integration. Upon termination, pursuant to her employment offer letter, upon delivery to the Company of a waiver and release in favor of the Company, Ms. Rubino is entitled to receive payments in the aggregate amount of $525,703 representing the sum of (i) $500,000, her annual base salary as of the date of her termination, and (ii) $25,703, representing 12 months of COBRA payments, multiplied by 1.5 to reflect a tax gross-up. All of Ms. Rubino’s restricted stock awards outstanding as of the date of her termination were forfeited.
Lack of Achievement of Most 2017 Pay-for-Performance Metrics
Given the Company’s poor financial performance prior to changes in executive management, most of the pay-for-performance compensation metrics established for 2017 were not achieved during the year. Based on our pay-for-performance compensation philosophy, the compensation paid to our named executive officers (other than for Dr. Molina and John C. Molina for whom vesting of performance-based stock awards was accelerated as required by the terms of their employment agreements) was negatively impacted by 2017 financial performance in the following ways:
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•
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No cash amounts were paid under the Company’s short-term cash incentive bonus program for 2017 that consisted 65% of a net income measure and 35% of a discretionary bonus
;
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•
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No equity compensation vested in connection with the targets established in 2015 and 2016 for 2017 net profit margin of 1.5%;
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•
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No equity compensation vested in connection with the target established in 2015 for 2017 pre-tax income; and
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•
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No performance stock units vested in connection with the target established in 2017 for 2017 net profit margin of 0.5%.
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Additionally, the equity compensation awards that were subject to vesting based on the quality metric of achieving an improvement in Star ratings of 0.5 Stars or greater for each of two separate health plans from the levels of the previous year, with no decline in the then-existing average Star rating across all remaining health plans, did not vest.
The following equity compensation awards vested in 2018 for the specified metric achievements:
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•
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2017 annual premium revenues, net of acquisitions;
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•
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2015-2017 three-year TSR above the median of our peer group; and
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•
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Expansion in 2017 into the states of Mississippi and Idaho.
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For 2018 and future years, the Company intends to significantly reduce the number of its long-term equity compensation metrics and simplify the design of its long-term incentive programs.
The Company’s Compensation Philosophy
2017
Compensation
Philosophy.
(1)
In 2017, the Company’s compensation philosophy was to endeavor to pay our management team competitively within the marketplace in a manner that would ensure personnel are properly motivated to increase profitability and stockholder value. To that end, the 2017 total compensation opportunities for the Company’s executives were generally targeted between median and 75th percentile relative to peer executives. Our strategy in setting 2017 executive compensation was to pay our named executive officers base salaries at competitive market rates as determined by peer group comparisons, and to use the majority of both short-term and long-term incentive compensation to pay for actual financial performance. In designing performance and equity compensation vesting metrics for both our 2017 short-term cash bonus and long-term equity based incentive compensation, the compensation committee focused particularly on the achievement of various elements of our three-year strategic plan.
(1)
The compensation committee revised the Company’s compensation philosophy for 2018. Rather than targeting compensation between the median and 75
th
percentile relative to peer executives, we will now target compensation at or near the median, with actual compensation positioned below median when performance is below target, and closer to or even above 75th percentile when performance is strong. We believe that this approach is more consistent with our overarching pay-for-performance philosophy.
Molina Healthcare, Inc. 2018 Proxy Statement |
24
For 2017, the target total compensation opportunity for our named executive officers was reduced from the historical 75th percentile of our peer group objective to the level at or below the median compensation of our peer group. Actions taken by the compensation committee in 2017 have resulted in target total compensation opportunities that are now generally more comparable with peer benchmark median figures than had historically been the case, specifically:
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•
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The compensation committee recalibrated the Company’s executive compensation philosophy by generally increasing cash compensation, decreasing target long-term incentives value, and increasing potential long-term incentive upside opportunity when results are substantially in excess of targets; and
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•
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The Board restructured the senior management team, replacing two of the five named executive officers with executives whose target total compensation opportunities are positioned closer to relevant peer benchmark median opportunities.
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Reflecting the recalibrated compensation philosophy, and subject to some variation by individual, target total compensation opportunities for the Company’s named executive officers in aggregate now rest close to peer median benchmarks. This relative positioning is reasonably consistent across all elements of pay.
Compensation Best Practices
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What We Do
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What We Don’t Do
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Maintain stock ownership guidelines for directors and executive officers. In early 2018, such guidelines were revised to increase the ownership holdings to four (4) times the annual cash retainer for directors.
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No guaranteed bonuses.
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Have an incentive compensation clawback policy.
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No gross-ups on excise taxes.
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Enforce restrictions on “pledges” of shares of Company stock by directors and executive officers.
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Do not grant discounted stock options.
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Restrict hedging transactions by directors and executive officers.
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Do not permit repricing of stock options without stockholder approval.
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Engage an independent compensation consultant.
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Do not provide above-market earnings on deferred compensation.
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Provide very limited perquisites.
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Provide for director equity award limits in our equity incentive plan.
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Elements of Compensation
Primary Elements of Compensation.
The Company’s compensation program consists of three primary elements: (i) base salary; (ii) annual short-term performance-based cash bonus awards; and (iii) long-term incentive compensation, including both a performance-based vesting component and a time-based vesting component. Additional compensation elements include various benefit plans, such as a 401(k) and deferred compensation plan, and severance and change in control benefits. In certain special instances, such as in the case of the recruitment of senior executives like Mr. Zubretsky, the Company may be willing to offer a sign-on bonus and/or a substitutive equity award.
Retirement Plans
. The Company does not maintain a retirement pension plan. However, the named executive officers are eligible to participate in the Molina 401(k) Salary Savings Plan. The purpose of this program is to provide all Molina Healthcare employees with tax-advantaged savings opportunities and income after retirement. Eligible pay under the plans is limited to Internal Revenue Code annual limits. The Company makes a dollar-for-dollar match on the first four percent (4%) of salary electively deferred under the 401(k) Plan by all participants.
Deferred Compensation Plan.
The Company has established an unfunded non-qualified deferred compensation plan for certain key employees, including the named executed officers. Under the deferred compensation plan, eligible participants can defer up to 100% of their base salary and up to100% of their bonus to provide for tax-deferred growth. Eligible participants under the deferral program may select from approximately fifteen investment options representing a broad array of asset classes and spectrum of risk profiles.
Employee Stock Purchase Plan.
With the exception of our former chief executive officer and our former chief financial officer who were not eligible due to their possession of more than five percent of our voting common stock as determined under Section 424(d) of the Internal Revenue Code, the named executive officers are eligible to participate in the Company’s 2011 Employee Stock Purchase Plan, on an equal basis with all other employees. The
Molina Healthcare, Inc. 2018 Proxy Statement |
25
Employee Stock Purchase Plan allows eligible employees to purchase from the Company shares of its common stock at a 15% discount to the market price during the successive six-month offering periods under the plan.
Health and Insurance Benefits.
With limited exceptions, the Company supports providing benefits to named executive officers that are substantially the same as those offered to salaried employees generally. The named executive officers are eligible to participate in Company-sponsored benefit programs on the same terms and conditions as those made available to salaried employees generally. Basic health benefits, life insurance, disability benefits, and similar programs are provided to ensure that employees have access to healthcare and income protection for themselves and their family members.
Severance and Change in Control Benefits.
We have entered into employment agreements with all but one of our named executive officers pursuant to which they are eligible under certain circumstances for severance and change in control benefits. The severance and change in control payments and benefits provided under the employment agreements are independent of other elements of compensation. Additionally, the named executive officers are eligible for certain benefits provided for in the event of termination of employment within 24 months of a change in control under the Company’s Change in Control Severance Plan established for employees of the Company with positions of vice-presidents and above. A description of the material terms of our severance and change in control arrangements can be found later in this proxy statement under
“Potential Payments Upon Change in Control or Termination.”
The compensation committee believes that severance and change in control benefits are necessary to attract and retain senior management talent. Our agreements are designed to attract key employees, preserve executive morale and productivity, and encourage retention in the face of the potentially disruptive impact of an actual or potential change in control. We believe these benefits allow executives to assess potential takeover bids objectively without regard to the potential impact on their own job security.
Perquisites and Other Personal Benefits.
The Company does not provide named executive officers with any material perquisites or other personal benefits.
Executive Pay Study for 2017
To evaluate the compensation levels of the Company’s named executive officers in relation to the compensation levels of executives employed by the Company’s industry peers, the compensation committee engaged Exequity, a compensation advisory services firm, to conduct a total compensation study with respect to the Company’s named executive officers for 2017 (the “2017 Compensation Study”). Exequity reports directly and exclusively to the compensation committee with respect to executive compensation matters.
In its 2017 Compensation Study, Exequity used a 12-company peer group consisting of seven publicly traded managed care companies, three health care facilities, and two health care service companies, as follows:
|
|
|
1. Centene Corporation
|
7. Team Health Holdings, Inc.
|
2. Cigna Corporation
|
8. Tenet Healthcare Corporation
|
3. Community Health Systems, Inc.
|
9. Triple-S Management Corporation
|
4. DaVita HealthCare Partners Inc.
|
10. Universal American Corp.
|
5. Humana Inc.
|
11. Universal Health Services, Inc.
|
6. Magellan Health, Inc.
|
12. WellCare Health Plans, Inc.
|
Based on the findings of the 2017 Compensation Study, the compensation committee increased the named executive officers’ 2017 base salaries and materially decreased the grant value of the long-term incentives granted in 2017, resulting in substantial reduction of target total compensation opportunities which are now close to peer median benchmarks for the current named executive officers. The 2017 long-term incentive awards were set slightly above the median, with the exception of Dr. Molina (our former president and chief executive officer), whose level was near the median. The compensation committee left unchanged from the 2016 levels the target short-term cash bonus opportunity as a percent of salary for all of the named executive officers, except for Mr. White. His target short-term cash bonus opportunity was increased from 90% to 100% of his base salary in May 2017 in connection with Mr. White’s change in position from chief accounting officer to chief financial officer. Additionally, the 2017 equity compensation was made subject to multiple-year profit margin targets and achievement of certain business development targets that are consistent with the Company’s achievement of its long-term strategic plan.
Molina Healthcare, Inc. 2018 Proxy Statement |
26
Special
Compensation
in Connection
with
2017
Recruitment
of Mr
.
Zubretsky
as President
and
Chief
Executive
Officer
In late 2017, in order to induce Mr. Zubretsky to join the Company as its new president and chief executive officer, the compensation committee agreed to pay Mr. Zubretsky as a sign-on bonus a lump sum cash amount of $4 million, less applicable withholding taxes. In the event that prior to the second anniversary of his start date Mr. Zubretsky’s employment terminates by reason of a termination by the Company for “cause” (as defined in the employment agreement) or Mr. Zubretsky’s resignation without “good reason” (as defined in the employment agreement), Mr. Zubretsky will be required to repay the Company a prorated portion of the sign-on bonus payment. In addition, as a further inducement to join the Company, Mr. Zubretsky was granted an option to purchase 375,000 shares of the Company’s common stock. The stock option vests in equal annual installments over three years, on each of October 9, 2018, October 9, 2019, and October 9, 2020, subject to his continued employment with the Company on each vesting date.
Base Salary
The objective of base salary is to reflect the executive’s fundamental job responsibilities. The base salary of our named executive officers is the only element of their compensation that is fixed and predetermined. In
2017
, the named executive officers were paid competitive base salaries determined by the evaluation of several factors, including the base salary levels of corresponding officers at peer companies as determined based on the 2017 Compensation Study, critical skills, job history, and unique roles or abilities of the executive. The
2017
and
2016
base salaries for the current named executive officers, as well as the changes in such base salaries from the
2016
to the
2017
levels, are reflected in the table below. The base salaries of the named executive officers (other than Mr. Zubretsky) were increased in 2017 in light of the substantial reduction in the value of their long-term incentive awards.
Base Salary - Current Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
Current Named Executive Officer
|
2017
|
2016
|
Change ($)
|
Change (%)
|
Joseph M. Zubretsky, President and Chief Executive Officer
|
$
|
1,300,000
|
|
N/A
|
|
N/A
|
|
N/A
|
|
Joseph W. White, Chief Financial Officer and Former Interim President and Chief Executive Officer
(1)
|
$
|
650,000
|
|
$
|
538,000
|
|
$
|
112,000
|
|
20.82
|
%
|
Jeff D. Barlow, Chief Legal Officer and Secretary
|
$
|
550,000
|
|
$
|
525,000
|
|
$
|
25,000
|
|
4.76
|
%
|
(1)
Mr. White held the position of chief accounting officer until May 2, 2017. Effective as of January 1, 2017, Mr. White’s annual base salary for such position was increased to $600,000 from his 2016 annual base salary of $538,000, representing an increase of 11.52%. Effective May 2, 2017, Mr. White was promoted to chief financial officer, and his annual base salary for such position was increased from $600,000 to $650,000, representing an increase of 8.33%. The Company and Mr. White entered into an amended and restated employment agreement in June 2017, effective as of May 2, 2017, pursuant to which Mr. White is entitled to an annual base salary of $650,000 as compensation for his role as chief financial officer and was entitled to an additional monthly special salary of $100,000 for his role as interim president and chief executive officer from May 2, 2017 to November 6, 2017.
The 2017 base salaries for the former named executive officers were increased as follows, in connection with the restructuring of their respective total compensation package, which included a substantial decrease of their respective long term-incentives:
|
|
•
|
Dr. Molina’s base salary was increased to $1,250,000 from the 2016 base salary of $1,170,000;
|
|
|
•
|
Mr. Molina’s base salary was increased to $900,000 from the 2016 base salary of $878,000;
|
|
|
•
|
Ms. Bayer’s base salary was increased to $700,000 from the 2016 base salary of $644,000; and
|
|
|
•
|
Ms. Rubino’s base salary was increased to $500,000 from the 2016 base salary of $476,826 (Ms. Rubino was not a named executive officer at the time of the 2017 Compensation Study, and thus her compensation was not part of that study).
|
Molina Healthcare, Inc. 2018 Proxy Statement |
27
Annual Short-Term Performance-Based Cash Bonus Awards
Our compensation program provides for an annual cash bonus that is entirely performance linked. The objective of the program is to compensate executives based on the achievement of specific and objective annual goals that are intended to correlate closely with the growth of stockholder value.
In February
2017
, the compensation committee established short-term cash bonus opportunity levels and measures for the current named executive officers (other than Mr. Zubretsky) as follows:
|
|
•
|
Mr. White’s target bonus opportunity was set at 90% of his base salary in connection with his position as chief accounting officer (and later increased to 100% of his base salary in connection with his change in position to chief financial officer); and
|
|
|
•
|
Mr. Barlow’s target bonus opportunity was set at 90% of his base salary.
|
The target bonus opportunities for the former named executive officers were as follows:
|
|
•
|
Dr. Molina’s target bonus opportunity was set at 150% of his base salary;
|
|
|
•
|
Mr. Molina’s target bonus opportunity was set at 125% of his base salary;
|
|
|
•
|
Ms. Bayer’s target bonus opportunity was set at 100% of her base salary; and
|
|
|
•
|
Ms. Rubino’s target bonus opportunity was set at 50% of her base salary (Ms. Rubino was not a named executive officer at the time the compensation committee established the short-term cash bonus opportunity levels, and thus her target bonus opportunity was not evaluated by the compensation committee).
|
Mr. Zubretsky, who joined the Company as president and chief executive officer in November 2017, was not eligible to receive an annual short-term cash bonus for fiscal year 2017.
The
2017
bonus performance measures for Mr. White, Mr. Barlow, Dr. Molina, Mr. Molina, and Ms. Bayer were based 65% on a fiscal year 2017 net income metric, and 35% on the discretion of the compensation committee, as follows:
|
|
•
|
65% of the bonus opportunity shall be based on the Company’s net income achievement for its 2017 fiscal year. The fiscal year 2017 net income bonus shall be based on the entry level achievement of at least $84 million in net income. The achievement of $84 million in net income in 2017 shall trigger the payout in cash of this bonus element at the 50% level; achievement of $120 million shall trigger payout at the 100% level; and achievement of $156 million shall trigger maximum payout at the 200% level. Under all circumstances payout shall be capped at the 200% level. The actual cash bonus payout amounts for achievement within the specified points along the net income range shall be interpolated linearly between the specified points.
|
|
|
•
|
35% of the bonus opportunity shall be subject to the discretion of the compensation committee, and shall be based upon the consideration by the committee of a wide variety of factors, including, for purposes of illustration (but not limited to), such factors as: (1) completing the organizational development effort and filling key executive roles; (2) developing a long-term strategic plan for Medicare and Direct Delivery; (3) increasing quality revenues from the state health plans; (4) improving our claims payment metrics and overall claims systems; (5) improving our Star metrics; and (6) miscellaneous other factors as may be identified by the compensation committee in the exercise of its discretion. As with the net income metric, payment of the discretionary bonus shall be capped at the 200% level.
|
|
|
•
|
The 65% net income bonus metric and the 35% discretionary bonus shall be determined and paid independently. Entry level achievement of the net income metric shall not serve as a condition for any partial or full payment of the discretionary bonus.
|
Because the Company did not achieve the 2017 net income entry level of $84 million, no cash bonus was paid based on the net income metric. Additionally, due to the Company’s unsatisfactory financial performance in 2017, the compensation committee decided not to award any portion of the 35% discretionary bonus to the named executive officers.
The following table sets forth the fiscal year
2017
base salary levels, along with the two bonus elements determined by the compensation committee for the Company’s named executive officers who were eligible to receive a cash bonus in 2017.
Molina Healthcare, Inc. 2018 Proxy Statement |
28
Bonus Opportunity - Current Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Named Executive Officer
|
Base Salary
|
Target Bonus
Opportunity (% of Base Salary)
|
Target
Net Income Bonus Opportunity (65% of Baseline Bonus Opportunity)
|
Discretionary Bonus Opportunity (35% of Target Bonus Opportunity)
|
Bonus Paid
|
Joseph W. White
|
|
|
|
|
|
Chief Financial Officer and Former Interim Chief Executive Officer
(1)
|
$
|
650,000
|
|
100
|
%
|
$
|
422,500
|
|
$
|
227,500
|
|
$0
|
Jeff D. Barlow
|
|
|
|
|
|
Chief Legal Officer and Secretary
|
$
|
550,000
|
|
90
|
%
|
$
|
321,750
|
|
$
|
173,250
|
|
$0
|
|
|
(1)
|
The Company and Mr. White entered into an amended and restated employment agreement in June 2017, effective as of May 2, 2017, pursuant to which Mr. White is entitled to an annual base salary of $650,000 as compensation for his role as chief financial officer and was entitled to an additional monthly special salary of $100,000 for his role as interim president and chief executive officer. Further, effective as of May 2, 2017, in connection with his role as chief financial officer, Mr. White’s target bonus opportunity was increased from 90% of his base salary to 100% of his base salary. Mr. White served as interim president and chief executive officer from May 2, 2017 to November 6, 2017.
|
Long-Term Equity-Based Incentive Compensation Awards
The majority of the total compensation package for the named executive officers for
2017
was based on long-term incentives designed to align the financial interests of our named executive officers with the long-term financial interests of our stockholders. In those instances where the relevant long-term performance metric is not achieved, the equity-based compensation does not vest, and thus the compensation is not realized by the executive officers.
Our new president and chief executive officer, Mr. Zubretsky, and our former senior vice president, Medicare & Duals Integration, Ms. Rubino, were not named executive officers in 2016 as of the time of the Company’s annual long-term incentive award cycle, and their long-term incentives granted in 2017 were structured differently than for the other named executive officers.
|
|
•
|
Mr. Zubretsky’s employment with the Company commenced on November 6, 2017. In connection with his employment, Mr. Zubretsky was granted an option to purchase 375,000 shares of the Company’s common stock with an exercise price per share of $67.33. The stock option vests in equal annual installments over three years, on each of October 9, 2018, October 9, 2019, and October 9, 2020, subject to his continued employment with the Company on each vesting date. The Company does not generally grant options to executive officers, but it did so for Mr. Zubretsky as an inducement for him to accept employment with the Company, and to compensate him for the forgone value of options granted to him by his previous employer and to immediately enhance the alignment of Mr. Zubretsky’s interests with those of our stockholders.
|
|
|
•
|
For 2017, Ms. Rubino’s long-term incentive consisted of a restricted stock award of 12,146 shares of the Company’s common stock subject to vesting in equal annual installments over four years, on each of March 1, 2018, March 1, 2019, March 1, 2020, and March 1, 2021.
|
For
2017
, these long-term incentives for our named executive officers, excluding Mr. Zubretsky and Ms. Rubino, took the form of a combination of performance stock units and restricted share awards subject to time vesting, with the following grant date values:
Current
Named
Executive
Officers
|
|
|
|
|
|
|
|
|
|
|
|
2017 Equity Compensation
(1)
|
|
Target PSUs
|
Shares
|
Current Named Executive Officer
|
Amount
($)
|
Number (#)
|
Amount ($)
|
Number (#)
|
Joseph W. White, Chief Financial Officer and Former Interim President and Chief Executive Officer
|
$
|
1,216,030
|
|
24,616
|
$
|
684,042
|
|
13,847
|
|
Jeff D. Barlow, Chief Legal Officer and Secretary
|
$
|
832,044
|
|
16,843
|
$
|
468,016
|
|
9,474
|
|
Molina Healthcare, Inc. 2018 Proxy Statement |
29
Former Named
Executive
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Equity Compensation
(1)
|
|
Target PSUs
|
Shares
|
Former Named Executive Officer
|
Amount ($)
|
Number (#)
|
Amount
($)
|
Number (#)
|
Dr. J. Mario Molina, Former Chief Executive Officer
|
$
|
5,120,014
|
|
103,644
|
|
$
|
2,880,020
|
|
58,300
|
|
John C. Molina, Former Chief Financial Officer
|
$
|
1,760,023
|
|
35,628
|
|
$
|
990,025
|
|
20,041
|
|
Terry P. Bayer, Former Chief Operating Officer
|
$
|
1,408,048
|
|
28,503
|
|
$
|
792,030
|
|
16,033
|
|
|
|
(1)
|
Generally, the grant date fair value presented does not correspond to the actual value that the named executive officers will realize from the award. In particular, the actual value of performance stock awards (PSAs) received is different from the accounting expense because such awards depend on the Company’s performance. In accordance with SEC rules, the aggregate grant date fair value of the PSAs presented above is calculated based on the most probable outcome of the performance conditions as of the grant date, which, for the PSAs, was target performance.
|
In order to better align management compensation with the achievement of long-term strategic goals of the Company, the compensation committee agreed that 64% of the long-term incentive award shall be in the form of performance stock units (PSUs). Within that 64%, 44% of the total long-term incentive award (or approximately 69% of target PSUs value) was tied to net profit margin for each of the years 2017 through 2019, and 20% was tied to certain expansion metrics from 2017 through 2019. The balance of 36% of the total long-term incentive award consisted of time-vested restricted stock awards, vesting in equal tranches over three years.
A detailed schedule and graph of the equity awards granted in
2017
to each of the above-listed named executive officers is set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Performance Stock Units (#)
|
|
Restricted Stock Awards (#)
|
|
|
Net Profit Margin
|
2017-2019 Expansion Metric
|
|
Time Vesting Over 3‑Years
|
Named Executive Officer
|
Total
|
2017
(1)
|
|
2018
|
|
2019
|
|
|
Joseph W. White
(2)
|
24,617
|
|
5,769
|
|
5,769
|
|
5,385
|
|
7,694
|
|
|
13,847
|
|
Jeff D. Barlow
|
16,844
|
|
3,948
|
|
3,948
|
|
3,684
|
|
5,264
|
|
|
9,474
|
|
J. Mario Molina
(3)
|
103,644
|
|
24,292
|
|
24,292
|
|
22,672
|
|
32,388
|
|
|
58,300
|
|
John C. Molina
(3)
|
35,628
|
|
8,350
|
|
8,350
|
|
7,794
|
|
11,134
|
|
|
20,041
|
|
Terry P. Bayer
|
28,503
|
|
6,680
|
|
6,680
|
|
6,235
|
|
8,908
|
|
|
16,033
|
|
|
|
(1)
|
The 2017 net profit margin was not achieved, and as a result the PSUs subject to this metric did not vest.
|
|
|
(2)
|
In addition to the restricted stock reflected in the table, on June 5, 2017, Mr. White received a restricted stock award of 15,008 shares vesting over three (3) years, on each of June 5, 2018, June 5, 2019, and June 5, 2020, as compensation for his role as interim president and chief executive officer from May 2, 2017 to November 7, 2017.
|
|
|
(3)
|
On May 2, 2017, Dr. Molina’s and Mr. Molina’s employment were terminated by the Company without “cause,” as such term is defined in their employment agreements. Under their respective amended and restated employment agreement, they were each entitled to receive full vesting of all equity compensation. Accordingly, all of the
2017
grants awarded to each of Dr. Molina and Mr. Molina vested in full.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
30
As described above, the 64% element of the long-term incentive awards consisting of PSUs was further broken down and allocated into four separate elements, each further described below, as follows:
|
|
•
|
15% element for a 2017 PSU metric related to net profit margin;
|
|
|
•
|
15% element for a 2018 PSU metric related to net profit margin;
|
|
|
•
|
14% element for a 2019 PSU metric related to net profit margin; and
|
|
|
•
|
20% element for a multi-part metric in any of 2017, 2018, or 2019 related to expansion/growth of the Company.
|
2017 Performance Units Compensation Metrics.
The first 15% PSU element metric was related to the achievement of net profit margin in fiscal year 2017 of at least 0.5%. The entry point for the metric was at 0.5% net profit margin; target achievement was at 0.75% net profit margin; and full achievement was at 1.0% net profit margin. Achievement of the entry point would have resulted in 50% vesting of the PSUs subject to this metric; target achievement would have resulted in 100% vesting of the PSUs; and full achievement would have resulted in 200% vesting of the PSU grant. Intermediate achievement within the range would have resulted in the vesting of that number of PSUs as was proportional to the level of achievement within the range; all amounts are interpolated linearly between the end points of the range. If the metric had been achieved to any degree, the PSUs would have vested on March 1, 2018.
Performance of this first PSU metric was not achieved and thus the PSUs subject to this metric did not vest.
2018 Performance Units Compensation Metrics.
The second 15% PSU metric was related to the achievement of net profit margin in fiscal year 2018 of at least 1.0%. The entry point for the metric is at 1.0% net profit margin; target achievement shall be at 1.25% net profit margin; and full achievement is at 1.5% net profit margin. Achievement of the entry point will result in 50% vesting of the PSUs subject to this metric; target achievement will result in 100% vesting of the PSUs; and full achievement will result in 200% vesting of the PSU grant. Intermediate achievement within the range will result in the vesting of that number of PSUs as is proportional to the level of achievement within the range; all amounts will be interpolated linearly between the end points of the range.
If this second PSU metric is achieved to any degree, the PSUs will vest on March 1, 2019.
2019 Performance Units Compensation Metrics
. The third 14% PSU metric was related to the achievement of net profit margin in fiscal year 2019 of at least 1.5%. The entry point for the metric is at 1.5% net profit margin; target achievement is at 1.75% net profit margin; and full achievement is at 2.0% net profit margin. Achievement of the entry point will result in 50% vesting of the PSUs subject to this metric; target achievement will result in 100% vesting of the PSUs; and full achievement will result in 200% vesting of the PSU grant. Intermediate achievement within the range will result in the vesting of that number of PSUs as is proportional to the level of achievement within the range; all amounts will be interpolated linearly between the end points of the range.
If this third PSU metric is achieved to any degree, the PSUs will vest on March 1, 2020.
2017-2019 Performance Units Compensation Metrics
. The final 20% of the total 64% PSU number is conditioned upon the Company’s closing on a Board-approved acquisition in a new state, winning an RFP in a new
Molina Healthcare, Inc. 2018 Proxy Statement |
31
state (including winning an RFP for Molina Medicaid Solutions, or winning an RFP for a new Medicaid product line in an existing state), or achieving a 10% year-over-year annual growth in Medicare enrollment (including enrollees in Medicare-Medicaid duals programs). However, the next two expansion achievements from and after March 1, 2017 were subject to the expansion targets previously identified as target metrics in the 2016 compensation cycle (meaning the second and third such achievements after the Today’s Options of New York, Inc. acquisition, which represented the first such achievement; thus, this metric shall first be triggered with the fourth such achievement after 2016). SNP or Marketplace/Exchange entry, or a capabilities-based acquisition, do not count towards satisfaction of this performance metric. In the event the Company achieves this metric in fiscal years 2017, 2018, or 2019, upon the first such achievement (meaning the fourth such achievement after 2016), 50% of the PSUs subject to this metric will vest. Upon the second such achievement (meaning the fifth such achievement after 2016), 100% of the PSUs subject to this metric will vest. Upon the third such achievement (meaning the sixth such achievement after 2016), 200% of the PSUs subject to this metric will vest. All PSU awards will be settled by the issuance of shares of common stock of the Company equal to the number of PSUs as described herein. Partial vesting of this PSU award may be made on March 1
st
of each of 2018, 2019, or 2020, as applicable, following the relevant level of achievement, whether entry, target, or full.
No PSUs subject to this final PSU metric shall vest sooner than March 1, 2018.
Time Vested Equity Compensation
. As described above, 36% of the long-term incentive awards were granted as shares of restricted stock subject to time vesting. The number of time-vesting shares were fixed as of the date of determination of March 1, 2017, and were not subject to increase to the 200% level as with the PSUs.
These shares of restricted stock were granted on March 1, 2017, subject to vesting in one-third increments over three years, on each of March 1, 2018, March 1, 2019, and March 1, 2020.
2015-2016 Long-Term Incentive Awards Achievement Status
The following provides a status summary with respect to the portions of the stock awards made to the named executive officers in 2015 and 2016, with vesting based on the achievement or non-achievement of performance metrics determined for the respective period ended December 31, 2017. If the respective metric was not achieved, the portion of the stock awards based on that metric did not vest, and such portion was forfeited, further reflecting the Company’s pay-for-performance compensation philosophy.
2015
Equity
Compensation
In 2015, our named executive officers received potential equity compensation opportunities, a portion of which was subject to vesting based on 2017 performance metrics as reflected in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
2015 Target # of Performance Shares Subject to Vesting Based on 2017 Metrics
|
2017 Annual Premium Revenue
|
2017 Net Profit Margin
|
2017 Pre-Tax Income
|
Three-Year TSR
|
|
TOTAL
|
VESTED
|
VESTED
|
NOT VESTED
|
NOT VESTED
|
VESTED
|
Joseph W. White, Chief Financial Officer
|
9,048
|
|
4,524
|
|
2,262
|
|
2,262
|
|
2,262
|
|
2,262
|
|
Jeff D. Barlow, Chief Legal Officer and Secretary
|
7,540
|
|
3,770
|
|
1,885
|
|
1,885
|
|
1,885
|
|
1,885
|
|
Terry P. Bayer, Former Chief Operating Officer
|
11,460
|
|
5,730
|
|
2,865
|
|
2,865
|
|
2,865
|
|
2,865
|
|
The 2015 equity awards were divided into eight (8) separate elements, four (4) of which, representing 40% of the awards, were not determinable until the end of the three-year period ended December 31, 2017.
|
|
•
|
10% of the 2015 stock awards was based on the Company’s 2017 annual premium revenue achievement, with an entry point of $15.0 billion in annual premium revenues, excluding acquisitions after April 1, 2015, and full achievement at $16 billion in annual premium revenues, excluding acquisitions after April 1, 2015.
This performance metric was fully achieved in 2017 and the stock vested.
|
|
|
•
|
The second fiscal year 2017 10% performance metric of the 2015 stock awards was based on the Company’s fiscal year 2017 net profit margin, with an entry point at 1.5% net profit margin, and the third fiscal year 2017 10% performance metric of the 2015 stock awards was based on the Company’s pre-tax income in fiscal year 2017, with an entry point at $500 million in pre-tax income.
Neither the 2017 net profit margin metric nor the 2017 pre-tax income metric was achieved and, accordingly, the portions of the stock awards based on these performance metrics did not vest.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
32
|
|
•
|
Another 10% of the 2015 stock award was conditioned upon the Company’s achieving a three-year TSR for the three-year period ended December 31, 2017 as determined by ISS calculations that is greater than the median TSR achieved by the Company’s 2015 ISS peer group. The Company’s three-year TSR for the three-year period ending December 31, 2017 was 13.5% compared to the median of 3.8% for the Company’s 2015 ISS peer group.
Since this metric was achieved, the portion of the stock awards based on this performance metric vested.
|
2016
Equity
Compensation
In 2016, our named executive officers received potential equity compensation opportunities, a portion of which was subject to vesting based on 2017 performance metrics as reflected in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
2016 Target # of Performance Shares Subject to Vesting Based on 2017 Metrics
|
2017 Net Profit Margin
|
Star Ratings
|
Expansion (MS)
|
Expansion (ID)
|
|
TOTAL
|
VESTED
|
NOT VESTED
|
NOT VESTED
|
VESTED
|
VESTED
|
Joseph W. White, Chief Financial Officer
|
15,110
|
|
6,476
|
|
4,317
|
|
4,317
|
|
2,159
|
|
4,317
|
|
Jeff D. Barlow, Chief Legal Officer and Secretary
|
10,962
|
|
4,698
|
|
3,132
|
|
3,132
|
|
1,566
|
|
3,132
|
|
Terry P. Bayer, Former Chief Operating Officer
|
18,039
|
|
7,731
|
|
5,154
|
|
5,154
|
|
2,577
|
|
5,154
|
|
The 2016 equity awards were divided into eight (8) separate elements, two (2) of which were not determinable until the end of the two-year period ended December 31, 2017.
|
|
•
|
The first 2017 10% performance metric was related to the achievement of a net profit margin in fiscal year 2017 of at least 1.5%.
Performance was not met under this metric and thus these awards did not vest.
|
|
|
•
|
The second fiscal year 2017 10% performance metric was related to the Company achieving an improvement in Star ratings of 0.5 Stars or greater for each of two separate health plans from the levels of the previous year, with no decline in the then existing average Star rating across all remaining health plans.
Performance was not met under this metric and thus these awards did not vest.
|
|
|
•
|
The final 20% metric was conditioned upon the Company’s either closing on a Board-approved acquisition in a new state, or winning a Request For Proposal (“RFP”) in a new state, or winning an RFP for a new Medicaid product line in an existing state during the 2016-2018 period. Special Needs Plan (“SNP”) or marketplace entry, or a capabilities-based acquisition, do not count towards satisfaction of this performance metric. Upon the first such achievement of this metric in 2016, 2017, or 2018, 5% of the restricted stock grant shall vest. Upon the second such achievement, a further 5% of the restricted stock grant shall vest. Upon the third such achievement, the final 10% of the restricted stock grant shall vest.
|
|
|
•
|
The first such achievement of this goal was met in 2016 as a result of the closing of the New York Medicaid acquisition.
|
|
|
•
|
The second such achievement of this goal was met in 2017 related to winning of an RFP in Mississippi for a Medicaid Coordinated Care Contract for the statewide administration of the Mississippi Coordinated Access Network (MississippiCAN), by the Company’s wholly owned subsidiary, Molina Healthcare of Mississippi, Inc. The operational start date for the program is currently scheduled for July 1, 2018, pending the completion of a readiness review with the Mississippi Division of Medicaid.
|
|
|
•
|
The third such achievement of this goal was also met in 2017 related to the expansion of the Company into Idaho, through the Company’s wholly owned subsidiary, Molina Healthcare of Utah, Inc., dba Molina Healthcare of Idaho. As of January 1, 2018, the plan launched a so-called Fully Integrated Dual Eligible Special Needs Plan (or FIDE SNP) Medicare-Medicaid Coordinated Plan (MMCP) and Medicare Advantage HMO (MAPD) Plan. As part of this launch, we have signed both a MMCP contract with Idaho Department of Health and Welfare and a FIDE SNP contract with CMS. The product’s specific name is Molina Medicare Options Plus. An FIDE SNP enrolls individuals over the age of 21 who are eligible for both Medicare and Medicaid.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
33
As a result, the entire 20% of the restricted stock grant subject to this metric has vested (5% vested in 2017 based on the first achievement of the goal in 2016, and 15% vested in 2018 based on the achievement of the additional two goals in 2017).
Stock Ownership Guidelines for Named Executive Officers
The Board of Directors believes that executive officers should own and hold a reasonable number of shares of common stock of the Company to further align such officers’ interests and actions with those of the Company’s stockholders, and also to demonstrate confidence in the long-term prospects of the Company. The Company’s guidelines with respect to stock ownership by executive officers provide that executive officers of the Company shall own the minimum number of shares of the Company’s common stock with such value listed next to each such officer’s title below, calculated as a multiple of annual base salary.
|
|
|
Executive Officer
|
Value of Shares
|
Chief Executive Officer
|
5X Annual Base Salary
|
Chief Financial Officer
|
4X Annual Base Salary
|
Chief Operating Officer
|
3X Annual Base Salary
|
Other Named Executive Officers
|
2X Annual Base Salary
|
The value of an executive officer’s holdings is based on the average closing price of a share of the Company’s stock for the previous calendar year. Shares that satisfy these guidelines may be those owned directly, through a trust, or by a spouse or child, and include shares purchased on the open market, vested or unvested shares of restricted stock, or exercised and retained option shares. Unexercised options and equity securities that are pledged are not counted toward the executive officer ownership requirements. Until an executive officer’s stock ownership requirement is met, the executive officer must retain at least 50% of all “net settled shares” (as defined above under
“Stock Ownership Guidelines for Directors”
) received from the vesting, delivery or exercise of equity awards granted under our equity award plans until the total value of all shares held equals or exceeds the executive officer’s applicable ownership threshold.
Executive officers are expected to achieve the recommended ownership guidelines within five (5) years of assuming their positions. Once achieved, ownership of the guideline amount must be maintained for as long as the individual is subject to these guidelines. In addition, there may be certain instances where these guidelines would place an undue hardship on an executive officer. The compensation committee may therefore make exceptions to these guidelines as it deems appropriate.
Each of the named executive officers of the Company satisfied the stock ownership guidelines as of
December 31, 2017
, except Mr. Zubretsky whose employment with the Company started November 2017 and who pursuant to the guidelines has five (5) years from the start of his employment to comply with the policy.
Clawback
Policy
The Company has a Clawback Policy addressing the recovery by the Company of incentive-based compensation from current and former executives of the Company, in the event of any accounting restatement due to material noncompliance by the Company with any financial reporting requirement under the applicable securities laws (“Accounting Restatement”). According to the Clawback Policy, in the event of an Accounting Restatement, the Company will use reasonable efforts to recover from any current or former executive officer of the Company, who received incentive-based compensation from the Company during the three (3)-year period preceding the date on which the Company is required to prepare an Accounting Restatement, based on the erroneous data, the excess of what would have been paid to the executive officer under the Accounting Restatement. In addition, the Clawback Policy further provides that the Company will use reasonable efforts to recover from current and former executive officers, up to 100% (as determined by the Board or a duly established committee of the Board in its sole discretion as appropriate based on the conduct involved) of such incentive-based compensation from the Company during the three (3)-year period preceding the date on which the Company is required to prepare an Accounting Restatement, if the Board or a committee thereof, in its sole discretion, determines that an executive officer’s act or omission that contributed to the circumstances requiring the Accounting Restatement involved: (i) willful, knowing or intentional misconduct or a willful, knowing or intentional violation of any of the Company’s rules or any applicable legal or regulatory requirements in the course of the executive officer’s employment by, or otherwise in connection with, the Company or (ii) fraud in the course of the executive officer’s employment by, or otherwise in connection with, the Company.
Molina Healthcare, Inc. 2018 Proxy Statement |
34
Restrictions
on Pledges
of Shares
by Directors
and
Executive
Officers
The Company’s insider trading policy prohibits our directors and executive officers from, directly or indirectly, pledging a significant number of shares of the Company’s common stock. For these purposes, “pledging” includes the intentional creation of any form of pledge, security interest, deposit, or lien, including the holding of shares in a margin account, that entitles a third-party to foreclose against, or otherwise sell, any shares, whether with or without notice, consent, or default. “Significant” means the least of: (i) 1% of the Company’s total outstanding shares of common stock; (ii) 20% of the common stock of the Company then held by the executive officer or director; and (iii) 50% of the Company’s average daily trading volume for the three months prior to the pledge date.
The shares of common stock attributable to a director or executive officer for these purposes include shares attributable to the director or executive officer under either Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended. Further, any shares that are pledged shall not be counted toward the executive officer or director stock ownership requirements.
As of the date of this proxy statement, none of the directors and executive officers of the Company had any pledge of shares of the Company’s common stock.
Hedging
Restrictions
As part of the Company’s insider trading policy, directors, executive officers (including the named executive officers), and vice presidents of the Company or subsidiary executive officers (collectively, “Controlling Insiders”) are prohibited from engaging in “hedging” with respect to the Company’s securities. For these purposes, “hedging” includes any instrument or transaction, including put options and forward-sale contracts, through which a Controlling Insider offsets or reduces exposure to the risk of price fluctuations in a corresponding equity security. Speculative trading, short-swing trading, or short selling of stock of the Company by Controlling Insiders is expressly prohibited at all times, as is the buying or selling of any publicly traded option on stock of the Company and the establishment or use of margin accounts with a broker-dealer for the purpose of buying or selling stock of the Company.
Results of the May 2017 “Say On Pay” Vote
At our May 10, 2017 annual stockholders’ meeting, the Company’s stockholders approved an annual advisory “say-on-pay” vote. The compensation committee monitors the results of the Company’s annual advisory “say-on-pay” proposal and considers such results as one of many factors in connection with the discharge of its responsibilities. At our May 10, 2017 annual stockholders’ meeting, the compensation of our named executive officers was approved, on an advisory basis, by a 78.5% majority vote.
The actions taken by the Board to restructure management and recalibrate the compensation program are, in many ways, a response to the say-on-pay proposals and address the concern among stockholders that compensation programs must have incentive features that (a) provide a proper measure of accountability and reward, and (b) correlate incentive compensation with the achievement of our long-term strategic objectives. Additionally, the compensation committee also simplified the compensation program with fewer performance metrics.
At the May 2017 annual meeting, the stockholders also voted on an advisory basis to change the frequency on the say-on-pay vote from every three years to every year. The Company is including a “say-on-pay” proposal in this year’s proxy statement. The compensation committee will continue to take into consideration the outcome of the Company’s “say-on-pay” votes when making future compensation decisions for the named executive officers. Further, the Company will continue to focus on aligning executive pay with building stockholder value and the achievement of short-term and long-term financial and strategic objectives.
Compliance with Internal Revenue Code Section 162(m)
Effective through December 31, 2017, Section 162(m) of the Internal Revenue Code generally disallowed a tax deduction to public corporations for compensation over $1 million paid for any fiscal year to the corporation’s chief executive officer and four other most highly compensated executive officers as of the end of the fiscal year. The Affordable Care Act (ACA) amended the Internal Revenue Code, in part, by adding Section 162(m)(6), which limits the amount that covered health insurance providers such as the Company may deduct in any taxable year for compensation to any employee in excess of $500,000. This legislation did not create any exceptions for performance-based compensation. Commencing with the Company’s fiscal year 2016, the compensation limitation pursuant to Section 162(m)(6) as amended by the ACA applied to the Company and the Company was not able to deduct compensation to its executive officers in excess of $500,000. Accordingly, while the compensation committee continued to adhere to its pay-for-performance philosophy, the Company derived no tax benefit in 2017 from structuring its compensation determinations based on the requirements for the performance based compensation exception of Internal Revenue Code Section 162(m).
Molina Healthcare, Inc. 2018 Proxy Statement |
35
The Tax Cuts and Job Act of 2017 (TCJA) amended Internal Revenue Code Section 162(m). Effective for years beginning after December 31, 2017, Internal Revenue Code Section 162(m) will generally disallow a tax deduction to public corporations for compensation over $1 million paid to a corporation’s principal executive officer, principal financial officer, three other most highly compensated executive officers, and any employees who served in such capacities. Further, the exception to the $1 million limitation for performance-based compensation has generally been eliminated. TCJA did not amend the Section 162(m)(6) limitation applicable to the Company as described above.
Compensation Committee Report
The compensation committee has reviewed and discussed the CD&A with the members of management of the Company. Based on its review and discussions, the compensation committee recommended to the Board of Directors that the CD&A be included in this proxy statement and incorporated by reference into the Form 10-K.
Compensation Committee
Richard M. Schapiro, Chairman
Charles Z. Fedak
Steven J. Orlando
Ronna E. Romney
March 5, 2018
Molina Healthcare, Inc. 2018 Proxy Statement |
36
Compensation Tables
Summary Compensation
The following table provides information concerning total compensation earned or paid to (a) the president and chief executive officer, (b) the chief financial officer, and (c) the three other most highly compensated executive officers of the Company who served in such capacities as of
December 31, 2017
, in each case for services rendered to the Company during the last year. In addition, the table provides information concerning total compensation earned or paid to our former chief executive officer and former chief financial officer who served in such capacities during
2017
, in each case for services rendered to the Company during the last year. These seven officers are referred to as the “named executive officers” in this proxy statement.
2017
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
(1)
|
Option Awards
|
Non-Equity
Incentive Plan
Comp.
(2)
|
Change in
Nonqualified
Deferred
Comp.
Earnings
(3)
|
All Other
Comp.
(4)
|
Total
|
Joseph M. Zubretsky
(5)(8)(9)(10)
|
2017
|
$
|
175,000
|
|
$
|
4,000,000
|
|
$
|
—
|
|
$
|
15,536,250
|
|
$
|
—
|
|
$
|
—
|
|
$
|
27,858
|
|
$
|
19,739,108
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
Joseph W. White
(6)
|
2017
|
$
|
1,248,167
|
|
$
|
—
|
|
$
|
3,361,920
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,821
|
|
$
|
40,232
|
|
$
|
4,653,140
|
|
Chief Financial Officer and former Interim Chief Executive Officer
|
2016
|
$
|
538,000
|
|
$
|
—
|
|
$
|
2,786,018
|
|
$
|
—
|
|
$
|
80,000
|
|
$
|
1,377
|
|
$
|
15,033
|
|
$
|
3,420,428
|
|
|
2015
|
$
|
515,000
|
|
$
|
—
|
|
$
|
1,461,882
|
|
$
|
—
|
|
$
|
384,432
|
|
$
|
136
|
|
$
|
15,064
|
|
$
|
2,376,514
|
|
Jeff D. Barlow
|
2017
|
$
|
550,000
|
|
$
|
—
|
|
$
|
1,616,103
|
|
$
|
—
|
|
$
|
—
|
|
$
|
27,041
|
|
$
|
33,681
|
|
$
|
2,226,825
|
|
Chief Legal Officer and Secretary
|
2016
|
$
|
525,000
|
|
$
|
—
|
|
$
|
2,021,015
|
|
$
|
—
|
|
$
|
75,000
|
|
$
|
8,395
|
|
$
|
33,545
|
|
$
|
2,662,955
|
|
|
2015
|
$
|
475,000
|
|
$
|
—
|
|
$
|
1,218,191
|
|
$
|
—
|
|
$
|
354,574
|
|
$
|
146
|
|
$
|
31,654
|
|
$
|
2,079,565
|
|
Dr. J. Mario Molina
(7)
|
2017
|
$
|
440,770
|
|
$
|
—
|
|
$
|
9,944,395
|
|
$
|
—
|
|
$
|
—
|
|
$
|
708,440
|
|
$
|
5,904,399
|
|
$
|
16,998,004
|
|
Former President and Chief Executive Officer
|
2016
|
$
|
1,170,000
|
|
$
|
—
|
|
$
|
8,442,976
|
|
$
|
—
|
|
$
|
255,000
|
|
$
|
165,449
|
|
$
|
15,443
|
|
$
|
10,048,868
|
|
|
2015
|
$
|
1,050,000
|
|
$
|
—
|
|
$
|
7,893,843
|
|
$
|
—
|
|
$
|
1,306,324
|
|
$
|
—
|
|
$
|
15,490
|
|
$
|
10,265,657
|
|
John C. Molina
(7)
|
2017
|
$
|
318,038
|
|
$
|
—
|
|
$
|
3,418,430
|
|
$
|
—
|
|
$
|
—
|
|
$
|
79,908
|
|
$
|
4,197,577
|
|
$
|
8,013,953
|
|
Former Chief Financial Officer
|
2016
|
$
|
878,000
|
|
$
|
—
|
|
$
|
4,258,980
|
|
$
|
—
|
|
$
|
180,000
|
|
$
|
50,025
|
|
$
|
16,090
|
|
$
|
5,383,095
|
|
|
2015
|
$
|
878,000
|
|
$
|
—
|
|
$
|
2,606,918
|
|
$
|
—
|
|
$
|
910,279
|
|
$
|
—
|
|
$
|
15,277
|
|
$
|
4,410,474
|
|
Terry P. Bayer
(11)
|
2017
|
$
|
700,000
|
|
$
|
—
|
|
$
|
2,734,795
|
|
$
|
—
|
|
$
|
—
|
|
$
|
176,253
|
|
$
|
22,698
|
|
$
|
3,633,746
|
|
Former Chief Operating Officer
|
2016
|
$
|
644,000
|
|
$
|
—
|
|
$
|
3,326,005
|
|
$
|
—
|
|
$
|
110,000
|
|
$
|
74,991
|
|
$
|
22,499
|
|
$
|
4,177,495
|
|
|
2015
|
$
|
644,000
|
|
$
|
—
|
|
$
|
1,851,686
|
|
$
|
—
|
|
$
|
534,141
|
|
$
|
—
|
|
$
|
17,798
|
|
$
|
3,047,625
|
|
Lisa A. Rubino
(5)(12)
|
2017
|
$
|
500,000
|
|
$
|
—
|
|
$
|
600,012
|
|
$
|
—
|
|
$
|
—
|
|
$
|
42,545
|
|
$
|
33,906
|
|
$
|
1,176,463
|
|
Former Sr. Vice President of Medicare & Duals Integration
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This column shows the aggregate grant date fair value of performance stock awards (“PSAs”), performance stock units (“PSUs”) and restricted stock awards (“RSAs”) granted under the Company’s 2011 Equity Incentive Plan in the years shown. The aggregate grant date fair value is the amount the Company expects to expense for accounting purposes over the award’s vesting schedule. See the
2017 Grants of Plan-Based Awards Table
for additional information, including the performance conditions and valuation assumptions as applicable, for PSAs, PSUs, and RSAs granted in
2017
.
|
Generally, the grant date fair value presented does not correspond to the actual value that the named executive officers will realize from the award. In particular, the actual value of PSAs and PSUs received is different from the accounting expense because such awards depend on the Company’s performance. In accordance with SEC rules, the aggregate grant date fair value of the PSAs and PSUs presented above is calculated based on the most probable outcome of the performance conditions as of the grant date, which, for the PSAs and PSUs, was target performance. If the maximum performance metrics are achieved, the grant date fair value of the 2017 PSUs would be $5,039,746 for Mr. White, $2,764,122 for Mr. Barlow, $14,801,204 for Dr. Molina, $5,087,941 for Mr. Molina and $4,677,559 for Ms. Bayer.
|
|
(2)
|
This column shows the amounts earned under the Company’s performance-based short-term cash incentive plan.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
37
|
|
(3)
|
Ms. Bayer’s change in non-qualified deferred compensation earnings for the year 2015 was ($6,924); Dr. J. Mario Molina’s change in non-qualified deferred compensation earnings for the year 2015 was ($188,966); and Mr. Molina’s change in non-qualified deferred compensation earnings for the year 2015 was ($7,487).
|
|
|
(5)
|
Compensation for Mr. Zubretsky and Ms. Rubino is provided only for 2017 because they were not named executive officers prior to 2017. Mr. Zubretsky’s employment with the Company started on November 6, 2017. Since Ms. Rubino was not a named executive officer prior to 2017, the compensation committee was not involved in the determination of her salary or bonus opportunity.
|
|
|
(6)
|
Mr. White’s annual salary was increased from $600,000 to $650,000 effective as of May 2, 2017 in connection with his appointment as chief financial officer. In addition, Mr. White received a monthly special salary of $100,000 for his service as interim president and chief executive officer from May 2, 2017 to November 6, 2017. The amount of $1,248,167 represents the sum of (i) his salary as chief accounting officer and chief financial officer of $631,500 received in 2017 and (ii) the special salary of $616,667 for serving as interim president and chief executive officer. Additionally, in connection with his service as interim president and chief executive officer, on June 5, 2017 the Company awarded Mr. White a restricted stock award of 15,008 shares subject to time-based vesting in equal increments over three years on each of June 5, 2018, June, 2019, and June 2020.
|
|
|
(7)
|
Dr. Molina’s and Mr. John C. Molina’s employment was terminated by the Company without cause on May 2, 2017. See also Note 2 to the
2017 All Other Compensation Table
below.
|
|
|
(8)
|
Mr. Zubretsky’s employment with the Company commenced on November 6, 2017, and as a result the salary amount reflected in the table is the amount paid for the period November 6, 2017 to December 31, 2017, at an annualized salary of $1,300,000. Mr. Zubretsky’s bonus amount consists of his sign-on bonus. In the event that prior to the second anniversary of his start date Mr. Zubretsky’s employment terminates by reason of a termination for the Company for “cause” (as defined in the employment agreement) or Mr. Zubretsky’s resignation without “good reason” (as defined in the employment agreement), Mr. Zubretsky will be required to repay the Company a prorated portion of the sign-on bonus payment.
|
|
|
(9)
|
For 2017, Mr. Zubretsky was not eligible to receive any non-equity incentive plan compensation (short-term incentive cash bonus) and was not eligible to participate in the Company’s non-qualified deferred compensation plan.
|
|
|
(10)
|
Pursuant to Mr. Zubretsky’s employment agreement, the Company granted him an option to purchase 375,000 shares of our common stock at an exercise price of $67.33 per share which expires October 8, 2027. These options are subject to time-based vesting in equal increments over three years on each of October 9, 2018, October 9, 2019, and October 9, 2020. The Company granted Mr. Zubretsky such option to compensate him for forgone compensation benefits from his previous employer.
|
|
|
(11)
|
Ms. Bayer retired from her position as chief operating officer of the Company on February 2, 2018.
|
|
|
(12)
|
Ms. Rubino’s employment was terminated by the Company without cause on March 2, 2018.
|
2017
All Other Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Long-term Disability Premiums
|
Group Term Life Premiums
|
Executive Disability Premiums
|
401(k) Matching Contribution
(1)
|
Liquidated Amounts for Paid Time-off
|
Severance
(2)
|
Relocation Expense/Remote Stipend
(3)
|
Imputed Tax Benefit
|
All Other Compensation
|
Joseph M. Zubretsky
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
27,858
|
|
$
|
—
|
|
$
|
27,858
|
|
Joseph W. White
|
$
|
820
|
|
$
|
3,612
|
|
$
|
—
|
|
$
|
10,800
|
|
$
|
25,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
40,232
|
|
Jeff D. Barlow
|
$
|
820
|
|
$
|
1,932
|
|
$
|
—
|
|
$
|
10,800
|
|
$
|
20,129
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
33,681
|
|
Dr. J. Mario Molina
|
$
|
426
|
|
$
|
1,250
|
|
$
|
—
|
|
$
|
10,800
|
|
$
|
201,923
|
|
$
|
5,690,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
5,904,399
|
|
John C. Molina
|
$
|
378
|
|
$
|
669
|
|
$
|
345
|
|
$
|
10,800
|
|
$
|
145,385
|
|
$
|
4,040,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4,197,577
|
|
Terry P. Bayer
|
$
|
1,230
|
|
$
|
10,668
|
|
$
|
—
|
|
$
|
10,800
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
22,698
|
|
Lisa A. Rubino
|
$
|
820
|
|
$
|
5,544
|
|
$
|
—
|
|
$
|
9,539
|
|
$
|
9,615
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8,388
|
|
$
|
33,906
|
|
|
|
(1)
|
The Company has a 401(k) plan that is available to all employees. The plan allows pretax deferral, for which the Company matches dollar-for-dollar of the first 4% of salary electively deferred under the plan.
|
|
|
(2)
|
Dr. Molina and Mr. Molina were terminated by the Company without cause on May 2, 2017, and received severance payments and benefits pursuant to their employment agreements with the Company. The severance amount reflected in the table consists of the cash severance received in connection with the termination of employment. Ms. Bayer retired on February 2, 2018, and received severance payments and benefits pursuant to her employment agreement with the
|
Molina Healthcare, Inc. 2018 Proxy Statement |
38
Company, but since her retirement occurred in 2018, such payments and benefits are not reflected in this table. Ms. Rubino’s employment was terminated by the Company without cause on March 2, 2018. For more information on the severance payments and benefits for such former executive officers, see discussion above in
“Executive Compensation - Termination of Named Executive Officer Founders,”
“Executive Compensation - Retirement of Chief Operating Officer,” and “Executive Compensation - Termination of our Senior Vice President of Medicare & Duals Integration.”
|
|
(3)
|
Consists of $27,708 relocation expense and $150 remote stipend.
|
Realized Compensation
The SEC’s calculation of total compensation, as shown in the
2017 Summary Compensation Table
, includes several items driven by accounting assumptions. As a result, total compensation as defined by the SEC differs substantially from the compensation actually realized by our named executive officers in a particular year. To supplement the SEC-required disclosure, the table below shows compensation realized by each named executive, as reported on his or her IRS W-2 form. These amounts are not a substitute for the amounts reported as SEC total compensation. Information on how realized compensation is calculated is included below the table.
Further, the potential compensation of the named executive officers is an aspirational amount, dependent on the achievement of several financial goals. As a result of the Company falling short of its financial targets, management failed to achieve their target compensation in years
2015
,
2016
, and
2017
as reflected in the 2017 Realized Compensation Table below.
2017
Realized Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized Compensation
|
Name
|
2015
|
|
2016
|
|
2017
|
Joseph M. Zubretsky
(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,202,858
|
|
Joseph W. White
|
$
|
2,238,488
|
|
|
$
|
1,630,426
|
|
|
$
|
2,309,774
|
|
Jeff D. Barlow
|
$
|
1,901,409
|
|
|
$
|
1,462,354
|
|
|
$
|
1,319,559
|
|
Dr. J. Mario Molina
(2)
|
$
|
9,490,297
|
|
|
$
|
5,572,952
|
|
|
$
|
30,528,257
|
|
John C. Molina
(2)
|
$
|
3,667,891
|
|
|
$
|
3,068,059
|
|
|
$
|
15,458,294
|
|
Terry P. Bayer
|
$
|
4,016,653
|
|
|
$
|
2,262,426
|
|
|
$
|
2,066,115
|
|
Lisa A. Rubino
(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
752,910
|
|
|
|
(1)
|
Realized Compensation for Mr. Zubretsky and Ms. Rubino is provided only for 2017 because they were not named executive officers prior to 2017.
|
|
|
(2)
|
Dr. Molina’s and Mr. Molina’s 2017 realized compensation includes the severance payments and benefits received in connection with termination of their employment without cause on May 2, 2017. For more information on the severance payments and benefits received by such former executive officers, see discussion above in
“Executive Compensation - Termination of Named Executive Officer Founders.”
|
To calculate realized compensation for
2017
, which represents taxable W-2 income for
2017
, we started with the amounts shown in the SEC Total column in the
2017 Summary Compensation Table
and made the following adjustments:
Subtractions from SEC Total:
|
|
•
|
Bonus earned for
2017
(reflected in Bonus and Non-equity Incentive Plan Compensation columns), which was paid in
2018
;
|
|
|
•
|
Aggregate grant date fair value of equity awards (reflected in Stock Awards and Option Awards columns);
|
|
|
•
|
Year over year change in nonqualified deferred compensation earnings (reflected in the Change in Nonqualified Deferred Comp. Earnings column);
|
|
|
•
|
Contributions to 401(k) and medical premiums that are deducted from income on a pre-tax basis; and
|
|
|
•
|
The Company’s 401(k) match (reflected in All Other Comp. column).
|
Additions to SEC Total:
|
|
•
|
Bonus earned for
2016
(reflected in Bonus and Non-equity Incentive Plan Compensation columns for
2016
) which was paid in
2017
;
|
Molina Healthcare, Inc. 2018 Proxy Statement |
39
Grants of Plan-Based Awards
The following table provides information about plan-based awards granted to the named executive officers in
2017
. The “Non-Equity Incentive Plan Awards” were granted under the Company’s Incentive Compensation Plan. The “Equity Incentive Plan Awards” and “All Other Stock Awards” were granted under the Company’s 2011 Equity Incentive Plan.
2017
Grants of Plan-Based Awards Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards
(1)
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
(2)
|
All Other
Stock
Awards:
Number of
Shares of
Stock
|
All Other Option Awards: Number of Securities Underlying Options
(8)
|
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
(9)
|
Name
|
Grant Date
|
Threshold ($)
|
Target
($)
|
Maximum ($)
|
Threshold (#)
|
Target
(#)
|
Maximum (#)
|
Joseph M. Zubretsky
|
11/6/2017
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
375,000
|
|
|
$
|
15,536,250
|
|
Joseph W. White
|
3/1/2017
|
$
|
211,250
|
|
$
|
422,500
|
|
$
|
845,000
|
|
—
|
|
—
|
|
—
|
|
13,847
|
|
—
|
|
(3
|
)
|
$
|
684,042
|
|
|
5/10/2017
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
12,309
|
|
24,617
|
|
49,233
|
|
—
|
|
—
|
|
|
$
|
1,677,895
|
|
|
6/5/2017
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
—
|
|
—
|
|
15,008
|
|
—
|
|
(4
|
)
|
$
|
999,983
|
|
Jeff D. Barlow
|
3/1/2017
|
$
|
160,875
|
|
$
|
321,750
|
|
$
|
643,500
|
|
—
|
|
—
|
|
—
|
|
9,474
|
|
—
|
|
(3
|
)
|
$
|
468,016
|
|
|
5/10/2017
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
8,422
|
|
16,844
|
|
33,687
|
|
—
|
|
—
|
|
|
$
|
1,148,087
|
|
J. Mario Molina
(5)
|
3/1/2017
|
$
|
609,375
|
|
$
|
1,218,750
|
|
$
|
2,437,500
|
|
—
|
|
—
|
|
—
|
|
58,300
|
|
—
|
|
(3
|
)
|
$
|
2,880,020
|
|
|
5/10/2017
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
68,016
|
|
103,644
|
|
174,900
|
|
—
|
|
—
|
|
|
$
|
7,064,375
|
|
John C. Molina
(6)
|
3/1/2017
|
$
|
365,625
|
|
$
|
731,250
|
|
$
|
1,462,500
|
|
—
|
|
—
|
|
—
|
|
20,041
|
|
—
|
|
(3
|
)
|
$
|
990,025
|
|
|
5/10/2017
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
23,381
|
|
35,628
|
|
60,122
|
|
—
|
|
—
|
|
|
$
|
2,428,405
|
|
Terry P. Bayer
(7)
|
3/1/2017
|
$
|
227,500
|
|
$
|
455,000
|
|
$
|
910,000
|
|
—
|
|
—
|
|
—
|
|
16,033
|
|
—
|
|
(3
|
)
|
$
|
792,030
|
|
|
5/10/2017
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
14,252
|
|
28,503
|
|
57,006
|
|
—
|
|
—
|
|
|
$
|
1,942,765
|
|
Lisa A. Rubino
|
3/1/2017
|
$
|
81,250
|
|
$
|
162,500
|
|
$
|
325,000
|
|
—
|
|
—
|
|
—
|
|
12,146
|
|
—
|
|
(3
|
)
|
$
|
600,012
|
|
|
|
(1)
|
These columns show the possible payouts under the Company’s performance-based short-term cash incentive plan. The discretionary portion of the performance-based short-term cash incentive bonus is excluded from the table above. Under this plan, Mr. White’s bonus opportunity is 100% of his base salary; Ms. Bayer’s bonus opportunity is 100% of her base salary; Mr. Barlow’s bonus opportunity is 90% of his base salary, and Ms. Rubino’s bonus opportunity is 50% of her base salary. For each of the named executives, 65% of the bonus opportunity relates to a net income performance measure and 35% is subject to the discretion of the compensation committee, based on consideration of such factors as completing the organization development effort and filling key executive roles; developing a long-term strategic plan for Medicare and Direct Delivery; increasing quality revenues from the state health plans; improving our claims payment metrics and overall claims systems; improving our Star metrics; and various other factors, with the net income and discretionary component determined and paid independently. Achievement of the threshold of $84 million in net income results in payout at the threshold level of 50%; achievement of $120 million in net income results in payout at the target level of 100%; and achievement of $156 million in net income results in payout at the maximum level of 200%. The actual cash bonus payout amounts for achievement within specified points along the net income range (as specified under the performance metric) are interpolated linearly between those points. The maximum payout is 200%. See further discussion regarding these metrics at “
Compensation Discussion and Analysis
—Elements of Compensation.” The actual amounts earned and paid to the named executive officers under the
2017
plan are presented in the “
2017 Summary Compensation Table
—Non-Equity Incentive Plan Comp.”
|
|
|
(2)
|
These columns show the estimated future payouts of PSUs under the awards granted in
2017
. For each of the named executives, with respect to the
2017
net profit margin performance metric, (i) achievement of the entry point of the metric results in 50% or first share vesting of the PSUs, (ii) target achievement results in 100% vesting of the PSUs, and (iii) full achievement results in 200% vesting of the awards. Intermediate achievement within the range results in the vesting of that number of shares proportional to the level of achievement within the range; all amounts shall be interpolated linearly between the end points of the range.
|
For the 2017-2019 performance metrics, achievement is conditioned upon the Company’s closing on a Board-approved acquisition in a new state, winning an RFP in a new state (including winning an RFP for Molina Medicaid Solutions, or winning an RFP for a new Medicaid product line in an existing state), or achieving a 10% year-over-year annual growth in
Molina Healthcare, Inc. 2018 Proxy Statement |
40
Medicare enrollment (including enrollees in Medicare-Medicaid duals programs). However, this metric is further conditioned on achievement of the expansion targets previously identified as target metrics pursuant to grants made in 2016; thus, the metric will first be triggered after the fourth such achievement after 2016. SNP or Marketplace/Exchange entry, or a capabilities-based acquisition, do not count towards satisfaction of the performance metric. In the event the Company achieves the metric in 2017, 2018, or 2019, upon the first such achievement (meaning the fourth such achievement after 2016), 50% of the PSUs subject to this metric shall vest (threshold). Upon the second such achievement (meaning the fifth such achievement after 2016), 100% of the PSUs subject to this metric shall vest (target). Upon the third such achievement (meaning the sixth such achievement after 2016), 200% of the PSUs subject to this metric shall vest (maximum). Partial vesting of this PSU award may be made on March 1st of each of 2018, 2019 or 2020, as applicable, following the relevant level of achievement, whether entry, target or full. No PSUs subject to this metric were to vest sooner than March 1, 2018. For more information on the specific metrics and vesting schedules, see
Outstanding Equity Awards
.
|
|
(3)
|
Includes the RSAs granted to named executive officers on March 1, 2017. These awards are subject to time-based vesting in equal increments over three years on each of March 1, 2018, March 1, 2019, and March 1, 2020.
|
|
|
(4)
|
Includes RSAs granted to Mr. White on June 5, 2017, which awards are subject to time-based vesting in equal increments over three years on each of June 5, 2018, June 5, 2019, and June 5, 2020.
|
|
|
(5)
|
Dr. Molina’s employment was terminated on May 2, 2017. Pursuant to his employment agreement, all outstanding equity awards were immediately vested at the target level. For more information on the severance payments and benefits received by Dr. Molina, see discussion above in
“Executive Compensation - Termination of Named Executive Officer Founders.”
|
|
|
(6)
|
Mr. Molina’s employment was terminated on May 2, 2017. Pursuant to his employment agreement, all outstanding equity awards were immediately vested at the target level. For more information on the severance payments and benefits received by Mr. Molina, see discussion above in
“Executive Compensation - Termination of Named Executive Officer Founders.”
|
|
|
(7)
|
Ms. Bayer retired from the Company on February 2, 2018, and received severance payments and benefits pursuant to her employment agreement with the Company, including acceleration of vesting of certain outstanding equity awards previously granted to her. For more information on such severance payments and benefits, see discussion above in “
Executive Compensation - Retirement of Chief Operating Officer.”
|
|
|
(8)
|
Pursuant to Mr. Zubretsky’s employment agreement, the Company granted him an option to purchase 375,000 shares of our common stock at an exercise price of $67.33 per share which expires October 8, 2027. These options are subject to time-based vesting in equal increments over three years on each of October 9, 2018, October 9, 2019, and October 9, 2020.
|
|
|
(9)
|
This column shows the grant date fair value of the PSUs, RSAs and Options. Generally, the grant date fair value is the amount that the Company expects to expense in its financial statements over the awards’ or options’ vesting schedule. As described above, the amounts in this column do not reflect compensation actually received by the named executive officers.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
41
Outstanding Equity Awards
The following table provides information on the named executive officers’ holdings of stock and option grants as of year-end. It includes unexercised stock options (vested and unvested), and PSAs and RSAs for which vesting conditions were not yet satisfied as of
December 31, 2017
. The vesting schedule for each outstanding award is shown following this table.
2017
Outstanding Equity Awards at Fiscal Year End Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock and Stock Unit Awards
|
Name
|
Option Grant Date
|
Number of
Securities
Underlying
Unexercised
Options (Exercisable)
|
Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Options (Unearned)
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
Stock Award Grant Date
|
Number of
Shares of
Stock
That
Have Not
Vested
|
|
Market
Value of
Shares of
Stock
That
Have Not
Vested
(1)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares
That Have
Not
Vested
|
|
Equity
Incentive
Plan
Awards:
Market
or Pay-
Out
Value of
Unearned
Shares
That
Have
Not
Vested
(1)
|
|
Joseph M. Zubretsky
|
11/6/2017
|
|
375,000
|
|
—
|
|
$
|
67.33
|
|
10/8/2027
|
|
|
—
|
|
$
|
—
|
|
—
|
|
$
|
—
|
|
Joseph W. White
|
|
|
—
|
|
—
|
|
|
|
|
4/1/2015
|
2,262
|
|
$
|
173,450
|
|
4,524
|
|
$
|
346,900
|
|
|
|
|
|
|
|
|
|
3/7/2016
|
8,636
|
|
$
|
662,208
|
|
10,793
|
|
$
|
827,607
|
|
|
|
|
|
|
|
|
|
3/1/2017
|
13,847
|
|
$
|
1,061,788
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
5/10/2017
|
—
|
|
$
|
—
|
|
18,848
|
|
$
|
1,445,265
|
|
|
|
|
|
|
|
|
|
6/5/2017
|
15,008
|
|
$
|
1,150,813
|
|
—
|
|
$
|
—
|
|
Total
|
|
|
—
|
|
—
|
|
|
|
|
|
39,753
|
|
$
|
3,048,259
|
|
34,165
|
|
$
|
2,619,772
|
|
Jeff D. Barlow
|
|
|
—
|
|
—
|
|
|
|
|
4/1/2015
|
1,885
|
|
$
|
144,542
|
|
3,770
|
|
$
|
289,084
|
|
|
|
|
|
|
|
|
|
3/7/2016
|
6,263
|
|
$
|
480,247
|
|
7,830
|
|
$
|
600,404
|
|
|
|
|
|
|
|
|
|
3/1/2017
|
9,474
|
|
$
|
726,466
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
5/10/2017
|
—
|
|
$
|
—
|
|
12,896
|
|
$
|
988,865
|
|
Total
|
|
|
—
|
|
—
|
|
|
|
|
|
17,622
|
|
$
|
1,351,255
|
|
24,496
|
|
$
|
1,878,353
|
|
Terry P. Bayer
(2)
|
|
|
—
|
|
—
|
|
|
|
|
4/1/2015
|
2,866
|
|
$
|
219,765
|
|
5,730
|
|
$
|
439,376
|
|
|
|
|
|
|
|
|
|
3/7/2016
|
10,309
|
|
$
|
790,494
|
|
12,885
|
|
$
|
988,022
|
|
|
|
|
|
|
|
|
|
3/1/2017
|
16,033
|
|
$
|
1,229,411
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
5/10/2017
|
—
|
|
$
|
—
|
|
21,823
|
|
$
|
1,673,388
|
|
Total
|
|
|
—
|
|
—
|
|
|
|
|
|
29,208
|
|
$
|
2,239,670
|
|
40,438
|
|
$
|
3,100,786
|
|
Lisa A. Rubino
|
|
|
—
|
|
—
|
|
|
|
|
3/1/2014
|
3,981
|
|
$
|
305,263
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
3/1/2015
|
4,710
|
|
$
|
361,163
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
3/1/2016
|
7,059
|
|
$
|
541,284
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
3/1/2017
|
12,146
|
|
$
|
931,355
|
|
—
|
|
$
|
—
|
|
Total
|
|
|
—
|
|
—
|
|
|
|
|
|
27,896
|
|
$
|
2,139,065
|
|
—
|
|
$
|
—
|
|
|
|
(1)
|
The market value of the unvested RSAs, PSAs, and PSUs represents the product of the closing price of the Company’s stock as of December 29, 2017, the last trading day of our fiscal year, which was $76.68, and the number of shares underlying such award and, with respect to PSAs and PSUs, assumes satisfaction of the applicable performance conditions. See the
Outstanding Equity Awards Vesting Schedule Table
on the next page for more information regarding vesting of these awards.
|
|
|
(2)
|
Ms. Bayer retired from the Company on February 2, 2018, and received severance payments and benefits pursuant to her employment agreement with the Company. For more information on such severance payments and benefits, see discussion above in
“Executive Compensation - Retirement of Chief Operating Officer.”
|
Molina Healthcare, Inc. 2018 Proxy Statement |
42
Outstanding Equity Awards Vesting Schedule Table
|
|
|
|
|
|
|
|
|
Name of Executive Officer
|
|
Grant Date
|
|
Stock Awards and Units Vesting Schedule
(1)
|
|
|
Vested
|
Subject to Vesting
|
|
|
PSAs
|
PSAs/PSUs
|
Joseph W. White
|
|
4/1/2015
|
|
4,524 PSAs vested in 2018
|
|
|
2,262 RSAs vest 4/1/2018
|
|
|
3/7/2016
|
|
6,476 PSAs vested in 2018
|
4,318 RSAs vested in 2018
|
4,317 PSAs vest 3/7/2019, subject to performance conditions
|
4,318 RSAs vest 3/7/2019
|
|
|
3/1/2017
|
|
|
4,616 RSAs vested in 2018
|
|
4,616 RSAs vest 3/1/2019; 4,615 RSAs vest 3/1/2020
|
|
|
5/10/2017
|
|
|
|
5,769 PSUs vest 3/1/2019, subject to achievement of performance conditions; 5,385 PSUs vest 3/1/2020, subject to performance conditions; 7,694 PSUs vest either on 3/1/2019 or 3/1/2020 subject to performance conditions
|
|
|
|
6/5/2017
|
|
|
|
|
5,003 RSAs vest 6/5/2018; 5,003 RSAs vest 6/5/2019; 5,002 RSAs vest 6/5/2020
|
Jeff D. Barlow
|
|
4/1/2015
|
|
3,770 PSAs vested in 2018
|
1,885 RSAs vested in 2018
|
|
|
|
|
3/7/2016
|
|
4,698 PSAs vested in 2018
|
3,132 RSAs vested in 2018
|
3,132 PSAs vest 3/7/2019, subject to achievement of performance conditions
|
3,131 RSAs vest 3/7/2019
|
|
|
3/1/2017
|
|
|
3,158 RSAs vested in 2018
|
|
3,158 RSAs vest 3/1/2019;
3,158 RSAs vest 3/1/2020
|
|
|
5/10/2017
|
|
|
|
3,948 PSUs vest 3/1/2019, subject to achievement of performance conditions; 3,684 PSUs vest 3/1/2020, subject to performance conditions; 5,264 PSUs vest either on 3/1/2019 or 3/1/2020 subject to performance conditions
|
|
Terry P. Bayer
(2)
|
|
4/1/2015
|
|
5,730 PSAs vested in 2018
|
2,866 RSAs vested in 2018
|
|
|
|
|
3/7/2016
|
|
7,731 PSAs vested in 2018
|
10,309 RSAs vested in 2018
|
|
|
|
|
3/1/2017
|
|
|
16,033 RSAs vested in 2018
|
|
|
Lisa A. Rubino
(3)
|
|
3/1/2014
|
|
|
3,981 RSAs vested in 2018
|
|
|
|
|
3/1/2015
|
|
|
2,355 RSAs vested in 2018
|
|
|
|
|
3/1/2016
|
|
|
2,353 RSAs vested in 2018
|
|
|
|
|
3/1/2017
|
|
|
3,037 RSAs vested in 2018
|
|
|
|
|
(1)
|
This column shows the vesting schedule for unvested or unearned stock awards reported in the “Number of Shares of Stock That Have Not Vested,” and “Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested” columns of the
2017 Outstanding Equity Awards at Fiscal Year End Table
. RSAs vest on the dates indicated above. PSAs and PSUs vest subject to the achievement of performance conditions, on the date the compensation committee certifies the achievement of such performance conditions. See the
Outstanding Performance-Based Equity Awards Table
for more information on these awards.
|
|
|
(2)
|
Ms. Bayer retired as chief operating officer of the Company on February 2, 2018. Her retirement was deemed a termination without cause for purposes of determining her eligibility to receive severance benefits pursuant to her employment agreement. As part of such benefits, she was entitled to acceleration of all of her time-based restricted stock awards (29,208 RSAs) and acceleration of the performance-based equity compensation for which the performance conditions were satisfied (10,596 PSAs). For more information on such severance payments and benefits, see discussion above in
“Executive Compensation - Retirement of Chief Operating Officer.”
|
|
|
(3)
|
Ms. Rubino’s employment with the Company was terminated on March 2, 2018, and as result all of her RSAs with vesting dates after March 2, 2018 were forfeited.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
43
Outstanding Performance-Based Equity Awards at Fiscal Year End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Goals
|
|
Name
|
Performance Period:
Fiscal Year(s)
|
Metric
|
Entry Point
|
Target Achievement
|
Full Achievement
|
Grant Date
|
Joseph W. White
|
|
Jeff D. Barlow
|
|
Terry P. Bayer
|
Annual Premium Revenue
(1)
|
$15.0 billion
|
|
$16.0 billion
|
4/1/2015
|
2,262
|
|
|
1,885
|
|
|
2,865
|
|
2017
|
Net Profit Margin (after-tax)
(2)
|
1.5%
|
|
2.0%
|
4/1/2015
|
2,262
|
|
|
1,885
|
|
|
2,865
|
|
2017
|
Pre-Tax Income
(2)
|
$500 million
|
|
$650 million
|
4/1/2015
|
2,262
|
|
|
1,885
|
|
|
2,865
|
|
2017
|
3-year TSR
(3)
|
|
|
|
4/1/2015
|
2,262
|
|
|
1,885
|
|
|
2,865
|
|
2015-2017
|
Net Profit Margin (after-tax)
(2)
|
1.5%
|
|
2.0%
|
3/7/2016
|
4,317
|
|
|
3,132
|
|
|
5,154
|
|
2017
|
Stars Rating
(2)
|
|
|
|
3/7/2016
|
4,317
|
|
|
3,132
|
|
|
5,154
|
|
2017
|
Net Profit Margin (after-tax)
(4)
|
1.5%
|
|
2.0%
|
3/7/2016
|
4,317
|
|
|
3,132
|
|
|
5,154
|
|
2018
|
RFP/Acquisition
(5)
|
|
|
|
3/7/2016
|
6,476
|
|
|
4,698
|
|
|
7,731
|
|
2016-2018
|
Net Profit Margin (after-tax)
(2)
|
0.5%
|
0.75%
|
1.0%
|
5/10/2017
|
5,769
|
|
|
3,948
|
|
|
6,680
|
|
2017
|
Net Profit Margin (after-tax)
(6)
|
1.0%
|
1.25%
|
1.5%
|
5/10/2017
|
5,769
|
|
|
3,948
|
|
|
6,680
|
|
2018
|
Net Profit Margin (after-tax)
(7)
|
1.5%
|
1.75%
|
2.0%
|
5/10/2017
|
5,385
|
|
|
3,684
|
|
|
6,235
|
|
2019
|
RFP/Acquisition
(8)
|
|
|
|
5/10/2017
|
7,694
|
|
|
5,264
|
|
|
8,908
|
|
2017-2019
|
Total
|
|
|
|
|
53,092
|
|
|
38,478
|
|
|
63,156
|
|
|
|
|
(1)
|
Awards vested on March 1, 2018.
|
|
|
(2)
|
Awards forfeited in 2018 because the performance metrics were not met.
|
|
|
(3)
|
Awards vested on January 19, 2018.
|
|
|
(4)
|
Net profit margin is based on the Company’s reported income from continuing operations, divided by total revenue. Achievement of the entry point shall result in 25% of first share vesting of the restricted stock grant, with full achievement resulting in 100% vesting of the grant. Intermediate achievement within the range shall result in the vesting of that number of shares as is proportional to the level of achievement within the range; all amounts shall be interpolated linearly between the end points of the range. If achieved, the awards, in the table above, subject to this metric will vest on March 7, 2019.
|
|
|
(5)
|
This metric is conditioned on the Company’s closing on a Board-approved acquisition in a new state, winning an RFP in a new state, or winning an RFP for a new Medicaid product line in an existing state. SNP or marketplace entry, or a capabilities-based acquisition, does not count towards satisfaction of the performance metric. In the event the Company achieves the metric in 2016, 2017, or 2018, upon the first such achievement, 25% of the restricted stock grant shall vest, which occurred on March 7, 2017. Upon the second such achievement, a further 25% of the restricted stock grant share vest. Upon the third achievement the final 50% of the restricted stock grant shall vest. The second and third such achievements occurred in 2017, and as a result, the final 75% of the restricted stock grants, in the table above, vested on March 7, 2018.
|
|
|
(6)
|
Net profit margin is based on the Company’s reported income from continuing operations, divided by total revenue. Achievement of the entry point shall result in 50% of the PSUs subject to this metric; target achievement shall result in 100% vesting of the PSUs; and full achievement shall result in 200% vesting of the PSU grant. Intermediate achievement within the range shall result in the vesting of that number of shares as is proportional to the level of achievement within the range; all amounts shall be interpolated linearly between the end points of the range. If achieved, the awards, in the table above, subject to this metric will vest on March 1, 2019.
|
|
|
(7)
|
Net profit margin is based on the Company’s reported income from continuing operations, divided by total revenue. Achievement of the entry point shall result in 50% of the PSUs subject to this metric; target achievement shall result in 100% vesting of the PSUs; and full achievement shall result in 200% vesting of the PSU grant. Intermediate achievement within the range shall result in the vesting of that number of shares as is proportional to the level of achievement within the range; all amounts shall be interpolated linearly between the end points of the range. If achieved, the awards, in the table above, subject to this metric will vest on March 1, 2020.
|
|
|
(8)
|
This metric is conditioned on the Company’s closing on a Board-approved acquisition in a new state, winning an RFP in a new state (including winning an RFP for Molina Medicaid Solutions, or winning an RFP for a new Medicaid product line in an existing state), or achieving a 10% year-over-year annual growth in Medicare enrollment (including enrollees in Medicare-Medicaid duals programs). However, this metric is further conditioned on achievement of the expansion targets previously identified as target metrics pursuant to grants made in 2016; thus, the metric will first be triggered after the fourth such achievement after 2016. SNP or Marketplace/Exchange entry, or a capabilities-based acquisition, do not count towards satisfaction of the performance metric. In the event the Company achieves the metric in 2017, 2018, or 2019, upon the first such achievement (meaning the fourth such achievement after 2016), 50% of the PSUs subject to this metric shall vest. Upon the second such achievement (meaning the fifth such achievement after 2016), 100% of the PSUs subject to this metric shall vest. Upon the third such achievement (meaning the sixth such achievement after 2016), 200% of the PSUs subject to this metric shall vest. Partial vesting of this PSU award may be made on March 1st of each of 2018, 2019 or 2020, as applicable, following the relevant level of achievement, whether entry, target or full. No PSUs subject to this metric will
|
Molina Healthcare, Inc. 2018 Proxy Statement |
44
vest sooner than March 1, 2018. Refer
“Executive Compensation - Compensation Discussion and Analysis - Long-Term Equity-Based Compensation Awards”
for further details.
Option Exercises and Stock Vested
The following table provides information with respect to stock options exercised and restricted stock awards vested for the named executive officers during fiscal year
2017
.
2017
Option Exercises and Stock Vested Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
Number of Shares
Acquired
on Exercise
|
|
|
Value Realized on
Exercise
|
|
|
Number of Shares
Acquired on Vesting
|
|
|
Value Realized on
Vesting
|
|
|
Joseph W. White
|
—
|
|
|
$
|
—
|
|
|
2,654
|
|
|
$
|
155,179
|
|
(2)
|
|
—
|
|
|
$
|
—
|
|
|
4,916
|
|
|
$
|
242,851
|
|
(3)
|
|
—
|
|
|
$
|
—
|
|
|
10,794
|
|
|
$
|
523,725
|
|
(4)
|
|
—
|
|
|
$
|
—
|
|
|
2,263
|
|
|
$
|
103,193
|
|
(5)
|
Jeff D. Barlow
|
—
|
|
|
$
|
—
|
|
|
2,123
|
|
|
$
|
124,132
|
|
(2)
|
|
—
|
|
|
$
|
—
|
|
|
4,008
|
|
|
$
|
197,995
|
|
(3)
|
|
—
|
|
|
$
|
—
|
|
|
7,830
|
|
|
$
|
379,911
|
|
(4)
|
|
—
|
|
|
$
|
—
|
|
|
1,885
|
|
|
$
|
85,956
|
|
(5)
|
J. Mario Molina
|
—
|
|
|
$
|
—
|
|
|
19,108
|
|
|
$
|
1,117,245
|
|
(2)
|
|
—
|
|
|
$
|
—
|
|
|
31,323
|
|
|
$
|
1,547,356
|
|
(3)
|
|
—
|
|
|
$
|
—
|
|
|
32,710
|
|
|
$
|
1,587,089
|
|
(4)
|
|
—
|
|
|
$
|
—
|
|
|
12,216
|
|
|
$
|
557,050
|
|
(5)
|
|
—
|
|
|
$
|
—
|
|
|
204,420
|
|
|
$
|
12,214,095
|
|
(6)
|
|
—
|
|
|
$
|
—
|
|
|
103,644
|
|
|
$
|
7,064,375
|
|
(7)
|
John C. Molina
|
54,000
|
|
|
$
|
1,492,020
|
|
(1)
|
7,099
|
|
|
$
|
415,079
|
|
(2)
|
|
—
|
|
|
$
|
—
|
|
|
11,133
|
|
|
$
|
549,971
|
|
(3)
|
|
—
|
|
|
$
|
—
|
|
|
16,500
|
|
|
$
|
800,580
|
|
(4)
|
|
—
|
|
|
$
|
—
|
|
|
4,034
|
|
|
$
|
183,950
|
|
(5)
|
|
—
|
|
|
$
|
—
|
|
|
83,111
|
|
|
$
|
4,965,882
|
|
(6)
|
|
—
|
|
|
$
|
—
|
|
|
35,628
|
|
|
$
|
2,428,404
|
|
(7)
|
Terry P. Bayer
|
—
|
|
|
$
|
—
|
|
|
4,644
|
|
|
$
|
271,535
|
|
(2)
|
|
—
|
|
|
$
|
—
|
|
|
7,509
|
|
|
$
|
370,945
|
|
(3)
|
|
—
|
|
|
$
|
—
|
|
|
12,886
|
|
|
$
|
625,228
|
|
(4)
|
|
—
|
|
|
$
|
—
|
|
|
2,866
|
|
|
$
|
130,690
|
|
(5)
|
Lisa A. Rubino
|
—
|
|
|
$
|
—
|
|
|
8,690
|
|
|
$
|
429,286
|
|
(3)
|
|
|
(1)
|
On February 28, 2017, Mr. Molina exercised 54,000 stock options, with an exercise price of $20.88 per share, compared with a weighted average market value of $48.51 per share.
|
|
|
(2)
|
These awards vested on January 16, 2017, on the date that the compensation committee of the Board of Directors certified the performance metric as met. The market value of our stock on January 13, 2017, the last trading day prior to the vesting date, was $58.47 per share.
|
|
|
(3)
|
On March 1, 2017, RSAs vested in accordance with the terms of the awards and, due to satisfaction of the underlying performance metric, PSAs vested. The market value of our stock on March 1, 2017 was $49.40.
|
|
|
(4)
|
On March 7, 2017, RSAs vested in accordance with the terms of the awards and, due to satisfaction of the underlying performance metric, PSAs vested. The market value of our stock on March 7, 2017 was $48.52.
|
|
|
(5)
|
On April 1, 2017, RSAs vested at a closing market price of $45.60.
|
|
|
(6)
|
These awards vested on May 2, 2017, due to Dr. Molina and Mr. Molina’s termination, in accordance with the terms of their employment agreements. The market value of our stock on May 2, 2017, was $59.75 per share.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
45
|
|
(7)
|
These awards vested on May 10, 2017, due to Dr. Molina and Mr. Molina’s termination, in accordance with the terms of their employment agreements. The market value of our stock on May 2, 2017, was $68.16 per share.
|
Nonqualified Deferred Compensation
Pursuant to the Company’s unfunded and non-qualified Amended and Restated Deferred Compensation Plan (2013) as amended to date, eligible participants can defer up to 100% of their base salary and 100% of their bonus so that it can grow on a tax deferred basis. The investment options available to an executive under the deferral program consist of approximately fifteen investment options representing a broad array of asset classes and spectrum of risk profiles.
The following table provides information for each named executive officer regarding such individual’s accounts in the Amended and Restated Deferred Compensation Plan (2013) as amended to date, as of
December 31, 2017
.
Non-Qualified Deferred Compensation for
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Executive
Contributions in
the Last FY
($)
|
|
|
Registrant
Contributions in
Last FY
($)
|
|
|
Aggregate
Earnings (Losses) in
Last FY
($)
|
|
|
Aggregate
Withdrawals/
Distributions
(2)
($)
|
|
|
Aggregate
Balance at
Last FYE
($)
|
|
Joseph M. Zubretsky
(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Joseph W. White
|
$
|
13,113
|
|
|
$
|
—
|
|
|
$
|
2,821
|
|
|
$
|
—
|
|
|
$
|
15,934
|
|
Jeff D. Barlow
|
$
|
103,657
|
|
|
$
|
45,577
|
|
|
$
|
27,041
|
|
|
$
|
—
|
|
|
$
|
176,274
|
|
J. Mario Molina
|
$
|
5,286,431
|
|
|
$
|
—
|
|
|
$
|
708,440
|
|
|
$
|
(5,994,871
|
)
|
|
$
|
—
|
|
John C. Molina
|
$
|
455,007
|
|
|
$
|
—
|
|
|
$
|
79,908
|
|
|
$
|
(49,659
|
)
|
|
$
|
485,256
|
|
Terry P. Bayer
|
$
|
1,032,143
|
|
|
$
|
69,892
|
|
|
$
|
176,253
|
|
|
$
|
—
|
|
|
$
|
1,278,289
|
|
Lisa A. Rubino
|
$
|
178,512
|
|
|
$
|
178,365
|
|
|
$
|
42,545
|
|
|
$
|
—
|
|
|
$
|
399,422
|
|
(1)
Since Mr. Zubretsky’s employment with the Company started on November 6, 2017, Mr. Zubretsky was not eligible to participate in the non-qualified deferred compensation plan in 2017.
(2)
Represents the amount distributed in connection with termination of executive’s employment with the Company.
Potential Payments Upon Change in Control or Termination
We have entered into certain employment and change in control agreements with our named executive officers that may require the Company to provide compensation to applicable named executive officers in the event of a termination of employment or a change of control of the Company. Payment of severance benefits to the named executive officers is contingent upon the executive signing a release agreement waiving claims against the Company.
Basis for Potential Payments—Annual Salary and Target Short-Term Bonus Opportunity
During
2017
, Mr. Zubretsky’s annual salary was $1,300,000, with no eligibility for short-term bonus; Mr. White’s annual salary was
$650,000
, with a baseline target short-term bonus opportunity of up to 100% of his base salary; Mr. Barlow’s annual salary was
$550,000
, with a target short-term bonus opportunity of up to 90% of his base salary; Ms. Bayer’s annual salary was
$700,000
, with a target short-term bonus opportunity of up to 100% of her base salary; and Ms. Rubino’s annual salary was $500,000, with a target short-term bonus opportunity of up to 50% of her base salary.
Employment and Change in Control Agreements
The Company entered into employment agreements with each of Mr. Zubretsky, Mr. White, Ms. Bayer, and Mr. Barlow, which provide that such executives’ employment will continue until terminated by the Company, or the executive resigns. Although Ms. Rubino did not have an employment agreement with the Company, she had an employment offer letter that provided for a severance payment for termination of her employment by the Company without cause (including any such termination by the Company or its successor following a change of control of the Company).
Ms. Bayer retired on February 2, 2018, and received severance payments and benefits pursuant to her employment agreement with the Company as described above in
“Executive Compensation - Retirement of Chief Operating Officer.”
Ms. Rubino’s employment was terminated by the Company without cause on March 2, 2018, and upon
Molina Healthcare, Inc. 2018 Proxy Statement |
46
delivery to the Company of a waiver and release in favor of the Company, is entitled to receive certain payments as described in
“Executive Compensation - Termination of Senior Vice President of Medicare & Duals Integration.”
Termination
of Employment
Without
Cause,
Retirement,
Disability, or Death
As described below, the employment agreements (or, with respect to Ms. Rubino, her employment offer letter) provide such executives with certain benefits in the event their employment is terminated by us without cause or the executive resigns for good reason, or if their employment is terminated by us without cause within a certain period of time following a change of control, subject to the executive executing a release in favor of the Company. Additionally, Mr. Zubretsky’s employment agreement also provides for certain benefits which he would be entitled to receive in case of retirement, disability, or death.
The employment agreement with Mr. Zubretsky provides that if he is terminated by us without cause or he resigns for good reason, he will be entitled to receive a cash payment equal to the sum of 150% of his base salary then in effect and 150% of his annual bonus then in effect, accelerated vesting of all time-based equity compensation, and extension of the exercise period for the vested portion of any stock option to three years following his last day of employment. The employment agreement includes confidentiality, non-solicitation, non-competition, and non-disparagement obligations. The non-solicitation and non-competition obligations by their terms expire 18 months after Mr. Zubretsky’s last day of employment with the Company.
Further, pursuant to the employment agreement, if Mr. Zubretsky voluntarily retires at or after age 65, and provided that he gives the Company one year advance notice of his retirement and executes a release of claims in the Company’s favor, upon his retirement he will be entitled to receive accelerated vesting of all time-based equity compensation; accelerated vesting at the target level of any then outstanding awards that are subject to performance-based vesting conditions, and extension of the exercise period for the vested portion of any stock option to three years following his last day of employment. If Mr. Zubretsky’s services are terminated by reason of his death or disability (as defined in his employment agreement), he will be entitled to receive accelerated vesting of all time-based equity compensation and accelerated vesting at the target level of any then outstanding awards that are subject to performance-based conditions.
The employment agreements with Mr. White, Ms. Bayer, and Mr. Barlow provide that if the executive’s employment is terminated by us without cause or the executive resigns for good reason, the executive will be entitled to receive one year’s (1x) base salary, a prorated termination bonus for the year of the employment termination, a cash payment of $50,000 for health and welfare benefits, and accelerated vesting of all time-based equity compensation. The employment agreements define “termination bonus” as 100% of such executive’s base salary then in effect. The employment agreements include confidentiality, non-solicitation, and non-disparagement obligations. The non-solicitation obligations by their terms expire 12 months after the executive’s last day of employment with the Company.
Ms. Rubino’s employment offer letter provides that if her employment is terminated by the Company without cause (including any such termination by the Company or its successor following a change of control of the Company) and she delivers to the Company a general release in favor of the Company, she is entitled to receive an amount equal to her annual base salary as of the date of termination, plus a payment equal to 12 months of COBRA payments, multiplied by 1.5 to reflect a tax gross-up.
Termination
of Employment
Without
Cause Following a Change of Control
The employment agreement with Mr. Zubretsky further provides that if termination occurs within 24 months following a change of control, he will be entitled to receive a severance payment equal to the sum of 200% of his annual base salary then in effect and 200% of his target annual bonus then in effect, accelerated vesting of all time-based equity compensation, accelerated vesting at the target level of any then outstanding awards that are subject to performance-based vesting conditions, and extension of the exercise period for the vested portion of any stock option to three years following his last day of employment. The employment agreements with Mr. White and Mr. Barlow provide that if termination occurs within one year following a change in control, the executives will receive all of the benefits such executives are entitled to receive under their change in control agreements with us. Under the change in control agreements with Mr. White and Mr. Barlow, if the executive’s employment is terminated by the Company without cause or is terminated by the executive for good reason within 12 months of a change in control, we will provide the executive with a severance payment equal to two times (2x) the executive’s annual base salary then in effect, plus, with respect to Mr. White, a pro rata portion of such executive’s termination bonus (40% of Mr. White’s annual base salary) and, with respect to Mr. Barlow, a pro rata portion of such executive’s target bonus for the year of termination (100% of Mr. Barlow’s annual base salary), full vesting of all unvested equity compensation and 401(k) employer contributions, and a cash payment for all the Company’s group health benefits of $43,500 for Mr. White and $50,000 for Mr. Barlow.
Molina Healthcare, Inc. 2018 Proxy Statement |
47
In 2017, the Company adopted a change in control severance plan pursuant to which all employees with positions of vice president and above are entitled to receive certain separation benefits in the event of a termination of employment within two years following a change in control of the Company. The named executive officers are entitled to receive such separation benefits under the plan only to the extent that such separation benefits would be in addition to or in excess of the benefits provided under their employment/change of control agreements. Pursuant to such plan, senior vice presidents and above would be entitled to receive two times (2x) their base salary, payment of their annual short-term incentive cash bonus (equal to the fiscal year target bonus opportunity) on a prorated basis based on the date of termination, full vesting of all unvested equity compensation, and continued health care, dental, and life insurance benefits under the Company’s applicable benefits programs for 24 months following the date of termination.
Change in Control
A “change in control” generally means a merger or other change in corporate structure after which the majority of our stockholders are no longer stockholders, a sale of substantially all of our assets, or our approved dissolution or liquidation. “Cause” is generally defined as the occurrence of one or more acts of unlawful actions involving moral turpitude or gross negligence or willful failure to perform duties or intentional breach of obligations under the employment agreement. “Good reason” generally means the occurrence of one or more events that have an adverse effect on the executive’s terms and conditions of employment, including any reduction in the executive’s base salary, a material reduction of the executive’s benefits or substantial diminution of the executive’s incentive awards or fringe benefits, a material adverse change in the executive’s position, duties, reporting relationship, responsibilities or status with us, a material relocation of the executive’s principal place of employment from his or her prior place of employment (as set forth in the agreements), or an uncured breach of the employment agreement. However, no reduction of salary or benefits will be good reason if the reduction applies to all executives proportionately.
Molina Healthcare, Inc. 2018 Proxy Statement |
48
Potential Payments upon Change in Control or Termination
The table below reflects the approximate amount of compensation payable to each of the named executive officers of the Company in the event of termination of such executive’s employment under the following scenarios: voluntary termination, retirement, involuntary not-for-cause termination, for cause termination, and involuntary for good reason termination following a change in control, disability, or death. The amounts shown assume that such termination was effective as of
December 31, 2017
, and exclude ordinary course amounts earned or benefits accrued as a result of prior service during the year. The named executive officers would receive other payments and benefits to which they were already entitled or vested on such date, including amounts under the Deferred Compensation Plan under the
Nonqualified Deferred Compensation Table
. The various amounts listed are estimates only. The actual amounts to be paid can only be determined at the time of such executive’s separation from the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name & Principal Position
|
Compensation Components
|
Voluntary Termination ($)
|
Retirement
($)
|
Involuntary Not for Cause Termination
($)
|
For Cause Termination
($)
|
Involuntary Not for Cause or for Good Reason Termination (Change-in-Control)
($)
|
Disability
($)
|
Death
($)
|
Joseph M. Zubretsky
|
Cash Severance
(1)
|
$
|
—
|
|
$
|
—
|
|
$
|
1,950,000
|
|
$
|
—
|
|
$
|
2,600,000
|
|
$
|
—
|
|
$
|
—
|
|
President and Chief Executive Officer
|
Stock Awards
|
—
|
|
$
|
3,506,250
|
|
$
|
3,506,250
|
|
—
|
|
$
|
3,506,250
|
|
$
|
3,506,250
|
|
$
|
3,506,250
|
|
|
Health Benefits
(3)
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
23,212
|
|
—
|
|
—
|
|
|
Disability Income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
1,080,000
|
|
—
|
|
|
Life Insurance Benefits
(4)
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
1,968
|
|
—
|
|
—
|
|
|
Total Value
|
$
|
—
|
|
$
|
3,506,250
|
|
$
|
5,456,250
|
|
$
|
—
|
|
$
|
6,131,430
|
|
$
|
4,586,250
|
|
$
|
3,506,250
|
|
Joseph W. White
|
Cash Severance
(1)(2)
|
$
|
—
|
|
$
|
—
|
|
$
|
1,300,000
|
|
$
|
—
|
|
$
|
1,950,000
|
|
$
|
—
|
|
$
|
—
|
|
Chief Financial Officer
|
Stock Awards
|
—
|
|
—
|
|
$
|
3,048,259
|
|
—
|
|
$
|
5,668,031
|
|
—
|
|
—
|
|
|
Health Benefits
(3)
|
—
|
|
—
|
|
$
|
50,000
|
|
—
|
|
$
|
43,500
|
|
—
|
|
—
|
|
|
Disability Income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
1,965,840
|
|
—
|
|
|
Life Insurance Benefits
(4)
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
1,968
|
|
—
|
|
750,000
|
|
|
Total Value
|
$
|
—
|
|
$
|
—
|
|
$
|
4,398,259
|
|
$
|
—
|
|
$
|
7,663,499
|
|
$
|
1,965,840
|
|
$
|
750,000
|
|
Jeff D. Barlow
|
Cash Severance
(1)
|
$
|
—
|
|
$
|
—
|
|
$
|
1,100,000
|
|
$
|
—
|
|
$
|
1,595,000
|
|
$
|
—
|
|
$
|
—
|
|
Chief Legal Officer and Secretary
|
Stock Awards
|
—
|
|
—
|
|
$
|
1,351,255
|
|
—
|
|
$
|
3,229,608
|
|
—
|
|
—
|
|
|
Health Benefits
(3)
|
—
|
|
—
|
|
$
|
50,000
|
|
—
|
|
$
|
50,000
|
|
—
|
|
—
|
|
|
Disability Income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
1,560,000
|
|
—
|
|
|
Life Insurance Benefits
(4)
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
1,968
|
|
—
|
|
750,000
|
|
|
Total Value
|
$
|
—
|
|
$
|
—
|
|
$
|
2,501,255
|
|
$
|
—
|
|
$
|
4,876,576
|
|
$
|
1,560,000
|
|
$
|
750,000
|
|
Terry P. Bayer
(5)
|
Cash Severance
(1)(2)
|
$
|
—
|
|
$
|
—
|
|
$
|
1,400,000
|
|
$
|
—
|
|
$
|
2,100,000
|
|
$
|
—
|
|
$
|
—
|
|
Former Chief Operating Officer
|
Stock Awards
|
—
|
|
—
|
|
$
|
2,239,670
|
|
—
|
|
$
|
5,340,456
|
|
—
|
|
—
|
|
|
Health Benefits
(3)
|
—
|
|
—
|
|
$
|
50,000
|
|
—
|
|
$
|
43,500
|
|
—
|
|
—
|
|
|
Disability Income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
315,000
|
|
—
|
|
|
Life Insurance Benefits
(4)
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
1,279
|
|
—
|
|
750,000
|
|
|
Total Value
|
$
|
—
|
|
$
|
—
|
|
$
|
3,689,670
|
|
$
|
—
|
|
$
|
7,485,235
|
|
$
|
315,000
|
|
$
|
750,000
|
|
Lisa A. Rubino
(3)(6)
|
Cash Severance
(1)(2)
|
$
|
—
|
|
$
|
—
|
|
$
|
500,000
|
|
$
|
—
|
|
$
|
1,250,000
|
|
$
|
—
|
|
$
|
—
|
|
Former Sr. Vice President of Medicare & Duals Integration
|
Stock Awards
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,139,065
|
|
$
|
—
|
|
$
|
—
|
|
|
Health Benefits
(3)
|
$
|
—
|
|
$
|
—
|
|
$
|
25,703
|
|
$
|
—
|
|
$
|
25,703
|
|
$
|
—
|
|
$
|
—
|
|
|
Disability Income
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
840,000
|
|
$
|
—
|
|
|
Life Insurance Benefits
(4)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,968
|
|
$
|
—
|
|
$
|
—
|
|
|
Total Value
|
$
|
—
|
|
$
|
—
|
|
$
|
525,703
|
|
$
|
—
|
|
$
|
3,416,736
|
|
$
|
840,000
|
|
$
|
—
|
|
Molina Healthcare, Inc. 2018 Proxy Statement |
49
|
|
(1)
|
The amounts in the table were computed based on the named executive officers’ salaries and target short-term bonus opportunity as of
December 31, 2017
. In February
2018
, the compensation committee determined to leave unchanged the base salaries for Mr. Zubretsky and Mr. White, and to increase the base salary for Mr. Barlow to $600,000. The compensation committee further determined to set Mr. Zubretsky’s 2018 target short-term bonus opportunity at 150% of his base salary, leave unchanged Mr. White’s
2018
target short-term bonus opportunity at 100% of his base salary, and increase Mr. Barlow’s 2018 target short-term bonus opportunity to 100% of his base salary. As provided in his employment agreement, Mr. Zubretsky was not entitled to a short-term bonus in 2017.
|
(2)
Severance for involuntary, not for cause or for good reason termination (change-in-control) represents executive’s severance payment pursuant to the Company’s change in control severance plan since such payment is higher than the severance payment executive would be entitled to receive under executive’s employment agreement, or with respect to Ms. Rubino, under her employment offer letter.
|
|
(3)
|
For Mr. Zubretsky, the amount for health benefits payable upon involuntary, not for cause or good reason termination (change-in-control) represents the amount he is entitled to receive for continued health care and dental benefits under the Company’s applicable benefits programs for 24 months following the date of termination, pursuant to the Company’s change in control severance plan. For Mr. White, Mr. Barlow, and Ms. Bayer such amounts under the change in control severance plan are lower than the amounts for health benefits they are entitled to receive under their respective change in control agreements, and for Ms. Rubino pursuant to her employment offer letter, therefore, the amounts in the table represent the health benefits payable for involuntary, not for cause or good reason termination (change-in-control) under those agreements.
|
(4)
Pursuant to the Company’s change in control severance plan, for termination in connection with a change in control, the executive is entitled to receive continued life insurance benefits under the Company’s applicable benefits programs for 24 months following the date of termination.
(5)
Ms. Bayer retired on February 2, 2018, and her retirement was deemed a termination without cause for purposes of receiving severance payments and benefits pursuant to her employment agreement with the Company. For more information on such severance payments and benefits, see discussion above in
“Executive Compensation - Retirement of Chief Operating Officer.”
(6)
Ms. Rubino’s employment was terminated by the Company without cause on March 2, 2018. For information on her severance payments, see discussion above in
“Executive Compensation - Termination of Senior Vice President of Medicare & Duals Integration.”
CEO Pay Ratio
As required by Item 402(u) of Regulation S-K, we are providing the following information:
For fiscal 2017, our last completed fiscal year:
|
|
•
|
the median of the total direct compensation of all employees of our Company (other than Mr. Zubretsky, our chief executive officer), was $46,397; and
|
|
|
•
|
the total direct compensation of Mr. Zubretsky, our chief executive officer, was $20,864,108.
|
Based on this information, the ratio of the median of the total direct compensation of all employees (other than the chief executive officer) to the total direct compensation of our chief executive officer was 1 to 450.
Our chief executive officer, Mr. Zubretsky, started employment with the Company on November 6, 2017. As an inducement to leave his previous employer and join the Company, the Company agreed to pay him a $4,000,000 sign-on bonus, and also agreed to provide him with a one-time substitutive option grant to purchase 375,000 shares of the Company’s common stock. Both of these inducements result in an increase in the median employee to CEO pay ratio. Without including the sign-on bonus in the calculation of the pay ratio, the ratio would reduce to 1 to 364. Based on estimated 2018 total direct compensation for our chief executive officer (including current base salary, non-equity incentive compensation assumed to be paid out at the target level, the target grant value of equity-based compensation, and an assumed figure for all other compensation), and assuming the median of the total direct compensation for all employees remained the same, the ratio would reduce to 1:286.
Our median employee pay ratio was calculated in accordance with the requirements of item 402(u) of Regulation S-K. With respect to the total direct compensation of our chief executive officer, we annualized his base salary and used the other compensation components (Bonus, Option Awards, All Other Comp) reported in our
2017 Summary Compensation Table
included in this proxy statement. Our calculation of the total direct compensation of our median employee includes all employees, part-time or full-time, excluding our chief executive officer, who were employed on December 1, 2017. The median employee is a full-time employee.
Molina Healthcare, Inc. 2018 Proxy Statement |
50
Pay elements that were included in the total direct compensation calculation for each employee consisted of the following:
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•
|
Salary received in fiscal year 2017;
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•
|
Short term incentives (cash bonus);
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•
|
Long term incentives (equity-based awards);
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|
•
|
Company-paid 401(K) plan match (4%) made in fiscal year 2017; and
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•
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All other compensation (stipends, sign-on bonus, one-time bonus, etc.).
|
Fiscal Year
2018
Compensation
In February
2018
, the compensation committee established the
2018
compensation for the named executive officers. The compensation committee consists of Mr. Schapiro (Chair), Mr. Fedak, Mr. Orlando, and Ms. Romney. The 2018 named executive officers consist of the following:
|
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•
|
Joseph M. Zubretsky, president and chief executive officer;
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•
|
Joseph W. White, chief financial officer;
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|
•
|
Jeff D. Barlow, chief legal officer and secretary;
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|
•
|
Pamela S. Sedmak, executive vice president of health plan operations; and
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•
|
Mark L. Keim, executive vice president of strategic planning and corporate development.
|
Executive Pay Study for
2018
To evaluate where the current compensation levels of the Company’s named executive officers stand in relation to the compensation levels of executives with the Company’s industry peers, the compensation committee engaged Exequity, a compensation advisory services firm, to conduct a total compensation study with respect to the compensation of the Company’s named executive officers for 2018. Exequity reports directly and exclusively to the compensation committee with respect to executive compensation matters.
In its 2018 study of the named executive officers’ compensation, Exequity used a 13-company peer group consisting of eight publicly traded managed care companies and five managed care facilities companies, as follows:
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1. Acadia Healthcare Company, Inc.
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8. Humana Inc.
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2. Aetna, Inc.
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9. Magellan Health, Inc.
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3. Anthem, Inc.
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10. Tenet Healthcare Corporation
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4. Centene Corporation
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11. Triple-S Management Corporation
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5. Cigna Corporation
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12. Universal Health Services, Inc.
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6. Community Health Systems, Inc.
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13. WellCare Health Plans, Inc.
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7. DaVita Inc.
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Of the 13-company peer group used in the 2018 study, ten companies were used in the 2017 named executive officers executive compensation study that Exequity had performed for the Company. Acadia Healthcare Company, Inc., Aetna, Inc., and Anthem, Inc. were added to the 2018 study, and Team Health Holdings, Inc., and Universal American Corp. were not included in the 2018 study. Team Health Holdings, Inc. and Universal American Corp. were removed as peers because each was acquired in 2017. The market study concluded that the target total compensation for the Company’s named executive officers in the aggregate is close to peer median benchmarks and this relative positioning is reasonably consistent across all elements of pay.
We endeavor to pay our management team competitively within the marketplace in a manner that will ensure our ability to attract and retain high quality personnel that are properly motivated to increase profitability and stockholder value. To that end, 2018 total compensation opportunities for the Company’s executives are generally targeted at or near median relative to appropriate peer executives, with actual compensation positioned below median when performance is below target and actual compensation positioned closer to or even above 75th percentile when performance is strong.
Molina Healthcare, Inc. 2018 Proxy Statement |
51
Fiscal Year
2018
Base Salaries
Based on peer group compensation levels and the considerations of compensation philosophy and approach as discussed above, the compensation committee set the base salaries for the named executive officers at the levels reflected in the table below.
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Base Salary
|
Named Executive Officer
|
2018
|
2017
|
Change ($)
|
Change (%)
|
Joseph M. Zubretsky, President and Chief Executive Officer
|
$
|
1,300,000
|
|
$
|
1,300,000
|
|
$
|
—
|
|
—
|
|
Joseph W. White, Chief Financial Officer
(1)
|
$
|
650,000
|
|
$
|
650,000
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|
$
|
—
|
|
—
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|
Jeff D. Barlow, Chief Legal Officer and Secretary
|
$
|
600,000
|
|
$
|
550,000
|
|
$
|
50,000
|
|
9.09
|
%
|
Pamela S. Sedmak, Executive Vice President of Health Plan Operations
|
$
|
600,000
|
|
N/A
|
|
N/A
|
|
N/A
|
|
Mark L. Keim, Executive Vice President of Strategic Planning and Corporate Development
|
$
|
500,000
|
|
N/A
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|
N/A
|
|
N/A
|
|
|
|
(1)
|
From May 2, 2017 to November 6, 2017, Mr. White also received an additional monthly special salary of $100,000 for his role as interim president and chief executive officer. Such special salary is not included in his base salary for this position of chief financial officer reflected in the table.
|
Fiscal Year
2018
Short-Term Performance-Based Cash Bonus Awards
In February
2018
, the compensation committee established short-term cash bonus opportunity levels and measures for our named executive officers. For Mr. Zubretsky, who in 2017 was not eligible for a short-term cash bonus opportunity, the 2018 target cash bonus opportunity level was set at 150% of his base salary. Mr. White’s 2018 target cash bonus opportunity was left unchanged from the 2017 level at 100% of his base salary (such level was previously increased in 2017 from 90% to 100%), and Mr. Barlow’s
2018
target cash bonus opportunity was increased to 100% of his base salary from 90% of his base salary in 2017. The 2018 target cash bonus opportunity levels for Ms. Sedmak and Mr. Keim were set at 70% of their respective base salaries.
The bonus performance measures of each of the named executive officers shall be based 70% on a
2018
pre-tax income metric, and 30% on the discretion of the compensation committee, as follows:
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•
|
70% of the bonus opportunity shall be based on the Company’s pre-tax income achievement in 2018. The target bonus level shall be based on the achievement of pre-tax income in 2018 that corresponds with the high end of the range of the Company’s 2018 preliminary guidance. Achievement at the target pre-tax income level shall trigger payout in cash of this bonus element at 100%. Achievement at a substantial fraction of the target level shall constitute the threshold level of achievement, triggering payout of this bonus element at 50%. Achievement substantially in excess of the target level shall trigger payout of this bonus element at the maximum amount of 200%. Under all circumstances payout shall be capped at the 200% level. All pre-tax income amounts shall be calculated net of the short-term cash bonus payouts. The actual cash bonus payout amounts for achievement within the specified points along the pre-tax income range shall be interpolated linearly between the specified points.
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•
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30% of the bonus opportunity shall be subject to the discretion of the compensation committee, and shall be based upon consideration by the committee of a wide variety of factors closely aligned with the chief executive officer’s goals and objectives, including for purposes of illustration (but not limited to), such factors as: (1) performance and operational improvements; (2) talent identification and succession planning; (3) financial planning and capital management; (4) development of a long term strategic plan; and miscellaneous other factors as may be identified by the compensation committee in the exercise of its discretion. As with the pre-tax income metric, payment of the discretionary bonus shall be capped at the 200% level.
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•
|
The 70% pre-tax income bonus metric and the 30% discretionary bonus shall be determined and paid independently. Entry level achievement of the pre-tax income metric shall not serve as a condition for any partial or full payment of the discretionary bonus.
|
Molina Healthcare, Inc. 2018 Proxy Statement |
52
The following table sets forth the fiscal year
2018
base salary levels, along with the two bonus elements for the Company’s named executive officers:
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Named Executive Officer
|
Base Salary
|
|
Target Bonus
Opportunity
(% of Base Salary)
|
|
Target
Net Income Bonus Opportunity
(70% of Target Bonus Opportunity)
|
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Discretionary Bonus Opportunity
(30% of Target Bonus Opportunity)
|
Joseph M. Zubretsky
|
|
|
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|
|
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President and Chief Executive Officer
|
$
|
1,300,000
|
|
|
150
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%
|
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$
|
1,365,000
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|
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$
|
585,000
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Joseph W. White
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|
|
|
|
|
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Chief Financial Officer
|
$
|
650,000
|
|
|
100
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%
|
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$
|
455,000
|
|
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$
|
195,000
|
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Jeff D. Barlow
|
|
|
|
|
|
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Chief Legal Officer and Secretary
|
$
|
600,000
|
|
|
100
|
%
|
|
$
|
420,000
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$
|
180,000
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Pamela S. Sedmak
|
|
|
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Executive Vice President of Health Plan Operations
|
$
|
600,000
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|
|
70
|
%
|
|
$
|
294,000
|
|
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$
|
126,000
|
|
Mark L. Keim
|
|
|
|
|
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|
Executive Vice President of Strategic Planning and Corporate Development
|
$
|
500,000
|
|
|
70
|
%
|
|
$
|
245,000
|
|
|
$
|
105,000
|
|
Fiscal Year
2018
Long-Term Equity-Based Incentive Compensation Awards
Effective as of March 1,
2018
, the named executive officers were granted long-term incentive awards in the form of performance stock units (PSUs) and restricted stock, in the following amounts, with the actual PSUs and share numbers being determined by using the closing price of the Company’s common stock as of that same March 1,
2018
grant date of $71.88.
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2018 Equity-Based Compensation
|
Named Executive Officer
|
Amount ($)
|
Total PSUs & Shares (#)
|
|
Joseph M. Zubretsky, President and Chief Executive Officer
|
$
|
10,000,000
|
|
139,120
|
|
Joseph W. White, Chief Financial Officer
(1)
|
$
|
1,900,000
|
|
26,433
|
|
Jeff D. Barlow, Chief Legal Officer and Secretary
(2)
|
$
|
2,500,000
|
|
34,780
|
|
Pamela S. Sedmak, Executive Vice President of Health Plan Operations
|
$
|
750,000
|
|
10,434
|
|
Mark L. Keim, Executive Vice President of Strategic Planning and Corporate Development
|
$
|
750,000
|
|
10,434
|
|
(1)
Mr. White’s long-term incentive award consists entirely of PSUs.
(2)
Effective as of March 1, 2018, in addition to the 2018 annual $1,500,000 equity-based compensation, the compensation committee also awarded Mr. Barlow a restricted stock award of 13,912 shares (or $1,000,000 based on the closing price of the Company’s common stock as of March 1, 2018 grant date). Such incremental award was conveyed to Mr. Barlow to recognize his superior performance and key role in providing stability during a critical transition period. The award is subject to vesting in equal one-third increments over three years, on each of March 1, 2019, March 1, 2020, and March 1, 2021. Such additional award is included in the table.
The compensation committee determined that, with the exception of Mr. White’s award, 60% of the long-term incentive award to the named executive officers shall be in the form of PSUs. The vesting of the PSUs is based entirely on the achievement of a single financial metric: the Company’s cumulative net income over the three fiscal years of 2018, 2019, and 2020. This single cumulative three-year metric aligns the long-term incentive awards of the both the chief executive officer and the named executive officers with our three-year strategic plan and stated business goal of sustained margin recovery. We believe it will be marginally difficult for the Company to achieve the threshold cumulative net income level, which would result in vesting at the 50% level. If that threshold cumulative net income level is not achieved, no PSUs shall vest. We believe it will be difficult but achievable to reach the target cumulative net income level, which would result in vesting at the 100% level. Further, we believe it will be possible but not probable to achieve the maximum cumulative net income level, which would result in vesting at the 200% level, which represents the cap on achievement. Achievement falling within the threshold level and the maximum
Molina Healthcare, Inc. 2018 Proxy Statement |
53
level will be interpolated linearly to determine the appropriate PSUs payout. The PSUs will be settled by the issuance of shares of common stock of the Company equal to the number of PSUs as described herein. Any payout of the PSUs, if achieved, will occur when we report 2020 net income in early 2021, when we are then able to calculate the three-year cumulative net income for this metric.
T
he compensation committee determined that, with the exception of Mr. White’s award, the balance of 40% of the total long-term incentive awards to the named executive officers shall be in the form of time-vested restricted stock awards. These awards are subject to vesting in equal one-third increments over three years, on each of March 1, 2018, March 1, 2019, and March 1, 2020.
Mr. White’s long-term incentive award shall be 100% in the form of PSUs, which award shall be consistent with the PSUs as described above.
A detailed schedule of the equity awards granted to each of the named executive officers is set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Stock Units
|
Restricted Stock Awards
|
Named Executive Officer
|
PSUs (#)
|
|
PSUs ($)
|
|
Restricted Stock Awards Total (#)
|
|
Restricted Stock Awards Total ($)
|
|
Joseph M. Zubretsky
|
83,472
|
|
$
|
5,999,967
|
|
55,648
|
|
$
|
3,999,978
|
|
Joseph W. White
|
26,433
|
|
$
|
1,900,004
|
|
—
|
|
$
|
—
|
|
Jeff D. Barlow
(1)
|
12,521
|
|
$
|
900,009
|
|
22,259
|
|
$
|
1,599,977
|
|
Pamela S. Sedmak
|
6,260
|
|
$
|
449,969
|
|
4,174
|
|
$
|
300,027
|
|
Mark L. Keim
|
6,260
|
|
$
|
449,969
|
|
4,174
|
|
$
|
300,027
|
|
(1)
The restricted stock award to Mr. Barlow includes the additional grant effective March 1, 2018 of 13,912 shares (or $1,000,000 based on the closing price of the Company’s common stock as of March 1, 2018 grant date).
Compensation Committee Interlocks and Insider Participation
The persons listed on page 17 of this proxy statement were the members of the compensation committee during
2017
. No member of the compensation committee was a part of a “compensation committee interlock” during
2017
as described under SEC rules. In addition, none of our executive officers served as a director or member of the compensation committee of another entity that would constitute a “compensation committee interlock.” No member of the compensation committee had any material interest in a transaction with Molina Healthcare. Except for Joseph M. Zubretsky, no director is a current or former employee of Molina Healthcare or any of its subsidiaries.
Molina Healthcare, Inc. 2018 Proxy Statement |
54